Headlines
In Brief
Igas Energy (LON:IGAS – 19p) – Trading Update
Independent Resources (IRG LN – 0.07p) – Credit Where it’s Due
Trinity Exploration and Production (TRIN LN – 3.01p) – Carnage Ahead
Urals Energy (LON:UEN – 2.13p) – Confidence Returns
In Brief
• Igas Energy (LON:IGAS – 19p) – Trading Update: Following the convulsions of the last 12 months, today’s trading update paints a promising tableau of the Company’s potential. However, we remain concerned by the high opex number and believe that this could be a sign of trouble ahead, especially against a dwindling resource, if it isn’t addressed head on. In this respect, however, we believe this is offset to some extent by the new production that is yet to come in to the hopper. All in all, we believe that today’s update, while underlining the potential in the future portfolio, will generate headwinds for the Company in the near to medium term.
• Independent Resources (IRG LN – 0.07p) – Credit Where it’s Due: Today’s news should ease a lot of the headwinds that have been buffeting the Company recently, as nothing is as destructive to value as creditors seeking satisfaction for their outstanding amounts. So against this backdrop it is to management’s credit that they have addressed it in a manner that even in the issue of shares creates value to the equity holder (issuance above market). All that remains for the Company now is to address the issues in Egypt, start to sweat those assets and generate free cash flow.
• Trinity Exploration and Production (LON:TRIN – 3.01p) – Carnage Ahead: That the management team have started the process of rebuilding the Company, which will require creditor support, is to its credit, as we can imagine the pressure that the team are operating under. What we can’t understand, however, is how in this market, with the issues that the Company is facing, how the it incurs ~$10mm of G and A expenses, which excludes ~$8mm of depreciation and amortisation. On that basis, there is a significant round of cost cutting coming, or a frustrated creditor will pull the plug. Either way there is carnage for somebody.
• Urals Energy (LON:UEN – 2.13p) – Confidence Returns: While only limited in scope and tied to volumes already lifted and in the tank, what today’s announcement of a [pre-finance facility underlines is the confidence that is returning to the Company’s management team. Those with a long memory will recall that Urals was one of the first companies to suffer at the hands of its creditors when it couldn’t develop its Dulisma field sufficiently quickly to meet its obligations. In that respect the Company escaped lightly as Sibir Bank only perfected the security over that asset and was able to dispose of it in to a rising market. So for management to take this step underlines the confidence within the Company. While we are sure that the Company will remain guarded against excessive leverage, we are happy to see that the management has returned to the market in this way, as a well-managed debt programme adds to any company’s efficient funding solution.