Headlines
• Comment – The UN Undermines its Own Credibility: In order for the UN to survive what we believe is self-immolation in the form of a direct attack on Article 1, it needs to acts swiftly and decisively, save for the potential for future conflict. Until then, this report will continue to cause great concern for all participants in the Falklands’ fledgling hydrocarbon industry, and uncertainty for the likes of Premier, Rockhopper and Borders and Southern.
In Brief:
88 Energy (LON:88E – 3.50p/A$0.07) – Permeability Exceeds Expectations
MX Oil (LON:MXO – 0.68p) – How Long does It Give?
Pantheon Resources (LON:PANR – 132p) – Sitting Pretty
Chariot Oil and Gas (LON:CHAR – 6p) – Signs of Life at the Margin?
Tethys Petroleum (LON:TPL – 2.50p/C$0.04) – A Lot of Activity to Stand Still
Comment - The UN Undermines its Own Credibility
The UN publication of the report in to Argentine territorial waters has resulted (whether they expected it to or not) in a course of actions and beliefs that are contrary to one of its founding principles in that it published a report that gave life to Argentina’s claim over the Falkland Islands. Of course there is the small matter of the fact that the Falklands was settled by the current Islanders’ ancestors in 1765, when it was uninhabited.
Argentina has on numerous occasions declared the Falklands to not be part of its territory and the fact that its sovereignty over the Falklands originates from the its claim that the Islands form part of the province of Tierra del Fuego – an area that was not claimed as a part of the Republic of Argentina until after two generations of Falkland Islanders had been born and raised there.
Knowing all of this, it makes it curious as to why the UN would put credence on a report that goes against this history and would contravene Article 1 of its Purposes and Principles. Article 1 reads:
The Purposes of the United Nations are:
1. To maintain international peace and security, and to that end: to take effective collective measures for the prevention and removal of threats to the peace, and for the suppression of acts of aggression or other breaches of the peace, and to bring about by peaceful means, and in conformity with the principles of justice and international law, adjustment or settlement of international disputes or situations which might lead to a breach of the peace;
2. To develop friendly relations among nations based on respect for the principle of equal rights and self-determination of peoples, and to take other appropriate measures to strengthen universal peace;
3. To achieve international co-operation in solving international problems of an economic, social, cultural, or humanitarian character, and in promoting and encouraging respect for human rights and for fundamental freedoms for all without distinction as to race, sex, language, or religion; and
4. To be a centre for harmonizing the actions of nations in the attainment of these common ends.
And as a result, it must be a growing concern to and of the UN, that in publishing a report that provides credence to the increase in Argentine territorial waters to encapsulate the Falkland Islands actually undermines the 1849 peace agreement between the UK and Argentina, the so called “Convention of Peace,” in which the Falkland Islands’ sovereignty was settled, has lost sight of Article 1, and now runs the risk of becoming ineffectual as a body.
Falkland Islanders have every right to feel aggrieved and should lodge a complaint, or at the very least seeking clarification as to the UN’s position, and why the founding principle of the UN (the freedom of self-determination) does not apply to the Falklands.
We have been impressed by the new Argentine government’s move to make the country investable, but we believe that this is starting to cause concern that it is not interested in remedying the errors of the past. We have made clear our belief that the people of Argentina deserve better that this sideshow, and their elected officials need to start to be as responsible with the Argentine economy as the peoples of Argentina are at generating the national income. Unfortunately, however, this issue keeps showing the government up as being more concerned with grandstanding, rather than addressing its structural deficiencies.
In order for the UN to survive what we believe is self-immolation in the form of a direct attack on Article 1, it needs to acts swiftly and decisively, save for the potential for future conflict. Until then, this report will continue to cause great concern for all participants in the Falklands’ fledgling hydrocarbon industry, and uncertainty for the likes of Premier, Rockhopper and Borders and Southern.
In Brief
• 88 Energy (LON:88E – 3.50p/A$0.07) – Permeability Exceeds Expectations: News today that the permeability of the core samples taken from Icewine exceed the predrill estimates is on the one hand a strong positive, but on the other hand raises further issues that need to be addressed by further down hole testing before any prognosis can be made of the impact that this has on the commerciality. If this were simply an issue of improving the commerciality, we would have expected more free oil in the mud than has been suggested. As such we need to know whether these high permeabilities a reflection of the highly fractured nature of the series, and if so are they localised, or are they communication channels through which more of the shale series will need to be accessed for fracking. Whatever they are it is too early to say, and it will require further in situ testing to determine the impact these high permeabilities will have on the commerciality of the shale series.
• MX Oil (LON:MXO – 0.68p) – How Long does It Give?: Today’s news is not a surprise, but it raises a more urgent question for management. How long does the Company give GEC Petroleum Development Company (not to be confused with anything associated with Gneral Electric) before it seeks an alternative buyer? We have no doubt that there will have been a period of exclusivity, which is now most likely drawing to a close, and mx have no desire to operate their corner, so the question becomes at what point do you start to market the interest again? Whatever the timing, there is little doubt that MX should keep its options open and sell to the first party to deliver the cash.
• Pantheon Resources (LON:PANR – 132p) – Sitting Pretty: Today’s results underline a company who is sitting in the box seats in its chosen area. With cash on the balance sheet and clear forward plan, we believe the Company has done all it can before execution to provide comfort that what they say will happen, will happen. With falling rig rates and almost limitless availability, we believe the Company is well positioned to springboard from here.
• Chariot Oil and Gas (LON:CHAR – 6p) – Signs of Life at the Margin?: Today’s news is a strong positive for the Company and is a feather in the cap for the technical team, especially in light of the fact that there is virtually no funding for discretionary exploration programmes currently. We have commented in the past that the Company was about to enter a hiatus period, which it is now in, so this news helps to offset the anticipated lack of news flow. What is also interesting to note is that there is still ongoing interest in the Atlantic Margin play in Morocco, which had been hitherto been undermined by previous high-profile drilling.
• Tethys Petroleum (LON:TPL – 2.50p/C$0.04) – A Lot of Activity to Stand Still: While the Company has made excellent progress in the year, appeared to lift the funding issue and taken out a great deal of cost, we can’t help but think that on the important numbers (cash flow and cash available to progress the business), the Company has made little progress. Nevertheless, we can say clearly that the immediate threat to the Company has been alleviated, but we are now increasingly concerned with how it will grow from here given the depleted resources on its balance sheet. Still, given that a lot of activity happened at the end of last year, this year will be a transitional period for the Company, and one at the end of which, will have told us far more about what future it has.