Dominion Petroleum shares look to make up for lost time

Dominion Petroleum (LON:DPL) shares looked to make up for lost time, rising today as the market was allowed to reveal its response to yesterday’s news that it will not go-ahead with a Malta farm-in deal and that it has a secured a new exploration license in Kenya. The shares could not be traded in London yesterday due to a technical hitch.

The London Stock Exchange informed the company at 2pm yesterday that there was an “isolated reference data issue that related specifically to Dominion's shares” and, as result, they would unavailable for trading during the session.

Trade reports in the company's shares that were submitted yesterday were rejected and member firms had to re-submit those same reports again today.

Today, with the shares trading normally, the stock rose 11.6 per cent or 0.55 pence to 5.28 pence in the response to the Malta announcement and further license success in Kenya.

The initial Malta farm-in deal was agreed with Mediterranean Oil & Gas (LON:MOG) in late June but was always dependent on Dominion being successful with a US$50 million fundraiser.

On 25 July, however, at a Special General Meeting, Dominion shareholders voted against the fundraiser. Dominion’s statement today confirms it will not be progressing with the farm-in and that it will now have to pay MOG a US$225,000 termination fee.

The strengthening of its deepwater exploration position in East Africa, meanwhile, is being hailed by Dominion chief executive Andrew Cochran as a major positive. He says the territory in which Block L15 is located is one of the “most sought after addresses in the exploration industry these days”.

He adds: “The region is seeing both growing attention from, and accelerated activity by, major players with Kenya now due for deepwater drilling within the next year following the last year's successes in Tanzania and Mozambique.

"Dominion's new award represents a material expansion of an already enviable deepwater East African portfolio. We can now focus our attentions on the business of exploring these blocks, realizing their true value and embarking on substantive discussions with potential partners to establish plans for drilling."

East Africa has become a major hydrocarbon hotspot of late following a series of major gas discoveries in the region – made by Anadarko (NYSE:APC), Cove Energy (LON:COV), BG (LON:BG.) and Ophir (LON:OPHR).

Dominion's plan is to tie-up a major partner so it can progress a drill programme of its own. Crucially the company believes that its newly expanded acreage could attract even more 'industry interest' and it can now adopt a partnering strategy for these assets.

The company expects to formally sign a production sharing contract (PSC) in Nairobi in the coming weeks. Dominion will be the operator of Block L15 and it will have a 100 per cent stake in the block.

A well was previously drilled on the area covered by Block L15, back in 1985, by Union Oil which encountered good oil shows in the Palaeogene and Upper Cretaceous intervals.

Dominion believes that its assets may be de-risked further in the next twelve months, thanks to nearby exploration drilling.

The new asset, Block L15, lies immediately to the north of Block L8 where a consortium that includes Tullow Oil (LON:TLW) is expected to drill a well on the Mbawa prospect, estimated at 1 billion barrels, next year.

The proposed PSC will have an initial two year exploration period, with a minimum work commitment of US$2.85 million and the acquisition of 250 square kilometres of 3D seismic data.

Beyond this initial two year period Dominion can extend the PSC further by committing to drill a well on the block.

The company believes that the terms and the commitments for L15 compare very favourably to other countries in the region, relative to the block’s potential resource.