The Oil Man: Faroe, Ascent Resources

WTI $63.37 -14c, Brent $68.02 -10c, Diff -$4.65 +4c, NG $2.72 +2c

The weakness I mentioned yesterday at the start was abruptly turned around by a good set of EIA inventory stats. The draw of 4.62 million barrels was better than expected by a margin and having been a buck 50 down crude recovered to close almost level.

Faroe Petroleum

DNO has announced that having bought the Delek stake of 15.37%, it then further acquired 10% through a reverse book building process and clearly found sellers over and today announces that it has bought another 2.32% all at 125p. This takes their stake to 27.68% and I assume that they are still ‘supporters’ of the management.

Faroe (FPM) has announced that they have had no discussions with either DNO or Delek regarding these moves and that 125p a share ‘substantially undervalues’ the company.

It is perfectly possible that DNO will keep their word and not go hostile in this respect but it has made a canny move in getting the first lump (presumably 29.9% after other loose holders are removed) at this price.

Now I have been criticised before for accusing shareholders for selling out early and on the cheap in these battles and I do understand markets and why holders sell out so early.

I also believe that Faroe is one of the sectors finest explorers and has a track record second to none, ironically showed by yesterday’s discoveries at Hades and Iris.

The market is indeed the arbiter of such values but the short termism of some shareholders with regard to a business that has been built up over many years is bewildering, DNO have the first part of the deal at 125p, they will have to pay much more for the rest but have secured base camp very much on the cheap…

Ascent Resources

A profit warning from Ascent (AST) this morning although really only an operational update that highlights some technical down hole problems that cut production in March. Pg-11A was shut in for a large part of the month due to work to remove a choke and stuck tooling, it was put back on production on the 28th March but flow rates and pressure are not yet fully recovered and are “unlikely to be clear for some time”.

March production was 43.9 MCF after February’s 63 MCF showing the shortfall although better news is that the gas price has increased substantially. Further good news is that the IPPC studies are to be submitted tomorrow. Shareholders are likely to be disappointed by this news but Ascent has a strong franchise and given time will prove rewarding, glitches like this happen and should not be overly punished.

And finally…

The HubCap Stealers went to work early last night and taking a 3-0 lead back to the Etihad is probably beyond their wildest dreams. Careful work next Tuesday should result in a semi-final spot where Real, Barca and Bayern will likely await them but after last night, not scare them.

And the Masters starts tonight at Augusta which is not only the start of the season proper but tells many stories. With the return of the Tiger, Rory going for his only missing major and of course the legend that it Iain Poulter it should be great fun to watch.

Malcolm Graham-Wood is an independent oil industry expert and freelance contributor, not a direct employee of Interactive Investor.

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