I have recently made a small investment in Ophir Energy (LON:OPHR) , thanks to @WShak1 alerting me to the price drop following the placing by early investors Och-Ziff and Mittal. As it turned out, this was shortly followed by a large rights issue, which I shall be happy to take up.
Ophir has been on my radar for a while, as a highly successful explorer, with some interesting assets. That price drop presented an opportunity to enter at what appeared to me to be an attractive price.
The rights issue prospectus (341pp) has provided me with an excellent source of information on the company, so I've been ploughing through that. Key information on Ophir's assets is presented on pp96-129.
I have digested this into a spreadsheet that investors may find useful (click for a readable version!):
The spreadsheet shows "official" 2C contingent recoverable resources for each block or group of blocks, and unrisked in-place management estimates of block potential (both on a net to Ophir basis). It also shows when drilling or other activity is expected for each.
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With over 4.5tcf of discovered recoverable resource already; a massive lead inventory (totalling over 18bn boe), as the spreadsheet shows; and around a $1bn of cash following the rights issue, Ophir looks like an interesting company to follow - though speculative.
There should be short-term interest, with DST results on two wells due shortly and two new wells due in Tanzania's Blocks 1, 3 and/or 4 in the coming quarter (Apr-Jun). Ophir's fund raising and resulting strong balance sheet strengthens its negotiating position for the many farm-downs that the prospectus indicates Ophir is aiming for.
I look forward to newsflow with interest.
Mark
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Ophir Energy plc is an independent oil and gas exploration business with a focus on Africa. The principal activities of the Company are exploration for oil and gas, predominantly in deepwater acreage in eight jurisdictions in East and West Africa. The company has a diversified portfolio of assets across East and West Africa comprised of 20 licenses, 18 offshore and 2 onshore, located in 10 countries including Tanzania, Kenya, Equatorial Guinea and Gabon. During the year ended December 31, 2012, the Company drilled six exploration and two appraisal wells. In February 2012, the Company acquired Dominion Petroleum Ltd. As of December 31, 2012, the Company completed three-well exploration programme in Tanzania with joint venture (JV) partner BG Group. As of December 31, 2012, the Company acquired ten new seismic programmes and four new deepwater licenses, covering 13,000 square kilometer and 17,916 square kilometer respectively. more »
6 Comments on this Article show/hide all
The big question here is why the rights issue. vs farm down?
Och-Ziff and Mittal obviously sold prior to rights to raise funds so they could take up rights issue.
They could have just wanted to keep high % interest as they have great belief in assets but more likely they couldn't convince a major to farm-in on reasonable terms. If the latter then one wonders why not? Obviously the value is in unlocking the huge prospective resources but if third party thought they were this good they'd have farm-ed in like a shot and OPHR would have avoided dilution. Can't be that dilution route was preferred by OZ and Mittal because they would have put more money in.
Looks like an excellent company but all comes down to how much they can prove up through appraisal drills so next few wells are key.
Log
In reply to loglorry, post #1
Studying the prospect inventory, it is clear that they need to do both! $1bn doesn't go very far drilling all that acreage on a sole (or main) risk basis.
It appears that the company doesn't want to farm down Blocks 1, 3 and 4 further at this stage - which seems sensible, given the degree of derisking that has already taken place. However, block 7, East Pande, the Kenyan blocks, Block R (EG) and several others all need farming down before drilling.
One reason that I wouldn't take too large a position is the one I alluded to in this article. Whilst LNG prices appear sound in the near/mid-term there is more uncertainty longer-term, which makes undeveloped gas assets in particular very hard to value. In that respect, it is interesting that the Block R development can possibly be done in a "brownfield" manner, expanding an existing LNG plant.
Would help matters if some of the potential oil prospects actually materialise!
Cheers,
Mark
Yep I think Bowleven looks cheaper on a price per contingent bbl and much more chance of some liquids there too. I know not really comparing like with like though. Also there is a lot of gas in Kurdistan which could get unlocked quite quickly via a Turkish pipeline. That could put a lot of pressure on European gas prices and thus pressure on LNG. India D6 gas price agreements could unlock a lot more there too. I think gas has a very bright future as coal and nuclear replacement but I'm not sure at what price.
Log
I have updated the timetable in the asset inventory linked in my original article to reflect the update that Ophir have issued this morning. The update is mixed, but I regard it as overall positive.
The only negative is that only one well will be drilled in Block 4 this quarter, instead of two previously planned. Positives:
Cheers,
Mark
Just announced: http://www.investegate.co.uk/ophir-energy-plc--ophr-/rns/notification-of-board-changes/201304260856413262D/
Alan Booth to join Ophir's Board as an NED. Nice!
Mark
Another positive update this morning: the current drillship has been re-contracted, bringing several wells forward. I have updated the timetable shown in the asset inventory linked in the header to reflect this.
Next news we need to hear (besides drilling results from Ngisi) is farmout, especially in relation to Tanzania Block 7. With 80% ownership by Ophir at present and a well now scheduled for Q4 this year, I wouldn't want the company to blow a big chunk of its cash on that prospect, on a sole-risk basis.
Lots of drilling news to come over the remainder of 2013!
Cheers,
Mark