Headlines
• In Brief:
o Zoltav Resources*** (LON:ZOL – 12p) – Update Underlines the Need for Effective Data
o Gulfsands Petroleum (LON:GPX – 6p) – Contract Reset Refreshes Impetus
o Pantheon Resources (LON:PANR – 63p) – Confused Operational Update
In Brief
• Zoltav Resources*** (LON:ZOL – 12p) – Update Underlines the Need for Effective Data: It was known ahead of time how complex the subsurface is at the North Caspian Basin’s margins, a fact which as today’s announcement has reiterated, and definitely made a great deal more complicated by the lack of effective 3D data. While disappointing, we believe that management have taken the right step to effectively announce that the technical programme will restart from first principles, working-up an up to date interpretation of the geology in its Bortovoy licence using modern techniques. We have no doubt that the Company will trade easier, but given that the value of the Company bears little relationship to the underlying value of the asset base, any further decline in the price will merely trade at a greater discount to the inherent value of the asset base. We continue to believe that the Company’s programme of refocusing on its core area will ultimately prove to be the catalyst to unlock the value within the asset base.
• Gulfsands Petroleum (LON:GPX – 6p) – Contract Reset Refreshes Impetus: The Company’s disclosure today that it has successfully reset the Putumayo 14 contract provides much needed room in order to conduct an orderly process to attract farminees. While there is no doubt that it is still a tricky undertaking, there is at least one less hurdle to overcome when negotiating with potential candidates.
• Pantheon Resources (LON:PANR – 63p) – Confused Operational Update: Today’s operational update still does little to clear up the confusion surrounding exactly what stage the Company’s assets are at. While the commentary surrounding the gas plant reads like a development programme, the well results are still being reported in the manner of an appraisal programme. While we can appreciate that the management are applying “rule of thumb” metrics in assessing an individual well’s commerciality, which we don’t necessarily disagree with, but a rule of thumb doesn’t qualify under SPE’s PRMS guidance for commerciality and reserves classification, which demands technical rigour and a concerted development plan. To our mind the markets are no different. Consequently, management owes the Company’s owners and the w ider market: (i) more guidance about their forward programme, with milestones, delineating what the well results will demonstrate; and (ii) what it means for recoverable volumes and all-important declaration of commerciality and reclassification of what at best is Contingent Resources in to Reserves. To our mind, these were urgent things to address some time ago, but with each new confused announcement, it becomes more pressing.