Headlines
Range Resources (LON:RRL – 0.34p/A$0.01) – Development Well Confusion Causes Concern: The Company is moving in the right direction, but it is required to go much further. This announcement demonstrates a worrying lack of understanding, and as such, the question now returns: does the Company have a plan for generating a return for its owners, the shareholders, or not? It's a simple question, but one that the Company needs to address quickly, save for the market answering the question on its behalf.
In Brief:
Europa Oil and Gas (LON:EOG – 3.50p) – Offshore Ireland Shows Ambition
LGO Energy (LON:LGO – 0.21p) – Goudron Updated Resource Assessment
Providence Resources (LON:PVR – 12p) – Focus Can Now Turn to Its Value
Sirius Petroleum (LON:SRSP – 0.33p) – Environment Approval a Step in the Right Direction
News Items
Range Resources (LON:RRL – 0.34p/A$0.01) – Development Well Confusion Causes Concern
This might seem like a trite statement, but a development well is one whose purpose is to develop the reserves already identified. Consequently, when the company speaks a Development well “to test the Middle and Upper Cruse sands” it sounds like an Appraisal well to us, hence our confusion as to what this well actually is.
Our concern is that this confusion emanates from the Company. You can of course have an Appraisal well that if successful can be completed as a producer, which if this is such a well, it is perfectly legitimate for it to be disclosed as such. This seeming incompatibility is magnified by the fact that this will be only the second well in to these horizons at this location. Rightly, the Company is drilling a second well to appraise and assess the discovery made in the new Middle and Upper Cruse sands by the first well. This will lead to the addition of Contingent Resources, which if successfully tested, could then be reclassified as Reserves.
We like the asset base and we like operating team, but the Company needs to sharpen up at the executive level, and shake off the rot that started with the disastrous Scott-Russell tenure. Our call for a cohesive plan to plot the Company's path forward, which deals with the asset, work obligations, and reduction of the debt pile, providing us with milestones is now entering its second year, and there is still no sign of any public disclosure of such a plan any time soon; what has been made available thus far does not constitute anything near adequate enough.
The Company is moving in the right direction, but it is required to go much further. This announcement demonstrates a worrying lack of understanding, or lack of attention to teh detail, and as such, the question now returns: does the Company have a plan for generating a return for its owners, the shareholders, or not? It's a simple question, but one that the Company needs to address quickly, save for the market answering the question on its behalf.
In Brief
Europa Oil and Gas (LON:EOG – 3.50p) – Offshore Ireland Shows Ambition: Today's update is the latest in a line of announcements regarding its long term portfolio and one in which the Company rightly crows about. However, the recent additions to the portfolio and spate of announcements is beginning to give rise to the thought that the management team has placed too much emphasis on what is likely to need significant funding before reaching the point at which a farmout is achieved. Still, the Company has operating assets with which to offset these costs, but here too, they will require investment to maintain production, especially at current oil prices. The focus now needs to be on these assets, and more specifically, how it will generate sufficient cash to not only sufficient critical mass to maintain growth, but to also take it to the next stage.
LGO Energy (LON:LGO – 0.21p) – Goudron Updated Resource Assessment: Today's news is an endorsement for the technical team, who despite the drilling issues, that along with the decline in the oil price to some extent precipitated the Company's fall in value, have continued to execute the plan, which up until that point, had generated significant value and illustrated further potential realisable value. This report should be the next stepping stone towards executing the programme that realises that value for LGO's shareholders. That is, if the forward momentum that has been regained after the setbacks, which includes those out of its control such as the oil price, is maintained.
Providence Resources (LON;PVR – 12p) – Focus Can Now Turn to Its Value: News last week that the debt repayment had been approved and that ten cash can now be transferred alleviates a significant pressure not only from the balance sheet, but from the Management too, as now it (Management) and investors alike can turn to the value within its portfolio offered by Barryroe, whose farmout must now be secured. Here too the recent fundraising leaves the Company well placed to leverage off of its position, as it now has sufficient cash to carry the programme forwards, especially as operating costs are very competitive currently.
• Sirius Petroleum (LON:SRSP – 0.33p) – Environment Approval a Step in the Right Direction: Today's news that the Company has secured environmental approval for its development plan is good news in that it confirms that the Company has a credible plan with which to move forwards with. This is the likely influence of Stein et al via his Havoc vehicle. Havoc’s credentials in the industry, and more specifically in West Africa, will help to engender the belief that the Company has a direction to now move in, which in turn could result in value being generated for shareholders. However, we caution that investors will have to follow their money for a while yet to see such returns, as the development phase will require equity, even if the Company secures debt funding to develop the asset.