Headlines
• Union Jack Oil* (LON:UJO – 0.12p) – Keddington-5 Extension: Today’s news of Keddington-5 is good for the Company as you have to make a discovery before it can be declared commercial, and is entirely consistent with the company's strategy of taking small non operated interests in UK onshore low risk exploration, appraisal or development stories in order to generate value for shareholders. Ahead of the results of the flow test, we are reiterating our 0.70p Target Price and BUY Recommendation.
• In Brief:
Genel Energy (LON:GENL – 121p) – KRG Shows Baghdad how it's Done
Trinity Exploration and Production (TRIN LN – 3.0p) – Loan Update Indicates More Pain to Come
Petroceltic International (PCI LN – 18p) – Senior Bank Facility Update
Frontier Resources International (FRI LN – 0.09p) – (HOLD – 0.26p) – If Oman Goes, So Too the Value
News Items
Union Jack Oil* (LON:UJO – 0.12p) – Keddington-5 Extension
Today's news that Keddington-5 has shown hydrocarbons is the first step towards declaring a discovery and hopefully bringing it on stream. While this has been a step out well, the local geology makes for a complicated reservoir patterns and can demonstrate intermittent or inconsistent geology, even locally between wells.
We are optimistic that this step out exploration well will ultimately flow commercial quantities of hydrocarbons, and as such today’s news increases the likelihood that this step out exploration will yield a commercial discovery. However, before adjusting our valuation, we will wait for the results of the flow test.
Today’s news of Keddington-5 is good for the Company as you have to make a discovery before it can be declared commercial, and is entirely consistent with the company's strategy of taking small non operated interests in UK onshore low risk exploration, appraisal or development stories in order to generate value for shareholders. Ahead of the results of the flow test, we are reiterating our 0.70p target price and BUY Recommendation.
News Items
• Genel Energy (LON:GENL – 121p) – KRG Shows Baghdad how it's Done: In spite of all of the issues and headwinds that the Kurdistan Regional Government ("KRG") is facing, that it is making payments to the international contractors is significant and bodes well for the operating under less turbulent times. What is also is an embarrassment for the Iraqi government who seemingly can't see that their actions and embarrassing attitude to international participation in the oil industry has been the sole reason that the country is still failing to fulfil its potential.
• Trinity Exploration and Production (TRIN LN – 3.0p) – Loan Update Indicates More Pain to Come: While the loan note’s extension itself isn't the real news here, what's really happening is that the buyer of TRIN's assets is either looking to withdraw or reduce the transaction price, which effectively means that what's left after repaying the loan will not be enough to have a business that will survive.
• Petroceltic International (LON:PCI – 18p) – Senior Bank Facility Update: as with Trinity, the banks will not jeopardise the process until such times as the outcome is clearer. The key difference for us between TRIN's position and that of Petroceltic is size and scale of assets, and a management team that understands industry and the finance markets.
• Frontier Resources International (LON:FRI – 0.09p) – (HOLD – 0.26p) – If Oman Goes, So Too the Value: We believe that the only value within the company is attached to the Omani licence area. So the question should be, if they haven’t found a farminee that will do it on acceptable terms, how is the loss of all the investment to date associated with the licence better? Should the licence not be renewed, and we believe that there is a basis for its renewal given the current environment, then we believe that the Company has no value beyond the cash and its listing, as the remainder of the acreage are too long dated and lack sufficient resolution to be deemed of value.