Oil Man Jim Company Oil & Gas Podcast, Mid Week Blog, 15th January 2020

It’s been an interesting week so far and some of the shares I mentioned at the weekend have performed strongly.

RockRose Energy (RRE) is now trading at over £22 a share, up from just under £20 at last Friday’s close and Tower Resources (TRP) was up to nearly 0.8p yesterday from just over 0.5p on Friday.  I said a couple of times towards the end of last year that Tower was a good buying opportunity under 0.4p.

Unfortunately, it’s not all good news for investors this week.  Lekoil (LEK), whose announcement of Qatari financing turned out to be false, returned to trading yesterday and collapsed from 9.5p to 2.5p.  They want to present themselves as the victim of an advance fee fraud, but this “victim” saw its share price double and do more than £10 million volume at the higher level before anything was said.  A stock promoter would be delighted with such a ratio, the fee which generated all this volume was just £600,000.

TR-1s show large buying before and large selling after the announcement.  Also troubling is a post by a well-known influencer that he had met with LEK last Friday and bought a further 1%+ stake in the company.  There’s no reason to doubt the accuracy of this, but it means that while the company was spinning its story to him, other directors in the next room were consulting with professional advisors regarding the bogus financing and preparing for a Monday morning suspension and “killer” RNS.

Moving forward, the big commercial problem for LEK is they are required to pay Optimum Petroleum sunk costs and consent fees by February 2020 – a payment estimated at around $10 million.  LEK is also required to show its ability by February 2020 to raise 42.86 per cent. of the drilling costs for one appraisal well, which is estimated to be about $28 million.  LEK needs real financing fast – by February means the end of this month.

Next, Anglo African Oil & Gas (AAOG) and Zenith Energy (ZEN).  The general meeting was held on Monday morning and, as expected, the Zenith deal was approved.  Now they need a new licence (but the signature bonus is not yet agreed) and, equally important, they need SNPC to pay up.

While we still don’t know exactly what all the money has been spent on, Anglo African raised over £20 million to fund the loss-making Tilapia deal and all they’ve achieved is a small reduction in production.  They’ve come up with every excuse under the sun, but the reality is that every effort has resulted in failure.  It’s too easy to say it’s all Sefton and Berwick’s fault because they actually employed professional contractors to do the work.  The reality is it’s the project that’s the problem.  Remember this all started in early 2017 with two work-overs with a claimed 100% chance of success of producing 250 barrels of oil per day, to be followed in September 2017 by a well completed in the Mengo producing 500 barrels of oil per day, moving on the jackpot of the Djeno producing 5,000 barrels of oil per day.  It’s now 2020 and they’re believed to be producing less than 30 barrels of oil per day with the field making even larger operating losses than when they bought it.

Apart from 20% of the Congo deal, what AAOG does have left is a claim against it for £1.7 million relating to the acquisition of the Tunisian assets by Sefton and Berwick.  It really is a hopeless case and the shares continue to hit new all-time lows.  And, remember, Riverfort and YAII still have well over 80 million shares left to sell with no floor.

United Oil & Gas (UOG) has no takers yet for the Jamaica farm-out of what they describe as a “super wild-cat area.”  Fortunately, they’ve managed to get a licence extension until 31 July 2020 for the final “drill-or-drop” decision.  The reality here is that when Tullow Oil (TLW) gave UOG 20% of this for free they were simply binning a work programme liability.  Most important news coming up here is the sustained production number for the new well in Egypt.

I’ll be back at the weekend with a full blog and podcast covering all the week’s news and if you’re interested in knowing my actual trading ideas and more about what I think of all the various companies, then subscribe to the private blog at https://oilnewslondon.com/oilman-jim  You can find out more about it there.

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The author holds one or more investments in one or more of the companies mentioned so this post cannot be viewed as independent research. This post does not constitute investment advice or a recommendation to buy or sell and may be incorrect or outdated.

No one was paid for this podcast & all views are the authors own.

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