‘Blue sky’ potential
The major shareholder of Victoria Oil & Gas is Noor Petroleum of Abu Dhabi. Not only does Noor know of Bramlin, it is also introducing into the enlarged group the assets of Falcon Petroleum. Victoria has signed a twelve month option to acquire the latter, which consist of exploration licenses over 45,000 sq kms of land in Mali and Ethiopia.
This adds some ‘blue sky’ potential to the group. But the more immediate areas of interest are Victoria’s operations in the former Soviet Union and those of Bramlin in Cameroon. The share price of Victoria today is just 6p. But back in 2006 they hit 260p after independent consultant, DeGolyer & MacNaughton, estimated that its West Med project in Siberia contains 1.1bn barrels of prospective recoverable oil equivalent, mostly in the form of gas.
The shares became a great favourite of private investors, but this reserve estimate was subsequently reduced by 9%. This sent shares into a tailspin from which they have never recovered.
West Med is located in the Nadym-Pur-Taz region of Western Siberia. Along with the Yamalk region of Russia, this is the heartland of Gazprom and holds approximately 20% of the world’s proven gas reserves. West Med lies next to the super-giant Medvezhye field and about 120km from Urengoy, the largest gas and gas condensate field in the world.
The potential is clearly massive. But production is some way off. Victoria has appointed GeoDynamics to conduct a passive seismic survey this winter focused on a new target location. Drilling of the next exploration well is not expected until 2010 with a further two wells scheduled for 2012.
Jackpot potential off course – but new deal could produce cash flow
So although Victoria may eventually hit the jackpot here, for the time being it is costing it money and its plans have been blown badly off course by the suspension of production at its Kemerkol field in Kazakhstan. This 65 sq km license area to the east of the Caspian Sea was put into production in March 2006, and in the first half of this year it produced thirty thousand barrels.
Victoria then faced a challenge to its title, a challenge that was upheld by a regional court. Victoria has taken the matter to Kazakhstan’s Supreme Court and hopes for a ruling very soon.
Victoria is confident of winning the day, but the court action has meant that it has had to suspend production at Kemerkol. So one attraction of the deal with Bramlin is that it comes with a property that should soon be producing some cash flow. This is Bramlin’s Logbaba project, which is located within the eastern suburbs of Douala, the economic capital of Cameroon.
Not yet on City radars
Four wells were drilled here by Elf back in the 1950s. All found gas. An evaluation of only a small section of the area by RPS Energy in July found reserves with a net present value of $169m. Given that industrial users sit almost on top of the field and otherwise have to pay about $23/mcf for imported gas from Equatorial Guinea, they should certainly be prepared to pay the $15 proposed by Bramlin. Bramlin has already signed some letters of intent with customers and plans to start drilling early next year with first deliveries scheduled for late 2009.
With Victoria issuing 163 million new shares to acquire Bramlin, the new group will still be valued at only £26m, just over half the £50m value at which City investors seem to take an interest in small companies.
However, Victoria has raised the possibility of acquiring further distressed oil and gas companies, while its share price could of course rise depending on progress in Cameron and the Former Soviet Union. But with many of Victoria’s shareholders suffering from burnt fingers they are unlikely to take too much on trust.
This one has not yet got the credentials that make it a good “bounceback belter” candidate for 2009 – not like the three I’ve just uncovered here.
Best regards,
Tom Bulford
For Fleet Street Daily
Don’t look down!
BY BEN TRAYNOR
Ever head of mean reversion? It’s a statistical term that crudely translates into “What goes up, must come down.” Or maybe “The bigger they are, the harder they fall”.
Over the long run, if something moves away from its trend or average, you can be fairly sure it’s going to come back. Not only that, but it will overshoot. To maintain the average, a variable that’s risen above for a sustained period of time must subsequently fall below by as much and for as long.
I found the following chart on an American website I visit (Generationaldynamics.com):
Source: www.generationaldynamics.com In terms of price-earnings ratios, the recent bubble was an absolute monster! The next few years could be very bleak if that long run average is gonna hold…and not just for US stocks (our very own FTSE.
Tomorrow we’ll see how this bursting bubble compares to other famous busts.
The Daily Reckoning – Going for broke
BY BILL BONNER
O! Bama! Where is thy bounce? Maybe it is here...
‘Black Friday’ turned out to be less dark than people feared. Sales rose 3% over the year before. This was a ‘weak start’ to the holiday shopping season, reported the New York Times. But to us, it was surprisingly strong.
In fact, many shoppers were so eager to part with money they would kill you if you got in their way. We’re not exaggerating. This report from the New York Times tells what happened at a Walmart:
“Suddenly, witnesses and the police said, the doors shattered, and the shrieking mob surged through in a blind rush for holiday bargains. One worker, Jdimytai Damour, 34, was thrown back onto the black linoleum tiles and trampled in the stampede that streamed over and around him. Others who had stood alongside Mr. Damour trying to hold the doors were also hurled back and run over, witnesses said.
Some workers who saw what was happening fought their way through the surge to get to Mr. Damour, but he had been fatally injured, the police said. Emergency workers tried to revive Mr. Damour, a temporary worker hired for the holiday season, at the scene, but he was pronounced dead an hour later at Franklin Hospital Medical Center in Valley Stream.”
You can read the Daily Reckoning in full here
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