| Encore Interim Results 2010

4th Feb '10 by marben100

6 comments 2499 reads

Here is a summary of the key points that I glean from today's interims:

We have 14.8p/share of cash, as at 31st December 2009.
Transaction with Egdon expected to complete by June 2010. The upper limit for this transaction is a 29.9% stake in Egdon Resources . I calculate that that would be worth up to another 1.1p per Encore share at the current market value of EDR shares.
"Plans for an appraisal well at Cladhan (UK Northern North Sea blocks 210/29a &
210/30a) firmed up with the signing, in December 2009, of a Letter of Agreement
for the semi-submersible J.W. MacLean rig to commence drilling within the period
from late May to early July 2010."
"Catcher, in UK Central North Sea block 28/9 on which we are Operator, is
expected to be drilled in late March / early April 2010."
Re gas storage: A third party study... has also confirmed suitability for gas injection and withdrawal in both
reservoirs... Marketing of the project is now underway, and it is only as the process progresses that we will be able to determine the value to EnCore.
CAPEX & other costs to Encore shouldn't exceed £3m, this year (unless Cladhan merits sidetracking - which would be good news). That would impact cash/share by around 1p.
We recognise that some of our shareholders would like us to continue to expose
them to high risk, high reward exploration and appraisal drilling, while others,
understandably, wish us to preserve our capital, with a view to returning it
through a capital reconstruction later in 2010, or at the time when we have
greater certainty over our three principal assets. We continue to seek farm-in
partners for a number of our exploration/appraisal licences, although the market
remains difficult, particularly for high risk/high reward targets. Our strategy
to return value to our shareholders means that we would not wish, at this stage,
to commit more of our capital to a number of these prospects. Alongside seeking
farm-in partners, we are considering alternative options for what we believe to
be an attractive appraisal and exploration portfolio.

E&OE, DYOR!

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marben100

4th Feb '10

I find the last comment intriguing and wonder whether Encore is again considering splitting the company into a GS part and an E&A part? If so, I hope that a mechanism would be found for those shareholders that don't want extensive E&A exposure to obtain their share of the cash + GS.

Cheers,

Mark

johnnylite

5th Feb '10

Is it me, or is this one of the best risk reward plays out there? With the market cap underpinned by cash and 2 wells coming up in the next 6 months that could provide significant upside, this looks like a no-brainer to me. If either well comes in we could be looking at 50-100% gain, if they both fail then the downside is probably only 10%. The Cladhan well is an appraisal of a known discovery so could be risked at maybe 50% whereas Catcher is probably more like 25% COS max. With these rough figures we have a 37.5% chance of a 10% drop and a 62.5% chance of a large gain. Sounds good odds to me.

Encore are already my second biggest holding but really tempted to top up on this.

JL

Impvesta

How curious to release the interims at 1:00 pm. Why would they do that?

Impvesta

StrollingMolby

10th Feb '10

Just noticed this basic write-up in the Chronic Investor, FWIW:

http://www.investorschronicle.co.uk/Tips/Buy/MiniTips/article/20100208/8466f8ae-14a0-11df-95c1-0015171400aa/EnCore-hunts-DOGs.jsp

ohisay

21st Feb '10

Will the Catcher drill still be going ahead I wonder ?

http://www.heraldscotland.com/business/corporate-sme/controversial-oil-tycoon-banned-from-north-sea-1.1008042

The tycoon at the centre of the collapse of oil explorer Oilexco has been effectively barred from the UK North Sea after the government refused his new company a licence to drill there.

Arthur Millholland, president and chief executive of Canadian group Velo Energy, has been told by the Department of Energy and Climate Change (DECC) that his company cannot re-enter the North Sea, “because of the substantial similarity in management and control between Velo and Oilexco Incorporated”.

The unusual decision, which appears to be a damning indictment on a character whose last company notoriously invested in an executive jet while deep in trouble, voids deals that Velo concluded to buy four North Sea fields last autumn. These included several agreements to buy back fields from Premier Oil that the latter company acquired in its $501 million (£325m) takeover of Oilexco last May.

http://www.offshore-mag.com/index/article-display/2028344940/articles/offshore/drilling-completion/north-sea-northwest-europe-2/2009/12/encore-lining_up_wells.html

If the structure proves to be hydrocarbon bearing, EnCore adds, the likely rig will undertake a well test and/or sidetracking into the adjacent Eocene Tay sand prospect Dark Roast (ex-E1). EnCore’s share of the well costs will be carried by Premier Oil (uncapped to cost exposure) and Wintershall (capped). Premier Oil’s interest in Catcher could, however, be assigned to a potential UK subsidiary of Velo Energy, subject to the outcome of a Velo fund-raising program.

oilretire

I would think Premier would proceed as normal. They will be obliged too as they, as current owners, will have been paying for & signing up to sea bed surveys, rig contracts etc.

http://www.investegate.co.uk/Article.aspx?id=201002041300016956G

Catcher, in UK Central North Sea block 28/9 on which we are Operator, is expected to be drilled in late March / early April 2010. During the period, a seabed survey was completed which determined that the well can be drilled using a heavy duty jack-up rig. Since the period end, a Letter of Agreement has been signed for the Transocean Galaxy II jack-up rig

I think we are better off with Premier anyway, at least funding won't be an issue. Too many bad smells around Velo in the North Sea. I'm glad to see the back of Art.

http://www.investegate.co.uk/Article.aspx?id=200912210700224363E

Premier Oil's interest in Catcher is the subject of a proposed assignment to a potential UK subsidiary of Velo Energy Inc ("Velo"), a company quoted on the TSX Venture Exchange. Completion of this acquisition is, amongst other things, subject to a successful fundraising exercise by Velo. The latest prospectus filed by Velo on 14 December 2009 notes that if the fundraising achieves only the minimum targeted level, then they will not have sufficient funds immediately available for their share of drilling the Catcher well. Any assignments will of course be subject to the necessary Department of Energy and Climate Change ("DECC") regulatory consent and demonstration of adequate financial capacity by the assignee to the existing co-venturers.

Encore Interim Results 2010

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Marben100

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