could nido become the next nexus??

Could
Nido become the next Nexus??

I recently did some research on Nexus
and was amazed at the similarities between Nexus and Nido.

This is what my research revealed.

In 2001 Nexus was a small private
company seeking to list on the ASX and pursue oil exploration. At
the time a struggling dot.com. company “eNTITy1” was also
looking for a new direction and successfully acquired100% of the
issued capital of Nexus.

In 2001 eNTITy1 changed its name to
Nexus Energy and raised additional capital to fund Nexus' forward
drilling program. In 2001 the shares in the new entity were trading
between 10 and 15 cents. In the last 6 months of 2001 Nexus
participated in a number of wells in the Surat Basin with Oil Company
of Australia. However, the results were disappointing and the shares
slumped to 5 cents.

At the end of 2001 Nexus management
reviewed its activities and disposed of its loss making IT business.
It also renegotiated the terms of its farm in agreement with OCA and
was eventually to withdraw from Surat Basin exploration altogether.

In 2002 Nexus was restructured and a
new management team led by Ian Techacos was appointed. The board was
also restructured with two directors resigning.

These management changes proved to
be a major turning point in Nexus fortunes.

The company announced a revised growth
strategy focused on the acquisition of appropriate cash producing
projects as well as low cost exploration. In the eighteen months
that followed, Nexus built up an impressive asset base which included
100% VIC/P54, aquired from Liberty Petroleum and applied for and was
awarded 100% of Vic/P56, VIC/P59, and VIC/P39. The company also
applied for and was awarded NT66 in the Bonaparte Basin.

It drilled one well, Eclipse #1, in the
Perth Basin permit EP 389 in 2003 with Empire Oil and Gas. Nexus had
10% of what turned out to be a duster. The low point for the shares
following the appointment of the new management team was a close of
1.5 cents on 7 February 2003.

In June 2004 Nexus announced that
Apache had farmed in to VIC/P54 and would fund 94% of the cost of the
two wells (Longtom #2 and Grayling #1) for a 67.5% interest in the
permit. This was a turning point for Nexus.

In the preceding 18 months Nexus had
gone to the market several times to raise more fund, but there was
little institutional interest in these capital raisings. Four days
before the announcement of the Apache farm in, Nexus announced that
it had placed 33.3 million shares at 16.5 cents to clients of Grange
Securities and Euroz to raise $5.5 million.

With Apache on board, Nexus now had two
firm drilling commitments in VIC/P54. The shares didnt immediately
reflect this certainty, trading in a 20-21 cents range for much of
July. In September the shares moved higher again breaching the 30
cents level for the first time. And they held these gains through
October and up to November 10 spudding of Longtom #2. In December
2 the share price hit an intraday high of 76 cents.

Nexus' share price was boosted by
broker support. Their web site under stockbroker reports lists over
20 broker reports recommending the stock as a speculative buy. So
when a company is able to raise capital through brokers like Grange,
Euroz and Baillieu as Nexus has done then you can guarrantee they are
going to recommend it.

Nido has also undergone similar
pathways.

In 1999 it changed its name from SOCDET
to Nido. As part of this change it inherited SOCDET's interests in
SC 14 in the North West Palawan Basin including Nido and Matinloc oil
production assets and the Galoc oil field.

Between 1999 and June 2004 new
opportunities were very limited, Nido and Matinloc oil production
rates were low, and development of the Galoc oil field was going
nowhere.

Nido's share price was around 1 cent in
June 2004. The change from an exploration focus to a production
focus led to the appointment of a new management team. So in July
2004 a new team of highly experienced oil industry professionals was
appointed headed by Dave Whitby. In addition, the staffing levels
increased and there were two new board members appointed.

The new strategy focussed on the
implementation of a three-pronged value proposition encompassing
production optimisation of it's producing Philippines oil fields,
Nido and Matinloc, the realisation of the Galoc oil discovery and the
creation of value through successful exploration efforts in the
Philippines and the North Sea and through it's strategic investment
in Cool Energy Pty Ltd, the sponsor of a new cryogenic gas
conditioning technology.

In the first 12 months the new team has
achieved enormous successes namely:

• Nido has raised $4.9 million via a
  series of share issues. These fund raisings have resulted in a
  significant lifting of Nido's corporate profile in the investment
  community and the introduction of some large institutional investors
  to its share register.

  
  

• In order to deliver in the new
  corporate direction Nido has expanded its team of full time
  professional staff and have hired the best and brightest to move the
  company forward.
  

  
  

• Nido has opened up an office in
  Manila to coordinate activities relating to business in the
  Philippines.

  
  

• Nido's working interest in the
  Nido and Matinloc fields increased from 17.5% for each to 22.486%
  and 28.283% respectively.

  
  

• Nido and Matinloc gross oil
  production during 2004 was 152,780 barrels (419 bopd) of which
  116,141 barrels (636 bopd) was produced in the second half. Gross
  oil production during 2003 176,391 barrels (483 bopd).

  
  

• A farm in agreement was executed
  by the SC14 JV partners with a consortium comprising Cape Energy,
  Team Oil of the UK and Vitol(European Investment Grade company -
  unconfirmed at this stage).

  
  

• Nido reached an agreement to
  farm-in to three highly prospective exploration blocks in the
  Southern Gas Basin of the UK North Sea.

  
  

• Nido made a strategic investment
  in Cool Energy Pty Ltd, a sponsor of a new cryogenic gas
  conditioning technology-which has recently formed an alliance with
  SHELL Global Solutions International.

  
  

• Nido has acquired further
  exploration and production opportunities in the Philippines such as
  West Linapacan and Palawan Basin with estimates of potential
  resources of over 100 million barrels.

  
  

• Nido has made submissions to the
  23^rd licensing rounds to acquire further acreages in the
  North Sea and is also considering applying to the Norwegian
  government for opportunities in the Norwegian Sea.

  
  

• In the 1^st year in
  office the new management team has been able to lift the share price
  from around 1 cent back in July 2004 to a 2005 high of 9.9 cents.

  
  

The point I am trying to make is
that the catalyst for change for both companies was the appointment
of a new CEO/MD and a new senior management team.

The second point is that it took the
new teams some time to acquire new opportunities and to persuade
bigger industry players to farm in and drill. Nido has been able to
do this a lot sooner than Nexus.

The third point to make is that both
have successfully taken the traditional path to the development of a
junior oiler. That is to acquire a high equity level in prospective
acreage, use your technical skills to demonstrate the potential of
the acreage and sigh up a farminee to fund you through the drilling.
This is what Nido has done with Galoc.

The forth point to make is that both
companies have promoted themselves through investor presentations and
have first class websites. Nexus has done a little better in this
area because they have over 20 stockbroker reports, whereas Nido is
now starting to talk to broking houses. In addition, brokers such as
Patersons Securities, Southern Cross Securities and Euroz Securities
have only recently been accumulating Nido shares (just quietly). One
can only guess what will happen once they analyse and report on
Nido's asset base and growth potential to their clients.

Lastly, if you look at a stock and
say it has already gone up 100% or more so it cant possibly continue
to record such gains. Wrong. Stocks can do anything. And as Nexus
has shown oilers can make quite spectacular gains before they have
even made a discovery.

Sources:
www.nido.com.au/www.nexusenergy.com.au/www.oilers.com.au

I would also like to thank Sani P/L
publisher of Junior Oilers Weekly for kindly giving me permission to
reproduce extracts from their weekly newsletter.