Proactive Investors - Run By Investors For Investors

Beaufort Securities Breakfast Today Oilex, San Leon Energy and Frontier Resources International

Beaufort Securities Breakfast Today Oilex, San Leon Energy and Frontier Resources International

The Markets

Market opening: Markets are likely to open higher today. FTSE 100 futures were trading 19 points up at 7:00 am.

New York: Wall Street extended losses amid reports showing weak manufacturing growth in the US. Healthcare and consumer discretionary stocks were the laggards. The S&P 500 closed 0.5% lower.

Asia: Markets witnessed light trading amid disappointing global cues and looming concerns over Ukraine. The Nikkei edged down 0.4% and the Hang Seng was trading 0.5% lower at 7:00 am.

Continental Europe: Equities closed in the red, driven by weak manufacturing data from China and aggravating tensions over Ukraine. Germany’s DAX and France’s CAC 40 lost 1.7% and 1.4%, respectively.

Crude oil: On Monday, the prices of Brent Crude Oil edged down 0.1%, while the WTI crude oil prices gained 0.1%. The spread between the two varieties stood at US$7.2 per barrel.

UK small caps: Yesterday the FTSE AIM All-Share index closed 10.67 points (-1.25%) lower at 845.66

Today’s news

Debate over Scotland’s independence still unresolved

Yesterday, a monthly survey by the research group Taylor Nelson Sofres (TNS) revealed that the proportion of respondents who wished to remain in the UK was unchanged at 42%. The share of Scots favouring independence edged down one point to 28%. Around 30% of the surveyed people stated that they were undecided.

Russia suspended from the G8

The remaining members of the Group of Eight (renamed as the Group of Seven) have decided to suspend Russia from participating in the meetings of the group. The Group of Seven has cancelled the G8 meeting which was scheduled to be held in Sochi and has decided to hold its summit in Brussels in June. Besides, these industrial powers have also warned of further sanctions on Russia if the latter escalates military advances in other parts of Ukraine.

Company News

Frontier Resources International (LON:FRI)

Yesterday, Frontier Resources International provided an update on its operations in Namibia and Zambia. With encouraging results from evaluation done over the Block 34 in the Kafue Trough prospect in Zambia and the Blocks 1717 and 1817 in the Owambo Basin in Namibia in 2013, the company is now planning to proceed with the next phase of operations. Frontier holds 100% paying interest and operatorship in both these licenses. In Namibia, Frontier plans to conduct a soil gas sampling survey and acquire 2D seismic data, while, in Zambia, it aims at obtaining airborne gravity and magnetic data. Frontier has put in place an online virtual data-room to facilitate data review by potential farm-in partners for these two prospects, with another one planned for Q2 2014 for the Block 38 in Oman.

Our view: Positive results from geological, geophysical and geochemical studies at the Namibian and Zambian licenses highlight the high-grade prospectivity of these areas. A potential partnership with suitable industry peers is likely to accelerate the progress of these projects through enhanced funding, and knowledge & expertise of the potential partners. In recent months, Frontier has made good progress in its exploration programme at the Owambo Basin, with confirmed presence of oil producing source rocks and extension of the exploration license. In light of these milestones and an aggressive exploration strategy, we remain optimistic about its future growth prospects and reiterate our Speculative Buy rating.

Beaufort Securities Limited acts as joint corporate broker to Frontier Resources International plc.

Oilex (LON:OEX)

Yesterday, Oilex reported mechanical issues with the Essar Land Rig #4 drilling the Cambay-77H well. The rig had completed drilling to a measured depth of 1,626m. The rig is on equipment downtime at no cost to the Cambay Joint Venture, while the replacement parts are being procured. The company expects the rig to resume operations in 10-12 days. Meanwhile, Oilex also announced the start of aircraft and personnel mobilisation for the acquisition of the airborne gravity/magnetics survey over Special Prospecting Authority (STP) SPA-0055 acreage in the Canning Basin onshore Australia. The survey is scheduled to start before 31st March 2014 and is expected to take about 10 days for completion.

Our view: The mechanical problem with the rig at the Cambay-77H well has disrupted Oilex’s progress therein amid encouraging set of developments at the Cambay project recently. The current 30% stake in the Cambay PSC translates into ~50 million barrels of oil equivalent (mmboe) of independently assessed 2C contingent resource for the company. On the other hand, the start of exploration programme at the STP-SPA-0055 prospect is a positive development for the company. The upcoming survey results are expected to define the extent of the Wallal Graben prospect into the Canning Basin acreage. Despite strong fundamentals, the exploration setback due to the rig issues at the Cambay project in India and its potential impact on the overall performance of the company, dent the near to medium term prospects of Oilex. Therefore, we revise our rating to a Hold.

San Leon Energy (LON:SLE)

Yesterday, San Leon Energy announcement amendment in the terms of its Letter of Intent (LOI) with Horizon General, originally signed in August 2013. As per the modified terms, Horizon would acquire 22.5% working interest (WI) in San Leon’s Cybinka and Torzym concessions at the Permian Basin in Poland. In return, Horizon would provide full funding of San Leon’s working interest share at the Sosna-1 exploration well (up to gross costs of €1.5m), the Torzym well (up to gross costs of €6m) and the concessions targeting the Permian Main Dolomite or production facilities or both (up to gross costs of €6m). San Leon and Horizon plan to frack the Sosna well and drill the initial Torzym well by 31st August 2014. After completion of the company’s work programme and this farm-in agreement, San Leon would hold 22.5% stake in the site as operator, followed by SNGN Romgaz SA (30%), Sceptre Oil & Gas (25%) and Horizon (22.5%).

