PROACTIVE NEWS SUMMARY: Gulf Keystone Petroleum, Providence Resources, 3Legs Resources, Tissue Regenix, EMED MiningReported by Proactive Investors on Thursday, 10 May 2012 (on May 10, 2012)
Investors in London were focused on the oil and gas sector this morning.
*Gulf Keystone Petroleum (LON:GKP)* denied speculation of a fundraising at a discount to the current share price, while* Providence Resources (LON:PVR) *told investors that the basal reservoir sands that flowed in the recent Barryroe well are ‘widely developed’ in the surrounding area.
Gulf Keystone, which is focused on the Kurdistan region of Iraq, hit back today at “unfounded speculation” it is planning a cash call.
“Due to the damaging and misleading nature of these various comments which have been posted on bulletin boards and other social media sites during the past 24 hours, the company feels it must respond,” it said in a statement to the stock exchange.
“Accordingly, Gulf Keystone is pleased to confirm categorically that it has no current intention of undertaking an institutional fundraising.”
GKP said it was currently taking legal advice with regard to the rumours and in a bid to prevent a repeat of the speculation.
Separately, the group revealed it is negotiating with “several interested bidders” for its 20 per cent stake in Kurdistan’s Akri Bijeel block.
Chairman Todd Kozel said: "We are working hard to create shareholder value via the continuing 2012/2013 exploration and appraisal programme on our world-class assets in the Kurdistan Region of Iraq.”
The report from Providence said the basal reservoir sands that flowed in the recent Barryroe well are ‘widely developed’ in the surrounding area.
The Irish oil explorer explained that it has been able to identify a ‘seismic response’ within its inverted 3D seismic data that relates to the basal reservoir sands it encountered and flow tested in the recent well.
This means that the basal reservoir sands are directly ‘mappable’ from seismic, Providence said. As a result it plans to 'better define' Barryroe's oil-in-place estimates.
"The results of the most recent seismic modeling and inversion are exceptionally encouraging as they confirm our ability to seismically image the Barryroe basal sandstone package, which tested at such great rates in the recent well,” said technical director John O'Sullivan.
“This materially helps in the mapping of the Barryroe licence area.
“The preliminary work also confirms that the reservoir is widely developed, which is very positive both in terms of incremental resource potential as well as our ability to accurately assess its distribution."
Providence said that a detailed interpretation of the seismic data is underway and it will be used to better define oil-in-place estimates for Barryroe. The results of this analysis are expected later in the summer.
Proactive also took a closer look at *3Legs Resources (LON:3LEG)*, an unconventional oil and gas resources company with big ambitions for shale gas in Europe.
The Isle of Man-headquartered group, which was formed in 2007, has six exploration and prospection concessions covering approximately 4,387 square kilometres (1,084,000 acres) in the onshore Baltic Basin of northern Poland.
As well as the Baltic concessions, 3Legs also holds exploration licences near Krakow, southern Poland, two licences in Baden-Württemburg, south-west Germany, while two further licence applications have been submitted in southern France.
The company raised over £58 million in 2011 through an initial public offering (IPO) on AIM last June, and had cash of £50.9 million at year end, compared to £1.6 million in 2010.
After shale gas burst onto the US market in recent years, the focus has now shifted to finding available resources in Europe, and 3Legs has drilled the only 2 horizontal shale gas wells (Lebien LE-2H and Warblino LE-1H) on the continent, according to the company.
However, there have been concerns about the economic feasibility of shale gas in Europe, given the complicated drilling techniques required to access the gas.
Shale gas is natural gas trapped within shale formations, which can be rich in petroleum and natural gas.
Hydraulic fracturing (is applied, where water, chemicals and sand are pumped into the well to unlock trapped hydrocarbons by opening the fractures in the rock and allowing natural gas to flow from the shale into the well. This technique, in conjunction with horizontal drilling, makes shale plays commercially feasible.
And with initial flow rates from 3Legs’ Lebien LE-2H and Warblino LE-1H wells below forecasts at 450-520 mscf/d and 18 mscf/d respectively, concerns have also been raised as to whether or not it really will prove to be a commercially viable option.
3Legs’ chief financial officer Alex Fraser clAIMs the results from the first well in particular in fact showed a good flow rate but that investors were expecting better.
“Mechanically, the frac job was successful. The flow rate wasn’t as good as investors were looking for. We consider it was actually quite a reasonable flow rate,” he said.
Another story by Proactive covered today’s report from regenerative tissue specialist *Tissue Regenix (LON:TRX)*, which has completed a preclinical trial on a new replacement cartilage with results due later this year.
Tissue said initial surgeon feedback had been encouraging, adding it believes there is there is a large but un-met clinical need for the product.
The company, which raised £25 million at the end of last year to fund its product development programme, added it had also begun to refine the production processes for a ligament repair product using implants from a pig. Preclinical work will start shortly.
House broker Peel Hunt added it had been a good year for Tissue with the group securing access to IP from its Brazilian university collaborator PUCPR, growing clinical acceptance of its CE Marked vascular patch and positive data on its heart valves.
Tissue Regenix has patented a tissue decellularisation technology called dCell.
It involves taking tissue from a human donor or an animal, usually a pig, washing and treating it to remove any trace of the donor’s characteristics or DNA, at which point it can be re-used in a human body.
One key advantage of the process is that it leaves the structure of the tissue- or the scaffold – intact. The human body then repopulates the new skin or organ with the recipient’s own DNA, solving the issue of possible rejection.
In the meantime, one of today’s main stories was dedicated to a note on *EMED Mining (LON:EMED)* from Fairfax Securities, which said its negotiations to acquire all the land related to the Rio Tinto copper mine are now at a ‘more realistic level’.
The company is currently working to start a redevelopment programme on the mine in Andalucia, Spain, and along with permitting the land acquisition is one of the main obstacles in the way.
Packages of land, hosting certain parts of the mine’s tailings dam, were sold to private landowners following the closure of the previous mining operation. And EMED must consolidate the ownership of the crucial piece of mine infrastructure before mining can resume at Rio Tinto.
Fairfax Securities analyst John Meyer, following a site visit to Andalucia, says EMED has been encouraged to try and settle directly with the landowners. But if a mutual agreement cannot be reached the company could proceed with a compulsory purchase of the land.
And Meyer says that with this option now looming EMED’s negotiations with the landowners have now come down to what he describes as a ‘more realistic level’.
“Negotiations with landowners are ongoing – the time frame for this is still not clear but with approval for administrative standing looming, the landowners are negotiating at a more realistic level and should have an economic incentive to settle ahead of a process of expropriation,” the analyst said in a note to clients.
He adds: “The company has offered €5 million to the landowners who acquired the land packages for €2.5 million. The company have provided €8 million for landholder acquisition and variance from this sum will not be material,” the analyst said in a note to clients.
“Should negotiations with landowners not be successful then they will have to start expropriation process which will take 6-12 months with the most likely time frame likely to be 8 months.”
Links: Full news story
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