Falklands, it’s all coming together.

Until this recent drill campaign the Falklands, particular for FOGL was only a place of dreams, expense and not really very much to show for it. They brought DES and its associated licenses to gain a foothold in the Sea-Lion play. They managed to raise a few million dollars, get a couple of good industry experts on board in a number of JV’s, spent 2 years with some unsuccessful 2D driven drills, they then spent  18 months on 3D and acquiring enough data to sink a battleship.

All of this was good, needed and essential, particular for an unexplored new environment.

However none of it actual proved that outside of Zebedee, oil actual existed.

This current drill campaign is therefore the result of years of work and is a defining moment for FOGL.

The drill on Isobel was a resounding success, although it barely reached the main potential reservoir and it didn’t reach Target Depth(TD) it did exceed all expectations and oil samples were extracted that proved good quality, water free, high pressure OIL. Isobel was part of the northern license area and although wasn’t part of the same system as Zebedee was similar, albeit possibly larger and better pressured.

The current drill on Humpback in the south license area, is a completely different kettle of Falklands fish.

No oil has ever been brought back to the surface in the Southern License area, BOR successfully found liquid gas, however the true prize is the black stuff. Not only would Humpback prove that oil isn’t just a myth, it’s rated as containing half a billion barrels of oil, if indeed oil exists there.

The importance of Humpback is not just the half a billion barrels of oil it might contain. If it comes in as a success it massively de-risks very similar plays containing another 1 billion barrels of oil. Nobel the JV operator of the well has committed to a second well, if it makes a discovery. It also opens up the entire southern range, for considerable further exploration.

The impact on Humpback for FOGL cannot be underestimated.

More recent developments.

Humpback was already a mammoth drill, due to take 60 days, FOGL have announced that this will be nearer 100 days now due to complications (enough time to drill 2 holes in the northern license area). A side drill we take place off the initial drill pad and hole.

It also announced that it has $30m left in the bank after the pre-payment of the Isobel and Humpback drills.

So where does that leave us?

FOGL have received more than their fair share of luck. The lack of the Isobel drill to reach TD looks to be a certain contract failure. Premier the Northern License operator  have to make a second Isobel drill the next priority, once Humpback has been finished. A second free drill to prove up Isobel and its reserves will be greatly appreciated by the market and the BOD of FOGL.

The extra 40 days required for Humpback, will be paid for by the operator Noble.

A new drill at Humpback, if the first is successful will require a fund raising to the tune of $30m. However this will be at a much higher share price, due to the successful drill. An estimated MCAP might be $300-500m.

Unlike the last drill, which saw the drill rig move sharply away from the Falklands after just 12 month. The Eirik Raude is on a notice contract until 2018. This allows Premier and Noble sufficient opportunity for many drills to come and more news flow for the FOGL. FOGL will obviously have to raise money to help contribute to thiss(approx. $150m or so), but it’s estimated that until 2018 they will be proving up between 1bn and 3bn barrels of oil. Beyond 2018 and the Ocean Rig Santorini can potential be used for production holes. Both Premier and Nobel have ear marked larger exploration budgets for 2016. Once in production, if FOGL can maintain a good share of the licenses it will be a multi-billion company as exploration firms up the resources, CPR’s and routes to production are finalised.

I have brought some FOGL recently, the potential of a successful drill with Humpback and the culmination of years of work, outweighs the risk. It also falls nicely into the high quality portion of my portfolio. The partners and potential of the resources are really world class, this isn’t a story of an AIM minnow dreaming about finding something amazing after spending a few million on a wildcat drill. FOGL and its partners have spent a 9 figure sum getting to this stage. Due to the depressed oil price and bear market, the share price is massively undervalued.

14-18-2015 round up #OXS #CEB #FOGL #PEL #AFPO

Evening.

A few interesting things happening and a few on the horizon. So I thought a blog was in order.

Lets start with something positive, #FOGL has an important drill due to be announced. Depending on results this might indicate a massive increase in the OIL reserves and wealth around the islands. Logging should be finishing in the next two weeks so news is nailed on. Personally with oil at its current low price, I will be watching but not buying before news, but it should be interesting.

Now onto #OXS, usual fun and games, with an August result unlikely (historically) we are looking more and more at an Autumn/Winter result. Still a firm hold for me, but I am happy to ignore all the rumours and wait.

I have been researching #PEL as promised. My initial thoughts ( and I am only half way through researching) is that the company looks to be a classic rehabilitation candidate. The biggest problems with these, as I've learnt many times is that the market doesn't believe these recovering companies, until its seen the evidence of good profitability in trading statements. The real question might be when will the company release these trading statements, but anyway more work needed from me.
BTW when I mentioned that the company might be being ramped, it doesn't imply anything concerning the companies true potential, just that there is an influx on short-term money that will be leaving the SP at some point. When this happens we normally see either a dramatic decline or a gradual decline depending on who brought the shares when the short-term holders sell. This might well be a long-term hold in the same vein as #AEG, I am not decided yet.