Our view: This farm-in deal with Horizon is likely to lead to an accelerated progress at San Leon’s key projects including the Sosna-1 exploration well, the Torzym well and the Permian Main Dolomite. The Sosna-1 well is intended to evaluate the commercial prospectivity of the Main Dolomite play and the agreement over the Torzym well would facilitate bringing the well into production in the coming period. The LOI is still conditional upon the approval of San Leon’s partners and would offer material upside to the company once finalised. Of late, San Leon has also made good progress at its other acreages in Poland including the Rogity-1 well. Despite some concerns relating to the probable impact of a downward revision of shale reserves in Poland, overall prospectivity of San Leon’s assets looks attractive. We reiterate a Speculative Buy.

Economic News

Eurozone PMI

Manufacturing PMI for the Eurozone fell to 53 in March from February’s 53.2, preliminary data from Markit Economics showed yesterday. The reading was in line with the market estimates. Meanwhile, the services PMI came in at 52.4, slightly lower than the expected as well as the prior month’s reading of 52.6. The composite PMI edged down to 53.2 from 53.3, matching economists’ forecast.

Germany PMI

Manufacturing PMI for Germany eased further to 53.8 in March from 54.8 in February, as per Markit Economics’ flash data. The reading fared below the market expectation of 54.5. The services PMI also moderated to 54 from 55.9, coming below the expected reading of 55.5. As a result, the composite PMI lowered to 55 in March from 56.4 in February.


Preliminary results from Markit Economics showed that the manufacturing purchasing managers’ index (PMI) lowered to 55.5 in March from 57.1 in February. The reading was below the market forecast of 56.5.

Important Risk Warnings and Disclaimers 

This report is published by Beaufort Securities Ltd ("Beaufort Securities"). Beaufort Securities Ltd is Authorised and Regulated by the Financial Conduct Authority and is a Member of the London Stock Exchange. 


This document is not an offer to buy or sell any security or currency. This document does not provide you with individually tailored investment advice. It has been prepared without regard to the your financial circumstances and objectives The appropriateness of a particular investment or currency will depend on your individual circumstances and objectives. The investments and shares referred to in this document may not be suitable for you. 

This research is non-independent and is classified as a Marketing Communication under FCA rules. As such it has not been prepared in accordance with legal requirements designed to promote independence of investment research and it is not subject to the prohibition on dealing ahead of the dissemination of investment research in COBS 12.2.5. However Beaufort Securities has adopted internal procedures which prohibit analysts from dealing ahead of non-independent research, except for legitimate market making and fulfilling clients' unsolicited orders. 

By receiving this document, you will not be deemed a client or provided with the protections afforded to clients of Beaufort Securities. When distributing this document, Beaufort Securities is not acting for you and will not be responsible for providing advice to you in relation to this document. Accordingly, Beaufort Securities will not be responsible to you for providing the protections afforded to its clients. 

Beaufort Securities may effect transactions in shares mentioned herein and may take proprietary trading positions in those shares, and may receive remuneration for the publication of its research and for other services. Beaufort Securities may be a shareholder in any of the companies mentioned in this report. Accordingly, this document may not be considered as objective or impartial. Additionally, information may be available to Beaufort Securities or the Group, which is not reflected in this material. The remuneration of the author of this report is not tied to the recommendations on any shares mentioned nor to the any transactions undertaken by Beaufort Securities or any affiliate company. Further information on Beaufort Securities' policy regarding potential conflicts of interest in the context of investment research and Beaufort Securities' policy on disclosure and conflicts in general are available on request. Please refer to 

Past performance is not a guarantee of future performance. Investments may go down in value as well as up and you may not get back the full amount invested. The listing requirements for securities listed on AIM or the ICAP Securities & Derivatives Exchange are less demanding and trading in them may be less liquid than main markets. This may make it more difficult to buy and sell these securities. 


This document includes certain statements, estimates, and projections with respect to the anticipated future performance of securities listed on stock exchanges and as to the market for these shares. Such statements, estimates, and projections are based on information that we consider reliable and may reflect various assumptions made concerning anticipated economic developments, which have not been independently verified and may or may not prove correct. No representation or warranty is made as to the accuracy of such statements, estimates, and projections or as to its fitness for the purpose intended and it should not be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only and may change without notice. Other third parties may have issued other reports that are inconsistent with, and reach different conclusions from, the information presented in this report. Those reports reflect the different assumptions, views, and analytical methods of the analysts who prepared them. This report has not been disclosed to any of the companies mentioned herein prior to its publication. 

This document is based on information Beaufort Securities has received from publicly available reports and industry sources. Beaufort Securities may not have verified all of this information with third parties. Neither Beaufort Securities nor its advisors, directors or employees can guarantee the accuracy, reasonableness or completeness of the information received from any sources consulted for this publication, and neither Beaufort Securities nor its advisors, directors or employees accepts any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection with this document (except in respect of wilful default and to the extent that any such liability cannot be excluded by the applicable law). You should not rely on this document and should not use it substitution for the exercise of the independent judgment of yourself or your adviser. 

The information contained in this document is confidential and is solely for use of those persons to whom it is addressed and may not be reproduced, further distributed to any other person or published, in whole or in part, for any purpose. Other persons who receive this document should not rely on it. Beaufort Securities, its directors, officers and employees may have positions in the securities mentioned herein.


© Proactive Investors 2019

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use