AIM Oil & Gas Update
Xcite Energy Xcite Energy shares have remained in a tight range around 77p despite positive news flow from its North Sea Bentley field over the last few weeks. The Rowan Norway rig drilling the 9/03b-7 well was producing at a stabilised rate of approximately 3,200 barrels per day with no associated basic sediments or water as of the beginning of August after an initial 2,900 barrels a day rate with 47,000 barrels of dry oil being collected by the Scott Spirit tanker. Investors are waiting for further news from Bentley on the reservoir performance and potentially maximised flow rates as well as a potential farm in deal to allow phase 1b of field development to begin in 2013. Patience required for now, but everything remains on track with a highly attractive asset in the North Sea.
Falkland Oil and Gas Falkland Oil and Gas sits at 92p compared with 97p in July, but plenty of news flow since then. FOGL has struck a deal with Noble Energy Falklands Ltd, an affiliate of Noble Energy, with a farm-in to the northern area licences of the South Falklands basin for a 35% interest except for two excluded areas. FOGL will secure total investment over the next three years between $180 million and $230 million leaving the company with around $200 million at the end of the current drilling campaign to continue exploration work or appraisals later in 2014 (equivalent to just under 50p per share). FOGL will continue as operator of the entire Northern Area Licences until early 2013 when operatorship of the farm-in area will be transferred to Noble. In June this year, FOGL announced a farm out deal with Edison International.
The Loligo exploration well 42/07-01 was spudded on Friday 3rd August 2012 using the Leiv Eiriksson rig. Following Loligo, the rig will move to the Scotia prospect in Q4 2012. To sum up, investors looking for a bit of action from the Falklands Islands have plenty to keep them excited in FOGL given the potential size of Loligo and Scotia in coming months. Plenty of risk, of course, but significant upside at 92p.
Northern Petroleum Northern Petroleum was 60p in July and is now at 67p following some positive drilling announcements. In mid-July, Northpet Investment, which has a 2.5% interest offshore Guyane (Northern owns a 50% equity interest in Northpet), commenced operations on the GM-ES-2, the second well on the Guyane Maritime permit on Friday 6th July. GM-ES-2 follows up on the Zaedyus oil discovery in late 2011 which encountered 72 metres of net oil pay. Results are expected in October from the well. In early August, Northern Petroleum announced that it had commenced drilling operations on the La Tosca-1 well in Italy, targeting a 43 billion cubic feet of gross mean prospective resource gas prospect with results expected in October. To conclude, with a freshly buoyant oil price, a supportive technical picture, cracking valuations relative to the sector for our stock picks (on a EV:2P basis) and also relative to recent corporate takeover benchmarks, we sit expectantly awaiting material gains from this area of the market over the next 12 months.
September 2012 | www.financial-spread-betting.com | 39