FoxDavies Daily Monitor - Nighthawk Energy, Soco International and Circle Oil

Thursday, November 1, 2012

Nighthawk Energy (HAWK LN, 5.47p, ▼ 2.50%): Stage set up for steep production growth - The third well (Knoss 6-21 well) will be put into commercial production this month and is expected to produce above 200 bopd. This is encouraging news, and now we expect year end exit production rate at ~450 bopd compared to 230 bopd earlier. Q3 production volumes averaged just 76 bopd. The fourth well has been successfully drilled, logged and cased and testing will commence shortly. Fifth and final well of 2012 is also expected to be spudded this month. Investors can expect significant news flow over next couple of months. Strategy announcement for 2013 would be key share price driver.
In this news:

  • The Knoss 6-21 well has been successfully completed in the Cherokee formation using the same completion techniques that brought the successful John Craig 6-2 well on-stream in September 2012. This involved perforation of three intervals of the Cherokee and mild acidisation of the formation under moderate pressures.
  • The Steamboat Hansen 8-10, the fourth well in the drilling programme has been successfully drilled to its target depth of 8,500 feet, well below the Cherokee formations. The well has been logged and cased.
  • The drilling rig is now on location at the Whistler 6-22 site and drilling is well underway. This is the final well in the 2012 drilling programme and is targeting similar 3D seismic defined structures and zones to the Steamboat Hansen 8-10 well.

Soco International (SIA LN, 337.80p, ▼ 0.59%): Balance Sheet Strong but Exploration is missing link - Production for 3Q was up 400% y/y to 13.7m boepd driven by production commencement from the second platform on Te Giac Trang field and we are confident of company meeting its full year production target of 16m boepd. On the exploration side, outlook appears muted, we don't see major exploration activities on any block in the near term. The Company needs to expedite exploration activities and acquire few assets to secure medium term growth. With positive operating cash flow and Net cash of $170.0mm, Soco has comfortable liquidity position.
In this news:

  • Production for the three quarters ended 30 September 2012 was approximately 400% higher than the same period in 2011 and averaged 13,755 boepd net to the Company's working interest (18,824 BOEPD week ended 26 October).
  • Net cash as at 31 October 2012 was approximately $170 million (30 June 2012: $178.0 million and 31 December 2011: $113.5 million).
  • The Te Giac Trang ("TGT") H4 Wellhead Platform ("H4-WHP") commenced production a month ahead of schedule in July 2012, increasing total field production to average above 50,000 barrels of oil per day ("BOPD") since start up; peak production reached over 60,500 BOPD; production for the last 24 hour period reported (30 October) was 58,867 BOPD.
  • In July 2012, the Company announced and completed the acquisition of the outstanding 20% non-controlling interest in SOCO Vietnam Ltd for cash consideration of $95 million.
  • Lideka Marine East Well 1 is expected to spud offshore the Republic of Congo before the end of 2012.

Circle Oil (COP LN, 18.75p, ▲ 2.74%): Operating Update - As planned, an exploration well has been spudded and commenced drilling in the South West Belli area of the Grombalia Permit. The BAB-1 well is targeting the Eocene Bou Dabbous Formation and the Late Cretaceous Abiod Formation, the main oil-producing formations in the north-eastern part of Tunisia. We believe that the Company's overall portfolio has an increasingly balanced feel to it, and one that investors can feel comfortable with being exposed to explosive upside, while the downside risks are progressively being reduced by increasing production from producing fields.

Essar Energy (ESSR LN, 137.20p, ▲ 0.22%): Positive news flow after few seatbacks - Stage 1 clearance from the Environment ministry for Mahan coal block in Madhya Pradesh, is a major boost to the Company's aggressive Power expansion plans in India. Stage-1 clearance is for pre-mining activities and will help the Company to secure fuel supply for the 1,200 MW Mahan phase-I power project which is expected to commence this year. Availability of captive mines significantly reduces pricing and execution risk. Essar Power, subsidiary of Essar Energy has six operational power plants in India and one operational power plant in Algoma, Canada. The current total installed generation capacity is 3,055 MW and Company plans to scale up capacity to 4,510 mw by the March 2013 and to 6,700 mw by March 2014.

Contribution by
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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