Headlines
In Brief:
Ascent Resources (LON:AST – 3.00p) – PG–10 Flow Test Improves Outlook
LGO Energy (LON:LGO – 0.12p) – La Lora Loss a Blessing
Zenith Energy (LON:ZEN / TSX:ZEE – 11p/C$0.17) – Debt Reduction a Positive
In Brief
Ascent Resources (LON:AST – 3.00p) – PG–10 Flow Test Improves Outlook: Today's announcement of repeatable flow test results is a strong positive for the Company as it now enables the well to be better characterised and a contactable deliverable from it. While this sounds turgid, this is an essential step in getting to an offtake agreement, from which the gas can be valorised. While there is still a number of steps required to be undertaken, this is a significant step forwards and one that will, in our mind, lead to cash generation in the near term.
LGO Energy (LON:LGO – 0.12p) – La Lora Loss a Blessing: Todays news, which discloses the Spanish authorities' decision not to extend the La Lora licence, but offer it out for tender, to our mind is a blessing in disguise for the Company. While the cash flow generated would have been useful, we believe that in order for the field to have a meaningful life span a number of elements have to fall in to place, namely: (i) a rising oil price; and (ii) an easing of the tax burden. To our mind, oil prices won’t rise fast enough to keep pace with necessary investment and tax reform is unlikely to happen at all. As a result, we believe that this is blessing for the Company, as the state now believe it to be a viable asset and hence assume all liabilities beyond this point, which given the fact that there is unlikely to be any environmental issues to date, is all of them.
Zenith Energy (LON:ZEN /TSX:ZEE – 11p/C$0.17) – Debt Reduction a Positive: News that the convertible bond holder has elected to convert some of the existing debt in to shares is a positive, as it shores up the balance sheet. It also provides a little more flexibility for the Company as it seeks to assemble a programme to assess the potential of its Azeri asset. The remainder of the portfolio (Italy and Argentina), must, from now on, be view through the prism of providing cash for its Azeri business, or ejected from the portfolio. Still, the next stage will be the disclosure of the first development wells that will form the basis for the ongoing redevelopment programme.