Carnarvon Petroleum Limited

A Look at The Recent Update:Carnarvon Petroleum Limited (ASX: CVN) is into the business of oil and gas exploration, development and production. The market capitalisation of the company stood at ~$593.71 million on 8^th October 2019.
Carnarvon Petroleum Limited announced that the Dorado-3 appraisal well successfully confirmed that the Caley reservoir is capable of delivering oil at significant production flow rates. The well test was conducted over an approximate 11 metre section of net Caley reservoir, between 3,999 and 4,015 metres Measured Depth. The test indicates very high potential flow rates of around 30,000 barrels per day from each production well in the Caley reservoir.

The results were also achieved with only a 220 psi drawdown and, as with the recent Baxter test, the Caley flow rate was constrained by the capacity of the test equipment on the rig.
 

 Map of WA-437-P showing the Dorado Field (Source: Company Reports)

Completed Baxter Flow Test in Dorado-3: Santos announced that the multi-rate flow testing of the Dorado field in the Bedout Basin, offshore WA, has confirmed excellent productivity and fluid quality from the Baxter gas and condensate reservoir.The now completed Baxter formation flow test was the first of two planned for the Dorado field, with testing of the primary Caley oil reservoir to be undertaken in the coming weeks. Preliminary interpretation of the well test points to reservoir quality and condensate gas ratio better than initially expected, which will result in higher well deliverability when the field is developed.

Carnarvon Successfully Signed A PSC: Carnarvon Petroleum Limited has provided an update on the Buffalo project following the signing of Production Sharing Contract (PSC) and ratification of the Maritime Boundary Treaty (MBT) by the governments of Australia and Timor-Leste.

On 6 March 2018, the governments of Australia and Timor-Leste signed the MBT that altered the maritime boundary between the two countries affecting the WA-523-P permit in which Carnarvon has 100% equity. The WA-523-P exploration permit has now been split in two with a portion (including the Buffalo oil field) changing from its Australian jurisdiction to being exclusively in the Timor-Leste jurisdiction.

Following extensive negotiations with the governments of Timor-Leste and Australia, and in consultation with the respective government regulators, Autoridade Nacional do Petróleo e Minerais (“ANPM”) and National Offshore Petroleum Titles Administrator (“NOPTA”), Carnarvon successfully signed a PSC confirming ongoing title to the Buffalo oil field and the surrounding exploration acreage.

Stock Performance:Currently, the stock is trading slightly below the average of 52-week high-low level of $0.625-$0.305, indicating a decent opportunity for accumulation. Its asset to equity ratio stood at 1.02x. The company’s current ratio stood at 34.66x in FY19, which is higher than the industry median of 1.21x. Thus, it looks like the company has a decent standing when it comes to liquidity levels and it can meet its short-term obligations in a better way than the broader industry. Hence, in view of aforesaid parameters and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.400 per share (up 5.263% on 8^th October 2019).

 
Cooper Energy Limited

Highlights for FY19:Cooper Energy Limited (ASX: COE) is an upstream oil and gas exploration and production company whose primary purpose is to secure, find, develop, produce and sell hydrocarbons. The market capitalisation of the company stood at ~$916.18 million as on 8^th October 2019.

The company reported a sales revenue of $75.5 million, up by 12% due to higher revenue from gas sales.Statutory loss after tax came in at $12.1 million after significant items of $25.4 million. 5 new gas agreements negotiated for supply to AGL Energy, Origin Energy, O-I and Visy from Casino Henry and Sole. The sole term contract capacity has been committed to 2025.


Financial Highlights (Source: Company Reports)

COE Abandons Annie-1: COE advises the abandonment of successful well, Annie-1, has been completed and the Diamond Offshore Ocean Monarch drill rig has been released.The abandonment of the well was delayed due to the failure of 2 of the drilling rig’s 8 mooring chains. The release also added that planning is underway to secure a rig for an offshore Otway campaign in which Elanora could be drilled. It is expected, subject to rig and equipment availability, the campaign could commence in FY21.

Stock Performance:On the stock performance front, it produced positive returns of 6.60% and 16.49% in the last three months and six months, respectively. Currently, the stock is trading slightly above the average of 52-week high-low level of $0.685-$0.390. The company has a debt to equity ratio of 0.49x. It has a current ratio of 3.30x, which reflects an improvement from FY18 figure of 2.15x. Hence, in view of aforesaid parameters and current trading levels, we give a “Hold” recommendation on the stock at the current market price of $0.555 per share (down 1.77% on 8^th October 2019).

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