Headlines
Comment: What is clear from the North Yorkshire County Council’s decision, is that common sense is now finally starting assert itself again, and industry is at least being given the chance to assess the shale series. What is needed now is a coordinated national plan that allows the planning process to be removed as one of the barriers to progress and a risk adjustment that needs to be made in assessing the value of such an investment.
In Brief:
Exillon Energy (LON:EXI – 67p) – April Production Report
San Leon Energy (LON:SLE – SUSP) – OML 18 Update
Sound Energy (LON:SOU – 17p) – Time For The Final Pieces
Xcite Energy (LON:XEL – 12p) – Why? What? How?
Comment - Local and National Interests Put First
It is rare that government actually does something that is right for the wider population against a vocal, populist minority that isn't beyond lying, deceiving and using celebrity to get their way. It is even rarer that it is local government, which is why today is a significant milestone for not only for the wider United Kingdom, but the UK oil and gas industry too.
The approval of fracking at Third Energy’s site at Kirby Misperton in Ryedale (Yorkshire) by the local council (North Yorkshire County Council) is a significant milestone as it is the first time that the local population has spoken out for a national interest. It is important to remember that fracking when done properly has no lasting effect (other than a brief period of intense activity) on the surface environment, but can a significant effect on the potential to create jobs, the local economy and can help to shore up the UK's wider energy security.
Of course this all assumes that the shale series is a suitable candidate for fracking, which it may not turn out to be. This uncertainty is underlined by the length of time that it has taken the US shale industry to mature, and how long other shale series, such as those in Morocco and Poland, have taken to make any sort of headway.
What is clear from the North Yorkshire County Council’s decision, is that common sense is now finally starting assert itself again, and industry is at least being given the chance to assess the shale series. What is needed now is a coordinated national plan that allows the planning process to be removed as one of the barriers to progress and a risk adjustment that needs to be made in assessing the value of such an investment.
In Brief
• Exillon Energy (LON:EXI – 67p) – April Production Report: Today's production update points towards the restoration of an upward trend, which to be frank is expected given the seasonal effects on production in these areas. We believe that the Company needs to start to become more transparent on its development plan, how it intends to develop its fields. We have often said that in the winter in these fields you either drill to raise production, or you build pads so you can raise production through the rest of the year, or a combination of the two. We would like to see greater clarity on which one the Company is undertaking.
• San Leon Energy (LON:SLE – SUSP) – OML 18 Update: Today the Company discloses that it has secured 5.75% economic interest in OML 18. The Company now needs to continue to make significant progress in a short space of time in order to complete the acquisition of the SunTrust share, which will bring the net economic interest to 9.72% (5.40% working interest).
• Sound Energy (LON:SOU – 17p) – Time For The Final Pieces: It seems churlish to say, but not that long ago it was difficult to see where Sound was going or what strategy it was pursuing. Over the last 24 months, the Company has gained a greater focus and in so doing gained traction. The last 12 months has seen this accelerate appreciably, and with the activity in the next 12 months, we believe that it is safe to say that this period will mark the end of the transition phase and see the start of the Company's new future path. The Company's investors should be pleased with the way that management has transformed the outlook. While James Parsons has been the catalyst and driver for this change, he now needs to start to look to strengthen his executive team with a CFO who can support his vision and start to lift some of the workload so he can focus on what he is best at. We believe that wi th a suitable CFO, the Company will really be in a strong position to accelerate its growth further.
• Xcite Energy (LON:XEL – 12p) – Why? What? How?: It's hard to know what to say about the results any more, as it is clear that the Company is heading towards creditor control or a dilutive equity raising. While this is the way of life at times, what galls more is that the management team have been complicit in arriving at this point, probably driving the Company towards a singular outcome that suits its needs, and not properly addressing the environment in which they operate, or adapting the plan to those changes. It's all well and good management having religion about an asset, sometimes it's what's needed to get a project off the ground, but there also needs to be a dose of reality and detachment associated with it too, so it can be properly assessed. The questions now are: (i) why if the asset is commercial at these oil prices, as it is moving towards funding, why hasn't it been pro gressed? (ii) what can the management team do to preserve the equity holders interests? On this point it was ridiculous to take debt in the first place given the stage of development they were at; and (iii) how much more time can investors afford to give this management to drift? Questions that need to be asked by investors, and quickly.