Columbus Energy Resources rises from the ashes – One to watch

Relaunched, reborn or just refreshed?
The difference between the old company and the new is clear for all to see. After digging a little deeper into the all new CERP.L (having been a past investor to the former company LGO.L) the assets are just as good as they have ever been. The problem with LGO was confidence. This was lost due to poor management and an approach to treat shares/equity like confetti. The former owners, (inc Mr Lenigas) promised a lot and delivered very little. It is no surprise to see investors greet the reborn LGO… now called Columbus Energy Resources with a critical eye and for long term holders, plenty of distrust and disdain.
The new owners/management team look lean and mean. Issuing confetti shares seems the last thing on their minds although funding plans are without a doubt on the horizon further down the line. Management have issued a clear plan and have outlined targets. These all look doable and with minimal cash outlay and fast pay back. The target is 1000bopd. That’s a near 300% increase in current production. If achieved and more importantly… sustained, then the company will move to increase production further in 2018. It’s possible the company could exit 2018 with circa 1500bopd to 2000bopd. That would bring in considerable cash and still barely put a dent in the 12mmboe reserves. The company has plenty of other catalysts to drive the stock higher. Spanish assets are suspended at present and a conclusion to this licence issue should be sorted soon.
Whilst the business is cash generative and has the means to pay down the pre-arranged funding via LIND (previous /current convertible bond holder) cash is instead being focused on raising production volumes with debt payments/draw downs being paid in shares. Today’s announcement of 20.3m shares being issued to LIND comes with a caveat / lock in of 6 months. That should be enough time for the company to deliver sizable production increases and cash flows which in turn should bring in new investors and increase liquidity. Hence, perfect time for LIND to exercise/profit from their new shares.
The assets are plentiful and mainly focus on Trinidad although there are added interests in South America (Colombia) which may see progress in 2018. For the moment, it’s all about boosting the productivity of each well via an infill drilling programme. It’s low cost and pays back swiftly. If you forget about the current production of circa 350bopd and instead look at the 2p reserves of circa 12mmboe and cost per barrel at circa $5pb, you soon realise that there is a large disconnect between the £21m market cap and the company’s full potential.
Should the company boost production to levels near 1000bopd or 1500bopd in next 6 months, the cash generation alone (using $55pb) could be $50pb+. Compared to most other operators, cost per barrel is close to $25pb (and that’s the good ones!). Profit points are closer to $10pb to $20pb at best. Hence, 1000bopd net to CERP, is a bit like 3000bopd to a higher cost per barrel player. Of course, that’s a rough comparison and tax /decom costs should be considered too. As should WTI / Brent pricing with $5pb difference at present.
For the here and now… CERP is doing around 350bopd. The new management team will know all too well how dangerous it is to over promise and under deliver. Hence, when the Exec Chairman Mr Leo Koot says he thinks production can boosted considerably, you have to take the man at his word. Should the company succeed, the cash flow funds coming in may go towards drilling a deep prospect on the Icacos Oilfield (Columbus, 50%) located in the extreme southwest of Trinidad. Resources are estimated in the ‘billions’ and any success there would be talked about for decades to come. Seismics are limited to date so there’s a bit of work to do before the deep prospects get explored. Currently, the licence is producing 25bopd from shallows with plenty of room to improve on that level on a low capex basis.
In summary, CERP’s assets were never the problem. It was past management that was the problem. The new team, new company name and new funding arrangement all points to a very new company. At 3.9p per share, it has all the potential to multibag on production success. Certainly one to watch over the next few months.
As always, important to read about risks and warnings in the sidebar to the right.

Sharehub Hotlist 2017 – Week 37

I hope you all had a good summer break. St Legers day has passed so the old mantra of sell in May and return after St legers day requires some brief analysis. On an Indices basis, the FTSE100 hit all time highs in May closing the month out around 7550pts. On Friday, September 15th (Prior to Saturday’s St leger day) the FTSE100 closed at approx 7215pts. In terms of Oil, Brent prices hit highs of approx $53pb and as of Friday, Brent prices were testing $55.75pb. A mixed bag then. Clearly selling the FTSE100 in May made sense although the interesting thing to consider is that Brent prices strengthened as did other commodity prices. Considering the FTSE100 is heavily weighted to commodity stocks, one would have expected more strength on the index. That said, it is just one day into ‘post st leger day’ trading and a few other FTSE100 sectors have taken a bit of a beating of late.

TheShareHub will be back to posting with the normal frequency here on and after the summer drift, some much needed growth is required from the hotlist picks if they are to avoid collecting the wooden spoon this year.

Week 1 to 37 Results below.

It’s been neck and neck for both the top newspaper tips. Both showing a very respectable 20% gain. Still 15 weeks to go and anything can happen in that time.

Stocks to watch over the next 3 months from thesharehub picks in particular are: Hummingbird Resources, Premier Oil, Faroe, Ophir, Providence Resources and Tullow.

Other stocks noted on sharehub over the last few months expected to perform well in Q3/Q4 are: Amerisur Resources, Pantheon Resources, Petrofac, and Imagination Technologies.

More updates and comments across a number of stocks to follow over the next few days and weeks.

Providence strike more water with Drombeg

Disappointing news out this morning for all PVR investors. It was a summer blockbuster drill with two multibillion targets, high quality seismics and big major players names involved. The end results show zero gar or oil producing zones although confirmation of perforated targets perhaps saves some face for the seismic interpretations. PVR are fortunately about much more than Drombeg. The Barryroe asset has a multibillion discovery and requires one more well to prove the commercial potential although an extended well test or EPS phase is likely to be required prior to full field development. PVR confirmed today that the next well the drill will be on Barryroe. That’s encouraging news for PVR and Lansdown investors. It has transformational potential and should be relatively low risk. When that drill happens is anyones guess and news on a drill date will certainly bring in the speculators. For the moment, it’s the end of the summer blockbuster drills.

