Thursday 11th May… London. Another trip to the big smoke for Share Talk saw Share Research Analyst, Steve Larratt, attend the Oil Capital Conference at The Brewery. Steve shares his thoughts on the companies involved in his blog below.
Jersey Oil & Gas (AIM:JOG)
I’m going to start with Jersey Oil and Gas, firstly unlike the name might allude to they are not drilling in Jersey but in the North Sea. Having visited their stand at my recent visit to the Master Investors Show they attracted some attention in the media and in the press due to their operations planned. The team in place is one of long standing and has experience in the oil and gas industry mainly focussed in the North Sea basins. They have three prospects in place two of which they have planned news flow in 2017. With the first Licence P.2170 – Verbier, drilling planned for this summer. Their second drill Licence P.1989 is conditional on a future payment of up to $4Mn with the well plan to be put in place. They currently have no debt in place and no material liabilities.
Verbier – a recent Competent Persons Report put Mean estimated resources in place of 162MMboe and P10 resources at 855MMboe and increased the chances of success to 29% up from 26%. They have a farm out deal in place with Statoil and CIECO and this will enable them to have a carry on the drill up to $25m and an additional 10% carry from CIECO whilst retaining an 18% working interest. They have already contracted out the drilling rig and have put a NPV target of £774 million in place as the potential to Jersey Oil and Gas.
Licence P.1989 with a $4m payment due to further the project and currently being able to use £25m of tax losses they plan to have the drilling schedule in place over the summer so I cannot foresee an issue going forward with this program.
JKX Oil & Gas (AIM:JKX)
Jkx Oil & Gas is a exploration and production company with multiple assets in place on their portfolio. Their main focus is countries in the Ukraine and Russia with other assets in Hungary and Slovakia. They have in place multiple Licences for gas and oil totalling 16 areas. They have a good spread of producing wells that are economic in the current oil climate to underpin the company’s share price and exploration potential in their Hungary and Slovakia prospects, in the former they have a gas processing plant as part of their infrastructure. Within the Ukraine they have the potential for large scale field developments and have infrastructure in place to meet their needs in the form of 2 processing facilities and 1 LPG plant.
With operational cash flow in place of around $30mn an increase of around 50% from last year the recent changes in the company are aimed at providing a near term underpinning of the share price and providing upside opportunities with minimal capital expenditure. They have restructured their debt and made cost savings initiatives work saving $2.6mn in the last year alone. Sale of its gas in the Ukraine attract a premium payment over the European and US markets. Geo Politically the Ukrainian government are aiming for energy independence by 2021 which will bode well for the company if they can make their assets work for them. With that in mind they are planning drilling and work overs to increase reserves as well as production levels.
To watch the JKX Oil & Gas video presentation from the event, click here.
TLOU Energy (ASX/AIM:TLOU)
An interesting company with favourable, long-term prospects. The prospects of the model are simplistic and the Boatswain government is embracing the technology and TLOU have first movers advantage. The company has assets in the coal bed methane sector of energy. Coal Bed Methane is natural gas but it is in seams of coal rather than the conventional sandstone reservoirs. Natural gas is mainly comprised of methane. TLOU plan to tap into this resource to then utilise this for energy in methane power plants that they have on site. This potential could be huge with the first movers advantage and with the backing of the government. There is already a market in place and the government has a plant using diesel which the company plans to convert to gas in the near future. With this comes sales and offtake agreements into the pre existing infrastructure in the country. Also they plan to sell their excessive electricity across borders in the area. The company presented a time-line of milestones which puts first production of power to the grid in 2019 with several milestones between now and then.
Bengal Energy (TSX:BNG)
Listed on the TSX under the ticker BNG. Assets again are not based in the region of the company’s name but in the Australian eastern regions. The main business model is in exploration in proven areas with a smaller production flow rates on the sidelines. They currently have and average of 355 barrels of oil per day and what they dub as a funds flow from operations of $1.4M per year. They are looking at prospects in the cooper basin in Australia and what they surveys have shown is a good sub surface geology in place with easy to read strata. Due to the existing geologic features there have been currently 28 wells and with 27 of them being commercially successful. They plan to drill these prospects and tap into the local infrastructure to supply to the cities of Sydney Brisbane and Melbourne. The sales are above the normal prices and seem to be rising over a yearly basis as the supply and demand is needed. Currently in the low teens there has been a commercial gas user that has been put at a fixed price of $20/GJ for a two year contract. They have several plays in the region and several drills planned to test the areas that they plan to bring online if successful. The main play is on their Barrolka permit area where they have mapped 5 prospects/leads on this permit, based on 2D seismic and looking at multiple drill log data and with Quantitative Interpretation which has a 92% accuracy predicting the lithology in recent development programs in the region. On their Barta permit area they have 52 API oil which they can sell at a significant price to Brent Oil Prices. At Cuisinier they have a 3D acquisition underway and news will be due shortly.
An offshore oil company with similarities to COPL in their analytics to find their oil targets. They own a block of offshore Guinea to the size of 5000km2. When listening to the exploration target that they have identified, it sounded like a very similar type of data set to the COPL drill site that unfortunately didn’t encounter oil. With 108MN years of separation between either side of the Atlantic with only a few similarities on both sides that exist using this methodology. However during their presentation they also have used several other ways to interpret the data and thus define targets and put a more reasonable figure by way of a chance of success which now stands at 31%. they have used several locally known sources to interpret the channel area with increased pore pressures below the water/oil contact area and with gas overlies that are indeed present in other plays that have used the same way to delineate the prospects that contain oil. The terms in place at present have the company needing to drill before 22/09 this year. With that in place they have a service agreement with Schlumberger and have a drill ship in place to provide the services needed to drill and define the field potential.
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