Sefton Resources climbing like a monkey?

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17th May '11 by LadyJennifer

28 comments 18239 reads

I have been taking a look at the charts today and am satisfied with what I have seen. Please be aware though that I am no expert and have backed my opinion with my money.

stock charts by Lady Jennifer - 16/5/2011

We seem to have seen the expected retrace on the Fib lines and with an uptick noticed in the lagging indicators I now expect to see a move upwards.

p.php?pid=chartscreenshot&u=NSp9X3sF0MtXZt3aR5LYXWJaftOh1ndfQwWBg6oCGkk%3D
stock charts by Lady Jennifer - 17/5/2011

p.php?pid=chartscreenshot&u=NIHFhQVqGtdFeH2yTqp0XKBOFIumJHQCINRZB4cxSZw%3D
stock charts by Lady Jennifer - 17/5/2011

All in my own opinion, of course. So Please do your own research and tell me what you see.

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About the Author

LadyJennifer

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28 comments

LadyJennifer

19th May '11

An independent report commissioned by the company put a potential value on its Kansas prospect of about $100m. At Friday’s closing price, Sefton’s market value stood at £15.6m. Today it stands at £12.32 million.............
SER could possibly be a candidate for a take over as some interesting things are happening at the moment, including a change of name, change of broker, focus on gas and the oil reserves estimates have been boosted recently. There is a possibility it will jump to 12-15p very soon as the type of volume we have seen for the past 5 sessions does not happen due to hot air!!!

I have also heard that an oil field close to Seftons in California with around 100BOPD and around 2 MMBO of oil reserves was recently put on the market for $25 million.

I would estimate that Tapia would be worth around the $35 million mark if asked.

The proven reserves at Tapia alone are worth around 9.5p per share based on some recent deals after paying back Sefton's (monthly reducing) debt.

It is now time to load up or add more shares in anticipation of a bear squeeze, for with no indication of an immediate placement then any shorters will have to scramble to buy back their stock on the open market.

Interesting times ahead with only 4 more trading days to the results update!

All in my own opinion, of course. So Please do your own research and tell me what you see.

flyingbull

19th May '11

Assuming someone takes over the whole company, by applying various discount/risk factors (subjective) to the Reserves and Resources and including the US$6.8 MM debt but excluding the pipeline/facilities infrastructures, my rough calculations indicate a takeover price of around 11p is acceptable for the current status of play. Hopefully this figure will go higher as time goes on.

As for how the market would respond to the next result update, I've no choice but leave it for the market to decide.....

fb

LadyJennifer

19th May '11

You can read more here: http://stips.com/share-stock-tips-tips/buy-sefton-resources/

LadyJennifer

19th May '11

OK by special request another "Good Graph".

Just a simple weekly chart showing long term resistance lines at

4.2p - Black
6.0p - Red
8.6p - Green
11.7p - Blue

Weekly Resistance Chart

Notice that the Black 4.2p line appears to have become support now as seen on the daily chart.

Daily Resistance Chart

LadyJennifer

20th May '11

S.M. Farouq Ali, P.Eng.
Honorary Professor of Oil and Gas Engineering
University of Calgary
Abstract:

How Steam is Taming Those Difficult Oil Reservoirs

Canada has as much oil in place as the conventional oil in the world, but it also occurs under some of the most demanding conditions: very viscous to semi-solid consistency, bottom water, top water, thin sands, reservoirs under lakes, and other challenging situations. Using steam injection, the petroleum industry has come up with clever solutions to some of these previously unsolvable problems. Clever use of horizontal wells has permitted in situ oil recovery from formations with oceans of water below or above them. Other applications, such as "Steam-assisted Gravity Drainage" (SAGD), have made it possible to recover some of the most viscous oils. In particular, "Cyclic Steam Stimulation" (CSS) has allowed the commercial development of viscous oil that was out of reach not too long ago. Other instances of steam injection show the industry’s ingenuity in producing the so-called "unrecoverable" hydrocarbons at a profit.

Biographical Sketch:

S. M. Farouq Ali is Honorary Professor of oil and gas engineering at the University of Calgary, and also serves as a petroleum consultant. He holds B.Sc. (Hons.), M.S., and Ph.D. degrees in petroleum engineering, and has served as professor at the Pennsylvania State University and in Alberta for over 38 years. Dr. Farouq Ali has authored over 500 papers and supervised over 200 graduate theses, and carried out over 200 reservoir studies. A recipient of numerous awards and two honorary doctorates from universities in Russia, he received the Petroleum Society’s Distinguished Service Award in 2000 and APEGGA’s Summit Award in 2001. Dr. Farouq Ali is also a member of SPE and a registered professional engineer in Pennsylvania.

