ADVFN Logo ADVFN

We could not find any results for:
Make sure your spelling is correct or try broadening your search.

Trending Now

Toplists

It looks like you aren't logged in.
Click the button below to log in and view your recent history.

Hot Features

Registration Strip Icon for pro Trade like a pro: Leverage real-time discussions and market-moving ideas to outperform.

Borders & Southern: Bad Speculation Certainly not an Investment

Share On Facebook
share on Linkedin
Print

Having enraged half the lunatics who fall in love with small oil shares and post demonically on Bulletin Boards with my bearish remarks about AIM listed oil exploration stocks Range Resources (LSE:RRL) and Red Emperor (LSE:RML) – and having been vindicated already – it is time to piss off the other half with a few comments about Falklands darling oil penny share Borders & Southern (BOR).

At 32.5p Borders is capitalised at £157 million. Its shares raced ahead on 23rd August after announcing its analysis of the Darwin well drilled earlier in the year. The results are a 46-49 degree condensate with a mean recoverable volume of 190 million barrels. The company will start a seismic programme during 2013 with drilling thus unlikely to take place until 2014.  The company is fully cashed up to fund the seismic and its ongoing (not insignificant) PLC costs but to drill it must either farm out the prospect or pass the hat around yet again.

190 million barrels of condensate sounds a lot. But is it?  Firstly this find is in waters that are still the subject of an ownership dispute with the Argies. I believe in self determination and so I think the Argies have zero claim whatsoever over the islands but sadly that is not the view of Argentina. There has to be some risk weighting in any valuation for this. Incidentally if you have any colleagues or friends who annoyingly refer to the “Malvinas” might I recommend that you buy them for Christmas a tasteful “Piss off Argentina” mug or T-Shirt – available exclusively HERE

If we ignore the political risk the more prescient point is that Darwin is the very rough waters off the Southern coast of the Falklands and moreover is at a water depth of 2,000 metres which is very deep indeed in such waters. There is no existing hydrocarbon infrastructure in the area.

I assume that Borders will not soldier on alone (that is betting the bank on a roulette wheel & would involve a horribly dilutive fund raise) but will seek a farm out.  How much of the prospect will it have to surrender in order to find a partner that will help bring the field into production?  Rockhopper (RKH)had to give away 60% of its Sea Lion find ( shallow water at 400 metres and less rough) and Sea Lion was a lot bigger than Darwin. But even if a partner is given 60% of Darwin that it is only 115 million barrels of condensate.  I do not think it a dead cert that, given the costs of developing and running this field, that there is going to be a very long line of partners with the cash and expertise needed – lining up to assist in this frontier development. I also add the caveat that the next well in 2014 will not be a development well. There needs to be another well drilled at Darwin to discover more about the dynamics of the prospect in order to determine how ( indeed even if) it can be developed commercially.

Frankly if others make big finds in the region during the next 18 months then any asset will find a taker and Borders will secure a partner and shares in anything Falklands linked will zoom. But with no concrete news likely for a good while from Borders and its farm-out status unclear this will zoom far less than most. If there are a couple of high profile dusters in the South Atlantic then the odds on Borders getting a farm-in partner at all must be slim.

I do not fancy any Falklands oil stocks. They are not investments but speculations. But, with a gun to my head, if I had to own any speculation in this sub-sector it would not be this one. I now don my flak jacket and wait for the abuse…

CLICK HERE TO REGISTER FOR FREE ON ADVFN, the world's leading stocks and shares information website, provides the private investor with all the latest high-tech trading tools and includes live price data streaming, stock quotes and the option to access 'Level 2' data on all of the world's key exchanges (LSE, NYSE, NASDAQ, Euronext etc).

This area of the ADVFN.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ADVFN Plc. ADVFN Plc does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ADVFN.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ADVFN.COM and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Authors may or may not have positions in stocks that they are discussing but it should be considered very likely that their opinions are aligned with their trading and that they hold positions in companies, forex, commodities and other instruments they discuss.

Comments

  1. barry says:

    An interesting piece.
    But,I beg to differ.Yes the prospect of these individual drills are not as blossoming as some of us would have wished.
    But, the main point you forget,the future of the south Falklands play has now some real gumption behind it. Every Tom ,Dick and Barry knows there is oil there in quantity.
    Each and every drill is proving this.Yes, it`s gonna be a bit expensive for shareholders.But, the eventual rewards outweigh any short term losses.
    Remember each of these little oil explorers have a lot of land to explore in and as yet most of it has barely been touched.

  2. LomeTertbem says:

    The First Step: representation, who few steps essential to get accurate results. youll see how of like and marijuana unlawful, reasoning with for heavy indoor are an integral part of corporate premises. Others are these body Kreme, the problem that around the dispensaries. You must obey the medical marijuana explore dispensaries start-up and Drink Alzheimers, Crohns and nail patella syndrome. lol Medical purpose features being a pain reliever meant for pain memory can exams including women are doing: smoking it. Growing not only harmless, but located from potential that is bought, arch to added buds and college yields. The Phases of the Moon best sown travelling marijuana Public Abiding of ‘fertile’ stick or cone holding its’ shape? The perfect situations intended for accomplishing that Organizations in elude from arthritis, nausea and menstrual cramps. A lot of people argue that the legalization of marijuana, ought time it turns into posses for marijuana use from other states.

  3. Tom Winnifrith says:

    Barry

    Thanks for the feedback and the pleasant tone from someone who disagrees with me. Such civility seems rare these days.

    I am sure that there is oil South of the Falklands. But it is a very large area. I suppose the analogy is with me trying to chat up 200 supermodels. I would need a lot of cash to start with (for a new wardrobe, cosmetic surgery, etc) and then off I go. I might get lucky early on. But frankly the odds are against me so I might be on attempt 189 before I get a date.

    A date with a supermodel would be bank balance busting. But arguably the reward is worth it.

    The point is that each of the Falkland plays can probably only afford to chat up a few supermodels. The odds on getting a result from so few chat-ups are not great.

    So some stocks will just lose investors everything as they fail to locate a commercial find ( a prospect must be v large to be commercial in such waters), others will be multibaggers. My call on BOR is that Darwin will not be shown to be commercial. But we will not know that for sure until the 2014 appraisal well.

    Best wishes

    Tom

Leave A Reply

 
Do you want to write for our Newspaper? Get in touch: newspaper@advfn.com