Monthly Oil Stock Competition: August for >20%...& Gold, Silver, Bronze.....

In reply to marben100, post #3

You don't think it might have something to do with?:

• production growing from under 40kboepd in 2008 to 61kboepd currently, with an exit rate of 75kboepd targetted for the end of this year (100kboepd in 3 years time)
• 2P reserves growing from around 200 to close to 300mmboe in that period (2C considerably higher)
• With substantially increased production & firm prices this year, very strong cashflow can be expected.

50% of their reserves are gas - and 93% of that is in Pakistan or in a collection of projects in Asia. It isn't in the North Sea, which accounts for less than 7% of their gas. Most investors wouldn't guess that from the company name ....nor would they guess it if they looked at the pdf presentation of their Annual Results, which mysteriously fails to mention that split. Without the Encore acquisition, their reserves would have been 65% gas.

2P reserves of liquids are 149.8mn bbls (p136 of the Annual Report). Their market cap is £2.08bn, which is 25% more than Cairn Energy (LON:CNE)

IMO it is disingenuous of PMO to present all the production and reserves figures in boe terms (except for the statutory reserves table).

I think the market looks at Premier Oil (LON:PMO) as "boring" (but good value) as you do yourself.....and has baked in a premium relative to the sector for the perceived reliability of the company and its cashflows. It is my opinion that there is a risk that this unwinds sharply at some point.

I keep trying to own shares in such oily businesses (like Venture and Dana) for the long term, but they keep getting bought from me by larger players. :-/

I don't disagree with that - but I wouldn't call Premier Oil (LON:PMO) "oily". I think Premier Oil (LON:PMO) is perceived to be in the same bracket for institutions as Shell, BG,  and BP.......we know what happened when BP tripped up and I think there is a risk that this happens to Premier Oil (LON:PMO) at some point.

Whilst Cairn have been suffering due to lack of drilling success in Greenland, I think the underlying (ex-explo) business model of Cairn and Premier Oil (LON:PMO) is quite similar - and yet consider their relative share price performance:

I simply think that Premier Oil (LON:PMO) has a premium rating compared to the the rest of the sector (and its asset mix) and that this will, at some point, unwind. The upcoming results season is as likely a time for that as any.

ee

Aminex (AEX) for the 20% up for me please. Must be time for some left of field newsflow soon.

No down.

I have to agree with ee on PMO. The devil is in the details and the % of gas is worrying especially when you consider that level of debt within the company. A slide in gas revenue would be quite painful especially as they will soon have to fund rather a lot of development in the south Atlantic.

up FOGL......Loligo spud

no down

In reply to emptyend, post #4

Hi ee,

I'm afraid you're wrong or out of date re Premier's reserves. See p136 of their annual report, where the reserves breakdown is clearly stated, on a working interest basis (as at end 2011, including Encore acquisition).

Only 13% of their total reserves consist of Middle East/Pakistani gas.

They have much larger gas interests in Indonesia and Vietnam (30% of total reserves). Per their recent trading update, Indonesian gas is selling for $19.6/mcf . Their Indonesian block A field production is largely sold to Singapore (hence the high value placed on that gas).

At the start of 2011 they had 57mmbbls of oil reserves in the North Sea. Following upward revisions and the Encore acquisiton, this has grown to 115mmbbls as at end 2011. (39% of their total). Premier has a 53% W.I. in the Chim Sao VN field, producing 25-30kbopd gross, as at March 2012 (production expected to grow). Asia OIL reserves total 33mmbbls (mainly VN).

That seems to be a very different picture to that which you've painted - and a much more substantial and well diversified company than Soco (which I do not currently hold), with considerably more production and reserves growth potential over coming years. Maybe you were looking at the gross size of the Pakistani fields? Premier only has a small W.I. in those.

As a matter of interest, I asked their explo director about the prospects he found most exciting at their AGM. Though there is a major explo programme taking place this year (17 explo and appraisal wells), he said that the 2013 programme was more exciting to him, specifically Norwegian and offshore Kenya drilling set to occur then. Certainly juggling plenty of balls!

Regards,

Mark

In reply to marben100, post #8

I'm afraid you're wrong or out of date re Premier's reserves

No I'm not. I referred to p136 and I've emphasised the part of my comment that you glossed over:

93% of that is in Pakistan or in a collection of projects in Asia

As for:

That seems to be a very different picture to that which you've painted

We're both working with the same figures. p136 clearly shows that half their reserves are gas and 93% of that gas is in the Middle or Far East.

