FoxDavies Daily Monitor - Oilex, Matra and BowLeven

Monday, March 26, 2012      

Oilex (OEX LN, 20.63p,▲ 2.48%): Cambay-76H Well Operations Update. The Company took another step forward towards the monetization of the block resources as it successfully completed a work over technique at the Cambay-76H horizontal well in the Cambay field onshore India. In the news:

  • Procurement and installation of equipment capable of managing the high reservoir pressure in the Cambay field completed.
  • The milling and clean out of fracture stimulation stages 8, 7, 6 and 5 have also been successfully completed.
  • What the above means is that four of the eight fracture stimulation stages have now been fully opened and one partially opened.
  • Tubing will be installed once the remaining four stages has been completed and the well will then be flowed to surface.

Matra Petroleum (BUY, 4p) (MTA LN, 0.87p,▲ 1.76%): Momentum Building - Today's results have continued to underline the Company's progress towards unlocking the value within these difficult reservoirs. Attention will not shift towards development, and the expansion of the reserves base. This news supports our 4p valuation and BUY recommendation. In this news:

  • Remedial action on A13 completed (water bearing formation isolated)
  • Imminent production from Well A-13
  • A12 underperformance isolated and attributed to poor completion; successful remedial action taken
  • A14 well planned imminently
  • 3D seismic planned over the asset to delineate the productive horizons
  • Cash or cash equivalents of €1.8 million at year end

BowLeven (BUY, 250p) (BLVN, 99.5p,▲ 12.75%): A Butterfly Emerges? - The results mark the close of a year of transition for BowLeven migrates towards development of its discoveries. Sapele's volumes continue to improve, and while the all-important commerciality is yet to be declared the outlook remains buoyant. With the final development scenario for Etinde underway and a full work 2012 programme fully funded, investors are well set for a year of intense activity. Following these results we reinstate our BUY recommendation with a 250p price target. In this news:

  • Sapele-2 and Sapele-3 exploration wells encountered significant hydrocarbon intervals at multiple levels, our fourth and fifth successful wells in the Douala Basin
  • Sapele-2 tested high quality light oil from Deep Omicron interval with a peak flow rate of 2,738 boepd
  • Sapele-3 further extended the Deep Omicron and Epsilon fairways, with oil encountered in both intervals, 16 kilometres from the original Sapele-1 discovery well
  • Substantial upgrade of Sapele Deep Omicron in place hydrocarbon volumes following Sapele-3 well results. Deep Omicron P50 STOIIP and Associated GIIP now estimated as 615 mmbbls and 1.5 tcf respectively. Resource revision on-going.
  • Significant progress made towards finalising the Etinde development concept, with the preferred approach based on a hub and spoke development
  • Jack-up rig contracted for two firm plus two optional wells on Etinde
  • 2D seismic data set on the onshore Bomono Permit acquired in 2011 now fully integrated into existing dataset and first exploration well location identified.
  • 4C OBC 3D seismic acquired over parts of block MLHP-7. Interpretation to support appraisal/development activities now ongoing.
  • Group cash balance $124 million at 31 December 2011, no debt.
  • Fully funded for current exploration and appraisal programme on Etinde and Bomono.
  • Bomono farm-out discussions ongoing.
  • EOV disposal nearing completion.

Tower Resources (HOLD, 4p) (TRP LN, 3.35p,▲ 6.5%): Moneyed Up! - The announcement of a ~$32mm financing should help restore investor confidence to a management team that has suffered the headwinds that exploration sometimes brings. With Naibia now the focus, the monies available should help the Company to once again gain traction. In this news:

  • ~$32mm Equity Financing Facility with Darwin.
  • Main purpose to provide funding flexibility
  • This agreement is in addition to its existing £8mm Standby Equity Distribution Agreement ("SEDA") with YA Global Master SPV Ltd ("Yorkville").

Salamander Energy PLC (SMDR LN, 225.5p,▲ 0.67%): Confidence Booster - While this news underlines how far the Company has progressed, and the determination of its management in refining the Company's strategy, further work needs to be done to fully unlock the true value of the assets. The Company has re-aligned its portfolio to focus on three core areas and an active drilling campaign this year starting with the spud of the Tutung Alpha-3 ("TA-3") appraisal well should enhance the Company's upward trajectory. In the news:

