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SP Angel Morning Oil & Gas Petroceltic International, Afren, Northcote Energy, Tethys Petroleum and others

Published: 09:37 02 Mar 2015 GMT

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News Items 

Rex International – Gemini Results End of March

Rex is today announced that the Gemini prospect, which it recently farmed into via its Lime Petroleum joint venture with Hibiscus Petroleum, should reach target depth and report its findings by the end of March.

We are taking this opportunity to reiterate our BUY Recommendation and S$0.87 Target Price.

Hibiscus Petroleum – Full Year Results

Given that Hibiscus is an exploration company the most important number in these results is the cash, and in this respect, that the Company has in excess of MYR100mm in cash or receivables, almost 3 times its current liabilities, the Company has some measure flexibility over its forward programme, which we will await further updates on over the next four weeks.

2014 has seen the start of the Company's transformation from a SPAC to the fully fledged E&P company. amd given the activity over the coming 12 months, there is plenty of opportunity for revaluation.

Petroceltic International (LON:PCI) – Now the Focus can be the Business

Following last week’s conclusion to the EGM, in which all the resolutions proposed were rejected by the majority of the Company’s shareholders, management can now focus on the business of operating its asset base.

In this respect there is lots to do, and the recent EGM, although successful, will still have been a distraction, at executive level at least. Nevertheless, we believe that the combination of this team and the decline in support costs (precipitated by the low oil price), should mean that the distraction will at least have some positive impact.

Furthermore, we are repeating our belief that Tom Hickey should be restored to the board, in addition to the replacement of the two independent directors that resigned. We believe that the independence of directors is essential in maintaining good governance, and they must always have the courage of their convictions.

The next phase for the Company will now be keenly watched, and we believe that without the shadow of this hanging over them, that the Company’s management will now start to direct all of that energy towards driving the Company forward.

Whilst there may yet be some downward pressure on the share price as those that bought in for a change in regime seek to lighten their position, we believe that the current value of the shares is undemanding, and offers an excellent opportunity for investors for the long-term.

Red Emperor Resources (LON:RMP/ASX:RMP) – Moving Forwards

After what has seemed to be a long time without activity, the Company has today disclosed that it has entered into a farmin agreement over offshore Philippines SC55 with Ottaway Energy. This marks a return to exploration activity following what has been a hiatus period while the Company has reviewed not only its options but the projects available for it to invest in.

We will await news of the planned forward programme, the associated costs as well as the size of the opportunity that the Company has invested in.

Cairn Energy (LON:CNE) – Cap Boujdour Uncommercial

Cairn Energy has disclosed that its recent Cap Boujdour exploration well has failed to encounter commercial quantities of hydrocarbons, despite approximately 14m of net pay. The results of this well will be integrated with the existing dataset and any further prospectivity will be highlighted.

Whilst this is disappointing, for us Cairn Energy, in the near term at least, is all about delivering cash flow from its recent acquisitions in both the UK and Norwegian North Sea.

Afren (LON:AFR) – Debt Restructuring Making some Progress

After what has been a torrid time for the Company, that it is able to report some progress in its debt restructuring is a significant positive. What is unfortunate however, is that none of the management a standing front and centre, that they’re leaving the eminently capable, and worthy CFO candidate, Simon Hawkins to stand front and centre.

Somebody of Simon’s Character and bona fides would do well to be appointed a more active and direct role within Afren's executive management team, and help replace the old approach that has been typified by those that have been removed from their position.

Tethys Petroleum (LON:TPL/TSE:TPL) – Increased Focus on Cash Flow

it is fair to say that the Company, whilst not underperforming, has drifted over the last few reporting periods. What has been clear over the last quarter, however, is that there has a definite shift in emphasis, migrating nearly all the focus onto the all-important cash flow.

We believe that this will not only increase the value of the Company, as investors can see the asset base being monetised, but in this environment, given the lack of liquidity in the market as a whole, it will also provide the Company with further flexibility to pursue alternative investments at a much more advantageous price than otherwise would have been possible.

We’ll be monitoring progress over the next few quarters, but we believe that in intent, at least, the Company is at last acknowledging that it needs to fulfil its promise.

JKX Oil & Gas (LON:JKX) – Step in the Right Direction

The lifting of the restrictive covenants placed upon sales gas by the Ukrainian government is a welcome step, and will do much to lift JKX’s outlook. However, this must be tempered against what is a volatile geopolitical backdrop, and whilst we say that it will “do much to lift JKX’s outlook,” it is still relative, as the Ukrainian government could impose a new punitive tax or sales limitation at any moment.

The Outlook has brightened, but risks still remain, especially with respect to its Russian and Ukrainian acreage. The Commpany's diversification straegy is now more important than ever, and any cash resources available, after a buffer has been accumulated, should be directed towards that aim.

Rose Petroleum (LON:ROSE) – Increased Acreage

We believe that the acquisition of acreage at cost, at any point in the cycle, is a positive thing. However, we can’t understand how additional acreage, increased costs and obligations, makes it a prudent move given the limited cash resources that they have available and the “forthcoming completion program.”

Northcote Energy (LON:NCT) – Flexibility to Operate

The receipt of the funds from the recent placement will now give the Company the option 80 to be able to pursue its growth strategy. The trick now is to be able to deploy those funds in a manner which is consistent with generating growth, and doing so in a timely manner.

The next few reporting quarters will be important to the Company and investors alike.

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