DEO Petroleum - A new North Sea Player with an experienced team
So the news is out.
Deo Petroleum has announced the acquisiiton of the Perth Blocks from Nexen along with a £16m funding issue at 45p.
Deo has effectively backed into an old cash shell with the highly regarded technical team from Oilexco. Between them they have a wealth of experience in the North Sea and especially subsea developments.
This is the first deal for the company and looks like a very interesting outfit.
Those ex Dana holders may notice that the other big partner in the block is PetroCanada, which of course has now been acquired by Dana and now KNOC.
From the RNS::
Perth Assets
The Perth Assets comprise a 42.08 per cent working interest in certain Licence
Areas in the UK Central North Sea. The Perth Field Development is located
approximately 185km northeast of Aberdeen in a water depth of 127m (450ft).
The discovery well 15/21a-7 was drilled in 1983 and tested oil in the Claymore
sands of the Upper Jurassic Kimmeridge Clay Formation. Three subsequent
appraisal wells (15/21b-47, 15/21b-49, 15/21b-56) and one sidetrack (15/
21b-47y) were drilled by Hess between 1992 and 1997. The wells were production
tested at rates varying from 1,000 to 6,000 bopd, all with H2S content
(2,500-8,500 ppm) and CO2 (25-42 mol per cent.) in the associated gas.
The Perth Field Development has subsequently been divided into four main areas
by an east-west fault to the north of the three appraisal wells and a
north-south fault zone between these wells and the discovery well. The areas
are referred to as:
• Perth Core - the three appraisal wells and one sidetrack
• Perth North - undrilled
• Perth Beta Terrace - discovery well 15/21a-7
• Perth Beta East - undrilled
Total 2C contingent resources of 20.6 MM boe have been identified for an
initial Perth Core area development. AGR TRACS define a development chance of
commerciality of the Perth Core area at 60 per cent. This, however, will change
if partner intent and commitment to develop becomes apparent.
Summary
In summary, the Board believes that the Acquisition provides the following:
• total 2C contingent resources for an initial Perth Core area development of
20.6 MM boe;
• two possible development options: tieback to Tartan platform; or use of a
FPSO;
• other prospective acreage (Perth North, Perth Beta Terrace, Perth Beta East,
Dolphin, Sigma and Gamma) which forms part of the Licence Areas being acquired;
• the opportunity to submit an FDP as operator to DECC; and
• ability to potentially achieve first oil production by January 2013.
Further details in relation to the Perth Assets can be found in CPR contained
in Part III of the AIM Admission Document.
Special Offer: Invest like Buffett, Slater and Greenblatt. Click here for details »
There are two main development options, through a tie back to Tartan or an FPSO.
The "easiest" option is obviously the tieback though an FPSO brings in more value for further development of the other areas such as Dolphin, Sigma, Gamma and the other Perth areas.
This is sour and horrible stuff but there shouldnt be any problem with a tie back through Tartan given how they're set up and is no "biggie" these days.
The problem with developing Perth previously has been as a result of the limited ullage at Tartan but with production there declining this is now an option.
One intersting one to follow me thinks.
Disc - we took part in the placing.
EDIT - Here's a link to the pathfinder prospectus with lots of information on the development and assets.
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84 Posts on this Thread show/hide all
In reply to Fangorn, post #64
Dunno, but I decided to make a small top-up. Seems like a good time to be deploying some cash, with Mr Market getting jittery. :0) Still a punt for me, but might be a gift horse... or a Trojan horse! We'll see.
Was all a bit of a surprise to me too, and a perfect opportunity to take a nibble. Not been filled though as I had a limit buy in place earlier today at 44.5, and I see it's started a small recovery.Long, prior to this, unfortunately at 60P!
Following the announcement by UKGov of an increase in RFES from 6% to 10%, I have had a go at calculating the additional benefit, in capex allowances against tax, to DEO based on the FPSO development option for Perth.
Using Edison Research's estimate of capex for the FPSO development option of £118m, we have:
2010: £10.5m acquisition etc (per b/s intangible fixed assets)
2012: £32.0m )
2013: £86.0m ) - my rough estimate of the split
Total £128.5m
Applying RFES at 6%, I make the compounded total, up to and including 2016, £166.3m whereas
applying RFES at 10%, the same calculation yields £196.1m.
If DEO's 42.08% Perth equity stake equates to an increase of £29.8m, then the whole development benefits to the tune of ~£71m in extra tax allowances.
I understand that the RFES has a 6 year life, plus any year(s) in which it is nominated not to be used in the tax computation, DEO shouldn't be paying any tax for a while longer beyond 2015 (DEO final results stated no tax would be payable until at least 2015, ans this was pre-UKGov tax raid).
Seems to be a bit of activity here over the last couple of days. I appreciate it is rather illiquid, and was pretty oversold, but yesterdays 11% jump, and today's 9% jump might be more than just the impact of bargain hunting one hopes. Not been one of my better investments it has to be said.
The rise is meaningless - just like the preceding fall. Volumes traded represent the cost of a Pret sandwich.
The rise is a reaction to minuscule trades prompted by an intricate and profound analysis published on TMF yesterday. (That's a joke by the way, but many a true word....)
