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By Jamie Ashcroft April 18 2013, 7:37am The deal comes as preparations are underway for the start of drilling on the ExxonMobil led Dunquin exploration well nearby
Europa Oil & Gas (LON:EOG) has struck an important farm-out deal with US oil firm Kosmos Energy for its two assets in the South Porcupine basin, offshore Ireland.
Kosmos is acquiring an 85% stake in the venture by covering the cost of a 3D seismic programme on each of the two licences, and it will also pay a proportionate amount of Europas back costs.
It is also committing to cover all the costs of two explorations wells, one on each licence this is capped at a combined US$200mln.
"We are very pleased to have secured a respected leading independent such as Kosmos as a farm-in partner and operator for our Irish Licences, said chief executive Hugh Mackay.
Kosmos are a highly experienced operator in frontier basins and pioneered the Cretaceous stratigraphic play that has resulted in significant exploration success in the Atlantic margin basins.
We look forward to working with Kosmos and their involvement is a highly significant first step towards realising the potential value of our exciting prospects in a new hydrocarbon play located in an essentially undrilled basin offshore Ireland.
"The farm-in provides recognition of the substantial potential value lying in our Irish exploration prospects. The work programme associated with the farm-in has the potential to deliver significant value realisation. Europa's retained 15% interest exposes the company to substantial upside in the event of drilling success at either or both of these prospects at a much reduced risk and cost to our shareholders.
The deal comes as preparations are underway for the start of drilling on the ExxonMobil led Dunquin exploration well nearby, AIM quoted Providence Resources (LON:PVR) is also involved in this programme.
Deal EOG at Proactiveinvestors preferred broker Losses can exceed your initial deposit By alfredgeorge
I was in this share a year ago and lost my pants. It's always the same old story . Sorry to say this but it ain't gonna happen. PVR is a better bet . News about to be released and it should be big. I wait in hope
By sky higher
We should include at least one John Teeling company in every TGISVP post, eh?! Believe it or not, Petrelâs been around (in one form, or another) for 30+ yrs now! This long-term chart covers less than half that period, but I think it neatly summarizes the companyâs progress â or rather, lack of progress, over its lifetime:
[Rather bizarrely, I'm reminded of Ackman vs. Herbalife (HLF:US). Unless the government targets them for being illegal (which I don't think they are, and what agency would bother), he's dead wrong with his investment thesis: Herbalife will never die, or go to zero.
Because they're selling a pipe-dream, and there's no need to bother with anything illegal when you're exploiting stupid people (read my recent Distressed post). Petrel's longevity & chart is just another reminder: There's always more suckers to go 'round... And they're all horribly co-dependent: The companies need suckers, but suckers need the companies too].
Petrel also neatly illustrates two key/overlapping aspects of junior resource stocks. First, management have v short attention spans â they get bored & frustrated pretty easily. After all, why stick to your original project, when you could be off striking exciting new deals in Africa? Why keep choking on the drilling problems youâre having, when you could just move on to something newer & shinier? Donât worry about your shareholders, they probably wonât even notice â theyâve got even shorter attention spansâ¦ And memories â I mean, they keep giving you fresh funding, donât they?!
Second, fronting a junior resource stock is all about spinning a good story â thatâs what the suckers want, some colour in their drab little lives. But over time, youâll be forced to change that story â to accommodate, or avoid, inconvenient truthsâ¦ Far better if you can just switch stories altogether â it distracts attention from previous failures, hopefully sucks in a new set of shareholders, and ideally it even captures the current zeitgeist (graphene, anybody?!).
Iâm bemused how well Petrel has surfed the waves over the years. In 2010/11, they were riding the Iraqi reconstruction wave & looking forward to being awarded billion barrel licences left, right & centre. More recently, Iraqâs been forgotten (with nothing to show for the time/effort/money expended). Why? Simple â things have come full-circle (as they tend to, every couple of decades) â offshore Irelandâs now red-hot! So thatâs exactly what Petrelâs talking up now. Just stand up at a conference, identify a billion barrel potential in your offshore Ireland licence, and the suckers will ensure an immediate quintupling of your share price! [Except fresh buyers are sitting on about a 50% loss since then, ouch...]
Once again, I value Petrel based on its verifiable assets (i.e. cash), less its estimated annual cash burn. This may be considered a rather stupid approach (Iâve been reliably informedâ¦) â but perhaps I put a lot more faith in PETâs price chart (or the large odds/money stacked against such a tiny company ever getting to a commercial reserves position). Petrel continues to look hugely over-valued.
There is a classic quote from John Teeling early in to broadcast: -
"The nature of our business is that they are explorers. So, erm, what we do is, is we take people's money and we give them hope, we give them romance and we give them mystery. We say look, you give us the money and if we are successful, and its a big if, it's a very big if, they will make 10 of 15 or 20 times their money."
PS - The Exxon well on Dunquin has a completely different reservoir objective than what Petrel have on their blocks - not that the market will care if Exxon/Providence hit big time!
Worth listening to, John Teeling from Petrel was on and Tony OReilly from PVR who are about to start drilling next to PETs Irish licence.
Things getting interesting for PET. By terrytrindler
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Gradual rise here. The only thing that worry's me here is, if a successful Farm In is announced, will PET have to raise some cashand how? Is the Ghana licence ever gonna get ratified as it runs out on 13th November.