Copyright (c) 1999 - 2010 - SPE - Lloydminster Section

============================================================================

Also see http://www.leadingreservoirs.com/people/scholars/ali.php

LadyJennifer

20th May '11

Why invest in Sefton

Undervalued by any asset metric	Growing production
Improving oil recovery by steaming	Proven reserves
>Reserves are boosted by improved recovery	Already profitable
USA low political and socio-economic risk	Low lifting costs
Diversified assets base with prudent oil/gas mix	Strong banking relationship
Plenty of scope for growth

The Forward Picture

Continuous steam stimulation of Tapia wells	Increase oil production
Activate gas pipelines and infrastructure in Kansas	Design full steam-flood program
Pursue focused, bolt-on acquisition opportunities for growth	Increase reserves
Sefton is spreading the word through a comprehensive Investor Relations programme

LadyJennifer

20th May '11

I found this on iii. I don't know how accurate it is as I cannot verify the information.....

'Evel Knievel' Simon Cawkwell has closed...

From his blog, today:

"Closed my short in Sefton Resources (SER) at 4.5p. However, I am told that this is a big mistake since Sefton is probably grotesquely overvalued. Anyway, I have done it now."

The position was opened last Friday morning, so probably a nice bit of profit margin there.

flyingbull

21st May '11

'Evel Knievel' Simon Cawkwell has closed...
From his blog, today:
"Closed my short in Sefton Resources (SER) at 4.5p…..

When I first bought into SER around mid-December last year, I had to buy shares. Unfortunately the spreadbetting firm Igindex, that I use, did not offer spreadbet for SER. Recently, I came across the same problem in trying to open a spreadbet position on another oil stock.

Can someone recommend a spreadbetting firm that deals with most, if not all, oil stocks on AIM and also Canadian oil stocks, too?

LadyJennifer

21st May '11

It has been a good week all told.

First we saw the general market wake up to the potential that we have here as evidenced by the CPR which told us that……..

Dr. Nafi Onat estimates the PV10 value of Sefton's oil and gas resources in Kansas at US$100.1 million. This is in addition to the Company's proved oil reserves in California, which at year-end 2010 had a present value (PV10) of US$80.6 million. These two assets alone give a value to Sefton of US$189.7M or £116.83M at midnight 20^th/21^st May.

TEG is in the process of commissioning a study for Leavenworth County, the assets will be relatively cheap to bring on line, needing only minor repairs and workovers. These are producing wells that were shut down when the old pipeline company went bust. They hold around 2.3BCF of gas and should prove fairly quick to show a return on capital expenditure. Sefton expects completion of the additional due diligence of the acquisition of the Cholla assets by 29 April 2011and that third party gas is expected to be carried by the end of June and should bring in significant additional revenues.

Oh yes, Sefton has won yet another operators award for the Tapia oil field in California. Making this the third consecutive year that Sefton has achieved this award.

Then we watched, perhaps in trepidation, as the sp dropped back to 4p on Wednesday. It was good to see Fridays blue close at 5p and wonder as to who it is that appears to be stake building….

Where to next?

There are those who would suggest a drop to 2p or less, but I feel that the next stop will be uphill of here and I am looking for a target of around 9p in fairly short order.

Next Targets 8p to 10p

Stock Charts by Lady Jennifer - 20/5/2011

LadyJennifer

21st May '11

It is difficult to find an SB firm who will cover all oil companies, or any other business for that matter, as they all seem to carry a minimum consistent market cap of around £10M before listing them.

LJ

flyingbull

21st May '11

I wanted to go long on Global Energy Development [GED] early this week but Igindex did not want to know. GED has market cap of £24.5 MM. In the end, I had to buy shares instead. Surely there must be another spreadbet firm that is as good or better than Igindex!!?? fb

LadyJennifer

21st May '11

Not that I am aware of FB.
I ran into the same problem some time ago with SEA (ex ROS) and came across the same conversation on another thread, I think it was one of the FTSE ones.
The consensus was as I sat yesterday and that it is the consistency of mcap that is important although I think liquidity may well come into it somewhere too.

flyingbull

21st May '11

LJ,

Yes, liquidity seemed to be the main issue. Thanks for your feedback.

