hartley's report - here

SUN RESOURCES NL
Minor Oil Shows in Possible Reservoir
Sun Resources NL (?Sun?, ?SUR?, ?Company?) has reported minor oil shows
and increased resistivity in several zones of interest with sandstone
characteristics in its Krai Thong well, located onshore Thailand. SUR has a
42.5% interest in the well, which is targeting 37 million barrels of oil
potential.
The measurements to date have been taken from Logging While Drilling
(?LWD?) tools. Further details will be gained from a full suite of wireline logs,
which will be run over the next 3-4 days.
Our interpretation is that the potential for a commercial discovery in this well
is low. However, it is mildly encouraging that shows, increased resistivity
and potential reservoir have been recorded, given the lack of reservoir and
shows in the first well.
No decision has been made on whether to drill the third (optional) well in the
program. We view this as a 50/50 proposition at this stage.
Thai Potential Remains Unclear
The drilling program may be drawing to a close; however, the potential of
the permit remains unclear. The Joint Venture has not encountered what it
expected in either of the first two wells in terms of the stratigraphic
sequence. This is common in areas where there has been little to no
historical drilling.
The information from this program will add to the geological understanding
of the region and it is possible that a future program will be designed based
on this understanding. We would not be surprised if more wells are drilled at
some stage next year to further test the potential of the permit.
Looking to NW Europe
Whilst the announced farm-in in NW Europe has yet to be finalised, we
believe it is likely to go ahead. This will provide Sun with a 15% exposure to
720 billion cubic feet of gas potential, with drilling expected in Q3 2011. This
represents upside potential of 48cps for SUR, if the well is successful.
Downgrade to Hold
Given the likelihood of a commercial success in the current well is low and
that there is no visibility around key catalysts, including the third optional
well and finalisation of the farm-in in Europe, we are downgrading SUR from
a Speculative Buy to a Hold. Our price target has decreased to 4cps.
We believe that speculative interest will return to the stock in the lead-up to
drilling in Europe. If the results from the current well are disappointing, then
an opportunistic entry may be possible in the event of further selling down of the stock.