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Views from the Trading Floor - Featuring Royal Dutch Shell, Red Emperor and Range Resources 12th April


Saints & Sinners: Oil & Gas   

Range Resources (LON:RRL) slipped 3% during early trading after the company provided an update on drilling operations on the Shabeel well in Puntland, Somalia which is being drilled by its Joint Venture Operator, Horn Petroleum Corp. ("Horn"). The Shabeel well is currently at a depth of 2703 metres and the setting of the 9 5/8" casing has just been completed. The well drilled through primarily tight limestones and shales of Lower Tertiary to Upper Cretaceous age and encountered a 355 metre section of Upper Cretaceous sands and shales of the Tisje / Jesomma Formations at a depth of approximately 1660 metres. The sands in this interval exhibited both oil and gas shows and petrophysical analysis of downhole electrical logs indicates a potential pay zone of between 12 and 20 metres in the section. Attempts to sample formation fluids using a wireline formation tester were not successful and thus the zone will require cased hole testing to confirm whether they are oil bearing. At a depth of 2015 metres, a thick section of tight limestone and shales was encountered and extended to the present depth of 2703 metres. This is believed to correspond to the Upper Cretaceous Gumburo Formation. The forward plan on the well will be to drill ahead to the originally planned depth of 3800 metres to evaluate the primary and secondary reservoir targets in the Lower Cretaceous and Jurassic intervals equivalent to the main productive section seen in the analogous fields in Yemen. A testing programme including the zones of interest seen to date and any deeper potential pay zones identified will be agreed with partners at that time. Upon completion of this well, the Company plans to move the rig to the Shabeel North location on which construction is nearing completion.

Horn's President and CEO, David Grellman, commented "We are encouraged by the results to date and pleased that we have confirmed the presence of an active petroleum system in the Dharoor Valley. We look forward to drilling ahead into the primary objectives of the well and hope to confirm the shallow prospective zones by testing in the near future."

Red Emperor (LON:RMP), who also hasa 20% ownership of the asset, slipped 7% to 38p on the back of the update. The shares traded down aggressively first thing, slipping from 42p to 36.75p, before settling down around the 38.5p area. We as a shop see the traces of oil and gas in shallower horizons and subsequently an active petroleum system increasing the chance of a commercial success with this well.

Royal Dutch Shell (LON:RDSA) slipped 5% to 2038p after the company said on April 11 thatShell notified the National Response Center (NRC) of a light sheen in the central portion of the Gulf of Mexico, between the Mars and Ursa production area. Shell has no current indication that the sheen originates from wells in either the Mars or Ursa projects. However, out of prudent caution, Shell has activated the Louisiana Responder, a Marine Spill Response Corporation (MSRC) vessel. The Louisiana Responder is an oil spill response vessel with skimming and boom capabilities. Shell has also requested flights to monitor the one by ten-mile sheen closely with additional aerial surveillance. At this time, the source of this sheen is unknown, and Shell's priority is to respond proactively, safely, and in close coordination with regulatory agencies. Updates will be provided as further action is taken.

Wessex Exploration (LON:WSX) slipped 10% to 8p during early trading after the company said it noted the announcement made today by Total S.A ("Total") stating that it has decided not to proceed further with an offer for the Company. As a consequence, the Company is no longer in an offer period. As previously announced, having completed the initial shareholder consultations, the Board are of the view that the approach of 10 pence per ordinary share undervalues the Company and was inadequate to secure their support for any offer which Total might consider at this level. Wessex confirms that, having raised GBP12m (gross) of additional funding in November 2011, the Company is fully funded for all current requirements, including participation in a further Zaedyus appraisal well and at least one additional well. Drilling is expected to commence in mid-2012 to follow up on the Zaedyus oil discovery in late 2011 that demonstrated the prospectivity of this licence area off South America. To undertake these operations Shell, the operator, has contracted the Stena DrillMax ICE drill-ship, which is expected to commence operations mid-year subject to government consents.

Matra Petroleum (LON:MTA) continued to fly again today, jumping another 50% to 1.75p on huge volume during afternoon trading. The shares have not looked back since the announcement yesterday morning of the introduction of Mr Barskiy as a strategic investor, expected to bring considerable new project acquisition opportunities to the Company. As part of the agreement, Mr Barskiy will, subject to Matra shareholder approval, subscribe for a placing of 575,000,000 new ordinary shares in Matra at an issue price of 0.8p per share, raising a total of £4.6 million before expenses.

Xtract Energy (LON:XTR) hasreally started to catch my attention over the last few sessions. After speaking with one of the Oil & Gas analysts over here (Alex Ogbechie), he highlighted a few points that can only add weight to the bullish story for the stock down at these levels. Alex highlighted the following " The company is still looking to explore the 2 licence areas in Denmark. News on the P2-10 drilled by Chevron in Jan 2012 should hit the boards very soon (within the next 3 weeks I would have thought). If that proves successful, they might use the cash generated from there to press ahead with Denmark. Partnership with a Saudi Prince can only bode well for their Shale project in Morocco. Hiring a leading service provider Worley Parsons to do some work on their Australian Shale project, I think,goes a long way to show how important their holdings in Australia are.I think XTR is an interesting one. The next 6 to 12 months should keep them very busy." Shares are sitting at the low level of 0.85p at the mid-price, down another 5% on the day. We will be watching this one very closely over the next few weeks.

