Sunday Blog, 19 September 2021
PHAR SOCLF PTAL TAL PTALF LBE DELT CLON PET UJO MATD PRTDF TRIN TRXEF SOU SNEGF IGAS IGESF HUR HRCXF MAY MEOAF
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On with the Sunday blog:
Pharos Energy (LSE: PHAR OTC: SOCLF) announced interim results for the half-year to 30 June (a profit of $6.4 million with average production of 9,147 boepd net) and the entering into of conditional agreements for the farm-out and sale of a 55% working interest and operatorship in each of the Egyptian El Fayum and North Beni Suef Concessions to IPR. The consideration consists of $5 million cash at completion, funding of PHAR’s retained interest share of the cost of future activities on the assets for $38.425 million net, and contingent consideration of up to $20 million dependent on Brent oil prices in each of the 4 calendar years from 2022 to 2025. Meanwhile, the 6-well infill development drilling programme in the TGT field in Vietnam is underway: the first well drilled is already on production with the initial flow rate at 1,600 bopd, the second well is currently being completed, and the third well in the sequence is due to spud shortly. Per Ed Story, President and CEO, the medium term outlook for Pharos is a return to free cash flow and ultimately to distributions to shareholders.
PetroTal (AIM: PTAL TSXV: TAL OTC: PTALF) announced it has completed the BN-8H well, the fourth horizontal well in the Bretana oil field, with unrestricted flow rates of approximately 7,600 bopd over a ten-day period. Total current field production is now approximately 15,400 bopd, a record production level for PetroTal, and the flush production from BN-8H is being monetized into some of the highest Brent oil price markets seen all year, providing a significant cash flow impact. Over the next few weeks, PTAL expects to commence drilling the next horizontal well, BN-9H, in its 2021 campaign. I mentioned PetroTal positively last November at 7.6p (after having been rather negative on it from the low 30s down). It’s now 19.9p.
Longboat Energy (AIM: LBE) announced an operational update. Drilling has commenced at Rødhette (20% interest), Longboat's first exploration well. A further two wells, Egyptian Vulture (15% interest) and Mugnetind (20% interest) are expected to commence drilling by the end of September and drilling at Ginny/Hermine (9% interest) is expected to commence in December. The rig is confirmed for the Kveikje and Cambozola wells, to be drilled in 2022, and the Copernicus well site survey is to be acquired shortly, to facilitate 2022 drilling, following the well commitment decision. Plenty of further news coming up here and more about LBE in the private blog.
Deltic Energy (AIM: DELT) announced interim results. It’s one of the more straightforward companies which states the result (in its case a loss of £691,754) in the highlights, rather than burying it deep into the accounts and trying to confuse investors with jargon. There’s plenty coming up at DELT too: the Deltic-Shell JV is scheduled to drill the Pensacola well in Q2 2022 and Cairn Energy has now farmed-in to five of DELT’s licences, accelerating development of Deltic's core Southern North Sea licences and ensuring significant investment through to the drilling decisions. The company also has retained a strong balance sheet with cash of £11.1 million as at 30 June. More on DELT in the private blog.
Clontarf Energy (AIM: CLON) also issued an interim statement. The most impressive aspect was the relatively small loss of £137,000. Most AIM companies run losses of £1-2 million a year (usually mainly, if not all, administration expenses), so it just shows how much room there is for cuts at most of them should shareholders ever effectively activate. As always, it’s delay after delay for CLON with their various assets in Bolivia, Chad and Ghana, but at a market capitalisation of just £2.4 million, it’s possible for the share price to explode upwards should the company announce any sort of meaningful news. That’s exactly what happened with CLON’s sister company, Petrel Resources (AIM: PET), which I highlighted as a favourite several times in 2019 at around 1p. It subsequently hit 26.5p, up over 2,500%.
Union Jack Oil (AIM: UJO) announced interim results too. Loss for the period was £833,446, although it made no mention of that in the highlights. Wressle should bring in some cash now, possibly even enough to cover the company’s £1.7 million a year administration expenses (a remarkable level for a company holding a few non-operated interests), but all eyes probably will continue to be on West Newton, where the operator has returned to the A-2 well to see if it can flow and be tested. In the meantime, it again looks like insiders have been selling ahead of yet another placing, the consideration of which was confirmed by the company after market close on Friday.
Petro Matad (AIM: MATD OTC: PRTDF) announced its interim results. Loss was $1 million for the 6-month period ended 30 June. The cash balance at that date was $0.4 million, however, in mid-July the Company successfully raised approximately $10 million net from placements, which will primarily be used to fund a development work programme designed to bring oil production on stream during the second half of 2022. The Block XX exploitation licence for the development of the Heron oil discovery has now been was granted for a period of 25 years, extendable for up to a further 10 years, and procurement processes for the 2022 operational programme are underway.
Trinity Exploration (AIM: TRIN OTC: TRXEF) announced its half-year report. Loss before tax was $128,000, with average net production of 3,032 bopd, down 8% from H1 2020. The potential here lies in its Galeota licence, in respect of which the marketing of a farm-out process is expected to commence next quarter. Sound Energy (AIM: SOU OTC: SNEGF)’s half year report made for grim reading, though, with a comprehensive loss of £7.3 million. Now 1.45p, it’s one I’ve been warning about since it was in the 40s.
Good news from IGas Energy (AIM: IGAS OTC: IGESF), however. It’s signed an agreement with CeraPhi Energy for the repurposing of oil and gas wells to access subsurface thermal heat to produce baseload clean energy. Hurricane Energy (AIM: HUR OTC: HRCXF) continued to please investors too, with an operational update demonstrating the continuing cash generating ability of the Lancaster field. Hurricane now has appointed new auditors, PKF Littlejohn, following the shareholders’ rejection of the resolution to re-appoint Deloitte, and the company now anticipates releasing its 2021 interim report and half-year results on 14 October.
Finally, Melbana Energy (ASX: MAY OTC: MEOAF) announced that the Alameda-1 exploration well in Cuba has spudded. It’s testing three separate targets with a combined prospective resource (best estimate) of 141 million barrels of oil. This will be followed by Zapato-1, which is to be drilled immediately following the completion of Alameda-1. Melbana has some significant assets, both in Cuba and Australia, and is capitalised at a relatively modest A$51 million (£27 million).
That’s it this week from the Sunday blog. The Private blog will be sent out this evening: click "Subscribe now” to receive it free for 30 days.
Last of all, I get asked quite a few questions regarding my views on effective trading, so it might be useful to set out again my thoughts on the subject.
Critical is where the company is in its operational, financing and promotional cycle.
Only go for the certainties, even if that means just 10 or so trades a year. Profits are worth nothing if they're wiped out by losses, the losses have to be eliminated.
You must have conviction so that you don't get shaken out of the position.
No position should be so large that it stops you sleeping and fear frightens you out. Better to relax and enjoy the trade, rather than endure a white-knuckle ride.
Enter the position in stages, always scale in gradually.
De-risk as the price rises. End up holding the position for free and ride it if you want, but remember that ultimately, these companies' business projects usually fail.
I’ve written a concise, 74 page book regarding this subject, which also explains exactly how the London small cap markets work in real life. A complimentary copy in electronic format is sent to all Private blog subscribers. Click “Subscribe now” to try out the Private blog free of charge for 30 days and you’ll also receive a copy.