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President Energy, Leni Gas & Oil and Falkland Oil and Gas feature in Fox-Davies Newsflash

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Daily Oil & Gas Monitor

Falklands Oil & Gas (LON:FOGL) – Solid Foundations. Now for the Finish: Today’s full year results underline the difference a discovery can make. FOGL is rightly optimistic about its immediate future, as it is not only well funded for its immediate drilling programme, which gives it the ability to be able to dictate its future to some extent at least, but that before any subsequent funding round, it will is able to choose what type of funding it will seek, and more importantly, when with a new seismic programme being shot, and well control data to integrate with it, the Company’s pencil should be sharper than it was previously, hence we believe that any fund raising will be conducted from a higher level. Furthermore, we believe that Argentinian Government is an irrelevance outside its borders and the Falklands Island Government and the South Falklands Basin’s (“SFB’s”) Operators will reach an understanding regarding limited onshore, or near-offshore, development that will unlock the potential of the SFB. Consequently, we are upgrading our Recommendation to BUY from Hold, but maintaining our Target Price (55p).

In this news:

Strong financial position

o At 31 December 2012, cash balances were $174mm with a further $45mm due from the farm-outs

o The overall profit for the year was $1.1mm (2011: loss of $6.6mm)

Resources in place to deliver value growth

o Fully funded for planned work

o Extensive 3D seismic surveys in progress to optimise target selection for next drilling campaign

Industry endorsement secured

o Endorsement of asset value and potential through farm-out transactions with established international players, Noble Energy Falklands Limited and Edison International S.p.A

o Position maintained as the largest acreage holder (40,000sq km gross) in the Falkland Islands with a substantial interest retained post farm-outs

Increasing operational capability

o As operator, successfully drilled two deep-water exploration wells safely, on schedule and within budget

o Demonstrated year round drilling is possible, with minimal weather downtime

o Benefitting from Noble's operating experience and track record

Working petroleum system proven

o Loligo Complex estimated to hold significant in place gas volumes, between 50 and 100tcf

o Results from Loligo, Scotia and Toroa have significantly advanced subsurface understanding

o Substantial areas remain prospective for oil rather than gas

Outlook

o Focus on further de-risking of assets through an extensive 3D seismic programme covering over 10,000sq km

Initial 5,235sq km 3D survey over the Cretaceous aged Diomedea Fan Complex completed in April 2013

A 1,000sq km survey over the Cretaceous fault block area underway

Further  large  3D survey in the Northern Licence Area planned for 4Q 2013

o Defining targets for exploration drilling during H2 2013.

President Energy (LON:PPC) – Argentina Still the Only Fly in the Ointment: Today’s full year results not only underline the progress that the Company has made over the last 12 months, but that its management team is focusing on measured growth with a balance between cash sources and cash uses. While it might seem obsequious, the fact that it recognises the need to fund its work programme with organic cash flow is welcome. However, the one issue that we have is that a substantial proportion of the Company’s growth in the near to medium term will be focused on Argentina, a country which continues to be run into the ground by its government. On this basis, the fruits of its diversification strategy can’t come soon enough, which in turn is the Company’s major risk factor. That said, management is doing all it can to mitigate this prospect, and while 2013 will be a transition year, as the acquisitions made in 2012 are bedded in, we believe that the Company is well poised to make progress.

In this news:

Corporate Highlights

o Significant expansion of the Company with entry into Paraguay by way of a farm-in, as operator, to world class exploration assets, which provide material upside leverage in the near to medium term, with operations already underway

o Total hydrocarbon production up 44% year-on-year

o Net risked Prospective Resources increased by 109.3mmboe, as a result of the Paraguay acquisition and independent technical review during 2012, with risked NPV10 success case value net to President in excess of US$2 billion (management estimates)

o Increased exploration upside complemented by existing 2P reserves of 6.9mmboe

o Fraccing campaign underway in Argentina, and two new 100% owned and operated concessions added to the portfolio through an open tender

o Louisiana continues to provide solid profits and cash flow

o Non-core Australian assets subject to current farm-out discussions

o Net revenue for the year increased by 60% to US$11.3mm (2011: US$7.0mm) while gross profit increased by 64% to US$3.2mm (2011: US$2.0mm)

o Cash balances of US$17.5mm at the year end with nil gearing and US$15mmof unused loan facilities

o Board strengthened by appointments of Dr. Richard Hubbard (Chief Operating Officer), Miles Biggins (Commercial Director), and Dr. David Jenkins (Non-Executive Deputy Chairman)

Outlook

o Exciting prospects in Paraguay with a rapidly moving programme and potential for exponential growth in shareholder value during 2013 and 2014 with a success case target of over US$2 billion net to President

o Following interpretation of the 3D seismic, Paraguay drilling campaign to commence in Q2 2014

o Potential  to materially increase production in Argentina from current fraccing campaign

o Louisiana is a continued source of solid profits and cash flow.

Leni Gas & Oil (LON:LGO) – Debt an Endorsement – But Raises the Stakes: Today’s news that the Company has secured a $50mm line of credit should be welcomed by investors as it does two things: (i) provides and endorsement as to the Company’s assets and strategy; and (ii) should alleviate concern that the Company will need immediate funding via equity. However, what debt does do is introduce an obligation that will need to be met irrespective of whether the Company meets its technical and corporate objectives, or not. As such, when a company has a small production base that needs to grow to meet the obligations that it is entering into, it creates an on-going funding risk. That said, at this stage it should be welcomed by investors, and should lead to a rerating of the Company, as investors start to look at its asset base, rather than viewing it as an underfunded company. 

Quick facts: Archer Daniels Midland

Price: 39 USD

NYSE:ADM
Market: NYSE
Market Cap: $21.66 billion
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