www.wessexexploration.com
Wessex Exploration plc (Wessex) was formed to explore the Wessex and Weald Basins of southern England at a time when the prolific Sherwood Sandstone reservoir had just been discovered in the giant Wytch Farm oil field and smaller oil and gas discoveries were being made in the Weald Basin. Wessex completed a regional geological study of these basins and concluded that the complexity of the stratigraphy, structure and geological history of the basins required a careful, disciplined and highly technical approach to hydrocarbon exploration and that additional significant hydrocarbon potential remained in place.
Wessex Exploration shares rise as investors give their endorsement to cash call
Shares in AIM-listed Wessex Exploration (LON:WSX) were up 4 per cent in afternoon trade as investors reacted positively to the company’s £12 million cash call unveiled earlier in the day.
A total of 240 million shares were placed at 5 pence each, which will expand the company’s equity base by a third, and the funds will be used to finance the firm’s continued participation in the Guyane oil block.
The modest 0.3 pence discount to last night’s closing share price suggests a great deal of support for the fundraiser.
It also reflects the huge interest in the potentially transformational events off the coast of the tiny South American state.
In September operator Tullow Oil (LON:TLW) revealed the Zaedyus well on the Guyane block had uncovered 72 metres of net pay oil in two turbodite fans.
The discovery effectively proved that Guyane is the mirror image of the Jubilee Field on the other side of the Atlantic off the coast of Ghana.
Wessex owns a 1.25 per cent stake in the exploration licence held via a joint venture company called Northpet Investments, which is 50 per cent owned by Northern Petroleum (LON:NOP).
The other partners are Shell (LON:RDSA), which is taking over operatorship of the Guyane licence, and Total.
On November 9, Tullow confirmed the partners were working on the 2012 exploration programme, which will include 3D seismic and the drilling of two wells.
This is expected to commence in mid-2012 once all necessary approvals have been obtained.
Wessex described the Zaedyus discovery is a “company-changing event”, adding that it has “every intention of remaining part of the consortium”.
WH Ireland, the company’s broker, said there are at least six fans within the eastern slope of the licence area, making the system potentially larger than that of the Tano Basin, offshore Ghana.
It estimates the ‘all in costs’ of exploring the area will be something in the order of US$160 million, or £102 million.
This WHI translates to a commitment of US$2 million a well – or £1.3 million.
“This raising is critical to the fulfilment of Wessex’s likely exploration and appraisal commitments in this now proven frontier petroleum basin,” the broker said in a note to clients.
WHI has a ‘base case’ valuation of Wessex’s stake in the Guyane block of US$60 million, or £38 million.
However this is based on very scant information on the block published by Tullow to date. Wessex’s market value, meanwhile, currently stands at £26.5 million.
The market’s reaction to the cash call has been hugely encouraging, with the stock up 4.5 per cent at 5.53 pence per share in early afternoon deals.
“This raising is clearly a positive step as it guarantees Wessex’s participation in the evolution of this highly promising frontier basin,” concluded WH Ireland, reiterating its buy advice.
“(We) expect to update the valuation of Wessex’s interest in the Guyane licence area as additional substantive information flows from the operator.
“It is expected this additional data could underpin a substantial uplift in our valuation.”
