Junior Oilers this week and last

Junior Oilers this week and last…

Saddam Hussein has bowed to the will of the UN Security Council and let weapons inspectors back in. Saddam claimed during the week that Iraq had no weapons of mass destruction when western intelligence agencies appear to have evidence to the contrary. It looks like Saddam is really saying “find them if you can”. He certainly has had enough time to hide them. This is setting up an interesting game of cat and mouse between Baghdad and Washington which could yet end in war. Oil prices hovered around $24-$25 strengthening slightly at weeks end. Natural gas prices (Dec contract) remained pretty firm closing near $US 4.

Last Week

The junior oilers were very quiet at the beginning of the week with very little volume across the board. More shares changed hands in LOK and ERG than in all the 18 junior oilers I monitored!! Shows you where the daytraders are. Activity began to pick up on Thursday with big volumes in ARQ ahead of the drilling of Hovea 4 and perhaps in anticipation of Cliff Head appraisal in January. Speculation of a possible new takeover bid may also have influenced the buyers. There was no specific news in the market that I could see that might have been responsible for the increased volumes which continued into Friday again on a rising price.
Some other stocks involved in the upcoming Perth Basin drilling also attracted market attention towards the end of the week namely AWE, NWE and VOY with increased volume and rising prices. It will be interesting to see if this continues next week. Time may be running out to get set in these stocks at these prices. One Perth Basin explorer HDR resisted the trend and dropped throughout the week probably due more to a rotation out of the stock and some stop loss selling rather than anything else. Another, BUY, also fell on small volume at weeks end. Company needs to raise capital?

VPE was also active during the week but seemed to activity by daytraders trying to take money off each other. Share price did little.

Drilling Activity

CUE’s Bilip 1 ended the week at 1,980 metres after operator ran wireline logs and did a shot survey (?) suggesting they wanted confirmation they were on track to penetrate the primary target. This they should do next week. CUE’s shares have done nothing as the market awaits the drill result. CUE would be a good buying opportunity for the longer term if Bilip is a duster and the shares take a hit. If Bilip is a success you will have to scramble quickly to get aboard.

CVN CEO announced at AGM on Thursday that the next two weeks would tell if the company was likely to meet its objective of becoming a successful producer. The lack of info on flow rates from the newly drilled Wichian Buri wells 4, 5 and 6 spooked the market during the week with CVN taking a hit on Friday. This one is a bit like CUE, disappointing flow rates could smash the stock (but not necessarily the company) while a good result from the new wells would resuscitate the share price.

PSA announced the success of its latest well at West Cameron, 343 #A-18 which gives them three strikes out of three on this producing lease. Inexplicably the market remains unimpressed with PSA’s continued drilling success in an area where gas sells for three times the price it does in ANZ . I guess people want to see the cash flow before they will believe Petsec is on the rebound. PSA represents good buying at these prices IMO. PSA should receive first revenues from Ship Shoal in December and from West Cameron in January or February.

Next Week

The Argos well spudded on 15 November and will take 7-8 days to drill so the result should be known this week. FAR and PPP pushed higher on Friday but on small volumes. SUR not doing much ahead of the drill. Problem with Argos as I see it is that the well will be plugged and abandoned whatever the result. (see SUR’s press release). If they do find oil the field will be developed at operator Apache’s pace and according to Apache’s priorities which may not necessarily be those of the juniors involved. And it will cost big, big bucks to develop if and when it happens. I wouldn’t be buying any of these three stocks at the moment but they are worth looking at again if Argos is a duster and the junior’s sps fall. PPP in particular might be a short term play given its interest in further Carnarvon wells and Tui. FAR is also a sound, conservative, well managed little company that has been around for a long time but one that rarely generates excitement. Its shares are near it year lows and with its increasing US gas revenues could also be good buying in the event that Argos disappoints.

AYO will probably spud Cayidere this week with Gocerler 4 to follow before the end of the year. Surprising lack of interest in Amity given what it already has in the ground, its increasing gas production and sales and its ambitious drilling program (11 wells in next 12 months). Maybe one to get into after Cayidere particularly if that well disappoints. Pity Amity seems to be affected by prospect of war in the region (Iraq)

It will be interesting to see if Horizon Oil informs the market this week on the outcome of the joint venture’s review of the Huinga 1B technical study. They were supposed to meet on 14 November. Even if a sidetrack into the Murihiku thrust is agreed it looks like it will not happen this year.

One interesting well coming up is Koriot West 1 to be drilled in December as a follow up to Essential Petroleum’s Port Fairy oil and gas discovery and another is Ceres to be drilled after Argos in the Carnarvon Basin. Best entry for Ceres is possibly Sun Resources. The more I look at EPR and SUR the more I like their willingness to keep the market properly informed. I have them both on my watch list.

Disclosure: I hold AWE, CUE, PCL, PSA, NWE and GBG. Last week I sold my holding in NZO (probably prematurely as a couple of buying orders have now appeared for NZO!!!) and topped up holdings in NWE and PSA. NWE has been held back a bit by Black Rock selling down it’s stake but seem ready to bounce higher. PSA seems to me to be a no brainer following its further drilling success this week.

Good trades all. JBC