Sunday, 22 December 2013

Weekly Review 21st December

Monday saw Bowleven announce that their FD has resigned. He is moving on to be CFO of an oil services co in the UAE from the New Year. He will be replaced by Kerry Crawford, currently deputy FD. It’s reassuring to know there won’t be a period of disruption whilst we wait for a new FD, but I did sigh when I read that she has been head of investor relations since 2008. So not much change likely in that area unless there is a subsequent new Head of IR? Bowleven also held their AGM this week. Big thanks to the likes of Guernsey81 and TimKempster who made it there and took time and effort to post their notes and reflections on the meeting – thanks for your trouble. To see Guernsey81’s full notes made on ADVFN click here
It sounds like it was a very good meeting, in that investors got the chance to ask challenging questions and there were some real reflections by Kevin and the board. Whether the audience found Hart sincere & professional or on the ropes there seems to be mixed views but overall it seems clear that they do recognise mistakes have been made and that this had had a severe impact on investors. I remain bullish on Bowleven, more so now, as the valuation of oil and gas in the ground is so small that at the very least someone will take a sniff if Bowleven don’t develop it themselves. I believe environmental approval will come in the first quarter of 2014 and with that I would hope for some of our costs to be reimbursed by Petrofac. We know that Ian Suttie and ii’s were prepared to subscribe for shares at 45p and yet the market is currently valuing Bowleven at only 36p. There doesn't seem to be any reason for this unless there is more bad news to come. Considering the market didn't know there was a placing coming, I can’t see that it can know there is more bad news, so a price below 45p in my opinion is all just about sentiment and nothing else. I know that some believe that the FD moving on suggests there is more bad news to come, but the RNS is clear that he has another job in the UAE and maybe it’s really just the case of him moving on after 9 years or maybe he has even been given the push?

This week saw good news from Xcite energy in that they have refinanced their US$72m loan notes which were due early next year, removing another small piece of uncertainty and providing a clear path now to farm out and RBL. The new loan notes have a slightly lower rate of 12% and a term of 360 days, extendable by another 360 days with the consent of the holders. Xcite also issued the same investors 1m shares at 98p immediately, and further warrants for another 1m shares exercisable for up to 3 years at 98p. I don’t know about you but that struck me as a little golden handshake for the deal – a “take some loan notes from me and I’ll let you have a million shares in my company at today’s cheap price and then you know you’ll get 3 or 4 times that back in 3 years or when we’re taken over” type sweetener. But what do I know, I’m just happy to see another piece of the jigsaw fall into place. 

Range Resources announced two lots of news this week, both focusing on Trinidad. The first was that they had formally executed their farm in with Niko Resources giving them exposure to another 280,000 acres on Trinidad. Range will earn 50% of Niko's existing interests in the deep and shallow areas. They will drill two onshore wells to test c.22% of the 100MMbo prospective resource estimate. The first well is targeted to spud in early 2014. Range will fund the cost of the two onshore wells and one appraisal well (if successful), and will share costs equally with Niko thereafter, including the cost of drilling an initial offshore test.  The offshore well will target the 33MMboe best case prospective resource. The second piece of news was that Range has received environmental clearance for up to 40 wells on their Beach Marcelle license in Trinidad. Final project plans can now be submitted and operations are due to start in Q1 2014. The intention is to develop Range’s currently undeveloped 12.8m barrels of 1P reserves.

Is it only me that was left scratching their head when reading the following from Range’s RNS on Thursday..... “The Company is also evaluating the option to deepen up to 8 wells.....successful deepening of existing well bores is expected to recover up to 90MMbo per well at approximately 80 bopd per well of initial production, and at costs significantly lower than drilling and completing new wells". By my calculations 90MMbo of oil at initial rates of 80bopd will take over 3065 years to extract. It might be cheap but it’s very slow! Probably why Range takes so long to do things, they are working on a timescale beyond any of our lifetimes! And then there was the usual issue of shares to accompany the RNS. This time 10m shares and 2m options in lieu of finance fees.

