In today’s update, Jim covers the companies he is interested in and what is catching his attention this week.
Oil Man Jim Company Oil & Gas Podcast, 5th October 2019
l3 Energy (I3E) issued its interim report on Monday and set out a clear explanation of the current situation. The first well result was a surprise to the third-party consultants who conducted due diligence on behalf of the institutional investors, which I think explains the heavy institutional selling. All three sets of seismic utilised to map the Liberator structure had conformed to one another and resolved the 13/23c-9 well location as a low-risk target at a structural high.
However, the targeted upper Captain sand was not penetrated at the first well location, so I3E acquired the only other available seismic dataset over the area. This had previously been reviewed by I3E and determined to be unsuitable. However, reprocessed, they believe this seismic will enable additional interpretation.
To allow time to analyse the data and potentially re-permit an alternative location for Liberator’s next appraisal well, I3E is drilling Serenity’s SA-01 as the second well. The well is anticipated to take approximately four weeks. I think the current market capitalisation of £22 million looks fair.
From here, there’s definitely one exploration well (now re-designated as an appraisal well in the last RNS) targeting a potentially significant resource at Serenity, and possibly an appraisal well at Liberator. It’s no longer the development deal it was before, but still remains interesting speculation, which will undoubtedly offer significant trading opportunities.
Global Petroleum (GBP), which announced final results last week is a company rarely mentioned. It’s capitalised at just £3 million but has a lot of assets, particularly its licences offshore Namibia, which cover 11,607 square kilometres (nearly 3 million acres) and make it one of the largest acreage holders in the region. GBP also owns licences offshore Italy where it has been fighting actions by environmentalists in the courts – and winning.
It’s an interesting situation now in Italy since to stop these endless battles between oil companies and greens, the Italian Parliament passed a bill in February this year suspending all hydrocarbon exploration activities, including permit applications, for a period of 18 months.
Following the 18 month evaluation period, the intention is that a hydrocarbon plan will be activated, setting out a strategy for exploration and production, excluding certain areas from future hydrocarbon exploitation. These environmental disputes are what has been holding back oil exploration activity in Italy and those companies whose areas do get approved are going to hit the jackpot since many of the potential resources in these licences are huge and highly profitable if allowed to be developed.
The company has more than enough cash to keep it going and GBP could be worth a punt. It just takes one farm-out to propel this North.
Providence Resources (PVR) and Lansdowne Oil & Gas (LOGP) eventually had to call it a day with the Chinese investors after the funds they claimed to have transferred yet again failed to arrive. Providence now is capitalised at £24 million and Lansdowne at £6 million, but in Barryroe they do actually own a genuine asset.
The shares are highly speculative but offer real potential. Estimated 2C recoverable resources are over 300 million barrels of oil from the two main tested reservoir intervals at Barryroe, and further resource potential has also been identified in other hydrocarbon-bearing intervals with estimates of up to over 1 billion barrels of oil. If they can find another partner, there’s huge upside from this level.
Coro Energy (CORO) and Empyrean Energy (EME) announced the Tambak-2 well spud. Total time to drill, core, log and test is estimated to be approximately 33 days, after which the rig is planned to move to the Tambak-1 location. The Tambak-2 well is primarily designed as an appraisal of the southern area of the Mako gas field and is a very large step out (over 13 km) south of the Mako South-1 location. It sounds more like an exploration well.
The same group that runs Coro Energy (CORO), Echo Energy (ECHO) and Sound Energy (SOU) have taken Nu-oil & Gas (NUOG) as their next shell. There’s undoubtedly a deal coming up, but with the group controlling a billion 0.05p placing shares and 5 billion more shares coming from a £2.5 million loan converting at the same 0.05p price, there’s going to be a huge amount of stock coming out. It all comes down to the strength of the deal coming in, but confidence in the group has been weakened by a poor choice of deals leading to large investor losses at Sound and Echo, and NUOG is a pure bet on how high they can ramp it.
UK Oil & Gas (UKOG) and Alba Mineral Resources (ALBA) announced the spud of the Horse Hill-2/2z Portland well. Both the HH-2z and the existing HH-1 Kimmeridge well are expected to be put into long term production by the end of 2019. I suspect production could easily surpass 1,000 barrels of oil per day – and they have permission to drill another four wells. Given its niche as a British onshore oil producer, UKOG at a current capitalisation of £66 million and ALBA at a capitalisation of £7 million offer opportunity.
Petro Matad (MATD) announced the commencement of testing of Heron-1. Operations are expected to be completed this month. Zenith Energy (ZEN) announced results of its C-37 well. It came in at a maximum of 50 barrels of oil per day after a significant water cut, exactly the same as Block Energy (BLOE)‘s recent well next door in Georgia.
Independent Oil & Gas (IOG) which I mentioned positively last weekend continues to firm up and is still being bought by Richard Griffiths of Jersey and Lombard Odier, both of whom filed TR-1s. There’s good news flow coming up here and I thought it interesting to see that IG is no longer allowing leveraged purchases on this. The market capitalisation is £74 million, so still plenty of upside when the scale of the project is considered.
Bahamas Petroleum Company (BPC) had a turbulent week. By Wednesday, it had collapsed to half of the price two weeks ago when I said it looked overvalued. On Thursday it issued a statement regarding potential fundraising denying any immediate intentions of undertaking an equity placing. Shorts panicked and pushed the share price back up over 2p. Reality is it’s very unlikely that they will be able to arrange a farm-out and, in my opinion, it’s only going to be possible to raise the funds for the well they have to drill with a very substantial equity placing. I think this will happen and at a much lower price, at which point I believe it will be worth looking at.
Another company needing a large placing is Reabold Resources (RBD), which issued a statement regarding potential fundraising. It’s in the process of taking indications of interest from investors with regard to an equity placing of between £20 – 24 million next week. Tower Resources (TRP) needs money too and issued non-news last week I guess to excuse a price move up. TRP is another one that will be interesting post-placing.
In other news, Echo Energy (ECHO), Victoria Oil & Gas (VOG), Rose Petroleum (ROSE), President Energy (PPC), Savannah Petroleum (SAVP), Petroneft Resources (PTR), Block Energy (BLOE), San Leon Energy (SLE), Aminex (AEX), ADM Energy (ADME), Cabot Energy (CAB), Nostra Terra Oil & Gas (NTOG) and Zoltav Resources (ZOL) announced interim results.
Cadogan Petroleum (CAD) announced the sale of Gazvydobuvannya and receipt of notice of requisition of a general meeting, Columbus Energy (CERP) announced ministry approval to drill the Saffron prospect and a new country entry, Caspian Sunrise (CASP) announced a BNG operational update, Oilex (OEX) made numerous sundry announcements, Egdon Resources (EDR) announced an operations update, Hardy Oil & Gas (HDY) announced the completion of sale of HEPI, Angus Energy (ANGS) announced the submission of its Balcombe planning application, TomCo (TOM) announced an operational update, IGas (IGAS) announced a new debt facility signed and Mosman Oil & Gas (MSMN) announced a Stanley-3 production update.
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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.
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