Empyrean Energy (EME, 6p, 10.9m) multi-stage fraccing of the Rancho Grande-1H well commenced on 17th May following completion of this operation the well will be flowed directly to sales. Rancho Grande-1H is the final requirement well under the Hilcorp farm in arrangement at Sugarloaf and follows the latter’s excellent record in bringing 4 wells into commercial production. SPECULATIVE BUY.
Providence Resources (PVR, 2.93p, £98.78m) gave an update on its Gulf of Mexico operations. Production has recommenced on the Ship Shoal 253 field which has been shut-in since August 2008 following damage inflicted by Hurricanes Gustav and Ike. Prior to shut-in the filed contributed 250 boepd to Providence’s net production which is material. A recompletion programme in 2010 is planned for the High Island A-268 and Main Pass 19 fields with additional gas bearing zones targeted. SPECULATIVE BUY.
RSM Tennon (TNO, 42.75p, £137.7m) has made changes to the board composition to reflect its move to main market. Bob Morton (Non-Exec Chairman); Andy Raynor (CEO); Russell McBurnie (FD) are unchanged as do Adrian Martin (Non-Exec Deputy Chairman and Senior Independent) and John Newman (Non-Executive Director). Carl Jackson, Tony Stockdale, Richard Smith and Mark Lucas step down from the group board but retain their current executive roles and responsibilities on the operating board. Admission to the full list is expected to become effective on 27 May 2010, subject to approval from the UKLA. We still view Tennon as very cheap and see the move to full list as potential trigger for rerating. BUY with a price target of 82p.
Scientific Digital Imaging (SDI, 23.5p, £4.23m) has performed broadly as anticipated and expects FY to 30 April 2010. results to be slightly ahead of market expectations due to better than expected performance at Atik and Synoptics in the US. We reduce our recommendation to sell, given the run in the share which leaves them trading on an expensive looking 18x and at least above 15x given an uplift in EPS. We reset our price target at 18p, which suggest a rating of 12x providing the company produces 1.5p of Earnings. SELL
Turbo Power Systems (TPS, 1.15p, £4.08m) is proposing a hugely dilutive investment from TSX listed Tao of £6.5m for just over 1.3bn shares at 0.6p per share a discount of 50% against yesterday’s closing price. TPS is a TSX listed company and there are currently no plans for integration of TPS with Tao but this is effectively a takeover by latter which will gain c.75.3% of the enlarged Share capital of the company on a undiluted basis and 55.2% of on a fully diluted basis, given it effective control. This follows less favourable terms offered by the convertible loan note holders who’s investment is secured on assets of the business. Tao is a subsidiary of Brazilian energy company VSE Vale Soluções em Energia S.A which has invested more than $270m in technology. The agreement is subject to shareholder approval but with the board warning it is likely to breach covenants if it is not passed so there appears little real choice. This is mixed news; on the one hand massively dilutive, but on the other its removes the loan notes at a discount which were a major overhang and which were secured over the business. This also provides the potential to pursue market opportunities and strengthens a relationship with possible key customer at terms more favourable than otherwise would have been available (straight equity finance was unlikely with the CLNs looming). Tao must of course also emerge as a possible exist route. We place the recommendation UNDER REVIEW.