First full week of the New Year and plenty going on.
Rockhopper Exploration (RKH) announced Heads of Terms with Navitas to farm-in to Sea Lion. This adds additional strength to the Sea Lion joint venture, which Rockhopper believes will increase the likelihood of a successful senior debt project financing for the Sea Lion Phase 1 development. Key of course will be the local political situation.
Sea Lion JV partner Premier Oil (PMO) announced its trading and operations update. 2019 production was 78,400 boepd. It's also looking forward to drilling its first well in Alaska, which it describes as "potentially transformational" for Premier, whose own interest comes via a farm out from 88 Energy (88E), which incidentally is now up 100% from when I mentioned it as a favourite towards the end of last year.
Premier also announced proposed UK North Sea acquisitions, which will add around 23,000 boepd production with development upside. The acquired assets are forecast to generate over $1 billion of free cash flow to the end of 2023, exactly the type of acquisition that RockRose Energy (RRE) is looking for. They announced a year end trading update. Year end total cash was $370.7 million ($54.9 million restricted), similar to the current capitalisation.
The market valuation of RockRose is very much a mystery. I first bought it around 130p and a few months later received a 150p per share return of capital, leaving me in for free. I said at the time it was financial alchemy, but so far it appears to be working. RockRose now is nearly £20 a share and average production in 2020 is forecast to be around 21,000 boepd, a 9% increase on 2019, and they continue to look at opportunities to make acquisitions. That's the key to the next step up here.
Bahamas Petroleum Company (BPC) announced an update regarding their mutual fund set up to allow locals to invest. The fund has opened for receipt of initial subscriptions and the proceeds received from investors will then be utilised for the purchase of ordinary shares in Bahamas Petroleum. It will be interesting to see how this goes and may open some new fund raising ideas for other exploration companies looking for extra finance.
Petrel Resources (PET) shocked investors, announcing that payment for the second tranche of shares has not yet been received from the Tamraz group. The shares fell sharply, but still look fairly resilient at 7.75p, some 520% above the 1.25p price Tamraz is paying and it would be rather strange if this transaction did not complete. I highlighted Petrel several times last year as a favourite around 1p and I suspect that most who bought at this level will be long gone now.
The arrival of Alan Linn as CEO at another Dublin company, Providence Resources (PVR), has perked the share price up considerably. He's looking forward to working with the board to bring new investment into the Barryroe project. Tower Resources (TRP), another looking to drill soon, also is starting to firm up. I said a couple of times last year that this was a good buying opportunity under 0.4p. Now 0.53p, key of course is a farm-out.
Lekoil (LEK) has been strong since it announced appraisal funding secured at the start of the year. It followed up last week with an announcement of the commencement of site survey on OPL 310. Currently 9.4p (up over 100% from 4.65p at the time of the 2 January announcement), Hannam & Partners have calculated a risked net asset value of 23p a share and an un-risked net asset value of 239p a share.
Meanwhile, the Zenith Energy (ZEN) and Anglo African Oil & Gas (AAOG) saga draws to a close. Voting on the deal is Monday morning and it looks like Zenith is going to get the old Congo field. It will be goodnight and goodbye to Anglo African though and, absent a relative miracle, I see it being sold down to virtually zero and delisting mid-year. I've been seriously critical of this company for a considerable period of time, unfortunately most just wanted to argue with me.
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For those who are not familiar with me, I focus exclusively on small cap oil and gas companies and I know this sector inside out. I have been involved in the stock markets (both UK and US) since the early 1980s and understand exactly how the finance and promotion game works. I also have many years’ operational and corporate experience in the oil business, which enables me to see very quickly whether or not these companies are telling the truth. It's not investment advice that I offer and if you want that, you should speak with a financial advisor. I share my take on companies and the markets and, as those who follow me know, I’m rarely wrong about these matters.
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The author holds one or more investments in one or more of the companies mentioned so this post cannot be viewed as independent research. This post does not constitute investment advice or a recommendation to buy or sell and may be incorrect or outdated.