Newsflash for the Snoozers Part 7

Monday, 9th November 2015 10:07 - by Moosh

Empyrean Energy – (TIDM: EME) EME has had quite a price surge recently since I declared my purchases in my Bought blog posts in the summer. Originally I wasn’t expecting the price to move for 12 months so this was a refreshing surprise. Since then, EME has released a further updated reserves report (13 October 2015) which suggests the 2P (proved and probable reserves) to be valued ~£88m.

2P reserves are usually the starting point for when companies are considering offers of being bought out, so given the current market capitalization of EME is £14.97m (as of market close 6 November 2015), there is plenty of upside in EME based on the 2P reserves. The company remains reasonably funded and partially hedged on its oil production, with healthy revenue which should satisfy quarterly loan repayments. Any companies who may be interested in buying EME would actually do better to buy up EME shares at the current price rather than pay the 2P reserves value – that’s just obvious. Further to this reserves update, there is also room for improvement on the 2P reserves as the further Austin Chalk and Lower Eagle Ford wells are brought into production, and notably, these reserves do not include any input from the Upper Eagle Ford. A recent third quarter results statement from Marathon Oil (4 November 2015) has provided some interesting snippets of information, including some 30 day initial production rates from 6 Upper Eagle Ford wells, which were between 1050-1480 net barrels of oil equivalent per day with high percentages of liquids. While I’m no industry expert, I feel these numbers to be actually quite good for this new zone and am looking forward to a future ramp-up in production from the Upper Eagle Ford as well as the continuing development of the Austin Chalk and Lower Eagle Ford plays.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.