Opinion

Oil price, Ithaca Energy, Aminex/Solo, Europa/Angus, Velocys, And finally...


Oil price

Marginally up last week but creeping in the right direction aided by the Iranians doing a missile test that was probably ill advised for such a peace loving nation…The Donald responded as you might expect but he cannot do much about the international sanctions, yet. The EIA said that US production might be up 110/- b/d this year, hardly the terror scenario that the oil bears are preaching. Having said that, the Baker Hughes rig count showed an increase of 17 units overall to 729, oil was up 17 to 583 units and the jobs data showed a growing if not booming economy.

Ithaca Energy- Giving it all away…..

Ithaca has announced an agreed cash offer worth 120p from Delek Group which is a 19.7% shareholder and which puts an enterprise value on IAE of $1.24bn. This bid which is only an 11% premium to the Friday share price, is highly opportunistic, coming as it does only days before the FPF-1 comes on stream at Stella and which will transform the economics of the company. There is no doubt that looking at current analysts' values of the company the bid might be considered full, but I would contend that those values would have changed significantly in this landmark year and looking forward the bid will look parsimonious in the extreme.

Ithaca has a fine portfolio of assets and a number of these will be proved to be especially valuable to Delek if the deal goes through. Whilst not certain of course, the economics of the sector are beginning to look as bright as they have done for a long time and with industry costs still falling and the oil price creeping up valuations are more subject than ever. Shareholders who are probably delighted with this bid, dont get me wrong, may be about to miss out on the ride of their lives as IAE start up at Stella, raise revenue, pay down debt, all bringing the rating down, and miss taking advantage of what is one of the best managements in the sector.

Having spoken to the management I fully understand that they have the best insight into the risk profile and the potential value of the company going forward and could not in all honestly not put this offer to shareholders with their recommendation. I am also assured that no discussions have taken place about job security and that includes whether the IAE executives are to be kept on should the rumours be true about Delek listing an oil vehicle in London. It should be noted that they also own 20% of Faroe Petroleum another premium North Sea player, maybe following this and the recent Chrysaor deal means that the consolidation of the sector is finally under way. That will be fine as long as long as opportunistic bids are not accepted just as the promised land is under foot and patient shareholders rewards are within tantalising reach. It would certainly not do if an uber cautious board delivered one the sectors finest companies into hostile hands on the cheap and without appropriate vision.

Aminex

The company has announced that the Ntorya-2 well has successfully found a gross gas bearing reservoir unit of approximately 51m and net pay of 25-30m, well ahead of pre-drill expectations. The company is doing flow tests now which should be complete by the end of the month. Given that the first well flowed at 20 million cubic feet a day with some condensate, there must be a reasonable chance that this is bigger than that. If this turns into a proper gas field as one can almost say it is, it is only 40km to the Madimba gas processing plant and the natural gas pipeline system. Aminex and Solo shareholders can look forward to the Ntorya field after a long and very patient wait…

Europa/Angus

EOG has farmed-out 12.5% of PEDL 143 which includes the Holmwood prospect to Angus Energy, who will pay for 25% of exploration costs with a cap of £3.2m plus other costs. Following various transactions EOG will keep 20% and Angus gets an entry into an area it is very familiar with.

Velocys

Velocys has announced that the first Fischer-Tropsch product has been successfully produced at Envia Energy's plant in Oklahoma City. I will write further on Velocys later as I have a meeting with the CEO tomorrow.

Sound Energy

A link below to a Proactive interview I did last week following the announcement of the independent basin model.

ProactiveInvestors Stocktube interview: Sound Energy Plc's “mind blowing” upside in Morocco

And finally…

Where does one start? I suppose with a new name to conjure with, Denis Shapolov the 17 year old Canadian tennis player who has earned new shame by being disqualified from the Davis Cup after hitting the umpire in the eye with a ball designated as for row z. It was the deciding rubber so team GB go through to play France.

In the Super Bowl it was the best ever fight back and first into extra time as the Patriots came back from 28-3 to win with you-know-who being MVP…

The 6 Nations rugby was first rate, Scotland started with a much deserved win over Ireland although Murrayfield held its collective breath as the tide of green looked like clawing back the deficit. England were not on song but crept over the line and in Rome, as ever, Italy started well but were rolled by Wales  in the end.

In the Prem Chelski were just too good for the Gooners, winning 3-1 whilst the HubCap Stealers lost 2-0 at Hull City Tigers. Jesus saved City with a winner in overtime and the Foxes are looking extremely vulnerable going down 0-3 to the Red Devils, without a fight.

Finally Alastair Cook has resigned as England cricket Captain which is a terrible shame but I suppose gives Rooooooooooooooot a run through a busy year which ends with the Ashes. I wish him well and hope he stays on at No1.



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