FoxDavies Daily Monitor - Empyrean Energy, Providence Resources and Xcite Energy

Friday, March 23, 2012

Empyrean Energy (EME LN, 6.88p, ▶ 0.0%) - $50mm Debt facility? The Company has disclosed that it has secured a $50mm debt facility form Macquarie Bank, but as yet there is not commitment required from the lender to release the funds, so this announcement could be deemed as being a little early. We don't doubt that the operator (Marathon) and the productive series (Eagle Ford Shale) is a safe bet, but this announcement is perhaps a touch premature. We look forward to the conclusion of the deal, which we would expect to follow within the next 3 months. In this news:

  • 3-year term debt facility of up to $50mm
  • Facility is subject to conditions precedent ("CP"), technical and legal due diligence
  • Acceptance of a committed offer would see Empyrean fully funded for its share of the currently anticipated development schedule for 2012
  • The funds will be used to support the development of Empyrean's core asset - the Sugarloaf Project, an Eagle Ford Shale Condensate and Gas project operated by Marathon Oil Corporation
  • $10mm initially available following acceptance of a committed offer and CPs being met
  • Further $5mm subsequently available, if necessary, subject to increases in proven reserves that are expected to be gained via the drilling and successful completion of further development wells.
  • The balance of funds would become available, if necessary, subject to further reserve hurdles being agreed upon and met

Providence Resources (PVR LN, 487,5p, ▲ 1.56%) - Barryroe results encouraging: The results are encouraging, and while not yet conclusive, the shallow water, relatively simple development proposition and proximity of infrastructure would all suggest that the right ingredients are present for a commercial discovery. This news should also support San Leon Energy, which has a 4% NPI on the field. In this news:

  • Lower interval flowed 3,514bpd & 3 mmcfpd
  • Upper part of the basal Wealden flowed 1,350bpd & ~7mm cfpd through a restricted 36/64" choke
  • Infrastructure in close proximity
  • San Leon (SLE LN) has a 4% NPI on Barryroe

DEO Petroleum (DEO LN, 28.75p, ▼ 0.86%) - UK Budget 2012 favours DEO: The Company received a major boost on the back of the statement by the HM Treasury ("HMT") of the package of changes to field allowances for companies operating in the UK and UK Continental Shelf. The news is encouraging to DEO and the wider UK sector of the North Sea, as it highlights the UK Government's acceptance that its changes in previous years have hampered the competitiveness of the UK to do business. This proposed change, alongside other changes announced, are the result of detailed dialogue between government and industry and go some way to restoring trust which had been shaken by last year's Supplementary Corporation Tax ("SCT") increase. In this news:

  • The changes designed to increase investment and production in the North Sea are anticipated to directly impact DEO, in particular the new small field allowance against the current Supplementary Charge rate of 32%.
  • DEO estimates that its Perth Field Phase 1 recoverable resources will now be below the new and increased minimum threshold set by HMT of approximately 45 million boe, and therefore anticipates that it will benefit from the full amount of its 52.03% share of the increased field allowance of £150 million.
  • This will reduce DEO's tax payable by approximately £25 million over the life of the field, improving project economics.

Xcite Energy (XEL LN, 122.0p, ▼ 4.69%) - Full year end results shows Progression: While this news underlines how far the Company has progressed, and the dogged determination of its management, further work needs to be done to fully understand and unlock the Bentley's full potential. While today's RNS sheds light on the Company's key successes over the past 12 months, the key will be in the long term testing. In the news:

  • Achievement of oil reserves of the type 1P, 2P and 3P for the core area of the Bentley field of approximately 96 mmstb, 116 mmstb and 140 mmstb, respectively, with NPV10 (after tax) for the core area of $1.076 billion, $1.464 billion and $1.921 billion on a 1P, 2P and 3P basis, respectively.
  • Strengthened balance sheet, with net new equity capital financing of £62.7 million in 2011. Cash balance at year end of £64.1 million, with an additional net £26.4 million raised since the year end. Included in cash balances at the year ended 31 December 2011 are amounts held in escrow of £47.1 million relating to the Bentley Phase 1A work programme.
  • Department of Energy and Climate Change approvals to drill and produce the planned Bentley field 9/3b-7 and 7Z wells under the Well Operations Notification System, the Petroleum Operations Notice and the Oil Pollution Emergency Planning.
  • Rowan Norway jack-up rig commenced Phase 1A of the work programme on the Bentley field, with 9/3b-7 well spudded on 18 March 2012.

Written by Steven Asfour, Sales Trader at Fox-Davies

Contribution from FoxDavies Capital

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This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. More

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