In today’s daily we have covered stock research on DRILLSEARCH (BUY).
The S&P 500 was up by 12.86 points or 0.61% to 2122.85 on Monday. U.S. stocks ended higher on Monday, with the Nasdaq closing at a record as hopes grew that a deal would be reached to prevent Greece from defaulting on loans. Equities have been largely driven by the situation in Greece of late, with investors concerned that if the country defaults on its loans, it may have to leave the euro or the European Union, potentially shaking the region's economic foundations.
Cigna Corp rose 4.8 percent to $162.65 after the health insurer rebuffed Anthem's $47 billion merger proposal on Sunday. Anthem rose 3.6 percent to $171.04. Martha Stewart Living Omnimedia slumped 12.5 percent to $6.11 on heavy volume after Sequential Brands agreed to buy the company in a deal that values it at about $353 million, or $6.15 a share. Martha Stewart shares had risen about 37 percent over two days after news of the deal emerged. The Dow Jonesindustrial average rose 104.53 points, or 0.58 percent, to 18,120.48, the S&P 500 gained 13 points, or 0.62 percent, to 2,122.99 and the Nasdaq Composite added 36.97 points, or 0.72 percent, to 5,153.97.
Martha Stewart Daily Chart (Source - Thomson Reuters)
S&P ASX 200 was up by 13.20 points or 0.24% on Monday and closed at 5610.20 points. IOOFshares plunged as low as 21 per cent, before recovering slightly with a 13.3 per cent loss to $9.24.Seek was also heavily sold, after it released a trading update advising issues relating to upgrades to its TAFE NSW IT system will result in flat second-half earnings. The online employment and education provider's share price fell 12 per cent to $14.47.
In the retail sector, Woolworths shed 1.6 per cent to $26.86, and Wesfarmers rose 0.2 per cent to $40.27. The winner for the day was professional services company Cardno, which added 11.3 per cent to $3.43. Rio Tinto rose 0.5 per cent, while BHP Billiton fell 0.3 per cent. Gold minerNewcrest Mining's shares lost ground, but Fortescue Metals Group was up slightly. Utilities was the best performing sector, up 1.2 per cent, while the industrials sector fell 0.8 per cent.
Cardno Daily Chart (Source - Thomson Reuters)
Top Stocks ASX 200 - 22/06/2015
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Stock Of The Day - Drillsearch (BUY)
Drillsearch Energy Limited (ASX: DLS) wet gas joint venture with Santos (DLS 40%, Santos 60%) recently reported a new gas discovery at Moonanga South-1. Moonanga South-1 is the joint venture’s eighth discovery of the financial year, and was drilled a total depth of 3,177 meters. Outstanding results were noted across the Patchawarra formation across 2,597 to 3,115 meters. Emery-1 is seventh well which witnessed a gas discovery. The well was drilled to a total depth of 3.262 meters. Emery-1 is situated 10.3 kilometers and 7 km southeast of Raven-1 and Moonanga wells respectively. Moonanga South-1 is the last well as per the drill search’s FY15 eight total drilling programs. Drill search successfully completed its FY15 drilling program with a 74% success rate.
Wet Gas Business discovery (Source: Company Reports)
With regards to the company’s joint venture with beach for Ex PEL 91 (Beach 40%, Drill search 60%), Pennington-4 well at PRL 163 was cased and suspended as a future producer subsequent to the intersection of 2.5 meter Namur oil column, and 4.2 m dross bearing oil interval covering McKinlay member. The well is assessed for upside potential of Namur and Mid Namur reservoirs in Pennington Field. Moreover the well is drilled to develop the southern area of the oil bearing anticlinal structure, as intersected by Pennington-1 and Pennington-2. The JV drilling program is to drill a total of 19 oil wells during the fiscal year of 2015. Ten Bauer development wells were cased and suspended for future while three new oil discoveries and two prosperous appraisal wells were delivered.
Cooper Basin Wells (Source: Company Reports)
March Quarter Highlights
As per the March quarter highlights, the total production declined 15% to 0.67 mmboe from 0.79 mmboe in December quarter, due to delays occurred while getting development wells online and in production facilities at western flank oil fairway. DLS major production asset-Western Flank contribution also decreased during the quarter averaging 6.048 bbls/d, as compared to 6,939 bbls/d in December quarter.
Meanwhile, the development of fluid handling facilities at the Western Flank joint venture have been completed with Bauer production reaching to 75,000bbls/d, as compared to 50,000 bbls/d. Bauer 19 initial rates were also higher than expected. The company’s 50% stake of raw gas, LPG and condensate output of 0.07 mmboe decreased by 28% during the March quarter, as compared to the December quarter. The decline is mainly due to the maintenance activities at Middleton gas plant and downtime at South Australian Copper Basin JV (SACB JV).
As a result of the lower production, the group reported a revenue of $43.7 million in March quarter, which is $66.9 million lower that the December quarter. The average realized oil prices also declined to $69.9/bbl during March quarter while the firm tried to maintain strong margins of oil production at $57.5/bbl, post average total operating oil costs of $31.9/bbl. However, the company performed a huge hedging activity of an extra 420,000 bbls for FY2016/17 at $60-$85 collars, to protect its gains.
DLS March quarter performance (Source: Company Reports)
The company’s cash position decreased to $135.7 million as of March 31, 2015, as compared to $149.2 million in December 31, 2014. Cash and undrawn working capital facility was $180.7 million, indicating the firm’s strong liquidity.
Commercialization Developments
Drill search intends to be the major Material Gas supplier in the east coast markets. Accordingly, the company has developed single wells plugging to the region’s close infrastructure. Moreover, DLS intends to improve production from deriving production from Multiple Standalones. Standalones like Vaneessa-1, discoveries in former PEL 101 close to Vanessa-1 and discoveries at western wet gas (JV with Santos) have this potential.
FY2015 program (Source: Company Reports)
Conclusion
We continue to be positive on Drill search given its strong exploration wells discoveries, hedging activities and solid cash position. We believe that the company’s efforts in tapping the east coast markets is also on track. Moreover, the shares of Drillsearch posted outstanding returns of 48.4% and over 13.9% in the last six months and three months, as compared to S&P/ASX 200 returns of over 6% and (5.5%) for the same respective periods. We believe that the stock will post better full year results and continue to be bullish on Drill search.
DLS Daily Chart (Source - Thomson Reuters)
Based on the foregoing, we give a “BUY” recommendation to Drill Search at the current price of $1.17.
Level 13 167 Macquarie Street
Sydney NSW 2000 Australia
E-Mail - [email protected]
Phone - 02 8667 3147
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