As for picture-painting, I'm merely pointing out the importance of gas to PMO - which is a point they choose not to emphasise.

a much more substantial and well diversified company than Soco (which I do not currently hold), with considerably more production and reserves growth potential over coming years.

Sure they are involved in many more places and sure they have a lot more gas. And on an oil equivalent basis they have higher production. As for reserves, lets wait and see just what SOCO International (LON:SIA) have to compare with the 149.8mn bbls of 2P liquids when they revise their reserves for the first time in 4 years.....I'm betting that SOCO International (LON:SIA) will have rather more.

Is Premier Oil (LON:PMO) worth twice as much as £SIA? Not IMO.

ee

BOR for the up please. The condensate results will be known this month (my bet is that they will be announced straight after the Olympics end) and I think will surprise to the upside. Also - just what were they doing with the Leiv Erikson rig at Stebbing - surely doesn't take that long to P&A so extensive further testing?

But speculative, and no position.

Nothing for the down, my glass is half full.

Thanks FB

dbfromgb

In reply to emptyend, post #9

Ok ee - seems a bit disingenuous though: there's a huge difference between gas in Pakistan (worth little), which is only a small proportion of reserves, and Indonesian gas that can be sold at the sort of prices quoted, due to proximity to Singapore.

We'll have to agree to disagree. Time will tell which company turns out to be worth more (cf its current SP), but PMO has many more opportunitities to add to its value. 

Cheers,

Mark

Sure they are involved in many more places and sure they have a lot more gas. And on an oil equivalent basis they have higher production. As for reserves, lets wait and see just what SOCO International (LON:SIA) have to compare with the 149.8mn bbls of 2P liquids when they revise their reserves for the first time in 4 years.....I'm betting that SOCO International (LON:SIA) will have rather more.

No disrespect you seem to set high expectations and have been wrong many times...and your reaction tends to be ahh I guess I got that one wrong etc etc etc

What are your views based on? Is there anything you know that the markets does'nt? We have had development drilling the past year or so, what makes you think researves will be upgraded rather then downgraded?

A few weeks ago I recall you saying you expected 2-3 significant events to happen very soon, since then we have had a buyout of the minority interest. What happened to the other two significant events?

In reply to marben100, post #11

Ok ee - seems a bit disingenuous though: there's a huge difference between gas in Pakistan (worth little), which is only a small proportion of reserves, and Indonesian gas that can be sold at the sort of prices quoted, due to proximity to Singapore.

Had you made that point initially then that would have been perfectly fair comment. The thrust of my own initial comment was that a) gas makes up 50% of reserves and b) the gas isn't in the North Sea (which some will assume). Out of interest, what is the % of sales revenue accounted for by Singapore?

Isaac,

Think things through yourself for a change, paying careful attention to what has been said recently and compare to what has been said in the past.

Is there anything you know that the markets does'nt?

It is patently obvious that I don't "know" anything - least of all exact timings!

However, I think I'm a couple of steps ahead of the market in working some things out. Perhaps just too far ahead, at times....

Meanwhile, I have a life to get on with.....

I don't know what proportion is sold to Singapore, but what we do know is that the average realised price for ~87mmscf/d W.I. of Indonesian gas production was $19.6/mscf, wheras ~95mmscf/d W.I. of Pakistani production sold at $4.1/mscf.

Indonesia looks like a better bet than the North Sea (price-wise), to me! Good illustration of the huge disparity in gas prices globally. Japan's nuclear issues are helping drive East Asian gas prices higher.

More detailed figures will be available in interim results due to be released later this month. 

PMG is my + 20%. News due on Platypus and done deal with DEO. Still some way to go to justify share price but has continued to hold well.
BOR my down. Recent developments have knocked sentiment badly and Darwin will have to be very positive to reverse trend.

In reply to marben100, post #15

I don't know what proportion is sold to Singapore, but what we do know is that the average realised price for ~87mmscf/d W.I. of Indonesian gas production was $19.6/mscf......Japan's nuclear issues are helping drive East Asian gas prices higher

Just out of interest, I see (p96) that Asia (excluding Pakistan) accounted for 51% of turnover and 115% of group operating profit in 2011.

