Headlines
• Mosman Oil and Gas Limited*** (LON:MSMN) – Testing the Prospectivity: Today's news is the first step in what will be a significant appraisal programme, which as highlighted by the Company's recent independent research publication, will require funding to carry through to fruition – the extent of which will be dependent on the pace of investment and the availability of farmin partners.
• Petroceltic International (LON:PCI) – Sharpening the Focus: We believe this focusing of the Company's portfolio is a clear indication that management does not view any of its asset base as a "sacred cow," and that subject to the usual caveats, anything is available for sale. We believe this underlines management's commitment to generating returns for shareholders, which is all a company's owners can ask for.
• Sound Oil (LON:SOU) – New Phase of Development: Today's news while disappointing, isn't a disaster for Nervesa, it merely deprives the cake of its icing. With the astute, well timed and strategic entry in to Morocco occupying the medium term outlook, we believe that the Company is becoming increasingly better balanced, and sustainable moving forwards. Today’s excessive move downwards is disproportionate and creates an opportunity for investors.
• Lekoil (LON:LEK) – Otakikpo a Step Forward: Otakikpo is an excellent asset, if only made more difficult to develop by its location in the delta, but given the excellent community management and what seems to be a quieter phase in the Delta, we believe that this asset has the opportunity to make a marked contribution to Lekoil's portfolio.
• Northern Petroleum (LON:NOP) – A Step Too Far?: While we don't believe that this is ideal timing, we acknowledge that the timing of investments cannot always be perfect, and we have confidence that the management team will take the necessary steps to ensure that the Company is not imperilled.
• Europa Oil and Gas (LON:EOG) – Time to Get Going: The Company's owners will be pleased with today's news, but it must be remembered that success in oil and gas can only be measured by the delivery of hydrocarbons, or more importantly, the economic benefaction of that delivery.
News Items
Mosman Oil and Gas Limited*** (LON:MSMN) – Testing the Prospectivity
The Company has disclosed that it is in the process of finalising the design and location of its first stratigraphic well in its new Murchison licence to test the prospectivity of the shale series. The prospectivity has been highlighted previously by the Company's publication of SRK's evaluation of the licence area, with particular focus on the shale series. While the report highlighted potential recoverable reserves, the overwhelming focus of the report has been the ~13,271bcf and 159mm bbl of prospective and contingent resources.
Today's news is the first step in what will be a significant appraisal programme, which as highlighted by the Company's recent independent research publication, will require funding to carry through to fruition – the extent of which will be dependent on the pace of investment and the availability of farmin partners.
Petroceltic International (LON:PCI) – Sharpening the Focus
Today's news that the Romanian portfolio has been cleaned up and disposed of is a significant step forwards for the Company as it starts to narrow the focus of it operations to its core areas.The most important of these, outside of the cash generation assets in Bulgaria and Egypt, is the development of Isarene in Algeria, which when on line will be the platform for the Company's future growth.
We believe this focusing of the Company's portfolio is a clear indication that management does not view any of its asset base as a "sacred cow," and that subject to the usual caveats, anything is available for sale. We believe this underlines management's commitment to generating returns for shareholders, which is all a company's owners can ask for.
Sound Oil (LON:SOU) – New Phase of Development
While initially difficult to understand, today's news that the testing of the lower horizons at Nervesa has failed to prove up further hydrocarbons is disappointing, as it won't add to the volumes currently booked, but it in no way impairs what has already been reported; in our mind, Nervesa will now progress to development as planned.
If Nervesa was disappointing, news that the environmental approvals for Dora and Dalla have been provided is a positive, and one that continues to move the Company forward, creating news flow until we reach the main prize of Badile.
Today's news while disappointing, isn't a disaster for Nervesa, it merely deprives the cake of its icing. With the astute, well timed and strategic entry in to Morocco occupying the medium term outlook, we believe that the Company is becoming increasingly better balanced, and sustainable moving forwards. Today’s excessive move downwards is disproportionate and creates an opportunity for investors.
Lekoil (LON:LEK) – Otakikpo a Step Forward
Today news that the DPR has approved the Company's farmin to Otakikpo is green light for the Company to start investing. We believe that the asset, while not a company maker for Lekoil in the context of the remainder of its portfolio, represents a significant step forwards for it nonetheless.
Otakikpo is an excellent asset, if only made more difficult to develop by its location in the delta, but given the excellent community management and what seems to be a quieter phase in the Delta, we believe that this asset has the opportunity to make a marked contribution to Lekoil's portfolio.
Northern Petroleum (LON:NOP) – A Step Too Far?
Recently we were informed that the Company has restarted operations in Canada, which is now generating cash flow. At that time we commented that:
Today's news is a positive for the Company, and one that should relieve the pressure that has been on both the management and share price. We will be looking for a revised onward programme in the coming months as the ship first steadies, then looks to rebuild.
and we believe that today's news represents the opening of a second area of focus, which may be a step too far.
This is mitigated to some extent by the fact that it has a major in Italy with it (Shell), but we would prefer to see more cash resources accumulated within the Company at this point, before pushing ahead with more investment plans.
While we don't believe that this is ideal timing, we acknowledge that the timing of investments cannot always be perfect, and we have confidence that the management team will take the necessary steps to ensure that the Company is not imperilled.
Europa Oil and Gas (LON:EOG) – Time to Get Going
Today's news that the three assets evaluated as part of the CPR (Wilde, Beckett and Shaw) have a combined valuation of $1.6bn, is a welcome vindication of the Company's strategy, and given that the assets are based in Europe, what is usually the death knell for large offshore projects, the possibility of gas, is significantly reduced given the gas pricing environment.
Today's news is an important step in what is a larger process, and the Company must now start the difficult process of valorising the asset base, starting with attracting suitable farmin partner(s).
The Company's owners will be pleased with today's news, but it must be remembered that success in oil and gas can only be measured by the delivery of hydrocarbons, or more importantly, the economic benefaction of that delivery.