Headlines
• In Brief:
Frontera Resources (LON:FRR – 0.30p) – Operations Update Points to Problems
Ithaca Energy (LON:IAE/CVE:IAE – 44p/C$0.79) – Q1 Results - What it Said on the Tin
San Leon Energy*** (LON:SLE – SUSP) – Strategy Update
Sound Energy (LON:SOU – 16p) – More to Come?
Union Jack Oil* (LON:UJO – 0.13p) – (BUY – 0.63p) – Final Results
In Brief
• Frontera Resources (LON:FRR – 0.30p) – Operations Update Points to Problems: Today's news is largely a rehashing of old news, and we don't believe that we have had a clear and cohesive plan presented as to what the programme will be, what its aiming to do and what it's milestones are. Still, I am sure they exist and that when we are aware of them, they will make sense. What causes us greater concern now is what appears to be a growing issue between the Company and the regulator. While we acknowledge that the Company has undertaken little productive investment in the past that there now appears to be fruit to its labours it is disappointing that the regulator chooses now to take a more aggressive stance on the Company's past performance. The less charitable would say that now that the Company has improved the likelihood of a commercial outcome, the government is taking a different view , to what end, one can only speculate. Still, this is the Company's chosen location and it must now address these issues for fear of losing its licences just at a time the Company's owners could benefit from the risks they have taken.
• Ithaca Energy (LON:IAE/CVE:IAE – 44p/C$0.79) – Q1 Results - What it Said on the Tin: Today's results from the Company are solid in that they have proven to be in line with guidance. While we have no doubt that there will be a number of investors who will be disappointed with today's headline production number, given that they have been well touted ahead of time, any weakness as a result should have already been reflected in the valuation. As a consequence, we believe that any weakness in the share price is an opportunity to increase exposure to what we believe is a well-run company successfully deleveraging itself in an oil price environment that makes that doubly difficult. All in all, we believe that the underlying performance remains strong, and that once the balance sheet is a little stronger, we believe that if the market value doesn't improve from these levels, that the Company c ould well be a target for an opportunistic acquirer.
• San Leon Energy*** (LON:SLE – SUSP) – Strategy Update: Today's update is a timely reminder of the scale of the transaction that the Company is undertaking, and with it, the new direction the Company is going. Its acquisition of up to 9.72% interest in OML18 will not only provide it with access of up to 5m bpd of production and ~47mm bbl of 2P reserves on completion. Given the value of the Company on suspension, these metrics would support an additional ~$350mm of value (based on market per barrel of production and per barrel of 2P reserves market multiples) being added to its current valuation, which includes its interest in its Albanian, Moroccan and polish assets, as well as the net profit interest in Barryroe.
• Sound Energy (LON:SOU – 16p) – More to Come?: Today's Nervesa update is disappointing in that the completion was not as designed, or that the design was inadequate for the duty, but from this slight cloud is the silver lining of previously completed production horizons being brought on stream. While there will be a number of questions to answer, the comma has repeatedly demonstrated its ability to solve issues put before it, and we believe that this issue will be easily addressed and resolved.
• Union Jack Oil* (LON:UJO – 0.13p) – (BUY – 0.63p) – Final Results: Today's news doesn't provide us with much in the way of information that we didn't know already before about its operations, but what is new, however, is the fact that the cash balance remains buoyant at ~$4mm, and with the prospect of Wressle generating revenue by the end of this year, 2016 should be a year in which the Company's prospects change dramatically. We are taking this opportunity to reiterate our 0.63p Target Price and BUY Recommendation.