Headlines
• Mosman Oil & Gas (LON:MSMN) – BUY (9p) – New Horizons: Mosman has accumulated a significant position in the Asia-Pacific exploration and appraisal segment, with interests or options in 6 highly prospective basins in Australia and New Zealand. This is bolstered further by the proposed STEP transaction, which could add up to $18.7mm (6.8p) to our current NAV estimate of $25.2mm (9p). Ahead of the completion of the STEP transaction, we are initiating with a BUY Recommendation and a 9p Target Price.
• San Leon Energy (LON:SLE) – Development Well Planned, But What Else?: Today's news is a boost for the shares which have suffered equally with the rest of the sector. What we require from the Company is a route map as to how the latest news translates in to development cash flows and allows it to build size and scale.
• MX Oil - (LON:MXO) – Mexico Execution Key: Today's news should be promising for the Company, and will hopefully provide some measure of support for its ongoing interest in Mexico. Mexico provides the potential for near to medium term opportunities, providing the contract terms are well managed and executed - should the Company only be able to secure Indonesian/Iraqi "KSA" type arrangements, then the upside will be limited and the risk all theirs.
• Aminex (LON:AEX) – A Step Closer: In this respect, the Company now needs to look towards the future and start to share with the public how it will address the issue of maximising its position in Tanzania, and addressing asset growth.
• LGO Energy (LON:LGO) – Trinidad Key: We see the Company’s Trinidadian position strengthening, which when the oil price rebounds, will have a significant impact on the Company’s valuation, especially as management have approached the development utilising the best cost effective practices.
• Range Resources (LON:RRL/ASX:RRS) – What is The Plan?: While we are certain that the asset base is a solid one, and the outlook positive were it able to articulate a coherent development programme, we just can't see where the Company is going at the moment. Still, the raw ingredients are there, and the tools are at its disposal, it's just now a case of the management team doing the hard yards required of an operating company.
Research Published
Mosman Oil & Gas (LON:MSMN) – New Horizons
In Brief
Mosman has accumulated a significant position in the Asia-Pacific exploration and appraisal segment, with interests or options in 6 highly prospective basins in Australia and New Zealand. This is bolstered further by the proposed STEP transaction, which could add up to $18.7mm (6.8p) to our current NAV estimate of $25.2mm (9p). Ahead of the completion of the STEP transaction, we are initiating with a BUY Recommendation and a 9p Target Price.
Contact us for a full copy of the note.
News Items
San Leon Energy (LON:SLE) – Development Well Planned, But What Else?
Today's news detailing the next development well is a welcome positive step for the Company, and one that helps to alleviate fears that it has lost a little bit of direction of late. As we have often said in the past, given that the Company is essentially the last operator in Poland, that it should:
- this is a step forwards for the Company, today's news must be tempered with caution, as Rawicz was a previous discovery and was testing the conventional prospectivity associated with the Permian Rotliegendes sandstones.
- As such, and given the Company's earlier focus of the polish shales opportunity and in light of today's statement, the market is probably due an update on the prospectivity of the shales series, especially as they are the last company in the segment standing.
and today's news we believe only serves confirms that notion.
The next issue that needs to be addressed is one of scale and investment required to get to a self-sustaining position. We believe that the business has all the attributes required of it to make it a success, and that the portfolio has the potential to transform it in to a lean and profitable operating company.
Today's news is a boost for the shares which have suffered equally with the rest of the sector. What we require from the Company is a route map as to how the latest news translates in to development cash flows and allows it to build size and scale.
MX Oil - (LON:MXO) – Mexico Execution Key
Today's update from the Company provides some indication as to the potential future pipeline, but the key thing for us in the near to medium term is the Aje field offshore Nigeria. Those with long memories will remember that the big issue standing in the way of the field's development historically is the fact that it is really a gas field with liquids.
As such, and given the limited market for gas in Nigeria, outside of the delivery of the much spoken of Nigerian Gas Master Plan, the key question is “are there enough liquids in Aje to support a reinvention development?”
Nonetheless, today's news should be promising for the Company, and will hopefully provide some measure of support for its ongoing interest in Mexico. Mexico provides the potential for near to medium term opportunities, providing the contract terms are well managed and executed - should the Company only be able to secure Indonesian/Iraqi "KSA" type arrangements, then the upside will be limited and the risk all theirs.
Aminex (LON:AEX) – A Step Closer
Today's news that the Tanzania Petroleum Development Corporation ("TPDC") is exercising it's right to acquire 5% of the Kiliwani North development is a positive affirmation for the project, and by extension the Company, as is enters the final stages of development prior to commissioning.
The last time we commented that:
- 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.
and we believe that today's news provides us with confirmation that the point at which cash flow will start is close at hand.
In the current environment cash is king, and given the opportunities that are presenting themselves in the market currently, we believe that the cash flow that comes from the Kiliwani development will be able to be better deployed than they would have 12 to 18 months ago.
Investors should be pleased with the recent vindication of the Company's development of the Kiliwani, and with the equity at these levels, we believe that issues that has best the Company previously, which have been cleared up by the current management team, are more than fully priced in and the improving outlook creates a significant opportunity.
In this respect, the Company now needs to look towards the future and start to share with the public how it will address the issue of maximising its position in Tanzania, and addressing asset growth.
LGO Energy (LON:LGO) – Trinidad Key
The money raised should be well deployed to the Goudron field, and given the depressed drilling costs currently in the global market, we believe that the Company will be able to achieve more for the same money.
We recognise, however, that the fundraising is in part a reflection of the oil price environment, and paradoxically, had the oil price not been at these levels, but higher, the money still would have been required as the drilling costs would have been greater.
We have previously commented that:
- Now the programme is in its development phase, it should continue to deliver results, which in turn will precipitate the unwinding of the Company’s discount between its inherent asset valuation and its “market worth.” In that respect, the proof positive of the investment that the Company has made is now in the “pudding’s eating,” i.e. production, reserves and cash flow growth.
We see the Company’s Trinidadian position strengthening, which when the oil price rebounds, will have a significant impact on the Company’s valuation, especially as management have approached the development utilising the best cost effective practices.
Range Resources (LON:RRL/ASX:RRS) – What is The Plan?
While today's news isn't bad, it doesn't really provide us with much in the way of new information about the Company against which we can assess its progress, or future direction. Indeed, we are now concerned that the management team are not engaged sufficiently with the business to understand where their opportunities lie.
While we are certain that the asset base is a solid one, and the outlook positive were it able to articulate a coherent development programme, we just can't see where the Company is going at the moment. Still, the raw ingredients are there, and the tools are at its disposal, it's just now a case of the management team doing the hard yards required of an operating company.