  • 2P Reserves increased by 13.6% to 75.3 MMboe (2010: 66.3 MMboe)
  • Average daily production of 18,600 boepd (2010: 20,300 boepd)
  • Bualuang East Terrace oil discovery, 8 MMbo added to 2P reserves
  • Matured prospect inventory in North Kutei, independent CPR points to 676 MMboe of gross mean prospective resources in four high-graded prospects
  • Revenue increased by 26.2% to $408.0 million (2010: $323.4 million)
  • Record pre-tax operating cash flow, before working capital changes, increased by 68% to $293.6 million (2010: $174.4 million)
  • Profit before tax of $112.6 million (2010: loss of $113.7 million)
  • Year-end cash and funds balance of $85.8 million (2010: $99.2 million)
  • Net debt of $210.1 million (2010: $190.2 million)
  • Disposed of mature, low margin, non-core interests in Offshore Northwest Java ("ONWJ") and Southeast Sumatra ("SES") PSCs
  • Deepened interest in Kerendan development, Greater Kerendan area, Indonesia
  • Expanded acreage position in Greater Bualuang area, Gulf of Thailand through G4/50 farm in
  • 2012 average daily production rate forecast to be 12,000-13,000 boepd following disposal of non-core producing assets
  • Bualuang Bravo Platform on schedule for installation 3Q 2012
  • Ensco-53 rig mobilised for development and exploration drilling in Greater Bualuang area
  • Tutung Alpha-3 spudded, gas appraisal drilling ahead
  • Gas and condensate found with the TA-3 well
  • The Tutung discovery is a gas-condensate accumulation with a mean resource volume estimated at circa 60 Bcf
  • Signed 12 month contract for Atwood Mako jack up rig in Greater Bualuang area from 3Q 2012
  • Exploration drilling in North Kutei to commence 4Q 2012

Ophir Energy (OPHR LN, 484.8p,▲ 13.1%): Tanzania - Bigger, Better, Faster? - Today's announcement has highlighted East Africa's prospectivity, and with another four drills to go in this campaign, Investors can look forward to further news that will most likely lift the share price still further. Following the acquisition of Dominion, which consolidated Ophir's East Africa portfolio, management is significantly closer to creating a sustainable core in Tanzania. In the news:

  • Fourth consecutive gas discovery for the Ophir-BG joint venture in Tanzanian offshore Blocks 1, 3, 4 and largest discovery by Ophir in its history
  • Estimated mean in-place resource number of 4.5 TCF. Recoverable mean resource estimated as 3.4 TCF (567 MMboe), exceeding mean pre-drill recoverable resource expectations of 2.2 TCF by 55%
  • A total 124m of net pay encountered across the stacked target horizons in high-quality reservoirs
  • Jodari-1 has de-risked the Lower Tertiary section, of comparable age to the outboard basin floor fan play in Mozambique, and in pursuit of which the Ophir-BG joint venture is now acquiring 3D in the eastern area of Block 1, Tanzania
  • Cumulative discovered, recoverable gas resources in Blocks 1, 3, 4 are now c. 7 TCF and nearing the minimum threshold volumes required for a two-train LNG development.

Nighthawk Energy (HAWK LN, 3.60p, ▼ 4.0%): Jolly Ranch project update shows progress- The Company has made significant progress at the Jolly Ranch project in the Denver-Julesburg Basin since assuming operatorship in Jan 2012, completing workovers on seven wells with recompletion work to bring three additional wells into production. We look forward to further updates on development of Jolly Ranch project and production numbers due for next month. In this news:

  • 2012 work-over program on schedule.
  • After re-entry of seven wells the Company now anticipates that additional down-hole work will be required above original estimates.
  • Preparation and data gathering complete on seven wells
  • The second work-over rig will be on location shortly
  • With the arrival of the second work-over rig, work on the other eight wells in the program will accelerate through the stages of remedial work.

InfraStrata (INFA LN, 10.13p,▲ 1.0%) To undertake further infill seismic programme over petroleum licence PL1/10- The Company has identified several large leads after completion of the interpretation of 288 kilometres of 2D Vibroseis seismic data acquired during 2011. Following the encouraging results it will undertake infill seismic programme over petroleum licence PL1/10 during June 2012 to identify the location for first exploration well. In this news:

  • Tesla Exploration International Limited (operator of the block) will be undertaking a further infill seismic programme over petroleum licence PL1/10 during June 2012.
  • The decision to undertake the new survey was taken after completion of the interpretation of 288 kilometres of 2D Vibroseis seismic data acquired during 2011.
  • Several large leads identified.

Ithaca Energy (IAE LN, 195p,▲ 4.8%)- Assumes operatorship of Carna discovery along with doubling its ownership: Today's RNS shows Ithaca confidence on the prospectivity on the Carna discovery which lies adjacent to the producing Garrow and Kilmar gas fields. Ithaca plans to accelerate development studies on the field and the intention to submit Field Development Plan for approval before the end of 2012 is real positive news. In this news:

  • Increased working interest from 16% to 32%.
  • Assumes operatorship in the Carna discovery. The effective date of the Acquisition is January 1, 2012.
  • The Carna discovery was made in early 2009 with net pay of 127 feet TVD was encountered in well 43/21b-5Z.
  • The well tested gas at a gross stabilised rate of 8.8 MMcfpd.
  • New ownership structure isIthaca Energy - operator (32%), Dyas Limited (24%), Centrica (40%), EWE Energie AG (4%).

