PROACTIVE NEWS SUMMARY: Borders & Southern, EnQuest, Royal Dutch Shell, Europa Oil & Gas, ZOO DigitalReported by Proactive Investors on Thursday, 26 April 2012 (on April 26, 2012)
The oil and gas sector generated the most interest in London today with* Borders & Southern (LON:BOR)* announcing a £46.5 million fundraising an *EnQuest (LON:ENQ)* upping its stake in the Kraken oil discovery in the UK North Sea.
Borders, which operates in the Falklands Islands, has raised £46.5 million in new capital selling shares through a placing.
The funding follows Monday’s news that the Darwin exploration well, in the South Falkland basin, had made a significant gas condensate discovery.
Today it revealed that 55 million new shares are being issued to investors at a price of 84p each, the same price as yesterday’s close.
Borders says the money will be used to acquire additional 3D seismic, help analyse the Darwin discovery and provide contingency funds for the next well in its drill programme.
"We are delighted to announce the success of this conditional fundraising,” said Howard Obee.
“The proceeds of the Placing will strengthen our already robust balance sheet and allow Borders & Southern to complete additional work including additional seismic and analysis to better understand the recent drilling results."
It is planned that the Leiv Eiriksson rig will next move on to drill the larger Stebbing prospect.
On Monday Borders revealed the deep-water explorer has discovered gas condensate, otherwise known as ‘wet’ gas, in the Darwin well. Borders says it is a large and simple structure that is likely to contain ‘significant’ volumes of gas.
Meanwhile, EnQuest today revealed that it is again increasing its stake in the Kraken oil discovery in the UK North Sea.
It is buying 15 per cent of the project from venture partner First Oil, paying between US$90 and US$144 million.
This is EnQuest’s third transaction relating to Kraken and it will take its total interest to 60 per cent.
The deal is another sign of EnQuest’s enthusiasm and determination to take Kraken to first oil, analysts say.
The deal metrics are the same the deal in January with*Nautical Petroleum (LON:NPE)*, in which EnQuest’scost per barrel was US$6 (before tax effects).
First Oil will receive the payment in cash but it is being differed. The ultimate amount payable by EnQuest will be determined by the Kraken field’s future 2P oil reserves – with the US$144 million maximum payable should reserves exceed 166 million barrels.
Kraken is currently estimated to contain 167 million barrels of oil, following an independent assessment last month.
“Overall this looks like a sensible deal that should take net production to over 60,000 barrels per day in 2016,” Oriel Securities analyst Nick Copeman said in a note to clients.
“We note that EnQuest already have a technical team working this project and have financing in place.”
Proactive also covered today’s statement from *Royal Dutch Shell (LON:RDSB)*, which said today it may acquire more assets in east Africa to follow this week’s acquisition of *Cove Energy (LON:COV)*.
On Tuesday, Shell agreed to buy Mozambique-focused Cove Energy for £1.12 billion.
Chief financial officer Simon Henry said it was an attractive area and the Anglo–Dutch firm could be interested in further acreage there as part of a major investment into the region.
Shell is bulking up its interests in LNG, a specialist sector in which it is already a leading player.
Cove has an 8.5 per cent stake in an Anadarko-led consortium that has made a series of large gas discoveries off the Mozambique coast in the Rovuma Basin.
Henry added it will take tens of billions of dollars to complete building up the LNG project in Mozambique.
East Africa has been a hotbed of activity, attracting the attention of oil giants such as *BG (LON:BG.)*, *Maurel et Prom (EPA:MAU)* and *Exxon (NYSE:XOM)*.
Other smaller oil exploration and development companies such as *Wentworth Resources (LON:WRL)*, *Ophir Energy(LON:OPHR)*, *Aminex (LON:AEX)* and *Solo Oil (LON:SOLO)* have also been working to capitalise on the area’s potential.
In the meantime, Proactive interviewed new chief executive of *Europa Oil & Gas (LON:EOG)* Hugh Mackay, who intends to deliver on its promises and “walk the talk”. Mackay admits that when he joined the group in October it had an image problem.
The stock had fallen 85 per cent in the seven months prior to his appointment as a difficult period took its toll on investors' confidence.
Mackay initiated a full review of the company’s assets and commissioned a new competent person’s report to establish an independent valuation, which he hopes will anchor the share price going forward.
“I needed to properly understand what Europa has really got in the portfolio,” he said, speaking with Proactive.
“So I could make the decisions about the company’s future based on a realistic understanding of the assets, and what they are actually worth.”
“The CPR will give us a strong insight into the value of the assets we currently have, and enable us to communicate realistically with the investment community.”
Also the completion of farm-out talks and future acquisitions will be central to Europa’s future development, he explains.
Mackay says the new CPR report is expected next month. And along with a recently announced exploration and appraisal strategy he hopes it will provide investors with a clearer picture of what Europa is trying to achieve.
“We really want to make sure that we deliver on our promises and do what we say we’re going to do, that we ‘walk the talk’.
At the moment the group’s core is a UK onshore operation and appraisal assets in France.
Its modest production base is a cash generating engine that gives Europa a head start in terms of funding its growth ambitions.
Production is currently on target to meet management’s budgeted expectations, set at 200 barrels per day.
But Mackay gives a frank assessment of the current crop of Europa’s production assets.
There is no magic bullet that is going to double production here, he says.
The fields are in decline and the emphasis is on managing costs and the rate of decline. Some initiatives are ongoing to achieve this, and output has shown signs of improvement.
“Small wins can have a big impact on production, and therefore cashflow.”
Proactive also talked to chief executive of *ZOO Digital (LON:ZOO)* Stuart Green, who is upbeat about the company’s prospects, notably its e-book business, after a bounce back into profit in the second half of the year.
In the first half, the firm had been developing its e-book offerings but now had started to secure growing amounts business, said Green.
Investors welcomed today's statement sending its shares surging by 20 per cent.
Underlying earnings at the company, which supplies software to the creative media and makes DVDs, came in at US$1 million and operating profits were US$0.2 mln in the six months to March 31.
That compared to a loss of US$0.4 mln and a loss of US$0.9 mln in the first six months (to September 30) when DVD sales collapsed.
Green said the second half's improved performance was down to an increased demand for Blu-ray and, notably, that revenues were now beginning to come through from the firm's e-Book activites.
He also told Proactive that the DVD market had now stabilised and cost reductions made by the company had also played a part in the trading improvement.
He was particularly optimistic about the e-Book industry, which has rapidly developed in recent years, but largely focused on converting conventional novels into electronic versions.
As well as converting word-based formats, Green said ZOO Digital's e-Book technology could help publishers to convert more complicated versions such as childrens' books, travel guides (which have pictures) and interactive books with moving images or sound.
Such technology allows publishers to produce premium, enhanced products, which command a higher price tag, pointed out Green.
"I think it's a very exciting market," he said, adding that he believed that there would be consumer demand, but it was early days.
"If publishers can really tap into that and embrace the format (electronic), then I think we are very well placed to capitalise," he said.
The group's largest customers include major Hollywood studios, for which the firm offers services such as DVD production, video editing services, and voice-over recording.
Green said its "bread and butter" business was still with large entertainment companies, such as those in Hollywood.
Another boost to second half earnings was the increase in Blu-ray production, Green told Proactive.
"Studios have recognised now that they really need to get their back catalogue out on Blu-ray," he said.
Links: Full news story
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