What will happen next year when Singapore's first LNG terminal opens?

More detailed figures will be available in interim results due to be released later this month.

No doubt.

In reply to marben100, post #15

the average realised price for ~87mmscf/d W.I. of Indonesian gas production was $19.6/mscf, wheras ~95mmscf/d W.I. of Pakistani production sold at $4.1/mscf.

A couple of points re 2011 results; "working interest" vs "entitlements" production for Indonesia/Vietnam was 14,350 boepd vs 11,700 boepd. The above quoted $19.6/mcf is a pre-hedge figure. No poste hedge $/mcf offered, other than to note $17.3m hedge cost. That should have been simple enough for PMO to provide, especially since they published both pre and poste hedge 2011 oil realisations of $111.9/bbl reducing to $89.6/bbl. 2011 average gas realisations were $8.51/mcf. Again, no poste hedge realisations.

I note from the latest trading update that they only quote WI production figures. I don't like the way they fail to update investors over Indonesian entitlements and hedging impact on the $/mcf price. Who knows how the PSC terms will affect ongoing future production? I also see that a couple of new gas sale agreements are expected to come in force in Indonesia, focusing on local domestic supply? It all looks pretty complicated for my poor old brain but I sense the fancy Singapore gas price could be further diluted by supplying cheap local gas.

At the end of the day, PMO will be judged on its profitability and skill set to build reserves. 2011 results showed an after tax profit of $171m but when you look into the numbers, they didn't pay any tax. Indeed they benefitted from a tax credit of $30m, so pre-tax profit was $141m. How much tax would an E&P normally expect to pay on that? Is it the sort of return an investor would expect on 40,000 boepd? I don't think so. Of course, the company is in a growth phase, so one has to make allowances but for me, making a massive commitment into the Falklands is a big gamble. PMO have once before taken a big gamble 10 or 15 years ago in Far East gas which all but saw them go bust. It paid off eventually after years of travails. Will they repeat the trick in the Falklands? I certainly wouldn't bet on it because the risks are so high. The super-majors could easily bear it but they are nowhere to be seen. That in itself tells a story.

CEO Lockett sure got a fancy pay package last year....something in excess of £4m, including cash bonus, pension provision and array of bewildering share awards, albeit some of those being projected into the future but what really surprised me was the $144m wages bill for the 640 employees, including directors. That works out at an average £150,000 p.a. for every person employed by the company. The mind boggles!! I wonder if the tea lady is contracted out and not on the books? I'm a bit surprised that Marben with his ShareSoc credentials should invest in such a company ;-)

In reply to davjo, post #18

Well, rather than passively not investing, due to the directors' excessive pay, I did something about it at the AGM. See: http://www.telegraph.co.uk/finance/newsbysector/supportservices/9275980/Michael-Page-and-Premier-Oil-targeted-on-director-pay.html

My understanding is that major institutional investors are also questioning the pay package, and I note that a new chair of the remuneration committee was appointed last year. Don't worry, I will be keeping on this case. ;0)

Interim results are due shortly, so we'll see how profits are coming on. I am not expecting them to be bad.

PS quoting a post -hedge $/mcf doesn't make much sense, as only a proportion of production is hedged, so changes in production (positive or negative) have no impact on total hedging costs. Hence quoting it as a set amount makes more sense.

In reply to emptyend, post #17

What will happen next year when Singapore's first LNG terminal opens?

Even more price pressure on LNG supplies? It's already trading at $18/mcf in Asia. I'm not expecting such high gas prices to be sustained indefinitely, but then rather more oil production is due to come on stream later this year from the North Sea Huntingdon and Rochelle projects, as well as growing VN oil production.

Cheers,

Mark

fwiw  I think PTR has bottomed out and could start a new uptrend 

The ops update is interesting : http://www.investegate.co.uk/Article.aspx?id=201208130700078319J

Sounds like management are finally getting on top of production,,,,,

PTR up 18% today

Amazing that the markets take these stocks to absolutely silly levels. And in the process a lot of holders who don't understand what is going on sell out at a loss wondering what is wrong, then suddenly it becomes apparent things are going to the right direction & the stock turns around back upwards.....Which is why if you buy value and you know what you are doing then it is easier to hold.

The stocks will always mvoe up or down, logically or illogically. But as long as one has done their homework and the good news continues the stock eventually responds in the upward direction.

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