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Oilman Jim's Private Blog



Union Jack Oil (UJO) and Reabold Resources (RBD) announced commencement of drilling of the West Newton B-1 well. Completion is expected to take six to ten weeks. The steam has very much gone out of the UJO share price since it fell by nearly half from 0.31p before the 0.16p placing (I was talking in the private blog about de-risking in the high 0.2s/low 0.3s). RBD also is weak. Romanian operations appear to have failed and investor confidence has ebbed away. Regular readers know that I’ve warned about Reabold many times and at much higher prices than today. If you want to gamble (and that’s all it is) on the outcome of the drill, Union Jack probably is the better bet. RBD owns a greater percentage, but UJO has the audience needed.

Predator Oil & Gas (PRD) announced an operational update. Reassuringly, it confirms that Morocco is the “greatest potential risk/reward prize in the Company's portfolio and is an absolute priority for the Company to drill as early as COVID-19 restrictions allow.” The concern now is finance, since a new MOU-4 prospect has been announced, which is located 6 kilometres from the MOU-1 drill site and offers the opportunity for additional drilling while the rig is mobilised there.

Independent Oil & Gas (IOG) announced that it does not intend to make an offer to acquire Deltic Energy (DELT) due to the absence of Deltic board engagement both on an initial approach made on 26 August, which was rejected on 2 September, as well as on a second approach made on 25 September on improved terms, which was rejected on 2 October. DELT responded that the terms of the initial proposed merger “implied an offer value at that time which was less than Deltic's cash balance and as such placed no immediate value on Deltic's significant portfolio of non-cash assets, not least its interests in Pensacola and Selene.” Per DELT, the amended proposed merger terms “included a contingent value right proposal whereby additional value could potentially accrue to Deltic shareholders…however…the maximum value which could accrue to Deltic shareholders in the event that first gas was achieved on each of Pensacola and Selene was limited to £2 million per prospect.” There are clear synergies here, though, and to quote IOG "a transaction would have considerable industrial logic, consolidating and scaling up two complementary portfolios with a balance of near-term catalysts and longer-term upside, representing excellent value for both sets of shareholders.” The reality of course is that board control of a public quoted company is a licence to print for the directors and all involved. Who really would want to give it up?

Premier Oil (PMO) announced its merger with Chrysaor, a transaction which will create the largest independent oil and gas company listed on the London Stock Exchange with combined production of over 250,000 barrels of oil equivalent per day. Premier's shareholders, though, are only expected to “own up to” 5.45 per cent of the combined group and the share price has declined to just over 14p. It’s another salutary warning that, like Hurricane Energy (HUR) which announced a further operational and corporate update last week, what appears to be immediate success can, and indeed usually does, turn into eventual commercial failure. That is the reality of these types of companies and their shares: they are for short/medium term trading only, never longer term investing, regardless of how good the “fundamentals” may appear to you. On the bright side, though, the PMO/Chrysaor deal could be quite beneficial for both Rockhopper Exploration (RKH) and Borders & Southern (BOR) vis-a-vis their Falklands projects.

Since I’ve seen a flurry of promotional tweets this week regarding Nostra Terra Oil & Gas (NTOG), which can only be aimed at unwary newcomers, I’ll comment on it. The problem is that no one apart from the directors, brokers, PR companies and paid social media posters is ever going to make a profit from it. It’s essentially a small business (with a turnover similar to a petrol station) whose operating profits, if any, can never approach covering a quoted public company’s overheads. Even with a profit of $10 a barrel at the operational level (which is a generous assumption since many fields in the area do not even achieve operating break-even) NTOG would need 500 barrels of oil per day production just to cover administration and other expenses. Remember, they’ve been at it for years, have achieved nothing other than massive losses for shareholders, and in the process squandered nearly $30 million of investors’ money. There’s always an exciting new project to draw in new punters, but it always fails to reward them. A huge avoid.

In other news, Chariot Oil & Gas (CHAR) announced the appointment of a Morocco country director (the new man is Pierre Raillard, ex Orca Energy), SDX Energy (SDX) announced a trading and operational update (it continued to perform strongly in the second half of 2020), Zephyr Energy (ZPHR) announced a Paradox well is to be spudded by year-end (in fact, it’s a stratigraphic research well funded by the University of Utah Energy & Geoscience Institute), President Energy (PPC) announced a drilling update and change of auditor (it’s moving from Deloitte to Crowe, who I suspect might be less rigorous), Bowleven (BLVN) announced a corporate update (it continues to make good progress on the Etinde development, offshore Cameroon), Petroneft Resources (PTR) announced the successful testing of a mini oil refinery (it’s quite an interesting project), Nostrum Oil & Gas (NOG) announced an update regarding subsoil use contracts (it’s the disposal of its rights and obligations for both the Darinskoye and Yuzhno-Gremyachenskoye fields), JKX Oil & Gas (JKX) announced a quarterly operations update (production is up 4% to 10,245 boepd), Angus Energy (ANGS) announced work commencing on the pipeline at Saltfleetby (principal heavy works are expected to be concluded by 6 November), Petro Matad (MATD) announced an operational update (more delays), Advance Energy (ADV) (formerly ADL, formerly CEB) announced termination of the Betun-Selo KSO agreement (I did say this was worthless at the outset and impairment results in another $604,000 of shareholder funds down the drain), finally Zenith Energy (ZEN) announced the suspension of trading in its shares (the auditors appear to be nervous).

If you’re interested in more, in particular my trade ideas, try out the private blog at Personally, I look for what I would call certainties. Those shares where I think a profit is as good as guaranteed. If you’re not yet familiar with me, I’ve been involved in the markets for quite a long time. I bought my first shares in the 1970s and I’ve worked in the financial sector since the early 1980s. My particular knowledge is of the stock markets and I’ve been actively involved in these, both in the UK and the US for over 40 years from both sides of the fence. I’ve also had significant involvement in the oil and gas industry along the way, from drilling wells to negotiating farm-outs to majors, which enables me to see very quickly whether or not these companies are telling the truth.

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The author may hold 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.

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