And I've been in again! Little more activity here today, wonder why? :))
This bloke, Jackson's his name, has a column in the Telegraph and also in a tip sheet. He seems to be bent on destruction...his own. 50% right, 50% of the time?
Better than expected drilling news is boosting shares in companies with exposure to the Tiof-6 appraisal well offshore Mauritania.
One should be careful of assuming these regular drilling reports are truly meaningful for financial progress. Hardman Resources (an Australian company also listed on AIM) has taken the lead, with other listed companies - in particular Premier and ROC Oil, which are partners - then following suit. But today's update is genuinely good news because the results are better than expectations and lend hope for substantial upside.
With the greatest exposure (19%) Hardman shares (HNR) rise 14.4% or 11p to 87.5p, while Premier (PMO) is up 3.2% or 19p to 604p, and ROC (ROC) is up 2.5% or 2p to 82p. This is the snag for investors with fresh money, trying to react to drilling news: the market quickly prices in the new hope! It is very hard to guess whether momentum is likely to accelerate (as with Cairn on its initial success in Rajasthan) or the share price softens say a week later.
Remember that if expectations are initially set low then it makes today's announcement of 'a very encouraging first oil flow from Tiof’ a lot easier. It is still early days to define all this financially. In respect to Hardman, exploration is highly uncertain and management has been prudent not to raise expectations before today’s result. ‘The Tiof reservoir sands tested in this well are considered to be of poorer quality than those at Chinguetti and we therefore expected significantly lower production rates than those achieved in the Chinguetti early development well. The flow rates we have achieved at Tiof-6 exceed our pre-test expectations.’
At midnight on 14 February, an extended flow period was underway, with a maximum flow rate at 12,400 barrels of oil plus 11 million standard cubic feet of gas per day, on a 104/64 choke. That refers to the main flow period and the stable rate is about 9,150 barrels of oil per day, on a 72/64 inch choke.
The aim of this well is to further appraise the Tiof oil discovery and interpret its sands following 3D seismic – so we can expect plenty more detail in due course. But already, given an estimated 1 billion barrels of oil in place, an improvement in perceived reservoir quality should provide a boost to shares in the companies involved. Hardman lends the best exposure with 19% of Chinguetti, while Premier owns 8.1% and ROC Oil 3.25%.
Progress (or failure) with any Mauritanian wells is likely to impact other companies operating there, such as Dana Petroleum (where I retain shares) and AIM-listed Sterling Energy (which has a lesser involvement in Tiof).
So good news today for Mauritanian oil explorers, though I am not rushing to switch my portfolio for greater exposure.
HDR Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
