Headlines
• Mosman Oil & Gas*** (LON:MSMN) – Company Update: the Company has provided an update on its portfolio.
• MX Oil (LON:MXO) – Aje Investment: Irrespective of the time investment required in Nigeria, we see further dilutive fundraisings and marginalisation of the operations is Mexico. Either way, we do not see the plan that the Company has being successful without some form of equity to pay for the development, which equals further dilution.
• President Oil (LON:PPC) – Update Positive: Other than that, and it is fair to say that any diversification away from Argentina is better than nothing, we believe today's update is positive, and represents solid progress from the Company. We believe investors will be pleased with the progress detailed by today's update.
• Nostrum Oil & Gas (LON:NOG) – Tethys Offer a Sound Move: While we see a slim chance of a board approved offer at these levels, but the Company may approach the shareholders directly, who may have a different view, and ultimately decide that having an offer of cash on the table is preferable to the longer term risks associated with the development of an oil portfolio. We believe that increasing the offer by at least another 10% will make the transaction more likely to succeed.
News Items
Mosman*** (LON:MSMN) – Company Update
The Company has today updated the market with regards to its portfolio detailing the current position and what it sees as the next steps. We summarise these below:
• Murchison Permit, South Island New Zealand: progress being made towards drilling. Well design completed. Drilling 2015 still anticipated.
• Petroleum Creek Permit, South Island New Zealand: focus shifted to larger deeper structures. Further seismic required to better identify next drilling targets.
• Taramakau Permit, South Island New Zealand: further seismic required to high-grade the existing lead inventory to prospects. Seismic acquisition scheduled for 4Q'15/1H'16. JV negotiations terminated due to lack of agreement.
• Northern Territory Licences, Australia: Northern Territory Government has provided its support to the North East Gas Interconnect ("NEGI") from northern territories to east Coast Australia. Exploration of the permits continues.
• Canning Basin, Western Australia: option to farmin remains with the Company, at zero upfront cost. Mosman may elect to participate once the existing operator group has finalised its drill target.
• Otway Basin, Offshore Victoria Australia: The Joint Venture has completed additional geoscientific work on the Torquay Sub-basin. The work commitment for the next year is further technical studies.
• Officer Basin, West Australia: The West Australian Department of Mines and Petroleum has referred the negotiations on land access to the National Native Title Tribunal for mediation assistance. The Company is optimistic this will facilitate the land access agreement required prior to the award of the permit. In the meantime, there is no material expenditure until the permit is awarded.
MX Oil (LON:MXO) – Aje Investment
The Company has today announced that it has completed a transaction with Jacka Resources that provides it with Jacka's 5% interest in OML113, Nigeria. While the asset itself requires further appraisal (in our mind at least), we are still somewhat surprised by the fact that the Company has made such a divergent investment from its initial intention.
While MX only has 5% interest, and will have little say at teccom or fincom level, we have little doubt that management time will now be squeezed as the draw on human resources to operate successfully in Nigeria is significant, which in turn will see the time available for Mexico diluted. Either that, or the Company will gear up to meet the challenge of its new investment.
Irrespective of the time investment required in Nigeria, we see further dilutive fundraisings and marginalisation of the operations is Mexico. Either way, we do not see the plan that the Company has being successful without some form of equity to pay for the development, which equals further dilution.
President Oil (LON:PPC) – Update Positive
Today's update provides an interesting new angle in that the Company has elected to bolster its presence outside of Latin America, in the onshore U.S. While we welcome any diversification away from Argentina, we are not sure whether the size and scale of the investment will be sufficient to adequately counter balance the risks we see arising from operating in Argentina.
Saying all of that, in comparison to the acquisition cost and investment, the Louisiana investment has been a startlingly good investment to date, and one that will hopefully make a significant inroad to offsetting the investment costs associated with its Latin America portfolio.
Other than that, and it is fair to say that any diversification away from Argentina is better than nothing, we believe today's update is positive, and represents solid progress from the Company. We believe investors will be pleased with the progress detailed by today's update.
Nostrum Oil & Gas (LON:NOG) – Tethys Offer a Sound Move
The Company's offer for the entire share capital of Tethys Petroleum is a solid move to bolster its position within the Caspian, albeit to the expense of an increased geographical risk profile.
That said, the Company's offer of C$0.2185 represents a 15% premium to the previous 5-day average price. And irrespective of the fact that it is a more significant premium to the closing price the further back you look, we do not believe that it will be recommended by the board, especially as it has a funds solution already in place.
The time to have made this offer was when they were looking for it originally, and there is a sense that the Company has missed the boat, probably hoping to pick it up for cheaper, and for that, we can't fault the logic.
Historically, bidding companies have had to offer an average premium of 30% to take a company off its owners, and we don't see why in this case this shouldn't be the starting point. This is made slightly trickier for the Company as Tethys has the funding solution in place, and could, with a fair wind, realise the value within its asset base for its investors itself.
While we see a slim chance of a board approved offer at these levels, but the Company may approach the shareholders directly, who may have a different view, and ultimately decide that having an offer of cash on the table is preferable to the longer term risks associated with the development of an oil portfolio. We believe that increasing the offer by at least another 10% will make the transaction more likely to succeed.