St Peter Port Capital Ltd (SPPC) caught my attention on Tuesday. They released their half year report. A small AIM investment company, they have investments in 39 companies, many of them pre-listed resource stocks, including Oil, Gas, Mining, Uranium etc. According to their report their NAV is 100p per share, but they trade at 55p. They reportedly have several investments looking to deliver “liquidity events” in 2014 including potential IPO’s. The Chairman stated “There are good prospects for sizable transactions in 2014, which we expect generally to occur at a significant premium to our current carrying cost” whilst their investment adviser said  “We remained primarily focused on bringing forward the crystallization of value in the portfolio, particularly in our major holdings.  These offer the possibility of very large further gains if progress continues as it has recently." The liquidity is hopeless but at 55p there could be upside if one or two of their holdings manage to deliver some of these “liquidity events” in 2014. I’m not buying as I have enough on my plate but thought it was of interest.

Wednesday I noticed Edge Resources’ (EDG) drilling update. This oil and gas company focused on Canada has a number of 100% owned interests but had struggled with debt in the past and had to refinance in September. Shares were 22p not long ago but are currently just under 7p which gives a market cap of only £11m. They confirmed this week that they have successfully drilled and cased 4 wells in their Eye Hill license with all 4 wells expected to produce at commercial rates. Production testing should commence before Christmas. The wells should lead to increases in reserves and add significant cash flow and margin. Brad Nichol CEO, sounded very excited, even thanking “mother nature” for rewarding them with a couple of nice surprises! A new reserves report is due in the spring and 3 of the 4 should be producing before the year end. It seems like they could be another Nighthawk in terms of a turnaround story moving forwards in 2014 but DYOR as I have only skimmed across their details. Read the RNS here

Rockhopper (RKH) announced their interim results for 6 months to the end of September 2013. They have resolved their capital gains tax argument with the Falkland Government and continue to move the Sealion development forwards. Interestingly they reported that ongoing technical work has provided them an even more positive view of the scale of Sea Lion. The latest modelling has led the joint venture parties to increase the estimate of the field's 2C resources from 321 million barrels to 337 mmbbl, with a further 57 mmbbl contributed by the satellites. If there is no gas cap this could rise further by another 65mmbbls. They will be making decisions on concept selection in 2014 as well as moving towards the next round of exploration drilling across their licenses targeting almost 800m (net to Rockhopper) barrels of oil initially in place. Nothing like a bit of Falklands Fever for 2015 eh?

Berkeley Minerals (BMR) have been on a long journey. News of a step forward came this week in the shape of the construction being completed of the copper cementation plant at Kabwe in Zambia. A dry test has been run and they are now wet testing, in advance of copper, lead and zinc processing being on stream in 2014. Most investors seem to be stuck in BMR from years ago, sitting on losses and awaiting news of the various operational developments which have been sketchy for so long that it’s hard to believe that the journey will ever get to the destination. In fact investors actually see this lack of clarity as part of a determined cloak of secrecy from their Chairman Masoud Alikhani. Maybe there is a huge master plan about to unfold? Hmmmmm. Like Beacon Hill Resources 2014 should be the year when all the patience for investors in BMR is paid back. Let’s hope so.

In other news, there was a pretty solid corporate update from 3 Leg’s, and a disappointing update from Gulf Sands Petroleum (GPX) who announced that the first two wells in their first phase exploration in Morocco had found gas but in sub commercial quantities. This is part of a 9 well programme, 4 in phase 1 based on 2D seismic, and 5 in phase 2 based on newer 3D seismic. So the odds might suggest success at some point, albeit this week’s uncommercial gas news was met with a 15% drop in the share price. Victoria Oil and Gas released a video of the Cameroon president visiting Douala, Cameroon as he marked the inauguration of VOG’s gas plant in Douala. He commented on the importance of domestic energy to the development of Cameroon’s economy – take note Bowleven investors!

And finally we had “pointless RNS of the week” which this week I have awarded to Max Petroleum. who released an RNS containing nothing except to tell us they will release another RNS in 10 days which will contain their interim financial results and also an updated CPR, currently being prepared by Ryder Scott. I hold Max shares, and don’t look forward to what they will report. Good news has only ever seen a drop in the share price and bad news still more. In theory this end of year release should contain good news – news of production increased, an increase in 2P reserves, and an outline of positive cash flows in advance of debt repayments starting next year. If they stuff this RNS up then there is nothing left to hold for in my opinion. But unless something has gone seriously wrong this should be a positive update. They've confirmed there are only 10 days to wait, so pencil in 30th December for my early morning twitter whoop or yelp........

Have a very great Christmas everyone. I’m collating views on the best AIM prospects for 2014 so feel free to leave a comment below or tweet me your thoughts @timpronkster here and I’ll compile some sort of medley of top tips for an end of year blog........ 

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