Northern Petroleum (LON:NOP) slipped 4% to 82p during early trading on the back of Total pulling its offer for Wessex Exploration. The two companies have a joint interest on the Guyane permit.

Sticking with the fallout from the failed bid, Bluebird Energy (LON:BBE), who own 9% of Wessex Exploration, fell 3% to 0.95p at the mid-price.

Saints & Sinners: Mining   

Rambler Metals (LON:RMM) jumped 8% to 37.5p during afternoon trading on huge volume after the market finally woke up to the bullish announcement from yesterday that said a total of 9,714 ounces of gold have been poured to date at its 100% owned Ming Copper-Gold Mine, in Newfoundland and Labrador's Baie Verte Peninsula, Canada. Exploration diamond drilling in the 1806 zone returned new visible gold intersections. 4.45 metres (core length) of 49.69 g/ton gold uncut (7.57 g/t gold cut). 29.80 metres (core length) of 39.80 g/ton gold uncut (4.47 g/t gold cut). Copper concentrate production is scheduled to start in May, beginning with commissioning ore, withcontinued development of the high grade copper 1807 zone.

Stellar Diamonds (LON:STEL) slipped 30% to 4p first thing on huge volume after the company said it is seeking clarification after the government of Sierra Leone revoked its two licenses in the Kono district, which were granted in 2005 and renewed as recently as May 2011. Stellar said the letter from the Ministry of Mines of Sierra Leone asserts that it ought not to have granted the renewals of Stellar's licenses in 2010 under the Mines and Minerals Act of 2009 and that as a result Stellar no longer has mineral rights through the licences. Chief Executive Karl Smithson said: "Whilst this uncertainty is frustrating and unfortunate we strongly believe that our legal tenure over the Kono licenses is intact and will be engaging with the Ministry of Mines to clarify and then satisfactorily resolve this issue." Stellar and its former joint-venture partners have invested more than $19 million on the Kono licenses, the company said.

Thor Mining (LON:THR) slipped 8.5% to 2.075p at the mid-price during early trading after hitting the lofty heights of 2.4p only yesterday. The company did announce the appointment of Mr David Thomas as a Non-Executive Director of the Company, with immediate effect. Dave Thomas BSc(Eng), ARSM, FIMM, FAusIMM (CPMin) is a Mining Engineer from The Royal School of Mines, London, with experience in all facets of the mining industry. He has worked in senior positions in mine and plant operational management for Anglo American in Zambia, Selection Trust in London, BP Minerals, WMC and BHP Billiton in Australia and is experienced in project management as well as the completion of feasibility studies. He has also worked as a consultant in various parts of the world in the field of mine planning, process plant optimisation, business improvement and the completion of studies.

Red Rock Resources (LON:RRR) slipped 8% to 2.45p during afternoon trading after the company reported the appointment of Peter Bolt as Chief Operating Officer of Colombian mining operations and said that production at both Colombian mine and plant increased during the first quarter due to infrastructure improvements. Gold sales dropped to 1149ozs, a 19% decrease on the previous quarter. Monthly sales have picked up from a low in January of 312ozs to 398ozs for February and 439ozs for March. Significant decrease in recovery rates at the plant led to this drop in sales. Recovery rates have started to improve.

Oracle Coalfields (LON:ORCP) slipped 7% during afternoon trading on decent volume after the company said it has been granted, through its 80% owned local subsidiary, Sindh Carbon Energy Ltd., a mining lease by the Director General, Mines & Mineral Development, Government of Sindh, Pakistan. The lease applies to 66.1 square kilometres of Block VI of the Thar Coalfield for coal mining. The lease extends for thirty years and may be renewed for a further thirty year period on the same terms and conditions as this Mining Lease or on terms and conditions as may be mutually agreed between parties at the time.

Triple Plate Junction (LON:TPJ) jumped 13% to 2.7p during afternoon trading as long term holders made a stand after yesterday's drop. The first line of resistance here looks to be around the 3p level.

From the trading floor   

The FTSE 100 was in yoyo mode once again today, jumping from 5610 to 5640 then back down to 5610 no less than 4 times throughout the course of the day. As I type the FTSE 100 is 21 points better at 5650 (+0.33%) on volume of 571 million shares, helped by press chatter that the UK government could be close to selling a portion of its holding in RBS at around the 35p area. Obviously all speculation has to be taken with a large pinch of salt, but the speculation alone did help push most of the banks better on the day. The FTSE AIM All-Share Index was 0.38% better on the day on volume of 885 million.

Commodities Corner   

Gold - ↑Trading at $1656, up $1 (+0.07%)

Silver - ↑Trading at $31.71, up 10c (+0.34%)

Copper - ↑Trading at $8130, up $80 (+1.01%)

Zinc - ↑Trading at $2020, up $40 (+1.93%)

WTI Crude - ↑Trading at $102.96, up 27c (+0.26%)

Brent Crude - ↓Trading at $119.61, down 56c (-0.47%)

Any questions please don't hesitate to contact me at [email protected] or visit www.viewsfromthetradingfloor.com or www.fox-davies.com.

And, remember twitter: @FoxDavies and @SteveAsfour

Quick facts: Archer Daniels Midland

Price: 39.38 USD

Market: NYSE
Market Cap: $21.88 billion


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