Headlines
• Afren (LON:AFR) – Right Choice Wrong Time: Events of the past 12 months of proving that their departure won’t imperil the Company, but it still would have been honourable for them to at least try to stay on until the Company had been placed on an even keel.
• Sefton Resources (LON:SER) – Bali Hi? Unlikely: We can’t see any value in holding the shares at the current point in time due to the inevitable dilutions that will be required in order to invest to get to a point where there’s sufficient cash flow to meet operating obligations and grow the business. On another note, it’s good to see Rob Shepherd back in the market.
• Nighthawk Energy (LON:HAWK) – Introspection Is Sometimes a Good Thing: Today’s news, whilst not a blockbuster in terms of excitement, does demonstrate that the management team are taking the solvency and future growth of their company seriously, which in turn means that they are taking accretion in shareholder value seriously. We believe that investors should be pleased with today’s news.
• Independent Resources (LON:IRG) – Last Throw the Dice?: The management team remain the one bright spot in this situation, as they are taking all and every measure in order to maximise the amount of cash being invested in value generating propositions. And it is against this backdrop that we question whether there is a slim chance of the Company moving forward and creating value, and whether this year will be the last throw of the dice; we hope so.
• Aminex (LON:AEX) – Putting Your Money Where Your Mouth Is: The continued focus on delivery is impressive, and whilst there is always the ability of a management team to “snatch defeat from the jaws of victory,” we are confident that under the tutelage of the current management team it is only a question of when, not if.
News Items
Afren (LON:AFR) – Right Choice Wrong Time
Today’s news that the remainder of the board are not submitting their names for reappointment at the upcoming AGM is of itself not a surprise, but the timing is. The Company has not yet been put on an even keel, and rather than face shareholders, they have elected to step away.
Whilst the boards rejuvenation was ultimately going to happen, to leave the Company the way that they have to our mind reflects the same approach that they had to managing the Company in the first place.
Events of the past 12 months of proving that their departure won’t imperil the Company, but it still would have been honourable for them to at least try to stay on until the Company had been placed on an even keel.
Sefton Resources (LON:SER) – Bali Hi? Unlikely
Rob Shepherd’s association with the Company should yield significant opportunities, as his experience will be a benefit to the Company. However, that a company based in the US, that couldn’t make its US operations a success, but will in Indonesia is somewhat of a stretch, even with new management and Shepherd’s experience.
We have no doubt of the value that Rob Shepherd will bring to the Company, but to our mind in order to run Indonesian assets, you need to be in Indonesia. While there is not enough known about the new management team at Sefton, one merely needs to look at the Wise decision that Sound Oil took to exit its Indonesian operations, and it was considerably better formed in the country than Sefton is.
We can’t see any value in holding the shares at the current point in time due to the inevitable dilutions that will be required in order to invest to get to a point where there’s sufficient cash flow to meet operating obligations and grow the business. On another note, it’s good to see Rob Shepherd back in the market.
Nighthawk Energy (LON:HAWK) – Introspection Is Sometimes a Good Thing
Nighthawk has disclosed that it is identified a significant number of potential prospects in within its existing acreage, which is in keeping previously stated aim to look “behind pipe.” Previously, we have said that the management team is:
focused on maximising returns from its asset base, whilst minimising costs. Furthermore, the Company’s hedging programme addresses, partially at least, one of the systemic risks in the current operating environment.
and today’s news is the embodiment of this ethos.
We believe that although risks still exist in the Company’s attempt to secure further barrels, at $65,000 a well, the risk reward ratio is still in the Company’s favour, even at these prices. What makes this investment all the more profitable, is that no “entry price” has to be paid to get access to the opportunity, it is within its existing portfolio.
Whilst one could argue that were it not for the current all price environment, these additional barrels might well have been left behind, we say that we would hope so as managements time would be better spent pursuing larger more significant projects.
Today’s news, whilst not a blockbuster in terms of excitement, does demonstrate that the management team are taking the solvency and future growth of their company seriously, which in turn means that they are taking accretion in shareholder value seriously. We believe that investors should be pleased with today’s news.
Independent Resources (LON:IRG) – Last Throw the Dice?
Today’s news is on the one hand promising, in that there has been confirmation of the prospectivity of Ksar Hadada, its Tunisian play, which has been made all the sweeter by the approval of the extension last year.
On the other hand, however, it is disappointing to hear that they are withdrawing from the CBM opportunity in Tuscany. While undoubtedly it is the right thing to do, we believe that these assets were promising, but needed further work before a farmin partner could have been found.
Unfortunately from these levels we can’t see any meaningful value being created without first existing shareholders suffering excessive dilution, and with a balance sheet net cash liability in excess of £200m, we believe that the Company will ultimately be either acquired, or go into administration.
The management team remain the one bright spot in this situation, as they are taking all and every measure in order to maximise the amount of cash being invested in value generating propositions. And it is against this backdrop that we question whether there is a slim chance of the Company moving forward and creating value, and whether this year will be the last throw of the dice; we hope so.
Aminex (LON:AEX) – Putting Your Money Where Your Mouth Is
Today’s fundraising, while not the slamdunk required to precipitate a significant jump in value, does move it forwards. This, along with the potential proceeds from Solo’s option, were it to exercise it – and we can’t see why it wouldn’t, places the Company in a buoyant position.
The last time we commented on Aminex we stated that:
There has been a long road to get to this point, with a number of obstacles, not least the signing numerous loan agreement without the surety of cash flow to meet the repayment. Finally, however, the Company is at a point where it will be generating revenue and free cash flow against which it can borrow, as well as start to look to the future.
and today’s news does not in any way impair that. Indeed, what is interesting to note is that management have taken ~4.9% of the issue, which is a strong sign of confidence in the project.
We continue to believe that the current management team is starting to deliver on the value proposition that has been clearly identified in the past. That past management teams have imperilled that value by taking on board loans now appears to be firmly in the past, and were there to be any further debt put on the balance sheet, we believe that it would be done in a responsible manner and commensurate with the available cash flow.
The continued focus on delivery is impressive, and whilst there is always the ability of a management team to “snatch defeat from the jaws of victory,” we are confident that under the tutelage of the current management team it is only a question of when, not if.