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RRE, SQZ, HNL, JOG, ARG and ENOG

Rockrose Energy (RRE) announced an update on "incremental development projects" today.  It is looking to exploit what it believes is significant upside in terms of recoverable discovered hydrocarbons which could extend the life of the fields and postpone decommissioning.  This is what the game is about since the companies who gave RRE millions of pounds to take thousands of barrels of oil production off their hands did this to discharge what they believed were huge decommissioning liabilities.  Serica Energy (SQZ) already has done such deals, Hague and London Oil (HNL) is expected to return to the market soon with such deals done and Jersey Oil & Gas (JOG) is looking to do some of these deals too.  Obviously, it's all a question of persuading auditors to agree to changes in accounting assumptions, turning what were huge liabilities into huge assets overnight, but for the time being the market is buying this financial alchemy and the "sector" looks to have further upside.

Argos Resources (ARG) announced its 2017 financial results.  The company reported a $118,000 profit and cash reserves of $758,000 at year end.  Argos retains an overriding royalty interest of 5% of all oil and gas produced over the life of Licence PL001 in the North Falkland Basin from all hydrocarbon discoveries developed within the licence area and all future expenditures incurred on the Licence will be at no cost to the company.  ARG will receive future cash payments of $405,000 per annum from Noble Energy Falklands Limited and Edison International S.p.A which will be sufficient to meet its ongoing running costs until first oil production.  A three year extension of the Licence was approved in 2016 which extends the current Second Phase of the Licence to November 2019.  Effectively a "sleeper", but it might be worth tucking away.

Energean Oil & Gas (ENOG) commenced trading today with a market capitalisation of nearly £700 million.  It raised £330 million in the IPO and the bulk of the proceeds will go towards the development of the Karish and Tanin gas fields, offshore Israel, which hold a huge 2.4 trillion cubic feet gas resource.  Trading now at around a 5% discount to the £4.55 offer price, it might be worth keeping an eye on.

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The author holds one or more investments in one or more of the companies mentioned so this post cannot be viewed as independent research.  This post does not constitute investment advice or a recommendation to buy or sell and may be incorrect or outdated.

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