Mosman Oil and Gas*** (LON:MSMN – 0.78p) – (BUY – 3.2p) – Amadeus Basin Project Update: Following today’s news, we upgrade our valuation to reflect the Conventional and Unconventional volumes, which rises to 3.2p (from 2.73p), primarily as a reflection of the volume of unconventional Resources; we are reiterating our BUY Recommendation.
MX Oil (LON:MXO – 0.83p) – A Prudent Step
Trinity Exploration and Production (LON:TRIN – 1.50p) – Trading Out of Trouble?
LGO Energy (LON:LGO – 0.33p) – Goudron Investment Restarts
Sound Energy (LON:SOU – 16p) – Operations Update
Range Resources (LON:RRL/ASX:RRS – 0.32p/A$0.01) – Whose in Charge?
Mosman Oil and Gas*** (LON:MSMN – 0.78p) – (BUY – 3.2p) – Amadeus Basin Project Update
Today's news that company has confirmed the Prospective Resources is a step forwards for the Company in the Amadeus Basin. With the Company's withdrawal from the STEP transaction the Company is in the fortunate position to have gained significant flexibility, and given the nature of the current market, this is a strong position to be in.
Following today’s news, we upgrade our valuation to reflect the Conventional and Unconventional volumes, which rises to 3.2p (from 2.73p), primarily as a reflection of the volume of unconventional Resources; we are reiterating our BUY Recommendation.
• MX Oil (LON:MXO – 0.83p) – Prudent Step: Today's news that the Company is intending to carry forward the investment in to Aje is a wise step, as timelines can and are often only a starting point for most transactions, especially in these price environments. While there will have to be a balancing payment for the purchaser, as long as the asset is not in MX's ownership when it comes on stream, we believe this is a solid step forwards. We have oft said that the Aje asset will only achieve full value with a solution for the gas reserves, and even though the liquids rich horizon is going to be produced first, we are not convinced that the FGN will allow even the associated gas volumes to be flared (which is the cheapest option in this low price environment) especially as it is a rich gas stream.
• Trinity Exploration and Production (LON:TRIN – 1.50p) – Trading Out of Trouble?: News that the Company's assets are no longer for sale is an expected outcome given all of the delays, but with payables exceeding cash and receivables, either the Company needs an equity fund raise to close the gap (and quickly), or needs to negotiate a staggered payment plant for the outstanding payable, including the loan. We think both. Operationally, given how good these reservoirs are, and the limited investment required to maintain production, the quantum of the decline in production from the peak is a concern, and we now wonder if the current management team will have the right strategy to save the Company, or in the first instance convince equity holders and its creditors that it is good for taking a risk on. On this, we will have to see.
• LGO Energy (LON:LGO – 0.33p) – Goudron Investment Restarts: Today's news has in no doubt been precipitated by the rising oil price, but also supported by the improving outlook for the oil price too. Messers Ritson and Jenkins are amongst two of the better technicians in the UK market and we believe that providing they have the financial courses to complete their programme that the Company will perform operationally. What is needed in this instance, however, is a solid financial base from which to operate, such that issues of the type that occurred with the last Goudron well don't knock the Company as much as it obviously did.
• Sound Energy (LON:SOU – 16p) – Operations Update: News that the drilling decision for Badile will be as soon as the 21st of March is a solid (half) step forwards as getting any progress in Italy is a minor miracle. Nervesa production appears to be progressing well, and we believe that the combination of current cash resources and medium terms outlook continues to support the positive longer term prognosis for the asset. We believe investors will have been happy with the Company's progress thus far, but the problem with success is that it builds expectation, and the issue for management now will be how do they move forwards as the comparables start to be from a higher base? In the near term we believe this reverses the further out you look.
• Range Resources (LON:RRL/ASX:RRS – 0.32p/A$0.01) – Whose in Charge?: The news today of further wells in Trinidad is all very interesting, but we are not sure what this means in the context of the wider plan for the Company, if indeed there is still one. Right now, of more importance, for us at least, is getting a better understanding of who is actually in charge? Without a focal point, we believe that the mess that is now Range Resources, risks becoming a disaster.