Stock’s Details

Otto Energy Limited

Substantial Cash Flows Expected in Near Future: Otto Energy Limited (ASX: OEL) is engaged in oil and gas exploration, development, production and sales in North America. The company recently updated that production from the Green #1 well on the Lightning field in Matagorda County Texas, reached a steady state after completion of final facilities. The company has a 37.5% working interest in the leases covering the field. In addition, the company updated that the Thunder Gulch #1, the initial exploration well, testing the Mustang prospect reached the final intermediate casing point.

Highlights of March Quarter: During the quarter ended 31 March 2019, the company’s oil and gas sales totalled to 127,940 bbls of oil and 303,790 Mscf of gas. Cash received from the sale of its share of oil and gas during the quarter amounted to US$7.7 million, before royalties and operating costs.


Production Data (Source: Company Reports)

At the end of the quarter, the company had a closing cash balance of A$6.0 million. During the quarter, the company raised capital amounting to A$31 million through a placement and underwritten 1 for 5 rights issue.

Outlook: The company expects to generate substantial cash flows from the sale of steady production from its 50% owned SM 71 oil field in the Gulf of Mexico.

Stock Recommendation: The stock of the company generated returns of -3.92% and -12.50% over a period of 1 month and 3 months, respectively. The Lightning field development taken up by the company represents a major milestone in fulfilling its goal of becoming a successful oil and gas producer in the Gulf of Mexico. The company is making continuous progress towards its strategic production goal of 5,000 boepd by the end of 2020. However, we are yet to see how production from the Lightning field or exploration at Thunder Gulch #1 well will unfold into future earnings. Hence, we put our wait and watch stance on the stock at the current market price of $0.047, down 4.082% on 17 July 2019.
 

Tasman Resources Limited

New Joint Venture with Fortescue Metals Group: Tasman Resources Ltd (ASX: TAS) is primarily engaged in mineral exploration activities.

Recent updates from Eden Innovations: The company through its wholly-owned subsidiary, Noble Energy Pty Ltd, holds 37.49% of the total issued capital of Eden Innovations Ltd. As on 28 June 2019, the investment had a market value of $22 million. Eden Innovations recently updated on the approval of EdenCrete® and EdenCrete® Pz by NTPEP. Eden can now apply to all the U.S State Departments of Transportation for both the products to be added to their Approved Product Lists, growing penetration into the huge US infrastructure markets.

Highlights of June Quarter: During the quarter ended 30 June 2019, the company signed a conditional farm in and joint venture agreement with Fortescue Metals Group for its wholly owned Vulcan and Vulcan West Project EL 5499. Under the agreement, Fortescue will initially earn a 51% interest in EL 5499 by funding A$4 million plus GST in the form of exploration expenditure within a 3-year period.

During the half year ended 31 December 2018, the company generated revenue amounting to $1.47 million in comparison to $0.86 million in the prior corresponding period.The period also saw improvement in loss from $5.81 million in 1HFY18 to $4.49 million in 1HFY19.


1HFY19 Income Statement (Source: Company Reports)

Stock Recommendation: The stock price increased drastically in the time frame of the past one month, reporting returns of 170.37%. The stock has zoomed 30.36% in the last one week as at July 16, 2019 and is trading slightly below the average of 52 weeks high and low levels of $0.065. The extraordinary returns on the stock over such a short time period was due to various positive news flows. Going forward, we need to see the conversion of these positive factors to the earnings. Progress of the JV agreement will be keenly observed by the market participants to assess the outcome. Hence, In the view of aforesaid factors, we have wait and watch stance on the stock at the current market price of $0.064, down 7.246% on 17 July 2019.
 

Arafura Resources Limited

Nolans NdPr Project in Limelight: Arafura Resources Limited (ASX: ARU) is engaged in mineral exploration and development. The company recently updated that it had completed its fully underwritten non-renounceable 7 for 20 pro-rata entitlement offer to raise ~$23.2 million. The Entitlement offer closed on 12 July 2019, wherein the company raised a total of $8.1 million before costs, at an offer price of $0.085. The shortfall will be raised from underwriter and sub-underwriters, which will total to $15.1 million.

Funds from the entitlement offer will be majorly utilised for further development of the Nolans NdPr Project & exploration and metallurgical program for increasing the mine life of Nolans Project.

The company has also come up with a plan to further advance exploration of the Jervois Vanadium Project, held in 60:40 joint venture between Arafura Resources and Thor Mining.

March Quarter Highlights: During the period, the company achieved robust project economics from Nolans definitive feasibility study. As per the study, the project assures financially and technically viability & is expected to have a long-life operation. Annual NdPr production from the project is anticipated to be around 4,357 tonnes at an ultra-low cost of US$25.94/kg. Average EBITDA from the project is expected to be A$377 million p.a. Based on ore reserves, it has a mine life of 23 years.


Key Highlights of DFS (Source: Company Reports)

Outlook: As per independent forecasters such as Roskill, there are predictions about a 10-year price for NdPr oxide from 2020 – 2030, to be as high as $150/kg. In U.S. dollars, price is expected to be in the range of US$66 to US$90/kg.

Stock Recommendation: The stock of the company generated returns of 56.62% and 97.34% over a period of 3 months and 6 months, respectively. The outlook for the expected price range of NdPr oxide suggests favourable outcomes for the company’s Nolans NdPr Project. The decent results depicted by the definitive feasibility study signifies the projects’ long-term viability. The company is continuously working towards the development of the project and is well-positioned to feed into the forecasted NdPr supply shortfall with project commissioning targeted in 2022. Given the backdrop of the above factors and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.092 per share as on 17 July 2019, reporting no change on the previous trading session.


Comparative Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.