Nautical Petroleum (NPE LN, 332.25p, ▲ 0.65%)- Results of GCA report on the Kraken discovery: Following on from the interim results on the 19th, today's GCA report establishes reserves from the Kraken discovery following the results of the recent series of flow tests (commercial flowrates from 9/02b-5z well drilled in Q3, 2011). This news continues to support the stock specifically, and with a positive UK budget for operators in the North Sea, we remain optimistic fopr the continued growth of the Company. In this news:

  • Independent Reserves Opinion (IRO) conducted by Gaffney, Cline & Associates Limited (GCA) on the Kraken discovery.
  • GCA estimates (net) 1P at 22mm bbl, 2P at 42mm bbl and 3P at 68mm bbl.

Lundin Petroleum (LUPE SS, 147.5 SEK,▲ 4.7%): Appraisal Positive - News that Lundin's appraisal well 16/2-11 (PL501 - Norway) appraisal well has encountered an oil column in Upper and Middle Jurassic sandstone reservoir (and a successful test in the Middle Jurassic) is suggestive that the its discovery will be commercial. Further work will be required, and the side track to this well, to investigate the lateral thickness of the Jurassic sandstone, will be the next step. In this news:

  • Announced results from third appraisal well 16/2-11 located in PL501.
  • The well is located 2,2 km south-east of well 16/2-8 in PL265 and 3,3 km south-west of well 16/2-6, in PL501.
  • A full scale production test in the Middle Jurassic reservoir to investigate its flow properties resulted in flow rates, in excess of 2,700 bbl/d through a restricted 40/64 choke.
  • The well will now be side-tracked towards the east to investigate the lateral thickness
  • The well will then be plugged and abandoned. The total depth of the well is 2,125 metres MD.

Oilfield Services NewsKentz (BUY) (KENZ LN, 444p, -1.6%) Kentz's 2011 results were marginally better than expected with revenues up 29%, PBT up 18% to $79.4 and EPS up 25% to $c50.6. The gross cash balance was $238.1.

The group's backlog had increased to $2.40bn at the end 2011 and $2.44bn at end of February 2012, and provides visibility of work until 2015. This backlog represents a mix of projects with blue chip clients in the oil and gas, infrastructure and metals and mining sectors. The total pipeline of prospects is in excess of $10Bn ($8.89bn, June 2011). Management continues to remain positive about the outlook for 2012 and about the future prospects of the Company.

Kentz continues to represent a sound investment opportunity. The group is competitively well placed servicing a wide range of upstream and downstream markets and many geographies. The order book is most promising, giving good earnings visibility and the financial position of the group is very solid. We still believe that the valuation does not fully reflect the fundamental prospects for the group and attractive risk/reward profile.

Lamprell (HOLD) (LAM LN, 337p, 0.0%) Lamprell's 2011 results were much as expected with revenues up 127%, adjusted operating profit up 29.8% to $90.2 and EPS at $c30.8. These results reflected the successful acquisition of MIS. Net debt stood at $c101.7m.

The group's order book stood at $1.2Bn. The outlook statement reads positively. "We continue to see high levels of enquiries for our services in most sectors of our business. While remaining vigilant with regard to the risks posed by the volatile global economic climate, the Board remains optimistic that the long term prospects of the Group continue to be promising."

Rig Count News The Baker Hughes Rig Count is the key barometer for the oilfield services industry and in particular the drilling contractors. Last week's data (week ending (23/03/12) still remained positive for the industry as a whole despite declines. The U.S. Rig Count stood at 1968 down 16 on the previous week but up 230 year over year with the number of land rigs at 1899, down 21. The number of oil rigs stood at 1,314, down 4 on the previous week on the back of lower oil prices. Gas rigs stood at 652, down 11 as US gas prices remain low with the directional/horizontal rig count at 1,405, down 3. The Canadian rig count was, due to seasonality effects, down 165 on the previous week.

Written by Steven Asfour, Sales Trader at Fox-Davies


Article Tags

Matra Petroleum Oilex Ophir Energy Nighthawk Energy Salamander Energy Lundin Petroleum United Kingdom Worldwide Finance AIM Operations Update Farm In Farm Out Fracking LNG North Sea Seismic Spud Watch

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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