A Primer

24th Jun '09 by djpreston

159 comments 53707 reads

Since I mentioned COP in relation to Marben's posts on NOP, I thought I had better get something down on the boards if only for information. Hopefully some will find it of interest and worth a second look or comments can be made as to its merits.

Circle Oil is one of the least promotional companies I can recall having come across. They are rarely discussed on Bullboards and have limited coverage by other brokers and yet they are, Ifeel, quite interesting at the moment.

One thing is certain and that is that the website: http://www.circleoil.net/index.htm is pretty woeful compared to what other companies provide. I know that when I was looking it took me a long time to actually spot that they are in compliance with AIM Rule 26 (that section is hidden away in very small type at the top right hand corner of the webpage.

Anyway, some basics,

Circle listed on AIM back in 2004 and has spent the time since building a portfolio with a focus on N Africa and the Middle East. Originally the portfolio and focus was on "frontier" or high impact licences with acreage acquired in Oman and Namibia particularly prominent. In 2006 the focus shifted towards development work and getting production on board. To that end Egypt and Morocco have seen the most "action", together with Tunisia.

Last year the company conducted a placing (Sept) raising £33m mainly with two sharehodlers, Kaupthing (who now have 15%) and more interestingly, Libya Oil Holdings who have 29% of the shares. As part of the deal, LOH and Circle are looking to find projects on which that can work together.

This raising gave COP enough cash to cover their work planned for a 15 well programme running to the end of this year.

Due to drilling success, COP is likely to be producing over 5000 boepd by the end of the year and probably over 7000 bopd mid 2010. That, coupled with a strong balance sheet puts the company in a very interesting position to push further ahead with adding reserves.

Drilling Activity

Since the placing last year, these are the wells that have been drilled and their results:

3/10/08 Al Amir SE1 Well in NW Gemsa Egypt - tested 41 degree API oil and gas. Flowed at 3.4k bopd and 4.25mmcfd
10/11/08 ONZ6 in Ouled NZala Sebou Morocco - tested…

Unlock with Email

Unlock with Google

Already have an account?
Login here

djpreston

27th Jan '11

Morning Log

Patience indeed.

Just as the 40p level is breeched, Egypt goes and blows up (well, potentially). Egyptian market in freefall today and I guess that any company with interests there will be marked down as well (COP -5% as we speak).

Have to admit that I sliced some of our larger holdings yesterday - just a feeling that Egypt may cause some weakness and to take advantage of strength and free up some cash for other opportunities. Long term still very much a positive for me, especially as we head towards news on Oman.

StrollingMolby

O/T re Egypt, I note that Centamin Egypt (LON:CEY) has taken a battering this past week on the turmoil on the streets there. This coupled with weakness on production numbers and milling problems means it has fallen further probably than it deserved (on operational issues alone). It may not have finished declining yet, but possibly a falling knife to monitor...

loglorry

Yep I thought it might have something to do with that. I'm not so bothered as I think this will blow over and even if it does not whoever is in power will probably support foreign O&G companies in the region.

Very hard to say how much of it is hubris at the moment. No point watching the news they always make a fuss about things and so it is very hard to gauge real discontent or not.

Log

extrader

Hi log,

I worked in Egypt (Alex and Cairo) for 3 years in the mid 80's.

There's no doubt in my mind that there's 'real discontent' - there was back then and things for many have not got better - the question to ask is whether it is containable (on "acceptable" terms) or not.....

The Americans are in a bit of a pickle as to how to respond, it seems !

doverbeach

This has always been a risk factor for me with Circle - I didn't buy any until my Dana holding was gone to keep a cap on exposure to Egypt.

Wouldn't mind picking up some Petroceltic (LON:PCI) if that goes on down...

db

Wouldn't mind picking up some Petroceltic (LON:PCI) if that goes on down...

db

Hi db

Well, it looks as if you may get your wish. PCI has been weak since the news re Tunisia broke. Seems as if the whole N Africa political situation is a real state fo flux at the moment.

OT but from a mate I know (in O&G), who was out in Tunisia (left just before the problems kicked off - planned fortunately), the actual situation on the ground in Tunisia was a hell of a lot worse than the news media were showing.

ManSiarad

Hi, Darron,

yep - pity for COP that Egypt's in somewhat of a state at the moment. Just as a re-rating seemed to be getting under way.

My suspicion, for what it's worth, is that the protests will be crushed, pretty brutally, if necessary, by the state authorities, who have much more power to do so trhan those in Tunisia had, UNLESS - and this may well be the key - the Muslim Brotherhood choose to throw their weight behind the protests. We should get some idea about that after the Friday prayers tomorrow.

A difficult calculation for the Brotherhood to make - if they move too early, they could bear the brunt of the crackdown. If they hang back, hoping for the current protests (mainly the middle classes, it would seem) to develop and shake the regime, then they could be sidelined. They ARE, however, the best-organised opposition force, and probably best-equipped to make the best out of any breakdown in law and order and subsequent government collapse.

And the rise of the Brotherhood to power would be very unlikely to be beneficial for Egypt in many ways, particularly for the Coptic Christians, who are already extremely uncomfortable and very, very worried.

