FoxDavies views from the trading floor - Bowleven, San Leon and Xcite
Tuesday, January 17, 2012
from FoxDavies Capital
We have been highlighting Range Resources and Red Emperor Resources over the last few trading sessions, as traders rallied both stocks aggressively ahead of the spudding of Puntland in Somalia. Both stocks have enjoyed a near 100% rally over the last few months ahead of this anticipated news, and today the news investors have been eagerly awaiting hit the wires. The announcement highlighted the Spudding of the Shabeel-1 well, the first of two planned landmark exploration wells, in the Dharoor Valley, Puntland, Somalia, The first oil exploration well to be drilled in over 20 years in Puntland targeting Prospective Resources of over 300 million barrels of oil (mean 100% basis) Initial operations also commenced on the Shabeel North-1 well (second exploration well) Drilling is expected to take approximately 90 days. Both stocks retraced approximately 15% in trading, as investors took the news as a chance to take profits from a fantastic run. Even after this short spell of profit taking, both stocks are still up approximately 65% from the lows seen in mid-December.
Bowleven once the darling of the sector, jumped 7% in trading to 84.5p on 3 times the average daily volume as retail investors continued to speculate that a drilling update was due. Recent press speculation has continued to put Bowleven in the frame for a potential takeover. Nothing concrete has materialised from the speculation as of yet, but we are firm believers of 'there is no smoke without fire' We will be monitoring the movements of this one very closely.
San Leon jumped 10% in trading to 11.85p during another day of big volume. The company announced it had made significant progress on its Durresi License in Albania, adding that it received the first final processed volumes from its 840 km square 3D seismic survey in late 2011. Another very interesting part of the RNS said 'To date the Company has identified numerous prospects and leads across the license with unrisked prospective recoverable resources of more than 1 billion barrels of oil equivalent across the proven petroleum systems. Six source rock intervals have been identified with several potential oil reservoirs expected in Mesozoic carbonates and flysch as well as numerous gas reservoirs in the shallower Tertiary clastic deposits. The San Leon subsurface team continues to identify prospects across the license.' We have been closely following the recent rise in the San Leon share price since we highlighted the huge volume increase back at 8.5p.
Xcite Energy were active once again as holders speculated that an update could be due. Speculators were hoping for an update on the DECC approval. A previous RNS said 'Following acceptance and in accordance with the originally scheduled work program in Dundee, the rig will be modified to accept drilling and processing equipment, before being appropriately equipped and prepared by Xcite Energy prior to deployment to the Bentley field as soon as practicable. This is expected to be early Feb. 2012, subject to suitable weather conditions prevailing and all expected permits and consents having been obtained, after which the company expects to commence drilling for Phase 1A of the First Phase Development of Bentley.' We will be watching this space very closely for any new developments.
Oilex jumped 16% to almost 16p on 10 times the average daily volume. Bulletin boards were speculating an update could be round the corner. The shares have fallen a long way from this time last year, when they were trading at 35p. We will be watching the volumes and news wires on this over the coming sessions.
The rush of blood continued in Argos Resources today, jumping another 28% to 17.5p as investors continued to chase the Falklands plays higher. It would not be a surprise if part of this rally is attributed to short covering here, as the market was not expecting news from Argos for some time. The last RNS said 'it won't proceed with a drilling campaign in the North Falkland Basin which was due to end in December, citing weak capital markets and the limited availability of the drilling rig. As the rig is leaving the region in December, Chairman Ian Thomson said the company had rejected the option of drilling only one well because it remained convinced of the value of the area and the merits of a more extensive drilling program. The firm expects to complete the work in the first half of 2012 before looking for an industry partner to help fund its drilling program.'
We highlighted SacOil after the company issued a Cautionary announcing that they wish to advise shareholders that the Company is still in the process of considering various proposals and potential transactions, which if successfully concluded, may have a material effect on the price of SacOil ordinary shares ("Shares"). Today the company gave an operations update that highlighted, the Government of the Democratic Republic of Congo has granted a Presidential Ordinance to its partner, Total S.A., the operator of Block III, for their 60% interest in the block. Robin Vela, CEO of SacOil commented: "We believe that there is huge potential in this asset due to the neighbouring oil and gas discoveries in Uganda which suggest that Block III is in an attractive and hydrocarbon prospective address. We look forward to positive test results." The shares were trading 15% better in trading to 4.5p.
Nighthawk Energy announced it has conditionally placed 115,700,000 new Ordinary Shares with institutional and other investors at a price of 2.5 pence per share to raise approximately GBP2.75 million. The highlights of the Proposals are, to acquire a 25% working interest in the Jolly Ranch Project from Running Foxes for an initial consideration of US$12.5 million (comprising US$8.5 million in cash and US$4 million in Nighthawk shares), equating to approximately US$122 per acre. Nighthawk to become operator of Jolly Ranch Project. Significant $7 million (gross) work program planned to commence early in Q2 2012 with work-overs of existing wells followed by up to five new wells. Issue of 10 million zero coupon unsecured loan notes to raise GBP10million, convertible at 2.5p per share. Existing shareholders have the opportunity to participate in the Fundraising via an Open Offer of new Ordinary Shares at 2.5p per share to raise up to approximately GBP4.15 million. As you would expect on that basis the shares dropped 6% to 2.5p in-line with the fund raising. The shares have been crucified from its lofty heights of 100p a share back in 2008, down to the current levels. Should the company prove it can turn its self around, the price could have a long way to go.
Written by Steven Asfour, Sales Trader at Fox-Davies
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
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