logo-loader

SP Angel Morning Oil & Gas Chariot Oil and Gas, Nighthawk Energy, Max Petroleum, Sirius Petroleum, Nostra Terra Oil & Gas and others

Last updated: 10:54 01 May 2015 BST, First published: 09:54 01 May 2015 BST

no_picture_pai

Headlines

Chariot Oil & Gas (LON:CHAR) – Activity Closer: While the Company’s owners have had a long wait, today’s news reminds us that Chariot’s exploration programme is starting to draw close. Given that each of its prospects has the potential impact to make a significant difference to the Company’s overall valuation, we believe Chariot’s current “market worth” does not adequately reflect the opportunity within its portfolio.

Max Petroleum (LON:MXP) – Dilution Ahead, But its in Survival Mode: We see a difficult journey ahead for the Company, and its outcome is by no means guaranteed. But on the basis that AGR will also provide the Company with a kyrsha in Kazakhstan, where AGR’s principals have significant sway, we believe that the future is brighter than it has been for a long time.

Nighthawk Energy (LON:HAWK) – Valorising Existing Assets: We believe that today’s news should be warmly received by investors as it demonstrates a management team that is focused on maximising returns from its asset base, whilst minimising costs. Furthermore, the Company’s hedging programme addresses, partially at least, one of the systemic risks in the current operating environment. All in all we believe that the Company’s owners should be pleased with the approach that management is taking.

Nostra Terra Oil and Gas (LON:NTOG) – Right Direction: More than at any time in the Company’s history, the outlook remains bright, and pending the resolution of the status of the barrels in the White Buffalo asset in Wyoming, the history could be very bright indeed.

Roxi Petroleum (LON:RXP) – Luxury Problem to Have: This is a luxury problem for the Company to have, and one which we believe has real value implications. We look forward to the commencement of the testing programme, and we believe that investors should be optimistic about the implications this has for the current share price.

Sirius Petroleum (LON:SRSP) – Optionality is Key: Against this backdrop, we believe that the ideal partner for the Company, and hence its shareholders, is a partner with in-depth technical experience able to deliver a development project and operate. To this end we believe that an industry would be preferable.

News Items

Chariot Oil & Gas (LON:CHAR) – Activity Closer

While today’s announcement that the Mauritanian government has extended the first phase of the exploration license is a plus, the more positive news today is the fact that the integration of the Ras al Beida well data with the existing seismic data sets has supported the prospectivity of Block C-19.

Exploration companies it is all about increasing the likelihood that a material discovery (which will lead to a material development) will be made. No discovery can be made without first “pinning the bit,” and in this respect, with each passing week Chariot’s activity period draws closer.

While the Company’s owners have had a long wait, today’s news reminds us that Chariot’s exploration programme is starting to draw close. Given that each of its prospects has the potential impact to make a significant difference to the Company’s overall valuation, we believe Chariot’s current “market worth” does not adequately reflect the opportunity within its portfolio.

Max Petroleum (LON:MXP) – Dilution Ahead, But its in Survival Mode

News of a company able to achieve financing is usually received with relief, however, in this instance given the perilous state of the Company’s finances, it is difficult to see how any financing, no matter how generous, will see anything other than a wipeout for existing shareholders.

This then raises a philosophical question for shareholders as to whether it is better for a company, including Max Petroleum, to go into administration, and for the owners of the Company to take the risk in the line behind the creditors.

In this instance, however, we believe that there is still material value within the Company’s portfolio, which in such a distressed state would never be realised. Furthermore, and adding as further ballast to the argument that a debt restructuring and new equity is a better way to go, is that in unlocking the value of that portfolio, even in an environment post the dilution that is ahead for existing shareholders, that the per-share value is likely to be higher than where it is now.

We see a difficult journey ahead for the Company, and its outcome is by no means guaranteed. But on the basis that AGR will also provide the Company with a kyrsha in Kazakhstan, where AGR’s principals have significant sway, we believe that the future is brighter than it has been for a long time.

