Headlines
• In Brief:
o Chariot Oil and Gas (LON:CHAR – 11p) – Chariot Starting to Exit Hiatus Period
o Lekoil (LON:LEK – 16p) – Otakikpo Lives up to Billing
o Premier Oil (LON:PMO – 53p) – Solan Marks a Return to What it's Done Best - Oil
o Range Resources (LON:RRL – 0.45p/A$0.01) – Is it a Surprise to Find Oil in a Development Well?
o Rockhopper Exploration (LON:RKH – 30p) – Transition Underway
o Sirius Petroleum (LON:SRSP – 0.30p) – Funds Raised.... What Now?
o Victoria Oil and Gas (LON:VOG – 41p) – Debt Can be a Positive
In Brief
• Chariot Oil and Gas (LON:CHAR – 11p) – Chariot Starting to Exit Hiatus Period: Today's results were only ever really going to be about the outlook and cash resources. On the latter, cash resources, the Company is comfortable, if not completely secure, and to some extent, this has sharpened management's focus. The Company has oft said that 2015/2016 would be a period of reduced activity as its programmes stepped up and activity commenced in mid-2016. We believe that these results are a reminder of that timing and we believe that the Company has not only provided for a solid platform going forward, but it has not compromised shareholders access to the fruits of any success, while still limiting the financial risks.
• Lekoil (LON:LEK – 16p) – Otakikpo Lives up to Billing: Today's news that Otakikpo is performing above expectations is a positive for the Company, and in so doing, it is good news for not only the Company, but in many respects is a vindication of the past interest in the asset. Today's news should be welcomed by investors in the Company specifically, and in a wider sense should provide encouragement to outside commentators that at one level at least, Nigeria is open for business.
• Premier Oil (LON:PMO – 53p) – Solan Marks a Return to What it's Done Best - Oil: At least in some respects the Company has returned to its operating roots and focused on growing the bottom line though the application of engineering to oil and gas, opposed to financial engineering applied to its balance sheet and income statement – there is no engineering that can be applied where it matters – on the cash flow statement. Today’s news should please the Company’s owners, as well as the signs that it is returning to the things it does best. 2016 could yet be the year we finally start to forget about is disastrous attempt to create value by buying back shares.
• Range Resources (LON:RRL,ASX:RRS – 0.45p/A$0.01) – Is it a Surprise to Find Oil in a Development Well?: Each time Range puts out an announcement it shrinks further away from the Company that was once in charge of its own destiny and had a future. That intersecting hydrocarbon bearing zones in what is supposed to be a development well is deemed to be newsworthy, and announced with such pride, is unfortunately a clear indication of how far away from being a suitable company Range has now drifted. We believe that the last two cycles of management teams have run the Company further on to the rocks, and with each successive announcement the Company drifts further and further away from the realities of operating a successful oil company.
• Rockhopper Exploration (LON:RKH – 30p) – Transition Underway: What today's results mark, in our opinion, is the start of the transition from exploration company to one that has a balanced portfolio of cash flow producing and opportunity generating assets. While this will take a number of years to fully complete, the next real catalyst in migrating towards this state is the go/no go decision on Sea Lion. While this event has itself been subject to much movement, buffeted by the issues at Premier Oil, the principle headwind has been the fall in the oil price. Still, Rockhopper’s cash balances remain robust, but there will not be too many more periods in which we can claim not to be worried by the levels against the future activity, and require the Company's operations to be self-funding. That isn't this year, but could well (perversely) be precipitated by the sanction of Sea Lion' s development in 2017. Still, that is next year's issue, but for now, things are progressing nicely.
• Sirius Petroleum (LON:SRSP – 0.30p) – Funds Raised.... What Now?: There is an element of "so what?" To today's news that the Company has been successful in raising the funds it needs, but the question must now be what is left of its opportunity for it to spend its money on? The Company has been in hiatus for so long, and fallen off so many radars that we must reacquaint ourselves with it, the asset base and what is going to happen going forwards. The one significant positive for us is that Simon Hawkins is now in harness, and we can't help but put together the two events.
• Victoria Oil and Gas (LON:VOG – 41p) – Debt Can be a Positive: There are times when the power of debt can be harnessed to accelerate a company's progress, and add considerable value to shareholders. This is especially true if suitably matched with cash flows, or risks mitigated by the appropriate application of cash flow insuring instruments. Under these circumstances, debt need not be the beast that some have become. We believe that the consolidation of debt in to its midstream operation, is a judicious use of debt for equity holders of the Company, and should be applauded. Now all that needs to be ensured for this to happen for VOG is that the risks are kept sufficiently in check, and the cash resulting from access to the credit line applied judiciously.