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SP Angel Morning Oil & Gas: Caza Oil & Gas, Union Jack Oil and Rex International

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Rex International

Lupus Result Supports the RVD Process

Today’s news from Tullow regarding the failure of the Lupus well to intersect hydrocarbons is disappointing, but not terminal. We had not consolidated any value for the Lupus well, and as such will not impact our valuation. However, we accept that today’s news will inevitably provide some headwind to the share price.

Today’s news from Tullow regarding the failure of the Lupus well to intersect hydrocarbons is disappointing, but not terminal. We had not consolidated any value for the Lupus well, and as such will not impact our valuation. However, we accept that today’s news will inevitably provide some headwind to the share price.

While bears of the stock will point towards a failure as evidence that the RVD technology is not delivering as expected, three things must be remembered:

(i) that the Lupus well located using EM technology;

(ii) that RVD was applied subsequent to the drill location’s selection; and

(iii) that Rex did not take up its option to participate in the Lupus well due to the fact that the RVD response did not meet Rex’s criteria for participation.

Given that this well was not in our valuation, and the management team did not participate in the well due to the RVD results, we believe that it continues to support the current high success rates that have been trumpeted nor is there sufficient data RVD drilling result data to provide a definitive improvement in success rate using RVD, we are reiterating our S$1.19 Target Price and BUY Recommendation.

Union Jack Oil (LON:UJO)

Spin the Bit

Today's news from the company, disclosing the spud of the Wressle-1 well (WRS-1), marks the start of its exploration and appraisal programme. The Wressle prospect well currently adds 0.01p to our fair value estimate, and if successful, could add up to 0.19p; the well will take ~40 days to drill.

We would expect the share price to be supported as drilling progresses.

Caza Oil & Gas (LON:CAZA)

Milestone Achieved -

Caza's disclosure that it has repaid the eff faculty from xxxx should lift the shares, as it underlines the free cash that is being generated by the business. While the company should right receive the plaudits for this achievement, the next stage, that is self-funding growth, should be the company's goal.

On current performance we believe that this management team will be able to achieve that in relatively short order.

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