SATURDAY'S WEEKLY NEWS ROUND-UP

The news roundups, which are broken down by the sector, provide investors with an opportunity to read a summary of the most interesting news of the past five days of trading in just one story as they prepare for another busy week.

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Weekly oil and gas news summary including Dragon Oil, Europa Oil & Gas, Lansdowne Oil & Gas and Faroe Petroleum

January 19 2013, 9:00am
Weekly oil and gas news summary including Dragon Oil, Europa Oil & Gas, Lansdowne Oil & Gas and Faroe Petroleum

The week ended for offshore oil producer Dragon (LON:DGO) with an upgraded valuation from broker Davy.

It followed an upbeat operational statement earlier this week when it said production for 2012 had ended on a high peaking at 73,500 barrels a day in December after it overcame the sand control challenges that has previously constrained output earlier in the year.

Dragon also revealed a significant uplift in reserves - with 180% reserves replacement in the year - as it ended the year with 677mln barrels of oil and condensate reserves. The company said that it ended 2012 with US$1.7bn in cash.

Davy analyst Caren Crowley increased her net asset value (NAV) estimate for Dragon today to 736p a share from 712p – though she says this NAV is for Dragon’s cash and liquid resources only.

Trading at 580p a share the company’s share price is priced at a significant discount - about 20% - to the broker's NAV estimate.

It was a big week too for IGas Energy (LON:IGAS), which unveiled plans for a two well shale exploration programme in the UK.

IGas has been working on a possible farm-out of its UK shale acreage since the Ince Marshes discovery and it says the new work programme could ‘augment’ the value of the group’s shale business, by appraising its significant shale resources.

The drill programme is expected to cost £15mln and it will be supported by a new £23mln share placing, which was also announced today. 

The placing, which will also help fund the acquisition of the ‘conventional’ Singleton oil field, will be conducted through a ‘book-build’ process that’s being run by Jefferies and Canaccord. The book opens immediately and it will close at the discretion of the book runners.

Shares in Europa Oil & Gas (LON:EOG) were sent higher this week after impressive, albeit early stage, resource estimates for one of the firm's Irish prospects.

Following ‘first pass’ seismic mapping of the Kiernan prospect the company, which is currently worth just £16mln, says there could be as much as 1.6bln barrels of oil in three reservoirs.

Kiernan is one of two prospects the company has identified within the acreage it has under licence options in the South Porcupine basin, off Ireland’s west coast. The other, Mullen, is estimated to contain a shade under 500mln barrels of oil.

Europa is now looking to bring in a partner to help bring the projects forward, starting with a 3D seismic programme and followed by drilling.

Elsewhere in the sector, Lansdowne Oil & Gas(LON:LOGP) said its projects in the Celtic Sea have been substantially de-risked as it continues to progress farm-out talks with interested parties.

On Thursday, the company reported on a technical study, based on analysis of seismic data as farm-out discussions for drilling on its Amergin, Midleton and Rosscarbery licences continue.

It said the work indicated the likely presence of gas in the Midleton, SE Rosscarberry and Galley Head accumulation.

Also, according to Lansdowne, the results for the Amergin oil prospect indicate that the Lower and Basal Wealden reservoirs - which are proven to be productive on the adjacent Barryroe field - appear to be present at Amergin.

Turning to the North Sea, a farm-out deal for the Bentley oil field will focus investor attention on Xcite Energy (LON:XEL, CVE:XEL) and its key development project, said to Merchant Securities.

In an initiation note, Merchant analyst Brendan Long described Bentley as "one of the most attractive undeveloped fields in the North Sea".

The City broker rates Xcite as a ‘buy’ with a 167.8p price target.

Long says that appraisal drilling and last year’s production have reduced the risks of the Bentley reservoir, and he believes there is now a ‘heightened degree of confidence’ in the field’s expected production profiles.

Also this week, Faroe Petroleum (LON:FPM) said it expects to be producing at a rate of 7-9,000 barrels of oil a day in 2013 as it gears up for another ambitious drilling programme.

The Atlantic Margin focused group plans a further five wells in the next 12 months at a cost of £50mln, having sunk six in 2012.

And with £75mln on the balance sheet (plus undrawn debt) it has the financial wherewithal to implement these plans.


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