Lansdowne Oil & Gas, and Primeline Energy Holdings

‹ England’s Ashes

WTI $106.18 -32c, Brent $107.55 -99c, B/WTI Diff – $1.37 -67c , Natural Gas $3.31 -1c

Good morning

Another quiet summers day with virtually no news, so it’s a short blog as I’m off for more lead and Zinc with North River Resources which is definitely worth a look at if you do that space.

Oil Price

Even the traders are getting bored in the oil market now, resorting to flimsy excuses such as ‘activity in the front spread in Brent as we approach expiry’ and ‘more strength on the brt/dub boxes’ but overall its tired.

In the US the API inventory stats showed a draw of 3.66m barrels which was miles away from the consensus of 700,000 barrels, at least they got the sign right…..EIA numbers tonight might shake things up a bit.

I know I bang on about this, and I know it’s not going to change overnight but headlines like the one on the front of the FT, “Iran offers ‘serious ‘negotiation” can only remind us that at some stage it is possible that some or all of Iranian crude oil may make its way back to the market place. When that happens there are going to be some serious ‘negotiations’ within Opec to decide who takes the output cuts, otherwise its 20 bucks off the oil price before you can say quotas.

Lansdowne Oil & Gas

We had an excellent meeting with Stephen Boldly, CEO, and Emmet Brown Business Development Director, of Lansdowne Oil & Gas recently and feel that this is a company that is seriously undervalued and with a skewed shareholder list that might benefit from more institutional holders.

Focused on the North Celtic Basin and with a good mix of discovered resources and adjacent exploration potential, all in shallow water, the upside potential is substantial. Key to the success of the company, and its valuation is of course, Barryroe where Lansdowne has 20% alongside Providence Resources. There is a farm-out going on with this property at the moment and assuming even a conservative valuation and at the base case estimate, one might assume that in addition to back costs and a carry through to production, Lansdowne might get well more than their current share price for half of their 20% stake.

Lansdowne has an envious acreage portfolio in the cretaceous oil play fairway including the highly prospective Amergin prospect where they hold 100%. The company is also well represented in the cretaceous gas play with acreage licenced and under option adjacent to the Kinsale Head gas field. These include the Midleton prospect and the Galley Head gas field as well as Rosscarbery and SE Rosscarbery.

Lansdowne is suffering from the same problem as Providence in that so far the value of their primary asset has not been printed, with all the potential that the company has I believe that 40p is ludicrously cheap and I expect a much higher valuation to be achieved in the coming months.

Primeline Energy Holdings

I took part in the roadshow for Primeline a few weeks ago and those who saw it were almost all gobsmacked, ‘where’s the catch’ they asked. Herewith is our initiation on the company, as usual please ask me for a copy of the note and I will send it to you if I can. Below are the key points from the note by Dougie Youngson and Joe Stokeld.

Primed for Production

Our analysis shows that upcoming gas production from Primeline Energy Holdings’ (PEH) LS 36-1 field, in the East China Sea, could generate C$33m of operating cash flow in the 2014 financial year. The company is intending to use this asset as a cash engine to part-finance an aggressive exploration campaign in the prospective Lishui Basin, where we anticipate two wells could be drilled in 2014.

Overlooked and Undervalued

Chinese companies listed in North America have suffered over the past year, in the wake of the Sinoforest corporate governance scandal. In Primeline’s case, this has been compounded by perceived slow progress at LS 36-1 due to the lack of final government approval to commence production. In this report we discuss how, behind the ambivalence in the market, the development is on track, and the company’s assets offer solid upside now first gas is approaching.

Exploration Could Extend Project Life

As the only foreign gas developer in the East China Sea, PEH offers a unique play on an emerging hydrocarbon province. CNOOC is the operator for the development and has carried the company through to the current stage, allowing PEH to focus its attention on wider exploration prospects in the Lishui Basin. If successful, we feel any new discoveries could be tied back to LS 36-1 and monetised relatively quickly.

Recommendation and Target Price

Our sum-of-the-parts analysis uses the company’s overall development plan as a base-case scenario. This yields a value of C$104m, which gives a fully-diluted target price of C$0.86/share. This excludes the potential value of the company’s possible reserves and any exploration potential outside of the existing resources. We initiate coverage with a BUY recommendation and C$0.86 price target, to which PEH trades at more than a 50% discount.

And finally…

Suarez definitely wants to leave the Hub Cap Stealers for a side that is in the Champions League, no surprise there then….

Tony Parmesan has been nicked for drunk and disorderly and worse outside a nightclub in Brighton

And Harry Redknapp is slowly whittling down his unwanted players, today its Taarabt off to Fulham on a seasons loan.

Great win for Surrey last night at the fortress Oval against Somerset, Batty went well……..Batty!