Posted by Malcolm Graham-Wood - Malcy's Blog
Yesterday was the first up day for over a week as inventories came to the rescue and various reports were a tad more bullish about the market stocks position. The EIA reported a small draw of 237/- barrels in crude oil against market guesses of a build of 3.3m or more, and the position in gasoline, draw 3.05m and distillates draw of 4.23m barrels is more healthy at this time of the year. The distillate number was probably helped by the storm that has raged up the east coast in the last couple of days with buyers in advance of that but it is better underlying.
An acquisition this morning for AMER who have paid Pacific E&P $4.85m plus modest royalties for what looks like another really value adding deal. The vendor appears to be to a certain extent at the whim of its banks and accordingly is taking what to me seems like a knock-down price for the exploration assets whilst keeping the production. This suits AMER as they get really large stakes in prime blocks, mainly adjacent to the OBA pipeline which they can farm-down in due course as they have done before. With a number of these blocks under force-majeure there is little or no capex requirement and they are ‘commitment light' so AMER can pick the off at their leisure especially the 100% ones. The Put-12 and Platanillo look obvious targets as they are so close to the OBA and would be economically the best as well as the T and U sands in Put-9.
I see this as being analogous to previous deals where John Wardle has ended up with a host of leads and opportunities as well as selling of a small piece which pays for the whole deal. Amerisur has been weak of late as the market gets impatient about the lack of drilling short term but there is much to come including the current one. Even after today's rally the shares are a compelling buy for significant long term value connoisseurs.
There were a number of announcements yesterday of varying degrees of import, here is a take on most of them.
Victoria Oil & Gas said that it plans to go ahead with the Bomono deal as only it has the option to terminate the agreement made with the previous Bowleven management, there is no reason to believe that this will not be the case and I remain very bullish on VOG.
Premier announced that the final loan holder has agreed to the terms and that means that all the private lenders are in. I expect a swift end to this process now as I guess does the market given how it marked up the shares.
Sound Energy also announced that at Tendrara the well is now in the reservoir and has established the presence of both the TAGI sands and gas which is kind of important. The shares didnt move upwards I suspect reflecting the fact that neither of the above prove anything until wireline logging and analysis is complete. The company also announced that the badile well had reached its first casing point but still a long way to go here.
Bowleven announced that COC had won the day, it was a mighty close run thing which involved a final dive into the market to purchase a key stake. Things are uncertain now but I understand that COC may have a buyer lined up for the Etinde stake and will go ahead with the Bomono deal to which the firm is committed.
Boné dry was the news from Faroe which was disappointing on a number of fronts but it was always a long shot and only takes away from the most extravagant of upside cases.
Cape produced an excellent set of figures marred only by the cut in the divvi, normally one would blame longer term concerns over cover or even cash flow but here neither can be blamed. It is surely one of the rare occasions when a board cuts from a position of strength, or as the Chairman put it to me, we think we can do better with the money than shareholders can…. Very happy with record order book, great performance in Asia Pacific and tidying up litigation, less happy with the UK, which should improve when BP sign up again and their comment that margins would likely have peaked last year. Still a huge fan of Joe Oatley and team who will look after your money better than most and indeed think somewhat better than you can.
Savannah announced that it had signed up for a rig to drill three wells in Niger with an option for another six, the market has been waiting for this for some time and likes to see delivery of promises. The shares moved up to the top of what has been a very narrow trading range but I would expect more as things start to happen here. With a potential couple of vacancies in the bucket list, SAVP makes an interesting candidate, I met with Andrew Knott very recently and would give him the benefit of the doubt here.
What can one say about Pantheon, a share that at the moment is leaving everybody guessing? Yesterday's announcement appeared to read ‘no news' although investors with enough fingers and toes had worked out that yet again PANR are way behind expected their due date for some news. I know enough about the operator, and of Jay Cheatham's experience that I can totally trust them when they say that it's plumbing not the reservoir and am happy to give them the benefit of the doubt.
President also gave a reserves upgrade from Argentina yesterday saying that 2P reserves were over 19.9 mmboe and over 20m if you include the US. Followers of PPC should think about increasing the bet as if my expectations were to come to fruition I can see shares revisiting the 2016 highs.
Finally my Vox Markets podcast this week covered Sound, Amerisur and President, all in the news this week and the link is below.
VOX Markets podcast: Malcy on Sound Energy, Amerisur Resources and President Energy
Cheltenham is under way and no, that is not where I have been so far this week… Up til now it has all been about Willie Mullins who has not fired as previously, so far it's been Gordon Elliott and Nicky Henderson who have shared a lot of the prize money. JP McManus may have further success today ahead of tomorrow's blue riband event.
Would you believe it, only the fabulous Foxes are left representing the Prem in the remaining stages of the Champions League after the Noisy Neighbours went out last night on the away goals rules after the match was 6-6 after two legs. Tonight in the Boropa Cup the Red Devils need to beat Rostov to get through whilst domestically Boro have sacked manager Aitor Karanka whom I bet you couldnt have named…
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