10 November 2019 – UK Oil & Gas (UKOG) started the week with a Horse Hill update. So far they’ve successfully drilled 2,016 ft within the Portland reservoir’s most oil productive zone. It’s a clever PR, because the news last weekend was that of a rig engine fire. However, they’ve fitted a new rig engine now and are drilling the remaining 1,200 ft horizontal section. Drilling is expected to be completed by mid-November, at which point they will immediately complete, clean-up and flow test the well. The share price is still held back by Riverfort selling, but as this eases up I expect UKOG to go higher.
Rose Petroleum (ROSE) announced a placing to raise £1.25 million at 1.1p. The directors are buying a 10% interest in a 317 acre lease from themselves, but it actually equates to just a 2.217% working interest in the spaced drilling unit. It’s a shale project, an area in which US companies are trying to divest, yet they’re paying over $9,500 an acre for it. It’s also worth remembering that US projects which show up in London these days usually are doing so because they can’t raise funds in North America. I suspect that may well be the situation here.
Bahamas Petroleum Company (BPC) announced it had raised $11.4 million at 2p per share via a placing and open offer. However, the Company’s present estimate of the total cost for the drilling of the initial exploration well is in the range of $20 million to $25 million and they warn that “in circumstances where suitable funds are not raised via the Conditional Convertible Notes, or if a farm-out is not secured, the Company would likely not have sufficient cash to complete the drilling of the planned initial exploration well in 2020.” As I’ve said several times before, I wouldn’t consider this until the well is fully financed. If it isn’t drilled next year, they lose the licence.
IGas Energy (IGAS) had a difficult week following the announcement that the UK Government has announced a moratorium on “fracking” in Britain. The shares hit a low of 21.5p on Monday before stabilising around 30p, at which price the company is capitalised at less than £40 million. Some say the moratorium is only for the duration of the election campaign, but check out the actual betting odds for the general election and the chances of no overall majority / a hung parliament are around evens. Does anyone really think that a Labour/LibDem/Green coalition would reinstate “fracking”?
There’s also been a interesting development at Cabot Energy (CAB), which previously announced the proposed cancellation of its AIM admission next month. On Monday, Eric Krafft of Monaco bought 10.96% of the company. The share price now has stabilised around 2p and further news is awaited with interest. Perhaps it’s not all over yet? The EGM to approve the cancellation of the AIM listing is on 25 November.
I3 Energy (I3E) issued a positive RNS. The Liberator A2 well has been spud, the Company has agreed to issue £5 million of equity to funders of i3’s junior loan notes at a price of 35 pence per share to provide additional flexibility to extend the drilling programme, and the funding long stop date by which the Company was required to enter a reserve-based lending facility or to source alternative development financing has been extended from 6 December 2019 to 30 April 2020. On the minus side, Lombard Odier continue to sell down, but once they’re clear, I see the share price moving higher. Overall, at this level, to me it’s a buy. Although always remember that in the oil business, nothing is risk free.
Sound Energy (SOU) issued a hollow sounding RNS. The company has now entered into a non-binding heads of terms agreement with a privately-owned, UK registered company and has granted this company an exclusivity period expiring on 14 February 2020. The announcement was not received well and, after the last “keep the lights on” placing a few months ago at 10p, the share price has now dropped under 5p and the market capitalisation has dropped under £50 million. I remember receiving a huge amount of criticism for questioning the merits of Sound Energy last year when it had a £450 million market cap. It was so obvious even then that it was questionable, with its self-important behaviour and the pretence that the team were somehow leading experts. The rot has also spread through the other members of their so called “holy trinity” (Echo Energy (ECHO) and Coro Energy (CORO)) all of which were marketed to the gullible in an almost show business manner, resulting in huge investor losses. I warned about them all – all the way down – and you can read what I said in the Blogger archives at https://oilmanjim.blogspot.com. Back to the current “deal” for Sound, we don’t actually know who the private company is which is meant to be buying the Moroccan assets, or whether it even has any money, but one thing’s for sure, they’ll use this announcement to do another placing and keep paying their six and seven figure salaries.
Pantheon Resources (PANR) issued an equally insincere announcement. Reading between the lines, it doesn’t sound like they’re going to be drilling this winter and in reality I’m not sure they’re ever actually going to farm out leases to which Halliburton publicly attached no value at all. I like the line in the RNS in relation to the progress of the farm-out when they say that they “simply cannot discuss it,” in which case why even bother issuing an announcement?
Savannah Petroleum (SAVP) issued a Seven Energy transaction update. Final long-form documentation in relation to the Seven Energy Group financial restructuring has been agreed and next up is a court hearing on 13 November at which Seven Energy International Limited will request the appointment of administrators in order to effect the transfer of the Seven Assets to group companies controlled by Savannah and AIIM. Currently trading around 26p, institutions financed this deal at 35p a share two years ago and since then Savannah have had significant drilling success in Niger. It’s one that I see trending up.
Baron Oil (BOIL) noted the provisional award of the Timor-Leste offshore Chuditch Petroleum Sharing Contract to SundaGas. Baron is entitled to be issued a 33.3% shareholding in the intermediate parent company of SundaGas and, according to Executive Chairman, Malcolm Butler this has the potential to add significant value to Baron and its shareholders. Could this now be the new lease of life for BOIL?
Two companies which I highlighted recently have started moving. PetroTal (PTAL) is up 60% and 88 Energy (88E) is up 30%. Both have significant further potential in my opinion, particularly 88E (currently 0.875p), which has a broker’s price target of 4.8p and an un-risked value per this broker of 47.8p. Brokers’ targets are always hugely optimistic, but with these numbers out there I see 88E moving higher. Current favourites for those interested are I3E, 88E, UKOG and PTAL. Previous favourites were I3E, ECO, UKOG and PET. ECO more than doubled and PET rose 800%. We’re now waiting for I3E and UKOG to perform.
Finally, I’ve started a private blog available on subscription. You can read the details, plus a bit more about me, and subscribe if you wish here: https://www.oilnewslondon.com/oilman-jim
In other news, Europa Oil & Gas (EOG) announced an update on the Wressle public enquiry and confirmed that its production is unaffected by the fracking moratorium, Egdon Resources (EDR) announced an update on the Wressle public enquiry and a farm-out exclusivity agreement for P1929 and P2304, Rockhopper Exploration (RKH) announced a PL032 discovery area licence extension, Union Jack Oil (UJO) announced a response to the UK Government shale gas moratorium, a response to market speculation and the conclusion of the Wressel public enquiry, Zenith Energy (ZEN) announced the proposed acquisition of a Norwegian oil company and the approval of a prospectus, Alba Mineral Resources (ALBA)announced a Horse Hill update, Empyrean Energy (EME) announced the Tambak -1 well spud, Aminex (AEX), Andalas Energy & Power (ADL), Cadogan Petroleum (CAD) and Caspian Sunrise (CASP) announced operations updates, Reabold Resources (RBD)announced completion of the Rathlin cash investment and an update on West Newton, Attis Oil & Gas (AOGL) announced the extension of a memorandum of understanding, Solo Oil (SOLO) issued a Ruvuma update, Range Resources (RRL) issued a drilling rigs sale update and Hurricane Energy (HUR) issued a response to media speculation.
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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.