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SP Angel Morning Oil & Gas Egdon Resources, Green Dragon Gas, Union Jack Oil, Nighthawk Energy and others

Published: 08:59 04 Dec 2014 GMT

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News Items 

Union Jack Oil (LON:UJO) – Happy New Year, or Christmas Comes Early?

The Company’s disclosure today that the Wressle-1 will be tested in January 2015 is the next stage for the well. Given its location, we believe that a successful test will then very quickly lead to the all-important cash flow.

We are reiterating our 0.79p Target Price and BUY Recommendation.

MEO Australia (ASX:MEO) – Havana Club

the Company has disclosed that it has entered into negotiations for a PSC covering Block 9, which covers 2,380km2 onshore Cuba. Whilst there has been a number of discoveries in the block already, there has been no commercial production recorded. The entry into Cuba marks not only a new asset in MEO’s portfolio, keeping its exploration hopper full, but a new country too.

What this news also underlines, however, is that the Company is continuing to move forward and not being distracted by its negotiations with Alan Stein’s Neon Energy. We see no reason to vary our outlook for the Company until such times as further information has been disclosed to the market.

As such we are reiterating our A$0.36 Target Price and BUY Recommendation.

Nighthawk Energy (LON:HAWK) – Protective Hedge

today’s news that the Company has hedged at least half of its production for 2015 will provide a great deal of comfort to the management and shareholders alike, especially as the average is approximately ~$75/bbl, versus the current WTI contract average for 2015 of ~$69/bbl.

Whilst $6/bbl differential might not sound much, it could well be the difference between posting a profit and a loss in 2015, and in that respect, investors should be happy with the insurance that management has bought.

Egdon Resources (LON:EDR) – Feeding the Hopper

Egdon has announced its entry into PL161 and PL162 in Lincolnshire and South Yorkshire, which covers not only conventional prospectivity, but unconventional prospectivity too; these licences cover some of the measures of the Bowland series. While further work will be required before the prospectivity can be fully evaluated, we have no doubt that the longer term your perspective, the more prospective the block becomes.

Green Dragon Gas (LON:GDG) – Bond Redemption

As today’s news demonstrates a substantial proportion of the recent fundraising, both equity and debt, will be used to repay the debt that already in existence on the balance sheet, and in comparison, relatively little will be put into the ground in the form of wells.

While the Company will be able to rely on the cash flow from the wells that were drilled in its acreage over a period of years by a 3rd party, the Company has to demonstrate that it’s management team can unlock the value in its acreage as effectively as those that just decided to drill illegally.

Given that we have an issue with the management team that generated more value for shareholders in the courtroom than it has with the drillbit, we remain sceptical that the remaining cash will be effectively used to generate further value for shareholders, let alone sufficient excess cash flow to start to pay down its debt pile.

Given its track record to date, we can’t see this management team being able to stay ahead of that curve.

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