BOR’s market cap closed today at £157mln and 32.5p per share. Based on rough calcs their current cash balance after the April 84p placing should be around £50mln. That’s certainly enough funds to see them through the next phase of seismics and technical/survey planning.
There is no doubt that today’s news will have a number of interested parties on the phone. The reason is simple. Darwin is just one prospect of many in a licence area that is vast. Whilst oil is king, condensate is the next best thing and based on BOR’s data – the API is good quality stuff.
This is now officially the first potential commercial find in the southern basin. FOGL are currently drilling their own well at present and any positive news from this drill will undoubtedly light the touch paper under both stocks.
Caution is required with any maiden strike as further exploration and appraisal wells will be required before BOR can be sure of what they have at present. But BOR’s management team are experienced and if anything a quiet bunch. They do not oversell news and are generally quite conservative. Which makes today’s news all that more encouraging.
The market is harsh on failed wells these days – but by pricing BOR at 17p just a week or so ago was without a doubt 100% risk off and too heavy handed. The same could be said of CHAR on their duster with Tapir. Stock dropped from 150p to test 65p. Since then, the stock has run back up to test 127p based on impending results of second drill. These wild swings are very profitable if you time them well.
In a risk off sentiment driven market – it’s difficult to attempt a valuation measure and expect the sp to follow it. But using peers like RKH, DES and FOGL – one has to say that BOR looks like it has plenty of recovery room left before it starts to look pricey.
The ii’s that took the 84p placing – may well have had these numbers in mind. At 32.5p today, that marker is 51.5p away.
It looks like a country mile away, but sometimes the ‘correction’ phase or recovery can happen pretty fast as the market slams the door shut on the summer sales.
August 23rd 2012, Mirabaud Broker comment as follows:
This afternoon Borders & Southern Petroleum announced the long awaited results of the fluid analysis on the Darwin East well (61/17-1), which demonstrate the discovery to be a relatively rich gas condensate. Two samples were analysed, one yielding the equivalent of 123 barrels of condensate per million cubic feet of gas and the other 140, with an API gravity of between 46° to 49°. In terms of volumetrics, the company estimates recoverable condensate to range between 130 to 250 million barrels (mmbbl) with a mean of 190 mmbbl. On this basis, we believe that, subject to further appraisal, the field is likely to prove commercial on a standalone basis, with the most likely development involving stripping condensate from the gas stream and re-injecting the dry gas back into the reservoir. The next step will be to digest the abundance of technical data ensuing from the recent programme, but the results so far clearly justify further drilling and we would expect the company to seek an industry partner to help take this project forward. Given the enormous running room in the basin, as well as the number of Darwin lookalike prospects already identified, we do not believe the company will be short of potential candidates.
We therefore maintain our BUY recommendation with a target price of 100p/shr.”