If the protests are crushed - still probably the most likely outcome,in my view, - then some form of enforced stability may return, for a while.

Let's wait and see - and there's a lot of that going on around the Arab world, including in the Gulf, at the moment !

Sorry Man Siarad - Finger slipped, hence the thumbs down.

31st Jan '11

Sea Dragon have issued an update on their operations in Egypt.

They have been beaten up of late (down 33% since the start of the year) but they are of course 10% holders in NW Gemsa with COP.

The relevant section of the report is:

The NW Gemsa and Kom Ombo Concessions are desert located and lie considerable distance from urban areas and therefore all company assets and facilities are secure and unaffected by recent disturbances.

May well be worth listening in to their briefing later in the week:

The management of Sea Dragon is very much aware of how concerned our shareholders must be during this period of unrest in Egypt and therefore we will be holding an open line press conference on Thursday February 3^rd at 8:30am. Details will be posted on the company Web site later today. The company's chairman and CEO Mr. Said Arrata and President and COO Mr. Tony Anton will be on hand to answer any questions our shareholders may have.

And Circle Oil (LON:COP) RNS the same essentially:

Update - Egypt

Circle Oil Plc (AIM: COP), the international oil and gas exploration, development and production company confirms that its operations and oil production in the NW Gemsa Concession (40% Working Interest) remain unaffected by current events in Egypt. The Company continues to monitor the situation in Egypt and further updates will be made as appropriate.

thegreatgeraldo

2nd Feb '11

No flies on Kleinwort Benson - they added 2.5 mill shares to their position yesterday

http://www.investegate.co.uk/Article.aspx?id=201102021616215845A

Nothingventured

3rd Feb '11

Looks like people are waking up to the value at last...

From the FT;

Circle oil up 3.3 per cent to 39p after Evolution Securities issued “buy” advice on the explorer, which has fields in Egypt and Morocco, with a 97p target price.

“We expect the drilling success to lead to a significant, independently verified resource upgrade in time for the publication of the annual report, probably in April-May,” Evolution analyst Keith Morris said.

“Our estimate of the current core net asset value is 38p per share, and if current balance sheet cash is added, rises to 43p per share – well in excess of the current share price, with all the upside from existing discoveries and upcoming exploration in for free.”

Only the revolution to worry about meantime!

Jim

TheMarinersWife

5th Feb '11

Gas pipeline explosion in Sinai. Information is sparse right now, but it can't be good news for any of the oilies operating in Egypt.

http://af.reuters.com/article/energyOilNews/idAFLDE71401720110205

tiswas

11th Feb '11

Must admit I have been selling a few of these because of the political situation and the dangers of a new government not being so favourable to the west.

I see the price is already climbing back on the news that Mubarak is stepping down but the question still remains what will follow?

11th Apr '11

Just isued an update on Operations in Egypt re the Al Amir SE-7X and overall operations there.

This was a water injection well and to help find the OWC in the Kareem.

All seems to have gone well, found the OWC and good reservoir sands so should be a good injector.

The overlying sand stringers showed oil saturations, proving up their overall deepest oil projections.

The secondary objective of testing the Lower Rudeis stringers found 6ft of pay at 10% porosity 86% saturation. This wasnt tested due to mechanical problems and this will be tested with further drilling.

Current production is 7500 bopd gross expected to rise to 12000 bopd by mid 2012 as waterflood kicks in.

Q2 should see an independent recoverables report for the Annual Report.

oilretire

15th Apr '11

Another success in Morocco

http://www.investegate.co.uk/article.aspx?id=201104151000039953E&fe=1

The Company confirms a gas discovery in the Main Intra Hoot target and secondary targets available for future testing in the Mid and Base Guebbas sands. The well tested gas at a sustained rate of 4.0 mmscf/d on a 16/64" choke from the Intra Hoot. The perforated Intra Hoot zone of 17.9 metres at 1,761.2-1,779.1 metres MD has a calculated net gas pay of 11.6 metres.

The Base Guebbas zone of 37.7 metres at 1,636.0-1,673.7 metres MD has a calculated net gas pay of 5.5 metres. The Mid Guebbas zone of 22.8 metres at 1,464.1-1,486.9 metres MD has a calculated net gas pay of 4.1 metres. The Guebbas Zones will be tested at a later date following production and depletion of the Intra Hoot producing zone.

Roll on the completion of the pipeline I say. Though not huge reserves, the finds have been as planned - cheap to drill, easy production and very attractive fiscal regime (tax free for 10 years). A very useful sideline and cashflow generator when pipeline in place.

Fangorn

29th Sep '11

Latest FOX Davies note for all you COP aficionados - quite lengthy, just perusing it myself

http://www.fox-davies.com/media/416902/copupdatesep2011.pdf

Ooops

Forgot to say that weve sold out of COP in favour of EXI.

Tired of waiting on COP to deliver and EXI seemed a more compelling investment after its falls.

15th Dec '11

Operational update for you COP afficionados.

http://www.investegate.co.uk/article.aspx?id=201112151326030722U&fe=1

A Primer

Unlock the rest of this article with a 14 day trial

About the Author

Djpreston

159 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...