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Today's Market Review - Union Jack Oil; Egdon Resources; Lekoil; TomCo Energy

Published: 21:04 03 Dec 2018 AEDT

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Headlines

  • In Brief:

    • Union Jack Oil*** (LON:UJO)  0.10p  – $72.9mm (0.64p) – West Newton Completion

    • Egdon Resources (LON:EDR) – 7p Ceres a Welcome Diversion

    • Lekoil (LON:LEK) – 8p – Justice Moves Slowly

    • TomCo Energy (LON:TOM) – 5p – In the Land of the Blind…

In Brief

 

  • Union Jack Oil*** (LON:UJO) – 0.10p – $72.9mm (0.64p) – West Newton Completion: Today’s announcement that the Company has completed its farmin to Raithlin Energy’s West Newton licence (PEDL183). Given the fact that the Company enjoys a good relationship with the OGA, while not unsurprising, it is still pleasing, as the still requires an assessment of the Company’s suitability for inclusion on the licence. Following today’s news, we are reiterating our $72.9mm (0.64p).

  • Egdon Resources (LOBN:EDR) – 7p – Ceres a Welcome Diversion: Today’s news that Ceres is back on line is likely to be a relief to the management and shareholders alike. Not only does the production provide much needed cash flow, but it also a timely reminder to investors that it has assets outside of Wressle.

  • Lekoil (LON:LEK) – 8p – Justice Moves Slowly: Like many, we find the tardy ministerial approval of Lekoil’s acquisition of the 22.86% interest in OPL310 from Afren’s administrator a curiosity. While delay causes concern, we are comforted to some extent by the fact that the insolvency practitioner (Alix Partners), and the peculiar liability that they hold, demands that everything is conducted in accordance with the prevailing legal framework. Consequently, we have no doubt as to the legality of the acquisition of the additional interest, and we would expect it to be transferred in due course, its just that the wheels of government can sometimes move slowly in Nigeria, especially where the DPR are involved, which is complicated by Afren’s bankruptcy.

  • TomCo Energy (LON:TOM) – 5p – In the Land of the Blind…: The appointment of a drilling engineer is undoubtedly a positive step for a company that lacks any oil & gas experience, but this will not assist the Company in progressing the commercialisation of the technology, yet. Himes’ appointment is in reaction to a simple problem that should have been anticipated ahead of time, but in any regard is an operational issue for when you're in the buildout phase. We do not doubt that his expertise will be well leveraged once the wider technology issues have been resolved, but currently, the focus shouldn’t be on the drilling and completion, but on the understanding of the kinetics of pyrolysis and expulsion in a controlled environment, rolling out to a pilot scale application to assess its commercial potential. This is basic engineering research and needs systemic approach, breaking down each element in to its constituent parts to enable the understanding of the issue. Unfortunately, given this latest news, and the clear implication of where the management team believe that the issues reside, we are increasingly convinced that the team have little understanding of the scale of the issue that faces them, or how to approach it in a systemic manner, and Himes’ appointment is reflective of that fact. Given his skillset, he knows a lot more than they do about the subject area that the Company operates in, they are too inexperienced to be sighted on what that is. As they say, “in the land of the blind, the one-eyed man is king.”

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