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SP Angel . Morning View: Tower Resources, Amerisur Resources, Frontier Resources and Zenith Energy

Published: 09:41 08 May 2018 BST

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Headlines

Company

Reason

Headline

Valuation

Impact

Tower Resources***
(TRP LN)

Full Year Results
& Operational update

Sufficient cash for now, Thali programme key outlook driver.

+

Amerisur Resources
(AMER LN)

Operational Update

Lower production, but outlook remains undiminished

-

-

Frontier Resources
(FRR LN)

Operational update

latest drilling results continue to lack context for the prospectivity for the wider block.
Cause for concern.

-

- -

Zenith Energy
(ZEN LN)

Operational update

Lack of an Azeri study until recently underlines "hit and hope" approach to drilling.
Undermines management's credibility.

-

- -

In Brief

 

  • Tower Resources*** (TRP LN – 1.42p) – Forward Outlook More Important: Today’s full years are only really about one number and the commentary. The most important is that the Company has sufficient cash resources for its immediate plans, although it does highlight the need for further financing, should it drill on Thali (offshore Cameroon). To our mind, the outlook remains tied to the only asset that matters in the medium term, which is Thali. With the outcome of the revised work programme yet to be finalised and approved, these will be key for the next 6 – 8 months, including a better handle on cash requirements.

  • Amerisur Resources (AMER LN – 16p) – Steady as She Goes: Today’s update underlines the often “saw-tooth” progress that is made by oil companies, with some months relatively outperforming others. We believe that while today’s is not the most buoyant, relative to others the Company has issued, both qualitatively and quantitively, to our mind the underlying news remains positive and one where the Company’s owners should feel pleased. 

  • Frontier Resources (FRR LN – 0.50p) – Need to Pull it all Together: Another update and another set of drilling results, all of which look promising, but the problem is, in isolation, it doesn’t mean anything. What 5hesenresukts need to do is bring together all of the technical and study work that has been completed in the last ~10 years and tell us what it means for the commerciality of the assets. As we have said previously, we don’t believe that the Company has the technical skill base in-house to be able to organise and set up a programme that collates all of the results and integrates it all to deliver a future programme that clearly signposts the way to value. The management owes the Company’s owners a clear strategy for its asset base and what the scale and timing of the value generation will be. For too long now the management as traded on piecemeal information without measuring against the study as a baseline (if it exists), to act as a benchmark. As it is, this is yet another announcement that lacks context.

  • Zenith Energy (ZEN LN – 7p) – Only Now the Studies?: Today’s update leaves us rather curious as to what the Company has been doing since before it signed its RPDSA, if its entry to Azerbaijan wasn’t undertaken on the basis of a detailed assessment. We are not shocked by the disclosure, as we have consistently stated that the Company needs to disclose the well performance against its plans. The first announcement of the study of the 10th of April was “a” study, when in fact it was “the” study that we have discussed that needs addressing. While this should rightly embarrass the management team, the fact that the study is now being executed means that the results of the technical study of the field should direct the Company’s Azeri plans going forwards, and quantify the economic gains for the Company’s owners, opposed to “hit and hope.” In this context, the move into Indonesia is looking less a serious attempt to grow the business and more an attempt to distract from its current state in Azerbaijan. All we can hope for is that the planning and assessment that goes into any future deals is more developed than was seemingly the case for its flagship programme in Azerbaijan.

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