FoxDavies views from the trading floor - Range Resources, Red Emperor Resources and Chariot Oil & Gas

Tuesday, March 20, 2012

Lochard Energy (LON:LHD) are starting to look very interesting at the current level of 12p, after Trap Oil (LON:TRAP) announced yesterday it has bought 15% of the North Sea Athena Oilfield from Dyas UK Ltd for £34.5 million pounds. The current market cap of Lochard is approximately £35.3 million at the current share price, and Lochard have a 10% interest in the same asset. Based on the valuation that Trap Oil has placed on the field by acquiring 15% for £34.5 million, it could be argued that Lochards 10% stake could be worth somewhere in the region of £30 million pounds. Now if you add in the cash the company currently has, plus its other assets, the current market cap of £35.3 million is starting to look compelling. The market is waiting for the confirmation that the FPSO is on site, and possibly once they get that, the market could wake up and notice Lochard.

Ithaca Energy (LON:IAE) has been a very weak market the last two trading sessions, slipping from just over 200p to its current level of 186p. Ithaca announced on the 23rd of January 'The company notes the recent movement in the Company's share price on the Toronto Stock Exchange and confirms that it has received a confidential, non-binding proposal to acquire all of the outstanding shares of the Company. The proposal is conditional upon, among other things, due diligence, negotiation of all definitive documentation, receipt of all necessary approvals by the interested party and approval of the Board of the Company. The Board of the Company, which is being advised by CIBC World Markets Inc., wishes to stress that discussions are at a preliminary stage and there can be no certainty that the approach will lead to an offer being made for the Company.' The shares have traded as high as 207.25p since the RNS, but the last few sessions have seen the bulletin boards speculate that the potential deal may be off. Obviously with all bulletin board speculation, it must be taken with a large pinch of salt, but until the company give the market another update the shares could continue to wobble.

3Leg Resources (LON:3LEG) jumped 10% to 78p during early trading on decent volume after the company said its joint venture partner ConocoPhillips (COP) has exercised its call option to acquire a 70% equity interest in and operatorship over the company's three western Baltic Basin concessions. 2012 exploration program includes a vertical well on one of the three western concessions in the second half of 2012, with the option to drill a horizontal section later. Further testing on one or both of the two existing horizontal wells, Lebien LE-2H and Warblino LE-1H, is still under consideration. Plans for the three eastern Baltic Basin concessions are still under consideration. Three eastern Baltic Basin concessions are to be divested into a new legal entity to be retained by the company under the same terms as the existing Joint Evaluation Agreement. ConocoPhillips will retain the option to acquire a 70% interest in the three eastern concessions, exercisable at any time up until Sept. 30. Seismic acquisition on the southern Poland concessions is now complete; Data has been processed and is currently undergoing interpretation. This news can only add weight to our bullish company view on San Leon Energy (LON:SLE) which were trading 2% better at 12.5p against the back drop of a very weak equities market.

Range Resources (LON:RRL) slipped 8% to 14.25p during late morning trading after the company said it has entered into an agreement with the Puntland Government to obtain a 100% working interest in the highly prospective Nugaal Basin Offshore Block and also plans to raise GBP18.75 million via a share placing at 12.5 pence. Block is an extension of the onshore Nugaal Region which has the potential for deltaic deposits from the Nugaal Valley drainage system and comprises over 10,000km. Company will commit to a 2D seismic program within the first three years, with further 3D seismic and an exploration well to follow in the second three year period. Range has committed $5 million, for the tarmac sealing of an Airport Runway in Puntland at the Government's direction. It is Range's intention to offer a participation interest to its joint venture partner, Red Emperor Resources NL (RMP.AU) on terms to be agreed. Shabeel-1 well on the Dharoor Block in Puntland, Somalia is currently at a depth of 2,384 meters and drilling ahead. It is expected that casing will be run at 2400 meters-2700 meters as dictated by the next electrical logging run; target depth remains at 3800 meters.

Red Emperor Resources (LON:RMP) slipped 6% to 44.5p before bouncing straight back up to trade flat on the day at 47.5p. Volumes over the last few trading sessions in both have been through the roof, as retail investors continue to speculate about an imminent update from the Puntland drilling programme in Somalia. The selling could have been attributed to the update from Horn Petroleum (CN:HRN) who have a 60% interest in the same asset that said 'Horn Petroleum Corporation reports that the Shabeel-1 well on the Dharoor Block in Puntland, Somalia is currently at a depth of 2,384 metres and is drilling ahead to a planned target depth of approximately 3,800 metres. There are no results to report at this time.'

Roxi Petroleum (LON:RXP) jumped 18% to 6.5p during early trading on decent volume after the company said 'the Korean National Oil Corporation has bought a 35% stake in the BNG Contract Area license for about $30 million. Roxi has a 58.41% stake in the license which is estimated to contain over 500 million barrels of oil. The Korean National Oil Corporation has agreed to pay an initial cash consideration of $5 million and will invest a further $25 million in the license work program.' Profit takers did show up to the party during lunchtime trading, knocking the stock back down to 5.5p.

Chariot Oil & Gas (LON:CHAR) slipped 5% to 182p during early trading after the company said that it has conditionally placed 18,110,400 New Ordinary Shares at a price of 170 pence per to raise gross proceeds of GBP30.8 million (approximately US$48.7 million). Paul Welch, CEO of Chariot said "We have taken advantage of an opportunity to introduce a major, long-term investor to the register. With cash in hand at the year-end of US$129 million and cost obligations carried on the Kabeljou-1 exploration well, Chariot is fully funded for its immediate work programme. Proceeds from this Placing, therefore, will be used to give us greater headroom for contingencies, allow us to drill an additional deeper target and enable us to fund additional follow up activities. The Board believes this is a prudent move given increasing costs in the oil industry and the current financial markets."

The volume in Creon Resources (LON:CRO) caught the eye once again today, with near on 2 million shares changing hands before the end of lunch, and for a stock that frequently does not trade a single share, that was a decent slab of volume. With the size of the prints going through, it would appear a seller may have been taken out. We will be watching the news wires for any holdings or company updates.

Xtract Energy (LON:XTR) jumped 18% to 1.3p during lunchtime trading on almost 4 times the average daily volume before the end of lunch. Shares have been under a lot of pressure over the last few trading sessions, falling from 2p to 1p after the company said 'the drilling of the Luna prospect on the 01/11 license is about to be completed, and added that the well didn't encounter hydrocarbons. Luna well objective was to test the overall Rotliegendes play concept over licenses 01/11 and 02/05. Data obtained from drilling the Luna well will be analysed and integrated into the overall Rotliegendes play model covering the two license areas.'

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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