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Rose Petroleum - Update on 3D seismic data interpretation

Rose Petroleum -  Update on 3D seismic data interpretation

Rose Petroleum (LON:ROSE) announced the completion of the initial structural interpretation of the 3D seismic data it acquired over its Gunnison Valley Unit (GVU) which is part of its larger lease holding in the Paradox Basin, Utah, U.S.A. As a result of this work, key geological structures and multiple drilling targets have been identified, with to date 53 well locations identified in the Cane Creek reservoir zone alone.

All options are envisaged, including joint venture and farm-in arrangements, to ensure that any dilution to existing shareholders is kept to an absolute minimum, while still realising the full value of the project.

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October 23 2017

Rose Petroleum plc (LON:ROSE) provided an update on the likely completion date for the 3D seismic survey they are in the process of acquiring in the Paradox Basin, following the successful completion of a £3M funding. The 3D seismic data will be key to identify drill targets in the Cane Creek interval and other potential clastic reservoirs of the Paradox Formation, but also to steer the horizontal leg of the wells within the natural fracture system for optimal drilling and completion. Data acquisition started on 4/10/17 and should take up to five weeks; management expects to be in a position to select drilling targets by the end of the first quarter 2018. We have updated our project timeline accordingly, and believe the Company is well on track and has also indicated it may well advance this timeline. Management also identified a source of potential in the Leadville Limestone formation, additional to the resources estimated by Ryder Scott in 2014, in which the 3D seismic could identify potential structures.

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September 25 2017

PROGRESS YTD

Itaconix PLC (LON:ITX) reported H1 results (18/09/2017) which showed good progress, with revenues of £0.3m (H1 2016 ongoing: nil) and new collaborative partnerships in key product segments.

In this report we examine some of the drivers which are supporting this rapid commercial adoption of Itaconix PLC (LON:ITX) technologies, including productspecific performance attributes and the long-term mega-trend towards environmental sustainability in specialty chemicals.

INVESTMENT THESIS

Itaconix PLC (LON:ITX) has transformed (and renamed) itself in recent years towards a tight focus on specialty polymers for home care, personal and consumer health care, and industrial products. The H1 results demonstrate that the strategy is now delivering real commercial progress. Some of the drivers include:

• A patented production process that combines the versatile chemistry of Itaconic acid with breakthrough economics. • A range of bio-based products which can replace petrochemical ingredients. Industry-wide changes are being driven by consumer preferences, regulatory changes and the “Together for Sustainability initiative within the specialty chemicals sector. • Virtually limitless headroom for growth, with addressable end markets of $30bn. • Existing commercial revenues growing strongly. • Strategic partners including Akzo Nobel, Croda, and Solvay broaden the available channel to market.

In this report we examine some of the drivers in detail, with an overview of product categories and key differentiators.

SHARE PRICE DRIVERS / CATALYSTS

At this early stage of growth we don’t believe that there is any basis to value the shares on 2017/18 multiples. But by 2020 we believe the company could be generating £12m of revenue which would imply the shares trade on a 2020 multiple of 1.2x EV/Sales compared to peers on 3-4x (e.g. Croda plc.). With growth potential extending well beyond 2020, it’s unlikely that the market would value Itaconix this cheaply, in our view.

In the meantime, we believe the main driver for the share price will be adoption of Itaconix products by additional commercial customers. We expect progress across all three end markets – home care, personal and consumer health care, and industrial.

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August 01 2017

Green Dragon Gas (GDG) announced that the China National Development and Reform Commission (NDRC) has approved a Project Code for the Overall Development Plan (ODP) on the Greka Shizhuang South Zaoyuan portion of the Main Block (GSS), concluding that the ODP does not require an approval process and only needs to be registered. Management reckon this approval will shortens the time to large-scale commercial gas production from the GSS Block. We note that this announcement follows the recent approval (18.4.17) of the ODP on the GCZ Block. Both GSS and GCZ Blocks were specifically mentioned within China's 13th Five-Year Plan as being critical to domestic production requirements, and the latest approvals demonstrate the Chinese Government commitment to fulfilling this ambition. We see the next catalyst for the stock as the probable approval of an ODP for the GGZ Block in 2017.

The development program on GSS would add 42 vertical and 47 LiFaBriC wells by 2020 for a net investment of US$49.2m by GDG which has a 60% participating interest in this block with its 40% partner, China United Coalbed Methane Corp (CUCBM), a wholly owned subsidiary of China National Offshore Oil Corporation (CNOOC). This would come in addition of the already approved and more material development program on GCZ which would add 147 wells by end 2018.

Our valuation of GDG at 221p per share, based on a risked valuation of 2P reserves and adjusted for Net debt/cash and capitalised corporate costs, is unchanged. However, the approval of a second ODP this year should increase investors’ confidence in the quality of GDG’s assets and in the company’s ability to realise this valuation (Figure 1).

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