The US Presidential election result at last appears to be settled and the transition is underway. The Republic of Ireland looks likely now to be the one with the “special relationship” and act as the new bridge between America and Europe. A UK-EU trade deal still has not yet been agreed and businesses remain in the dark with just 22 working days to go. Many appear to believe that Brexit will be finished on 31 December. In reality, Brexit starts on 1 January. Whatever one’s views on the subject, its effects certainly are going to be “interesting," particularly when combined with the Coronavirus countermeasures. The important longer-term question is in which direction is Great Britain going to go.
Away from the economy and politics, I’m pleased to say that total reader numbers have more than doubled over the past few weeks following a blog syndication change. To those who don’t like its content, I would say don’t read it. There are plenty of others compensated by the companies they write about, which publish exactly what you want to hear. I’ll continue to focus on the facts.
On to the company news, it’s been quite a busy week for RNSs and I’ll comment on the more interesting ones. Pantheon Resources (PANR) announced the execution of a rig contract with Nordic Calista to drill the Talitha #A well, with operations expected to commence in January 2021. The Talitha #A will target four independent reservoirs in three separate trapping sequences, which PANR estimates has the potential to contain in the region of a billion barrels of recoverable oil. The contract secures the use of Rig #3, which is the same rig which drilled the Winx #1 and Charlie #1 wells for 88 Energy (88E) in the last two winter seasons. Let’s hope it has better luck.
Lekoil (LEK) failed to secure a replacement Nominated Advisor on time and trading in its shares was suspended on Monday morning. Later in the day, it announced that it had received a letter on the instructions of Metallon Corporation Limited, a 15.4% shareholder, requisitioning an extraordinary general meeting proposing resolutions that the Chairman be removed from, and Michael Onochie Ajukwu, Thomas Donald Richardson and George Maxwell be appointed to, the Board. LEK says this is an opportunistic attempt to take control of the company without paying a premium for the value of the assets to the shareholders and increases the risk that the shares may be delisted. Shareholders should be asking them exactly why the NOMAD resigned.
Bahamas Petroleum Company (BPC) announced a Perseverance #1 cost estimate and funding update. Covid-19 mitigation measures are increasing the cost by $4 million and a further $2 million is required as a contingency. To cover this, the conditional convertible loan note facility is being increased by £4.75 million to £15 million. This essential financing, though, remains subject to the satisfaction of certain conditions precedent. I’d suggest all those interested in this company take the time to read the 27 November RNS in full and understand exactly what is going on.
Aminex (AEX) issued a Ruvuma operations update. The operator, ARA Petroleum Tanzania, plans to spud the Chikumbi-1 well in Q1 2022 and to submit the full field development plan before the end of 2022. In the meantime, the work programme and budget for 2020/2021 (including the acquisition of a 454 km² 3D seismic survey) anticipates a gross JV expenditure of approximately $22.8 million. Aminex is fully carried for its 25% interest, however, the un-carried Scirocco Energy (SCIR) now has to find $5.7 million to cover its 25% share.
Two companies notorious for their leaked placings, Reabold Resources (RBD) and Union Jack Oil (UJO), announced a disappointing West Newton drilling update. Both the companies’ share prices were hit hard, but the news wasn’t that much of a surprise to the better informed. No larger companies were interested in getting involved with their “major oil discovery,” plus there was already the red flag of them having suspended the extended flow test for the A-2 well. It was only ever a trade for a pre-spud run. They’re now pushing ahead with a side-track and for those who do believe in West Newton, I would mention that UJO with its 16.665% interest is capitalised at £27 million, while RBD with more than three times that economic interest is capitalised at £29 million, just £2 million more.
Reabold Resources has other investments and it appears to be dawning on investors that these perhaps aren’t really worth that much, as I have been saying from some time now (see past issues of the blogs). If West Newton is a write-off, then RBD will be worth virtually nothing at all. Union Jack Oil has other investments too and further announcements were issued in conjunction with Egdon Resources (EDR) and Europa Oil & Gas (EOG) regarding Wressel, where they’re hoping to commence production at an initial gross rate of 500 barrels of oil per day. UJO has a 40% stake; EDR and EOG 30% each. Whatever operating profit there is should at least start to go some way towards covering these companies’ administration expenses. Union Jack’s is a massive £1,343,362 a year (a remarkable amount for the administration of a few non-operated minority working interests); Egdon, which actually runs an operating business, manages with £1,066,041 a year; and Europa, engaged in significant licence permitting activity, gets by on £811,000 a year.
Nothing’s ever really sure in the oil business, though, particularly onshore UK, as UK Oil & Gas (UKOG) demonstrated with its announcement that Surrey County Council has refused planning consent for its Loxley-1/1z Portland gas appraisal project, contrary to the recommendation of the Council officers' report which recommended approval. Undoubtedly they will appeal, but this type of process shows how a few individuals worried about local property prices can derail projects in some areas of England.
Deltic Energy (DELT) announced a prospectively update for Licence P2428. Prospective resources are 904 BCF (P50) including unlicensed acreage to the east. DELT’s business plan is to build a pipeline of drilling prospects, a conveyor belt of exploration drilling opportunities of material scale. It sounds exciting and they’ve already got two farm-outs to Shell under their belt. A number of large buyers of the shares are active in the market. Remember, both Reabold Resources and Independent Oil & Gas (IOG) made takeover approaches to Deltic earlier this year.
Providence Resources (PVR) and Lansdowne Oil & Gas (LOGP) issued announcements noting recent media speculation, confirming they remain in exclusive discussions with SpotOn in relation to a farm out of Barryroe and will update the market in due course and as required. Tomorrow is the expiry of the first extension to the exclusivity agreement with SpotOn, so an announcement of some nature will be required by Tuesday morning at the latest. A further extension will be a disappointment and revive memories of the failed Chinese deal last year. An agreement will result in a significant share price move, how much and which way depending on how exactly the deal is structured and who actually are the counter-parties. Tom Anderson is taking no chances, though. It was announced on Friday that he has sold 10 million shares and his shareholding has fallen below 3%.
I’ve now finished the second edition of “UNDERSTANDING THE LONDON SPECULATIVE MARKETS and THE SECRETS OF HOW TO PROFIT FROM THEM” and a complimentary copy in electronic format will be sent out mid-week to all private blog subscribers, existing and new, so if you’d like to read the book, try out a trial subscription to the private blog, details of which are at https://www.oilnewslondon.com/oilman-jim
The intention of the book is to be educational, as with my blogs, public and private. Hopefully, what I write can help protect you from being scammed and get you thinking about how you actually can make money in these unconventional markets. The private blog also includes my actual trading ideas.
For those who are not familiar with me, I focus exclusively on small cap oil and gas companies and know this sector inside out. I have been involved in the stock markets (both UK and US) since the early 1980s and understand exactly how the finance and promotion game works. I also have many years' operational and corporate experience in the oil business, which enables me to see very quickly whether or not these companies are telling the truth. I share my take on companies and the markets and, as those who follow me know, I'm rarely wrong about these matters.
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The author may hold 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.