The Oil Man: Zenith Energy, Providence Resources

Zenith Energy

Zenith (ZEN) has announced that it has entered into an option to purchase with binding exclusivity an oil production asset located in Indonesia. The proposed acquisition envisages Zenith acquiring a 100% WI in an oil production licence which contains two onshore blocks totalling 65 sq kilometres.

The licence produces in excess of 1,000 b/d which is transported into the national sales system at an all in cost of $18 pb. The production comes from just one oilfield, and the second field is “expected to be capable of significant production by drilling new wells and performing work overs on existing wells”.

The company is now undertaking due diligence after which it has 15 days to exercise an option to complete the acquisition for $6,600,000, payable in two halves. As to funding the purchase, Zenith is considering “a number of funding options”, including debt and equity.

It is clear that Zenith is moving ahead with its oft stated intention to acquire value accretive properties to “enrich its portfolio”, and this certainly looks to fit the bill. Indeed, it looks like this potential deal is cheaper and easier to produce than in Azerbaijan so should complement the programme there.

Having over 2,000 b/d from the region by 2020 will undoubtedly make Zenith quite a force and considerably add value for shareholders. Indeed, Indonesia is fast becoming the preferred post code for companies looking to add efficient barrels to their portfolios.

Providence Resources

It is near enough April Fools Day to check ones calendar as Providence Resources (PVR) announce a modest farm-out of the Barryroe field to a Chinese consortium who will fund 100% of three wells and associated side tracks.

This will be funded by way of a non-recourse loan secured against future Barryroe production plus warrants at 12p and, if completed, will be in Q3 2018.

Unusually, I have had no comment from Tony O’Reilly, when I have I will add more, but this deal is by no means a clean farm-out by traditional standards and lack of comment from TOR is worrying.

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

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation, and is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company’s or index name highlighted in the article.