15th January 2019
- Eland Oil & Gas (LON:ELA) – 121p – 2019 to Consolidate 2018
- Ophir Energy (OPHR:LN) – 45p – Solid First Step
- Sirius Petroleum (SRSP:LN) – 0.57p – Leaving it Tight
- Tlou Energy (TLOU:LN) – 6p – This Stage is Key
- Touchstone Exploration (LON:TXP) – 13p – Lithe Approach Will Bear Fruit
- Trinity Exploration & Production (LON:TRIN) – 16p – Solid Progress
- United Oil & Gas (LON:UOG) – 5p – Podere Gallina Approval a Cornerstone
Eland Oil & Gas (LON:ELA) – 121p – 2019 to Consolidate 2018: The 2018 update makes for solid reading, which should remind the Company’s owners why they are in the asset. With an active programme in 2019 that is likely to be weighted towards the end of the year, it will be difficult for 2019 to match the end of 2018, such has been its success.
What the Company is effectively suffering from is the weight of its successes in 2018, which means that 2019 is likely to be a difficult comparator. Consequently, we believe that 2019 will be a year of consolidation as the Company sets the foundations for what we believe will be further growth in 2020.
Ophir Energy (LON:OPHR) – 45p – Solid First Step: We have previously highlighted the differences between value and worth, and that to launch a successful defence of the Medco offer, the management team need to highlight how they are going to close the gap.
While the Licence “R” outcome is still a headwind to that ambition, this operational update provides a solid foundation on which it can build the case for either a higher realised price for the Company (the worth) or how the management team will unlock the undoubted value.
- Sirius Petroleum (LON:SRSP) – 0.57p – Leaving it Tight: The current timeline to achieve credit funding, even with the extension to the 15th of February, is tight. Usually, we recommend that a minimum for any credit funding, irrespective of the structure, is six months, which leaves enough time for the range of third-party verification that is usually required.
Tlou Energy (LON:TLOU) – 6p – This Stage is Key: The news that the Company is commencing the drilling of the lateral wells on the Lesedi CBM project is the signal of the start of the important phase of testing and appraisal for the project.
To our mind, the deliverability of these wells will be key to determining the extent of the commerciality of the project. It is important to note that while commerciality has already been demonstrated, our assessment indicates that the use of horizontal wells (assuming a pre-appraisal multiplier up to 4x initial vertical IPs), will make provide sufficient margin of comfort to allow for debt financing.
The outcome of this programme will be the key for investors and essential for assessing the development scenario.
Touchstone Exploration (LON:TXP) – 16p – Lithe Approach Will Bear Fruit: The operational update has largely been well flagged in the market, and as such the majority comes as no surprise. However, the one element that catches our eye is that the management team have continually adjusted their plan to suit their operating environment.
While this has led, in this instance, to the Company missing its drilling programme, it is for a good reason and one that provides more support to management’s guidance of the Company. It is inevitable that some investors might take umbrage with the fact that the performance could have been better than the 28% uplift in production, we believe that would be myopic and miss not only the progress over the last 12 months, but also the subtlety in the way management is proving itself.
Trinity Exploration & Production (LON:TRIN) – 16p – Solid Progress: While the operational progress has been well disclosed, the key element for us has been the Company’s focus on cash generation. The year-end cash balance of $11.8mm, while down on September 2018, remains healthy and we believe bodes well for the coming 12 months.
This is key because the programme that the Company has in place for 2019 should see the Company start to realise its inherent potential.
United Oil & Gas (LON:UOG) – 5p – Podere Gallina Approval a Cornerstone: The granting of a production licence for Podere Gallina is a notable achievement for the Company, especially in the context of the sclerotic Italian approvals process.
There are a number of subsequent stages to successfully navigate before first gas is produced, and the milestone of the receipt of sales revenue into the control account occurs, but this is a significant step towards achieving the critical point of self-sustaining cash flow.