Headlines
• Union Jack Oil* (LON:UJO) – Wressle Development Phase Started: Once the field comes on line, the cash flow from the operations, coupled with the lean corporate structure, means not only that the point at which the Company comes self-sustaining is lower, but that more of the cash get utilised for growing the business, which engenders flexibility and further growth potential.
Ahead of the disclosure of the development plan, we are reiterating our 0.84p Target Price and BUY Recommendation.
• Sound Energy (LON:SOU) – Increasingly Balanced Portfolio: Shareholders should be pleased with their management team, especially the approach that they are taking with regards to building the Company.
• Falcon Oil and Gas (LON:FOG) – Solid First Step: We believe investors will be pleased with the results to date and think of other success stories such as Cove Energy, but this must tempered with caution as there is a long way to go before commerciality is declared, and it isn't as simple and straightforward as conventional reservoir development. That said, that the programme has been accelerated is promising.
News Items
Union Jack Oil* (LON:UJO) – Wressle Development Phase Started
The Company has today announced that the results of the recent Wressle well test have been sufficiently positive to move in to the development programme; the Company is currently initiating the design the phase. This is a significant positive for any company, but especially UJO, as it underlines management's approach to risk mitigation and creating shareholder value.
Once the field comes on line, the cash flow from the operations, coupled with the lean corporate structure, means not only that the point at which the Company comes self-sustaining is lower, but that more of the cash get utilised for growing the business, which engenders flexibility and further growth potential.
Ahead of the disclosure of the development plan, we are reiterating our 0.84p Target Price and BUY Recommendation.
Sound Energy (LON:SOU) – Increasingly Balanced Portfolio
Today's announcement of the completion of the Sidi Moktar option agreement is the latest in a line of value enhancing transactions. We have previously commented that:
….[its] 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 news is further evidence of that, and that the Company is continuing to leverage off of its Italian operational base in to the Mediterranean basin area.
The structure and nature of this transaction underlines the fact that Sound's management team are continuing to create shareholder value, and given that there is greater value to be had corporately than at the drillbit currently, we believe this will not be the last deal to be announced.
Shareholders should be pleased with their management team, especially the approach that they are taking with regards to building the Company.
Falcon Oil and Gas (LON:FOG) – Solid First Step
Today's news that the Amungee-1 well has recorded promising results for shale gas are encouraging, especially as this is a new play. What is more encouraging is that the potential for the shale series to result in medium term cash flow has been boosted by the decision to move immediately to shale specific tests.
While there is no doubt that even on an accelerated timetable that there is unlikely to be meaningful cash flows until 2020, we believe that should the series prove potentially commercial, that the value created within the portfolio will demand that the Company is taken out by a bigger player.
This is especially true when you consider that the Company has two "600lb" gorillas in the form of Origin and Sasol, we believe that this would most likely be preferable to the dilution and stress that will flow from having to match their spending at the development phase.
We believe investors will be pleased with the results to date and think of other success stories such as Cove Energy, but this must tempered with caution as there is a long way to go before commerciality is declared, and it isn't as simple and straightforward as conventional reservoir development. That said, that the programme has been accelerated is promising.