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Northland Capital Partners View on the City - Ascent Resources, Photonstar LED Group

Published: 09:26 30 Jan 2017 GMT

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Ascent Resources plc (LON:AST) – CORPORATE*: Result of Pg-10 Flow Test

Market Cap: £30.6m; Current Price: 2.8p

Pg-10 flow test results exceeded management's expectations

Ascent reported that the flow test at Pg-10 has been successfully completed and the results have exceeded management's expectations.

The maximum stabilised flow rate was 8.8 million standard cubic feet of gas per day (MMscfd) which is in line with the rates measured when the well was initially tested for a short period in 2011 and is significantly above the minimum commitments required under the gas sales agreement with INA.

Well Pg10 is a vertical well with an 'S' deviation, which was drilled to a total depth of 3,497 metres. The well targets the 'F' sand at 3,125 to 3,175 metres. 

The stabilised flow rate achieved on a 12mm choke was 249,064 cubic metres per day or 8.8 MMscfd per day. Over the course of the 56 hour test the well was open for a total of 37 hours. 

The well produced total gas of 295,387 cubic metres (10,431,595 cubic feet) along with 28,250 litres of water and 2,930 litres of condensate. The average flowing well head pressure was 271 barg (3,930 psi absolute).

 

PhotonStar (LON:PSL) – CORPORATE*: Trading Update

Market Cap: £2.1m; Current Price: 1.1p; Target Price 4.9p

Trading update notes challenging conditions

PhotonStar LED Group Plc, specialist in the design and manufacturer of intelligent lighting and building control solutions, has issued a trading update for the year ended 31 December 2016.

The company reports that it has “experienced challenging trading conditions in the second half of 2016 and as such the Group's results for the year ended 31 December 2016 are expected to be below current market expectations”.  The audit for the year ended 31 December 2016 is underway.

PhotonStar reports unaudited FY16 revenue of approximately £5.4m (FY15: £6.9m) due to “continued price pressure in the more traditional area of the Group's business (light fixtures), the on-going emphasis by the Group on transitioning itself away from light fixtures and into intelligent lighting solutions and building control systems and market uncertainty following the U.K.’s "Brexit" referendum which has had a negative impact on existing and potential customers”.  The company reports that “these factors impacted Group revenues strongly during Q4 of 2016 and have also impacted revenues during January 2017”.

Consequently, PhotonStar reports an unaudited EBITDA loss in 2016 of approximately £(0.6)m and unaudited loss after tax for the year of £(1.3)m, which is inclusive of investment by the Group into its halcyon™ system of approximately £0.6m.  PhotonStar reports revenue generated by the installation of halcyon™, primarily as trial systems that are expected to result in much larger projects, of approximately £0.5m. Overheads for the year 2016 were £2.5m, compared to £3.5m for 2015, reflecting cost savings. At 31 December 2016 the unaudited cash balance was approximately £0.23m, with £0.83m of invoice financing debt drawn down out of the £1.65m facility.

PhotonStar reports that paid-for trials for halcyon™ and halcyon cloudBMS™ are still under evaluation by customers, with several new trials having been installed during Q4 2016.  It reports that  halcyon™ revenues slowed slightly and were below expectations, whilst trials identified the need for added software and upgrades to meet the requirements of large systems.

The Group reports completion of development work on hardware and Internet of Things device firmware for lighting control during Q4 2016 which will reduce R&D expenditure by approximately £150k/pa from Q1 2017. R&D focus is now on platform and cloud software development for the halcyon™ platform and halcyon cloudBMS™.   The strategic focus for 2017 is further development of halcyon™ towards roll-out stage and completion of the Group’s transition into becoming a designer and manufacturer of intelligent lighting and building control solutions.

PhotonStar expects to release its full year results for the year ended 31 December 2016 before the end of May 2017.

NORTHLAND CAPITAL PARTNERS VIEW: Projected FY16 revenue at £5.4m compared to our estimate of £6.05m, with the EBITDA loss at £(0.6)m compared to our £(0.3)m outlook.  Pressure on traditional lighting operations (an estimated 58% of our 2016 projections) is not a surprise and underlines the importance of PhotonStar’s emphasis on IoT and intelligent building systems, as attested by its collaboration with IBM and halcyon™ systems development.  We estimated a £0.75m revenue contribution from halcyon™ in FY16; PhotonStar reports a revenue contribution of £0.5m.  The Group made significant cost savings in 2016, ahead of our outlook (£3.28m) which establishes a sound platform for 2017.  We will review estimates in the light of this update but see no deviation from PhotonStar’s stated strategy of halcyon™ systems development.

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