Fox Davies Capital Update Featuring Baobab Resources, Griffin Mining, Sirius Minerals, Global Energy Development, Salamander Energy, SOCO International, London Mining, Stellar Diamonds, Jubilant Energy

17th Jan '11 by Fox Davies Capital

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Oil & Gas Corporate News

SOCO International (LON:SIA) (SOA, 348.1p, ? (0.37%)) announced that the wildcat exploration well Bayingu-1 in the Nganzi Block, onshore the Democratic Republic of Congo (Kinshasa), operated by its subsidiary, SOCO Exploration & Production - DRC SPRL encountered oil and gas shows in both the primary and secondary reservoir targets. The reservoir sands at the primary Lower Bucomazi target, however, were poorly developed, whilst the residual nature of the oil shows in the secondary Chela formation indicates lack of closure at this location. The well has been plugged and abandoned.

Global Energy Development (LON:GED) (GED, 104.5p, ? (0.0%)) has issued 317,000 ordinary shares of 1p each in consideration for the purchase and cancellation of US$600,000 variable coupon convertible notes due 2012 plus all accrued interest due under the Notes. The new ordinary shares will rank pari passu with the existing ordinary shares of the Company. As a result of this issue, the Company's issued share capital now consists of 35,756,009 ordinary shares of 1p each. The Company does not hold any shares in treasury. Therefore, the total number of ordinary shares with voting rights is 35,756,009.

Salamander Energy (LON:SMDR) (SMDR, 272.4p, ? (1.1%)) announced that the Dao Ruang-2 appraisal well, Block L15/50, Onshore North East Thailand, spudded on 16 January 2011. Dao Ruang is a 1993 Texaco gas discovery that has potential gross mean resources of 500 Bcf. Salamander has a 50% interest in, and is operator of, Block L15/50. Dao Ruang-2 will be drilled, using the MB Century 26 rig to approximately 1,670m total vertical depth sub-sea. The well will target a fracture network in the Pha Nok Khao Permian carbonate reservoir on the eastern flank of the structure as mapped on the recently acquired high resolution 3D seismic. The well is expected to take approximately 45 days to complete on a dry hole basis. On completion of the Dao Ruang-2 well, the rig will drill the Dao Ruang-3 appraisal well targeting a fracture network on the northwest flank of the structure. Dao Ruang-2 is the first well in the Khorat basin to be drilled using modern high resolution 3D imaging techniques to aid visualisation of the fracture network. This technology could prove to be key in finding and commercialising resources in this province where Salamander…

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repobear

17th Jan '11

Salamander looks like one to watch in 2011.

Lots of drilling with a good CoS.
Large and growing cashflow.
Cheap and below the radar of most of the market.
Has been mentioned as a potential bid target.
RNS on Friday with director buys of more than 500k. How often do you see that?

Worth a look, imv.

repo

Disclosure I have held for a couple of months and added on Friday shortly after the RNS.

Top pick for 2011

BUY

Following the first detailed outline of the 2011 exploration and appraisal programme we update our NAV to include four new prospects. We also significantly upgrade our Bualuang production forecasts for 2013 on and expect the company to increase reserves associated with the field. Overall, our total NAV increases by 70p to 375.5p offering 35.9% upside. Importantly, we believe the 2011 drilling programme, which is targeting 594p/sh of unrisked upside potential, is lower risk than in 2010 and this supports our Buy rating. Salamander is our top pick from the larger and mid cap E&Ps.

? 2011 set for drilling success? New details provided at a recent E&P conference highlighted significant exploration and appraisal potential in Salamander’s 2011 drilling programme including five prospects not previously recognised in our NAV. Salamander will operate all but one of the 13 wells, which will be drilled in Indonesia, Thailand and Vietnam, targeting 312 mmboe of net resource potential with several of these wells the tail end of the 2010 campaign. Importantly, we believe that the programme in aggregate, and in particular the majority of wells to be drilled during H1, are lower risk than many of the wells drilled in 2010 as they are typically targeting previous discoveries or step out prospects. Overall, we estimate the 13-well programme is targeting 594p/sh of unrisked upside potential.

? Bualuang reserves set for upgrade. Salamander is indicating that future development phases could increase production from the Bualuang field to 15mbopd in 2013 from 11mbopd in 2011 and more than double our previous 7mbopd forecast. Revising our model to include this potential, which would cost $90-105m to implement, strongly suggests that reserves will be upgraded by 5-10mmbbl (increasing recovery factor to 35-40% from 30%), although the timing of this is uncertain and the impact of the upcoming three-well exploration programme on the licence could change investment priorities. We increase our valuation for Bualuang by 36.3p to 170.5p/sh and believe exploration success could double this if fully unrisked;

The above is from a finnCap note of 13/01.

Cashflow is set to turn around significantly. Up 4% this morning.

repo

Fox Davies Capital Update featuring Baobab Resources, Griffin Mining, Sirius Minerals, Global Energy Development, Salamander Energy, SOCO International, London Mining, Stellar Diamonds, Jubilant Energy

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