Posted by Malcolm Graham-Wood - Malcy's Blog
Further signs of a bounce back from crude oil yesterday as markets thought that the immediate past of a shake out had been overdone, and so it should. Not much detailed news and recent shorter term sellers closed off their bear trades in case inventory numbers recover next week, which they might.
Wednesday night saw all of the Sound family presenting and for pretty much the first time showing the across the board strategies indicating the direction and significant potential in their individual markets.
Sound started with CEO James Parsons reinforcing the company's gas focussed, private investor centric strategy and with it the policy of developing its existing discoveries in Morocco. Combining those discoveries with further exploration drilling gives an exciting combination of risk and reward, monetising assets whilst at the same time giving some very decent upside. CFO JJ Traynor went down well with optimistic news that for every 1 TCF of gas in the portfolio the shares could add £1.50, news shareholders lapped up. Overall this presentation confirmed, if any was needed that Sound is the more mature part of the family with discovered gas assets in two plays with significant upside, a very crowded room as usual were happy with what they heard.
As for Echo, Fiona MacAulay was slightly restricted with what she could say as the shares are suspended and the authorities are understandably keen that no unpublished information shouldnt be revealed until the shares return to the market. Having said that she was able to talk about the two deals that have been done in Bolivia and Argentina. Overall, the Echo strategy is to be a leader in a LATAM exploration led, gas focussed business, value driven and with potential for significant returns. FM also had a new board, well financed and supportive shareholders to rely on and happy with the ambitious growth strategy that she has put in place.
Starting with Argentina, it is a much bigger play after all, the plans are clear, the asset is significant and an exploration led, but full cycle business capable of very significant upside. The financing of the deal was innovative and meant that for a modest up front payment the cash need to carry CGC and its aggressive work programme Echo will get more than its bang for its buck spent. I expect a lot of newsflow from Echo from the front line as well workovers, exploration and a great deal of seismic reprocessing should create the makings of a very proper E&P company with lots of upside.
In Bolivia where its initials bucks were spent all is going well and the signs emerging from the reprocessing are initially pretty good although there is much to be done. Overall I expect plenty of news on all fronts, with the shares returning to the market imminently, investors will get a chance to participate in what looks like a very good play in an a gas rich region of a massive hydrocarbon geography.
Finally Sara Edmonson of Coro spoke although with even more regulatory restrictions it was by necessity somewhat cautious in content, I am sure over the next weeks and months shareholders will get a much more detailed idea of the direction and pace of the strategy as Sara expands the portfolio in and away from its Italian base. Initially that policy is to expand its daily production and expose the EBITDA potential, thereby exposing the de-risking of the developments and creating a value driven approach to the business.
Coro will before long be re-admitted as a full cycle E&P company, with significant strategic potential and confident of further deals to be done and geographically away from Italy but not conflicting with any of the family assets, crafty investors may be able to work out which point of the compass the Coro management are pointing the telescope at in their hunt for value adding assets.
Whether investors hold one or all three of the family, I'm sure that overall these stocks look like a package of high quality assets with short, medium and long term upside and with management that is committed to delivery and return in a significant manner…
I recently had the opportunity to visit Azerbaijan and see Zenith's assets in the country, as the company is going through an exciting period of change I thought it would provide an opportunity to evaluate both the portfolio and its people. I will be putting out a fuller piece in the blog, hopefully on Monday but had noticed a bit of share price weakness and with incoming mail asking me if all was well wanted at first to say that on the ground I was very impressed on both counts.
With a significant portfolio of differing assets to drill or workover in the next year or so, and having established a very high quality team on the ground my initial prognosis is very promising. I will detail more very shortly but holders should sleep easy in their beds, Zenith is a well run, asset rich play with significant upside.
Empyrean has announced initial flow testing from its Dempsey 1-15 well, where the second deepest zone of gas shows is complete and flowed gas. The difficult bit to work out is how it will be flowed as the company itself says, This zone is interpreted to be a significant gas discovery with high pressures but low permeability over the zone of perforations. In my view this means it will be a frac job but until I speak to the company I won't speculate.
In haste today i'm afraid, the big matches are clearly the north west derbies, the Noisy Neighbours are going across town to the Theatre of Dreams whilst down the road the Toffees are going Fortress Anfield. Elsewhere London has a derby too, Chelski are at the Olympic stadium to play the Hammers and in other games the Eagles play the Cherries, Spurs host the Potters and the Gooners are at the Saints.
And the Tingle Creek at Sandown is a classic and with great jumping cards all over the country all offering top class jumping punters are spoilt for choice…
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