The ShareHub has take a small break during the slow summer drift months and will be back in force with numerous related posts to the sharehub hotlist picks after September 16th (St Legers day).

Enquest hit by Kraken delays

News out this morning on production levels for 2017 now moving to the lower end of expectations is disappointing. All eyes have been on Enquest’s flagship development ‘Kraken’ which delivered first oil on time as per guidance. However, today’s news shows a worrying sign across the Enquest folio of producing assets. Nearly all the producing wells at present are in decline. The speed of that decline is unclear but it’s enough to get the market worried. Enquest is heavily debt ladened and cannot afford lower production numbers at a time when PoO is still sub $52pb. Enquest does have hedges in place but these are actually below the current $52pb pricing of Brent. Kraken – the flagship development came online in late June and thus far does not appear to be producing very much oil at present. Enquest are being quite tight lipped about exactly how much Kraken is producing at present (although they have quoted 15kbopd as stabilised rates from DC1). Informing the market on key risk factors is important and one wonders if the delays on the FPSO topside work/commissioning could have been issued earlier. As a consequence of delays, Kraken will not be pumping at 50kbopd until late H1 2018. However, in fairness, Enquest’s guidance states H1 2018, so that could be Jan 2018 at the earliest. But investors will know from previous guidance via the board, that when they say H1 they really mean June at the earliest. All in all, this looks like around 6 months slippage. That’s not the end of the world and compared to Ithaca’s Stella development which ran at close to 14months+ over first oil guidance, Kraken is still relatively on track. Of course, this assumes no further delays and H1 2018 guidance is met. In today’s market, I think the concensus would be a ‘miss’ when it comes to hitting that amount. It would not surprise me if Kraken was still some 10k+ off full 50k production this time next year.

Finally, the company was expected to begin paying down the debt pile in H2 2017 but unfortunately due to Kraken delays (and no doubt lower PoO) is still adding to the pile which now stands at $76k short of being a whopping $2bln.

All in all – Not a very good update from Enquest but for the realists… not unexpected.

At last… a bit of decent M&A in the O&G Sector

It’s been a while since the Shell/BG deal kicked off hopes of a new M&A phase in the commodity sector. Today. Total SA snapped up Maersk O&G with a share issue deal and thus keeping cash piles strong. Sensible stuff in a market that is far from out of the woods.
My guess is… more acquisitions to follow as it’s most certainly cheaper to acquire reserves/production today than it is to explore, develop and produce the stuff. A damn site quicker too!

Total to Buy Maersk Oil & Gas for $4.95 Billion in Shares

Total SA has agreed to buy the oil and gas unit of A.P. Moller-Maersk A/S for $4.95 billion, another sign that the pace of deals in the energy sector is accelerating after a long downturn.

Maersk will receive a consideration of $4.95 billion in Total shares and the French company will also assume $2.5 billion of Maersk’s debt, the companies said in statements Monday. The transaction is expected to close in first quarter 2018.

“The combination with Maersk Oil offers Total an exceptional overlap of upstream businesses globally which will enhance Total’s competitiveness and value in many core areas, in particular through some high-quality growing assets,” Total said in its statement.

Total’s Chief Executive Officer Patrick Pouyanne said last month he was ready and able to make acquisitions and grow production, taking advantage of a plunge in the cost of drilling rigs and other equipment during the three-year industry downturn. Earlier this year, he agreed to purchase stakes in a project in Uganda from Tullow Oil Plc for $900 million and said yes to a $2.2 billion deal to buy into Brazilian oil fields and infrastructure.

Pantheon Resources complete VOBM#2H, Polk County frac

Ops update out. Frac looks successful on VOBM#2H although early days and they’ll need a bit of time before all frac water has been recovered. If successful, could be the first really good bit of news for PANR in 2017. More to come? Indeed…. the long awaited VOBM#4 sidetrack is now due to begin in mid Sept (previous guidance was early August).

If successful, it will be worth the wait and should propel PANR back into the 90’s. That’s a multibagger from recent 45p levels. Plenty of upside ahead based on successful ops over next few weeks. Downside looks priced in but if they do hit probs with VOBM#4H, no doubt the sp will take a hit too.

Plenty of risk remains with VOBM#4 side track but company looks like it’s learned from previous ‘horizontal’ drilling which has proven to be too difficult in this environment. Vertical wells look the way to go from here on.

RNS Below:

9 August, 2017, Pantheon Resources plc

Operational Update

Pantheon Resources plc (“Pantheon” or “the Company”), the AIM-quoted oil and gas exploration company with a working interest in several conventional projects in Tyler and Polk Counties, onshore East Texas, is pleased to provide the following update:

VOBM#2H, Polk County

Pantheon is pleased to confirm that the fracture stimulation procedure (“Frac”) on the VOBM#2H well, designed to remediate near wellbore skin damage caused during horizontal and deviated drilling, has been completed.

Initial results indicate that the Frac has been successful, with the well, which is presently in the process of recovering frac water, flowing both gas and oil to surface. The Company cautions however that it is too early to make an accurate assessment as to the ultimate performance of the well until the remaining frac water has been recovered, production tubing installed and flow testing completed.

A workover rig is required to install the production tubing and this procedure and subsequent testing is estimated to take a further three weeks on a trouble free basis. Results will be reported at the conclusion of testing operations.

VOBM#4, Tyler County

The operator has been notified that the mobilisation and delivery of the drilling rig, contracted for the planned sidetrack of the VOBM#4 well is now expected during the second week of September 2017. This is due to the third party currently utilising the rig, requiring it for longer than initially forecast.