Incidentally, you mention SEA. It's one of my many.
http://boards.fool.co.uk/here-is-my-portfolio-in-alphabetical-order-as-of-12218932.aspx
Quite happy with SEA's performance since I opened a spreadbet position on SEA a few months ago, as part of a multi-oil-stock strategy. From memory, I think SEA’s wind farm assets are valued at >£100MM. Current Market cap is £43MM, including the petroleum assets. Closed about half of my spreadbets on SEA over the last few days and banked the profit, just in case. Potentially, the share price can go much higher; that would probably depend on management’s skills in negotiation a good selling price.

LadyJennifer

21st May '11

That looks to be quite an interesting list you have. A quick look shows up one or two "dunkers" but , depending on when you picked them, quite a tidy potential return.

I am expecting a mixed bag with Sea though as, being almost exclusively news driven, it does have a history of large spikes. What might mitigate things somewhat is what they are planning to use the money for when they sell SERL.

There is an ongoing story in Montenegro plus a JV tender.
Sea Marine - servicing etc. of wind farms - with what looks to potentially be the most appropriate ship(s) in the business.
A percentage of LOGP which may be sold off in the future and of course the whispers about MPC which for some reason the management feel as sufficient potential to perform a U-turn in regards to it's closure.....

Hopefully there will be sufficient profits from SER in time to top up there.....

LJ

flyingbull

22nd May '11

LJ,

A quick look shows up one or two "dunkers" but, depending on when you picked them, quite a tidy potential return.

This is the slimmed down version http://www.stockopedia.com/fantasy-funds/flyingbulls-fund-211/ of the main portfolio. Surprisingly the performances of both portfolios are quite similar. This can be partly explained by the use of oil hedging http://boards.fool.co.uk/perfect-short-12251432.aspx?sort=postdate on the main portfolio. The dominant reason for the outperformance has a lot to do with the oil bull run during the second half of 2010.
The challenge for the remaining of 2011 is finding undervalued oil stocks. It looks like the task is much harder this time round.

LadyJennifer

24th May '11

Heavy oil Heavy oil is not new. Man’s relationship with bitumen extraction stretches back thousands of years. Commercially, oil and gas companies around the world have been extracting and producing heavy crudes for over 100 years. Today, rising frontier exploration risks, access to resources challenges, lower gas costs, and low pricing differentials are helping to make heavy oil regions increasingly attractive to producers. Generally, there is no exploration phase for heavy oil projects in the conventional sense. The main challenge in heavy oil is not in finding resources, but in the ability for an oil company to extract, produce, and sell heavy crudes within (often changing) economic guidelines and with minimal environmental impact. Under stable market conditions, heavy oil assets have the potential to generate many years of steady cash flow. Typically, these fields produce for more than 50 years.

Steam Assisted Gravity Drainage (SAGD) Until very recently, heavy oil fields were produced either by primary production techniques, or through “huff’n puff”. These techniques improve the percentage of reserves recovered but still leave behind significant quantities of the original oil in place.With steam being injected into some wells and producing oil through others on a continuous basis. The heat reduces the viscosity of the oil thereby significantly increasing production rates and the percentage of oil in place that is recoverable. The benefits of this continuous process have been demonstrated in other oil fields where actual flow rates and projected total reserve recovery ratios have shown a considerable improvement and can result in recovery rates of up to 80% of the original oil in place in a heavy oil field such as the Tapia Canyon field.

LadyJennifer

24th May '11

Over the last few days we have seen the sp hold up well even under heavy selling and appears to have now built a good base for continued upward movement on the back of the results.

Day	Trades Buy	Trades Sell	Balance	Unknown Trades
Thursday	2,603,402	2,956,777	(353,375)	2,502,845
Friday	10,131,547	11,764,665	(1,633,118)	8,383,282
Monday	2,393,864	2,738,559	(344,695)	1,696,622
Tuesday	2,316,928	3,732,532	(1,415,604)	1,675,000
Total	17,445,741	21,192,533	(3,746,792)	14,257,749

LadyJennifer

24th May '11

So what are you expecting from the results that will propel these shares forward?” came the acerbic question from the serial doubter.

“I expect a decent set of results tomorrow confirming Seftons’ continuing profitability!” answered our intrepid hero……..

Probably an operations update,

The preparatory work for the steam flood sensitivity modelling having been completed in April Dr Ali should have completed his steam flood modelling work this month, I think we will see the first indications ofimproved flow rates at Tapia and hear of the planned implementation of the recommendations of Dr Ali's report. Maybe the inclusion of Dr. Ali's report, though this is likely to be released at a later date.

