By Robin Mayes
The Brewery, Chiswell St. In The Heart Of The City
If you are interested in investing in oil and gas stocks this event is always worth attending. Between 6-8 companies present, there is a far too brief Q&A session at the end of each presentation but most of the presenting management stay behind to network with investors. A real opportunity to get in-depth knowledge of, not only the company’s assets, operations, and future plans but also to assess the management themselves. Look them in the eye, ask them awkward questions and see how they handle them.
If you can’t make the presentation fear not, they are filmed and recorded and can be viewed a week later on the Proactive Investor website. Not quite the same thing as networking with the management but better than nothing.
At this conference, there were 6 companies presenting. Trinity Exploration and Production (TRIN), Tower Resources PLC (TRP), Independent Oil & Gas (IOG), Tethys Oil (TETY, listed on Stockholm Exchange), Serinus Energy PLC (SENX), Bahamas Petroleum Company PLC (BPC).
Their presentation slides should all be up on their websites. My brief thoughts on them as follows:
Tethys Oil – Seemed the most ‘mature’ of the companies. It has a very strong track record of delivering increased production, generating profits, paying a modest annual dividend and regular special dividends. They have more assets to develop and keep increasing reserves each year. Growth and income promised. The founder is still the CEO and is the second biggest shareholder
Trinity Exploration & Production – Has recovered well from difficult times a few years ago. They have driven up production, have no debt, plenty of cash, are cash generative and have a big project they will make a final investment decision on next year which will be a step-change for the company. Dividends, buybacks or more aggressive drilling are all being contemplated. The management own 24% of the stock. The CEO has strong Trinidadian roots and is well connected with government ministers.
Independent Oil & Gas – Were the subject of a take over bid at 20p from Rockrose earlier in the year which they spurned. Since then they have been very busy securing various forms of financing to develop their gas assets in the North Sea. The key to monetisation is the pipeline they have secured to bring the gas onshore. The development will happen in phases over the next 5 years. First gas planned for the end of 2021. I think there is some way to go here and my instincts tell me it will take longer and cost more than they think.
Serinus Energy – Somewhat under the radar this one. Has just brought on stream a great gas development in Romania which has increased the group’s production dramatically. More coming in Romania. There are some complications re. legacy partners who didn’t pay their tax bill so Serinus’s tenure on the block hasn’t been ‘gazetted’. Think this is more of a technicality than a problem as they are producing but worth bearing in mind. They also have Tunisian assets which were plagued with union/strike problems. They are in the process of bringing them back on stream but they will need a lot of work raise production back to historical levels of circa 700bopd. There is plenty of upside there if they can keep the workforce at work! P.S. Looking at today’s RNS, they’ve just lost their CFO and a recently appointed COO has not had his contract renewed…! Hhmm.
Tower Resources – Are totally focussed on getting their appraisal well-financed. It’s been quite a long drawn out saga. Jeremy Asher has abandoned his attempts to debt finance the well(which were never realistic IMHO), is trying to get a farm outdone, has got a rig lined up, they’ve ordered long-lead items. From the presentation Q&A, trying to get a farminee who is already ‘in-country’ has not happened, they have some outside interest but they themselves have to raise funds to farm in. It’s taking time, and now they need to do a sea bed survey, I think there will be delays. TRP has made it clear that they need to raise money for corporate purposes and payback Asher’s loan to the company. To be fair to Asher he has backed the company with his own money one way or another. I will wait to see how any financing progresses before getting involved. I fear a large equity placing. If they get a farm out sorted, it’s ‘game on’.
Bahamas Petroleum – This has been a long and painful saga for shareholders. Many years of watching a healthy bank balance dwindle down to nothing, some money-raising, all spent existing whilst trying to secure a farm-out partner. To date, nothing. Facing a drill or relinquish deadline they have hit the emergency button and have decided to go for it. They’ve raised $12.5 million by way of a CLN and have lined up an option on a rig. There is a deadline of mid-October to commit to the rig. They can’t really afford much delay and they don’t want to lose the rig. They need $30 million for one well, $50 million for two. They need a farm-in partner very quickly or they will have to do a massive fundraising.
Of the six companies, my ‘nap’ is Trinity. They have really got operations into good shape, Bruce Dingwall is someone you would want to work with. I thought Tethys was also very good but it is on a foreign exchange (so Forex risk and the extra exchange rate costs) and is a touch dull. IOG and Serinus I will watch…….Bahamas and Tower need to get their financing in place.
Over the next few months, I may do some more in-depth articles on individual stocks. This article/blog is not financial advice. Do your own research. I do not hold any of the stocks mentioned. The fee for this article was donated to http://www.theolivercurdtrust.org/
Here’s why oil stocks have fallen!
The author of this article was remunerated via donation but does not hold shares