Gold Oil (GOO LN, 2.88p, ▶ 0.0%) Provides an update on the Colombia block - The Company has announced that the exploration well (La Vega Este -1) will spudded on the Azar Block (Colombia) in April, after the completion of civil work and availability of the exploration rig. Gold oil has a participating interest of 20% in the block but under the arrangement, will contribute only 10% to the cost of the well. The company had £8.3 million in cash with no leverage as of 31-Oct-2011, so would be able to meet the cash calls by the operator towards well cost. With current price supported by existing assets, the spudding of the La Vega Este well starts the count down on what could be a new accumulation for the Company, and an interesting ride for the share price.
Red Emperor (BUY, 22p) (RMP LN, 20p, ▼ 8.1%): Significant Progress Made - The Company has provided the market with an update on the progress of its Shabeel-1 exploration well which spudded on January 17th. The well is currently modestly ahead of schedule at a depth of 1,230m (out of a planned depth of 3,800m); the well is expected to be completed during the first quarter of 2012 and testing equipment is currently being mobilised to the site. The Company advises that if successful, any well results will be available early in the second quarter of 2012. Upon completion of drilling the Shabeel-1 well, the rig will be mobilised to the Shabeel North-1 well; the Company has an option over participating in this well. In Georgia, The Company advises that due to the severe weather conditions have hampered mobilisation of equipment to the drill site, and that the well should be spudded in April. The Company has also disclosed that preparations have begun on the 2D seismic program that is attempting to resolve the northern closure on the initial structures previously identified, as well as looking at identifying possible unconventional (shale) targets. The program will also include a seismic cross section over the recently drilled Mukhiani Well to assist with the potential side track option as identified through the earlier Vertical Seismic Profiling. The drilling in Puntland is an accomplishment in itself, which when coupled with the fact it is ahead of schedule resolves some of the risks associated with operating in the region. This, along with our modestly higher outlook for oil prices, means we are UPGRADING our target price to 22p and reiterating our BUY recommendation.
Salamander Energy (SMDR LN, 251.2p, ▲ 1.7%): Ding Dong! - Successful appraisal of the Dong Mun discovery in Block L27/43 (W.I 27.2%), Thailand - Salamander Energy today provided an operational update on the Dong Mun discovery, with the Dong Mun-3 ("DM-3ST") side-track appraisal well, in Block L27/43, Thailand. Highlights included: well was flow tested at a rate of 15.1mm scfpd, well was drilled to a total depth ("TD") of 3,010m MD, the DM-3ST bottom hole was located using the recently acquired 3D seismic data. The Company and its partners in Dong Mun believe that the results indicate a commercial gas accumulation, and intend to file for commerciality. We expect this to move the needle for investors.
Tullow Oil (TLW LN, 1532.0p, ? 0.07%): From Upstream to Downstream, Tullow's Ugandan adventure is all a D-Ream - the China Daily has today announced that Tullow, along with its partners CNOOC and Total, could participate in Uganda's first refinery. The project is mooted to cost $1.5bn and will take feed from the Company's assets, in-country. Whether this figure is part of the estimated $10bn needed to fully develop the Lake Albert Basin, or is in addition to the upstream plans, is as yet unclear. While I have no doubt that the Company is rightly exploring all options to monetise its upstream success, a refinery would be one step too far, and could destroy a balance sheet if not run properly. I would expect Tullow to monetise its interest in any refinery plan via a specialist operator.
Kea Petroleum (KEA LN, 7.38p, ▲ 5.36%): Interim Results - Key highlights include - Net loss increased to £1.3 million due to higher admin cost, Capex during the period stood at £2.0 million, Cash on hand at 30 November 2011 £10.7 million. The company plans to drill four or more wells on four different prospects (Douglas -1, Puka -1, Angus -1, Mauku-1) commencing imminently. It also updated that it has secured deep water rig and has entered into a drilling rig contract for the shallow well programme with Drill Force. We believe that the company has lined up an encouraging drilling program and it has resources in place to meet the requirements conveniently. On the back of exploration programme, the market will be looking for some positive news coming out over the next quarter. Will be following updates closely.
Caspian Energy (CEK CN, C$0.24, ▲ 4.2%). Zhagabulak - Success in the West. Progress in the East. The Company alongside its partners believe they could have a very Prominent discovery on their hands after Discovery Well 316 encountered net pay zones aggregating 184.8 metres. This potential net pay compares favourably with Well 308 at East Zhagabulak, which showed net pay of 118.4 metres The discovery well in the West Zhagabulak field of Kazakhstan has been successfully logged and cased to a depth of 4,950 metres and an application has been filed with local authorities to test the commerciality of the find. With this discovery, the Company believes it has substantiated outside estimates that West Zhagabulak may contain significant quantities of recoverable oil and it hopes to validate this by testing the well. With timely permits, testing of Well 316 could begin by the end of March 2012. If successful, this well will be ranked as a significant new discovery with the potential to more than double the Company's reserves in Kazakhstan. In East Zhagabulak, the Ministry of Oil and Gas granted approval for testing of Well 308. A rig has been contracted and testing operations are expected to commence on 29 February 2012. Concurrently, Well 306, which began drilling on 9 January 2012 has reached a depth of 1,500 metres on its way to a projected total depth of 4,700 metres. This well (306) is intended to delineate the southern extent of the East Zhagabulak field. To delineate the northern extend of the field, Well 315 will be drilled (East Zhagabulak) using the rig that's just been mobilized from West Zhagabulak upon drilling of Well 316. If successful, Well 315 will result in the material conversion of P3 (possible) reserves to P2 (probable) reserves. Caspian now have two drilling rigs and one service rigs working on two fields in the North Block, and the general feeling from the Company is that both 316 in West Zhagabulak and 308 in east Zhagabulak will be significant producers. Although no figure has been mentioned, today's update is very positive as it highlights the extensive work that's being simultaneously done on both fields. One to keep an eye on over the next few months.
Tower Resources (TRP, 2.28p, ▼ 34.5%) Mvule-1 exploration well disappoints. The Company has advised that operations on the Mvule-1 exploration well in Uganda (Licence EA5) has been completed. With the final Explroation period ending on 26 March 2012, today's news couldn't have come at a worse time for the Company. The well, the final commitment on EA5, reached its total depth at 590 metres (basement was penetrated at 576 metres). No significant hydrocarbon shows were encountered over the zone of interest and electric wireline logging and fluid sampling confirmed that the well was water bearing. The well is now being plugged and abandoned. The Company's wholly-owned subsidiary Neptune Petroleum (Uganda) will now complete its site restoration commitments in line with government regulations. The Company is now ready to focus on its Namibian interests, despite the disappointment in Uganda. The £5.41m placing and £600,000 SEDA drawdown, announced on 9 February 2012, strengthened Tower's financial base both to deal with this eventuality, and to provide a solid position from which to move forward. Tower has stated that the exploration well on their Namibian license, currently planned for 2013, will test five targets aggregating over 9 billion barrels of recoverable reserves. Tower has a fully carried 15% interest in the well and the operator, Arcadia, is currently in advanced discussions regarding a farm-out. It was inevitable that the share price was going to take a hit on the back of the news. It will be interesting to see what the Company does next with regards to its Namibian interest.
Written by Steven Asfour, Sales Trader at Fox-Davies