16th July 2018
Headlines
- In Brief:
- Pantheon Resources (LON:PANR) (18p) – Sound Approach
- Zenith Energy (LON:ZEN) (3.88p) – Right & Wrong
In Brief
- Pantheon Resources (LON:PANR) (18p) – Sound Approach: Today’s announcement, while at once sad in respect of the passing of Vision’s CEO, the structure outlined therein has been well thought out and, in our opinion, is fair to both sides. Vision’s shareholders can still participate in the success of the appraisal programme, which is further reflected in the contingent elements of the pricing, and Pantheon can finally assert full control over the asset for a fair price while mitigating the risk of overpaying for the risks inherent within the appraisal portfolio. Since the Company’s approach has become more in tune with the fact that its asset base isn’t a development asset, yet, we believe its decision making has improved. We look forward to the outline of the next stage of the appraisal programme; it’s aims and objective, and the all-important associated costs.
- Zenith Energy (LON:ZEN) (3.88p) – Right & Wrong: Firstly, the right. The subsurface complexity and structure of the majority of contracts means that there is very little room for error. Given that as we have stated previously, and continue to believe, that this company suffers from a lack of technical guidance and preparation, today’s news that the transaction has failed at the first blush of due diligence should be a welcomed relief. We believe that the entry to Indonesia will be the best deal that the Company never did. Secondly, the wrong. The commentary accompanying the hasty departure of Mike Palmer that the new hire has a skill set that is better suited to the tasks demanded, to our mind misses the point, significantly. In hiring David Sadoway, the Company have committed, in our mind at least, two cardinal sins: (i) thinking that the same approach will yield different results; and (ii) that believing that assessment of the technical demands of the fields isn’t required before wholesale field redevelopment. This is a similar mistake to that which sunk Ruspetro, that increases in production, no matter how delivered, were all that mattered, not the management of the reservoir. There is a general adage that holds well for engineering, that “proper planning prevents poor performance,” and this is especially true when approaching reservoirs. Shying away from technical rigour is, to our mind, creating an issue for the future, and failing to secure an appropriately skilled person engenders risk. Sadoway’s experience isn’t applicable to what is required now, but it will be applicable at the execution phase. We fear that without a comprehensive engineering study led by a suitably qualified person within the company, who subsequently works with the operations team, that what is achievable will be a fraction of what the CPR has outlined it could be.
We may provide a further update on one, or all, of the stories above later today. However, if there is anything that you would like to discuss, please feel free to contact us.