In January 2011 the company made a decision to reduce its borrowing base debt level by $100,000 per month from company cash flow and change the terms of the credit facility, so it will be interesting to see the anticipated effect of this, coupled with the cash flow impact of the current continuous Tapia steam pilot and the impact of by Dr. Ali’s report on the upcoming borrowing base redetermination in June/July.

There will probably be some mention of the completion of repairs to the LAGGS pipeline and connection with the Vanguard pipeline. 3^rd party carries should commence within the next 6 weeks.

All in all, I expect this to confirm reasons for the continuing upward movement of the Share price despite the fact that people are obviously still selling Sefton quite heavily.

Rising Trend Daily

Stock Charts by Lady Jennifer - 24/5/2011

Rising Trend Hourly

Stock Charts by Lady Jennifer - 24/5/2011

LadyJennifer

24th May '11

From ADVFN today -

California Joe - 24 May'11 - 19:26

I think, whether bull or bear, there are a few issues that are indisputable.

The Steam Flood: JE himself accepts there will be considerable expenditure involved in this operation and Sefton do not have the financial capability to move it forward. It's not just a case of running a load of pipes here and there, this is a major, major operational task and as JE stated, not only would all the steam equipment need to be replaced with more powerful machinery, Sefton would need a dedicated pipeline, plant and vast water disposal upgrades before it could even commence.

So the question is, why have they taken Dr. Ali into the fold and set him to work testing the viability of what appears to be 'the impossible dream'?

Yas0 mentioned in an earlier post that any company looking to buy Tapia would want to do their own testing and I agree, in most cases, one wouldn't take the word of a sellers own man. However, I do think in Dr. Ali's case, not only is he working independently to produce his report and being paid a fee to do so, he is a very highly acclaimed person in this particular field and apart from his reputation being at stake if he 'fiddled the books', his professional status from my research suggests that he is amongst the top figures for specialising in steam assisted recovery and any report he produces will be highly regarded and probably more than acceptable in terms of any sale.

Now, what is Tapia worth?

As it stands prior to any report from the good Doctor, it seems to average 4k barrels per month over the year (albeit rather lower this year) with the cyclical steaming. I have an answer regarding the low production being seen this year and that is the steamer is being utilised in Dr. Ali's testing and NOT in full use on the wells normally being steamed to produce the normal amount of oil.

It is accepted that Tapia has been problematic, not necessarily the easiest field to work, but the past few years, with the steaming, production has pretty much stabilised, albeit a lot lower than expectations. Anyone looking to buy the field and perhaps add another steam generator into the equasion would likely return reasonable revenues and potentially draw 5000+ barrels of oil per month with ease.

However, should Dr. Ali's report state that a full steam flood would likely make the oil field a very lucrative investment opportunity, the value will increase substantially if the right buyer can be matched to it.

Because of the fact Sefton cannot move forward with the steam flood on their own and seem to have been concentrating heavily on Kansas, I do think that it is very likely Tapia is going to see some major changes, either another company with the experience to walk in there and do the business on JV terms or the field will be sold.

Kansas in the past has been a bit of a bore. Previous RNS's have excited investors with the promise of Coal Bed Methane 'eclipsing' the oil revenues and more recently, Sefton's own pipeline. However, they have also been buying up wellbores that are able to be put into operation and I now firmly believe they are going to concentrate on utilising their pipelines to transport their own commodities to market and this will be funded by Tapia, although not in the revenue from production, but by a sale/jv.

Everything is going to hinge on Dr. Ali's report imo, it is why they have drafted in one of the most capable and respected men in the industry, an all time first for Sefton, actually getting someone who knows what they are doing to do a job for them. There is more to that than just knowing the viability of a steam flood.

Perhaps tomorrow there will be a more visible outlay of the grand plan!

http://www.advfn.com/cmn/fbb/thread.php3?id=14950058&from=52292

LadyJennifer

3rd Jun '11

Just for those who thought I had gone away never to return. I have been busy elsewhere (SEA, JPR, EME).

Hindsight is a wonderful thing and I should have anticipated a more significant retrace was on the cards.

The drop lines are just when various trend lines cross to give a loose indication of timing.

I still expect this to rise according to limits given in my earlier charts. I notice how the lagging indicators are positioned with MACD ready to turn up and RSI looking like it has already begun.....

Overcooked Retrace

stock charts by Lady Jennifer 3/6/11

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Sefton Resources climbing like a monkey?

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LadyJennifer

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