Summary
In Brief
Baron Oil*** (LON:BOIL) – 0.09p – $14mm (0.79p)
Portfolio Refresh
Echo Energy (LON:ECHO) – 3.33p
Solid Update, But What's the Outlook?
Zenith Energy (LON:ZEN) – 3.00p
One Well Does Not a Success Make
News In Brief
Baron Oil***
(LON:BOIL) – 0.09p
$14mm (0.79p)
Portfolio Refresh
The update from the Company has provided some insight as to where the Company has been focusing its attention, not least with respect to the results from the Colter drilling programme, the results of which are still being assessed.
The disclosure that the Company has expanded its investment horizon to include opportunities outside of the UK and Peru is also a plus, especially as it underlines its relationship network in Asia.
The addition of Andy Yeo to the board will also allow the burden of the day to day running of the Company to be lifted from the technical team, which has been bolstered by the arrival of Jon Ford. In allocating the public market and administration roles to Yeo, this frees Butler and Ford to focus on generating shareholder value at the drill bit.
While our valuation remains unchanged at $14mm (0.79p) as a result of this news, we believe that the probability of a near term expansion of the Company's portfolio has been increased, and with it, the potential for a material devaluation of the Company.
Echo Energy
(LON:ECHO) – 3.33p
Solid Update, But What's the Outlook?
The seeds for the Company's position reported as part of this update were sown some time ago, and while this underlines the solidity of the asset base that has been developed thus far, the news is backward looking.
In this context, the Company needs to provide leadership as to how it intends to leverage from this position and build on the solid foundations that have been laid. In this respect, the paucity of technical leadership on the board creates a concern that the lack of an outlook is related to the fact that the Company cannot effectively pilot a way forward.
What is required is a clear statement as to not only where the Company is going, but how it intends to get there.
Consequently, we believe that while investors will, and should, be pleased with how far the Company has come, they should be equally concerned with what's next.
Zenith Energy
(LON:ZEN) – 3.00p
One Well Does Not a Success Make
News that the Company's rig is moving to its next well to our mind isn't newsworthy, but what catches our eye in this instance is the belief that one well will somehow offset the disaster that has beset the Company today.
Make no doubt this disappointment has been precipitated by poor planning and an overly sim0listic belief that all you had to do to generate returns is work over the wells. This is why the exploration well will be so important because now that they have done the study on the existing asset base, they've found it to be a more significant task than either they initially thought and are capable of.
What the Company has effectively stated in this announcement is that unless they have a commercial success at its Jafarli well, which is drilling deeper to target an exploration zone, the disappointment of the past will continue, which puts into perspective just how poor the management team was at IPO.