Nighthawk Energy (LON:HAWK) – Valorising Existing Assets 

the Company’s operations update today is by no means the “home run” that investors always seek, but to our mind it is no less positive in the context of the current operating environment. Operationally, the Company is looking at the incremental opportunities with its existing production base, which not only adds cash flow, but has the doubly positive impact of “sweating” the existing asset base, which is better for cash flow.

Financially the Company is also taking a prudent approach. Unlike elsewhere in the London market, such as Afren, the Company is applying judicious use of financial instruments, such as forwards, to guarantee some of its cash flow, which if the oil price improves from the current levels will be a drag on earnings recovery, but if it stays at current levels, or declines, it has the significantly positive impact of being able to guarantee at least some portion of the cash flow.

We believe that today’s news should be warmly received by investors as it demonstrates a management team that is focused on maximising returns from its asset base, whilst minimising costs. Furthermore, the Company’s hedging programme addresses, partially at least, one of the systemic risks in the current operating environment. All in all we believe that the Company’s owners should be pleased with the approach that management is taking.

Nostra Terra Oil and Gas (LON:NTOG) – Right Direction

Today’s quarterly update is a solid step forward, but as we have said previously it is easier to post larger gains from a smaller starting point than it is further up the curve. Given that it is still an increase, in this environment, we believe that the management team should be applauded.

That said, for us, the real test of the Company’s metal will come when the 100% owned Wyoming properties are ready for drilling. However, we are uncertain as to whether the 20 “potential” horizontal drilling locations are “proved undeveloped,” or whether the 13mm bbls highlighted in the announcement are Contingent Resources or Prospective Resources. While the Company have called it the “White Buffalo Prospect,” they have also called their Chisholm Trail asset, which is a development play a “prospect.”

This requires clarification urgently, because it makes a material difference to the Company’s current valuation. If they are Contingent Resources, then all that is required is the right oil price to make at least some of those 13mm bbls commercial. If, however, they are Prospective Resources, then the valuation contribution would be significantly less, if at all, as we wager that the valuation contribution, on risked basis, would be offset by the belief that a fundraising would need to be undertaken to fund the first exploration well.

More than at any time in the Company’s history, the outlook remains bright, and pending the resolution of the status of the barrels in the White Buffalo asset in Wyoming, the history could be very bright indeed.

Roxi Petroleum (LON:RXP) – Luxury Problem to Have

Today’s news regarding the recovery of the drill string, while disappointing in that what is usually a relatively simple and straightforward procedure, has become complicated, investors should also look at why this is happened.

Pressure, whether at the surface and caused by the weight of the air, or subsurface and caused by the weight of the liquids therein, are all caused by gravity and are easily predictable. Therefore, in order for a pressure to exceed this gradient, it must be caused by something else. Unless the reservoir rocks are hot (>100C) and water saturated, overpressured horizons is usually an indication of hydrocarbons that have been generated into a sealed system.

This is good for two reasons, (i) that it clearly identifies the presence of hydrocarbons; and (ii) the fact that it is overpressured means that the motive force to “push” the hydrocarbons out of the reservoir and into the wellbore is far higher, which can make a poor reservoir commercial, or a good reservoir world-class.

This is a luxury problem for the Company to have, and one which we believe has real value implications. We look forward to the commencement of the testing programme, and we believe that investors should be optimistic about the implications this has for the current share price.

Sirius Petroleum (LON:SRSP) – Optionality is Key 

News that the Company is pulling its financing is disappointing, but not altogether surprising. Despite the fact that this is an early stage development asset, there have been perceived to be significant risks in the execution of the project.

Nevertheless, we believe that the assets are worthy of investment, even in this price environment, and that the only impediment to a successful development, and the Company realising value for its asset base, is the fact that the management team requires bolstering.

Against this backdrop, we believe that the ideal partner for the Company, and hence its shareholders, is a partner with in-depth technical experience able to deliver a development project and operate. To this end we believe that an industry would be preferable.


Caledonia Mining tackles 2023 challenges with optimism for 2024 as it...

Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL) chief executive Mark Learmonth tells Proactive's Stephen Gunnion the company faced a challenging 2023, primarily due to poor production in the first half of the year at its core asset, the Blanket Mine in Zimbabwe, and an underperformance...

1 hour, 50 minutes ago