The question has been asked why is oex price moving. A summary of why I think oex remains good value.
Firstly, the story is good. The strategy of oex is to apply 'new' drilling technology to tight oil and gas reservoirs. At cambay they are about to do this after a failed attempt prevously. In the canning they have a large acreage in a frontier play where this technology could unlock a large resource.
The acquisitions have been smart.
Cambay is know to contain tight gas so is de-risked, the partners (though typically difficult) are influential and the gas sales and commercialisation is fantastic. The gas price in India is good and getting better and the market is on the doorstep.
Canning is being explored and if the graben play comes off, it is likely to be oil or liquids rich in my opinion. This makes early commercialisation by oilex a lot more likely.
They have focused on the right assets making difficult decisions to sideline or exit Indonesia and Timor where political / partner issued make progress difficult.
The business model is to operate. Difficult to execute but a big value add and a company in control of its own destiny. It will be interesting if they operate canning.
They are beginning to build a track record of stead delivery of promises, a stark difference to oex 2 years ago. They are keeping timeframes aggressive whilst realistic. The achievement of getting approvals in India should not be overlooked. This did not seem to occur by accident as difficult decisions were made, such as changing out the management in India to achieve this.
They have secured funding with some contingency. Painful decision to fund at low share prices have been made. Magnum must be happy with their investment today. Funding should not be required until cambay is expanded or canning appraised. This should only occur after proof of concept at cambay.
These are my reasons to stay invested in this interesting time in the company's development.
OEX Price at posting:
6.7¢ Sentiment: Buy Disclosure: Held
