Headlines
In Brief:
Eland Oil and Gas (LON:ELA – 36p) – Incremental Gains and Losses
Green Dragon Gas (LON:GDG – 265p) – Starting to Deliver on its Promise
LGO Energy (LON:LGO – 0.28p) – Swagger Returning
Rose Petroleum (LON:ROSE – 0.16p) – A Curates Egg
In Brief
Eland Oil and Gas (LON:ELA – 36p) – Incremental Gains and Losses: Today’s update is positive on the one hand, as its incremental development programme starts to yield fruit in the shape of additional reserves and resources, and a loss as today’s update also discloses the departure of Louis Castro from the Company. While one man does not a company make, we believe that the departure of Castro provides an internal headwind to the Company that it doesn’t need at this stage. All things considered, on balance, we believe that despite the reserves addition, today’s news is net negative, but once the cash flows start to flow to the Company from Gbetiokun, then this will be reversed.
Green Dragon Gas (LON:GDG – 265p) – Starting to Deliver on its Promise: It has taken an inordinate length of time, and there have been a number of howlers along the way, but in today’s results we see the start of a company that looks as if it might just have the legs to exploit its asset base and generate a return for shareholders. For the first time in a long time, in looking at the statements we observe investment at the wellhead seeming to take preference over investment in the corporate structure, which to our mind has now started the process of rightsizing the Company. While there needs to be a sustained period of growth at the drillbit, and migration of Contingent Resources in to Reserves, this is at least evidence that this has started.
LGO Energy (LON:LGO – 0.28p) – Swagger Returning: Today’s news is positive not just because it will result in additional cash flow for the Company, but it also signifies the return to “normal” operations. While there is a distance to go yet before the Company gains back the same kind of forward momentum that it once had, at least this is the start of that journey.
Rose Petroleum (LON:ROSE – 0.16p) – A Curates Egg: We have highlighted in the past that we do not believe that oil and gas and mining assets run by the same people is a recipe for success, and today’s news is the evidence of that. We get the impression that the management team heard the word “shale” and jumped on board without really understanding the additional engineering and reservoir issues that come with oil and gas, over and above a mine. While the Company is retaining its interest in the Paradox asset, we don't believe that the team will be able to deliver a coherent strategy while they have mining assets within the same stable competing for management and capital resources, obfuscating both the opportunities and risks associated with it. In that vein, we think that today's announcement is a Curates Egg, we like the capital discipl ine demonstrated by its withdrawal from the Mancos assets, but we can help but wonder about the issues and tensions that it masks within the business.