#CEB....Wow..Just Wow on the day that the company announces its AGM, you get not one, but two director sells. One director sell, you can put down to bad luck or unusual circumstances, but 2 directors..

Quite simply for experienced AIM investors, director sells are a red flag. Its very rare for a company to see its SP rise after director sells. When the directors sell, just prior ground breaking news I have never heard that it bodes well.
We will hear all kinds of things from the ramping crew about this as they struggle to sell out. Over the years I've heard all the excuses as to Directors selling, from pension arrangements, divorce, needing the money to put the kids through education, ill health. The consequences for the company though are pretty uniform.

A simple question these directors will have known most things about the company, they will certainly be aware of the potential for any new Indonesian deals. So why sell now and not in 30 days time?
For me it indicates that the Directors were pretty certain (at least in their minds) that large dilution will occur when the deal goes ahead.
I've been accused of not being researched in #CEB, but that's simply not true. I've researched Indonesia and the Philippines at length, producing a PEST analyst on both. The reason for this is that both companies were considered excellent frontiers by Aussie mining companies when the Aussie industries were booming. There is a graveyard of projects left by this Aussie expansion.

Indonesia in particular had some bad experiences and developed a bad reputation for investment. Recently,  last year it declared it was going to pull out of its trade agreements (BIT's) with most countries, including the UK. This essentially removes protection for companies. We recently saw a terrible Mexico auction of its licenses and there is nothing to suggest that it will go much better for Indonesia.
At the end of the day until CEB tells investors what its investment will be, how its funded, what percentage of the deal it will keep (its already given away a chunk of anything) and importantly who will fund the exploration, its impossible to put a figure on the SP and its nothing more than a gamble. One the two Directors selling don't seem to want to take...

#AFPO is another one, where its impossible to justify the SP until we know the profit and figures from any deals. Take the profit and run IMHO.

Be careful out there folks.

Enjoy your summer !

“Where has all the mxo ramping gone from last month. Wait a minute it went to afpo. Another bunch of spiked pi’s , so what stock is next?”

I am not surprised in the slightest but my first post on AFPO and one of only a hand full this year was greeted with insults and abuse…

Was it because the post was incorrect? Well if we look at the “investors” who pumped MXO or reacted rather negatively we might see. On the 13^th of July I posted that the “pump” crew had sold MXO and has moved onto their next target…Funnily enough the same “pump” crew that told me that people selling at 4.5p was stupid, or that I was clueless. Since then they have become rather quiet about MXO and the MXO price has fallen……

They are also the same “pump” crew that have been ramping AFPO and have been selling in their droves whilst pumping away. They have already started the next pump.

So was I wrong?, NO.

So why the response….Maybe in the same way that when you tell a child off for being naughty, their first response is often one of denial. Maybe it’s because they are so incredibly insecure they need to response to every single negative comment. Maybe it’s because they are bullies.

Whatever the reason, if you post anything negative that they deem threatening it’s the same comments.

I am Clueless, It’s down to Envy, I must have made a loss, etc etc. It’s all rather juvenile to be honest. Occasionally you get a true comment about how it’s all about buying low and selling high, where they singly fail to realise that buying low, pumping a share, selling and then watching it fall back is the very definition of a “pump”…

Equally, investors shouldn’t be concerned if you get a negative comment in a negative market. We could all just say positive things about companies, but this would only lead to PI’s losing lots of money. If something is negative then say it’s negative, if something is being ramped then admit it’s being ramped, if it’s positive then say it’s positive. If you say this many times in the hope of changing market sentiment then it’s a problem.

It’s the same mentality of MP’s that claim £500 for a 5 mile bike ride, or investment bankers that sold the rather dodgy CDO bundles, or even the tried and trusted second hand car sales men.

I am more than happy making money in AIM in a rather more moral way.

I actually quite liked the MXO deal, far better than its Mexico licenses and said so (although I also said that I wouldn’t buy any yet).

Equally I quite like the AFPO deal. The problem is that we don’t have a clue how much profit will be made for AFPO, its margins on the revenue might be 2% or 50%! Nor have we heard why these hefty margins are going to be taken by middle men and yet the MOU buyers are happy to buy it?, why don’t they just cut out all the middle men and go straight to where AFPO are sourcing the product?. This will happen if AFPO are not adding any value. We simply don’t have enough information to justify a re-rate of the SP IMHO.

Finally not all investors are part of the “pump” crew some are genuine investors in these companies.

You might want to follow the “pump” crew, however for every “pump” that catches and works, there are maybe 2 or 3 that don’t get the traction.

Let’s see which one gets it this time round, maybe EDL, maybe AVP, maybe PEL,  RMP, AVP.

Enjoy your Summer, I know I am !