Deo is easy to understand. They have 2 assets. The submission of a FDP for the operated asset should logically trigger a rerating sometime soon - back to IPO price? But they will then need to raise cash to progress. Given the tiny size of the company and the illiquidity of the shares, I'd expect any fund raising to be at the same price as the IPO - no point issuing cheaper/dearer shares. I'd imagine that to be done year endish. real change in the SP will follow the fund raise in the run up to development next year.
The second non-operated asset ought to generate drilling plans for next year. It is free carried at this stage. Effect on DEO SP should be one way bet but timing of positive influence remains to be seen.
I value the shares at about 100p at present but don;t expect that level to be achieved until next year by which time value will be higher - so moving target.
I am entirely relaxed about the SP - my holding is safely tucked away for the long term.
T
In reply to tournesol, post #69
Tend to agree T but clearly Paul Curtis's buying has moved the market somewhat.
Thanks for the comments T. Have a few tucked away, in the bottom drawer - unfortunately bought at 60p, but as I'm here for the long term might add a few more if it weakens again.
So, as the September 30th deadline for the FDP submission looms, it's looking like a case of right place, wrong time for DEO.
After enquiring with DEO's IR, I'm expecting the submission to be on track and probably an RNS to that effect at some point in the next week or so. All good so far.
Unfortunately, they're going to have to raise funds and it doesn't look to be a good market for it at the moment.
Tournseol said:
I don't see the point in issuing cheaper shares either - other than I can't imagine they will be able to raise cash at 45p! ;-) With the submission only ~1 week away, it's unlikely it will wake the market up. Perhaps I'm still a little naive to think that "the market" would have noticed this deadline by now (and I noted a similar lack of response to first oil at TGT for Soco).
That's not to say I didn't make a typically badly timed double-up last week at 38p though ;-) I think this could really be "tuck away and don't look in the interim" stuff for me.
Just looking the Parkmead , PMG , Tom Cross , connection . Cuba Steve
In reply to cubasteve, post #73
Cubasteve
say again?
T
DEO is in a agreement to work together in the North Sea , with PMG , Parkmead . Tom Cross is the Boss and he was the same with Dana Petroleum . Sold at 1.8 Billion . Read the article above and you will see the connection . My personal tip is buy PMG at 0.12p . Cuba Steve
CubaSteve
I still don't understand what information you are seeking to impart:-
- that Dana was taken over last year?
- that Cross was CEO of Dana?
- that Cross is CEO of Parkmead?
- that DEO and PMG have in mind some collaborative relationship - albeit without any actual practical application to-date?
- that you regard PMG as an attractive investment opportunity?
I'm afraid that all of the above except the last one are not just old hat, they are ancient, threadbare, historical head-gear. I'd doubt there is a single Stockopede (or even a married one, or one in a civil partnership) who is unaware of those factoids or has anything less than a good understanding thereof.
As for the last point - that you fancy PMG as an investment - I grant you that is new, but it is not, of itself particularly compelling. Might I suggest you either
a) explain why you think PMG is attractive at its current price - including your thoughts about the valuation of its assets/portfolio vs its market cap/EV
b) seek counselling
T
" My personal tip is buy PMG at 0.12p "
Hmmm........market cap @ 0.12p = £0.72m
I think anyone might be tempted to buy at that price :-)
http://www.investegate.co.uk/Article.aspx?id=201111160900031708S
Perth Field Update - DEO/Atlantic/Faroe "to assume" Maersk's interest (19%) in the Perth Field.
No mention of any consideration paid.
No mention of any consideration paid
Deo spent £10.5m in acquiring their 42.08% of the asset and planned to spend £1.5m in producing the FDP, so Maersk's 19.12% has a read-across value of ~ £5.45m.
At 30.6.11 Deo had £2.35m cash and £1.5m invested in a bank deposit account with a maturity date of 7 September 2011.
Deo's use of the £16m placing funds was listed in the Admission Doc:
-£10.5 million, being the cash consideration payable to Nexen for the Perth Assets.
-approximately £1.2 million in respect of transaction costs;
-approximately £1.5 million, being the Company’s share of the costs to produce the FDP
-£2.8 million for general working capital purposes and to continue to develop its oil and gas strategy by seeking out and appraising further business opportunities as appropriate.
No room then to pay anything to Maersk, unless there's another placing about to be announced.
Rather muted "end" to Deo it seems.
http://www.investegate.co.uk/article.aspx?id=201205281617422543E&fe=1&utm_source=FE%20Investegate%20Alerts&utm_medium=Email&utm_content=Announcement%20Alert%20Mail&utm_campaign=Parkmead%20Group%20%28The%29%20Alert
29.5p/sh Equiv(2 PMG shares per 1 Deo)
In reply to Fangorn, post #80
PMG is down on the news so it's not even worth 29.5p anymore!
The nightmare scenario comes true!
Indeed it does.
Smells of a stitch up given PMG effectively have 56.3% of vote in the bag. Hate these scheme of arrangements. Still, I suppose it frees some cash to plough into GKP!
In reply to peterg, post #81
The markets always take some time to assess/evaluate these deals. Would be very surprised if Parkmead did not move up over the next few days/weeks, and if Platypus does come in then both Parkmead and DEO holders may be happy.
Does look like a lousy deal, given that DEO shareholders' shares are massively diluted by PMG paper. DEO shareholders will only have an ~15% interest in the combined group, by my reckoning.