Thus, the El Romeral gas power project is, for all intents and purposes, truly transformational to Prospex as it allows the company to transition from an energy-focussed investment company into an asset-backed and cash flow-generative investment company.
But here’s the real kicker;
The tentative valuation of the company’s portfolio of oil and gas assets, following the acquisition, now stands at £47.76m or 2.1p per share. Compare that to the company’s current market cap of £3.09m (0.14p per share).
Yes, feel free to bark the unsavoury but apt remark, “What the ….!”
And yes, the stock market is not always the perfect arbiter of value. However, for as sure as night follows day, the market will soon move to correct the mispricing.
And that, by the way, is the reason why Simon Chantler and the BOD own 11% and 6.5% of the company respectively.
In the meantime, look out for the following share price re-valuation triggers that are expected in the short to medium term:
• A ‘Completion of the El Romeral Gas Power Project Acquisition’ RNS. This will immediately drop a multimillion-pound asset into the company’s portfolio whilst injecting £58,000 worth of monthly revenues into the company’s existing cash flow.
• The ‘INTESA (intergovernmental agreement for Selva)’ RNS.
• The ‘Final Production Concession’ RNS from Italy's Economic Development Ministry.
• The ‘First Gas Production at Selva’ RNS advising of an initial production rate of 150,000 cubic metres per day and the subsequent new injection of cash.
• A ‘Technical Work Programme Update’ RNS to de-risk the 830 BCF gross prospective resources at the Tesorillo project in Spain.
• A ‘Production Update’ for the Bainet field.
Remember, all intelligent investing is value investing; acquiring an asset for less than its value means seeing what everyone else sees and thinking what no one else thinks.
Following the significant commercial gas discovery at the Podere Maiar-1d well in 2018, Prospex’s 17% interest in the Podere Gallina licence was assigned net 2P reserves of 2.26 BCF and net contingent and prospective resources of 2.40 BCF and 15.56 BCF respectively. House broker Novum believes historic gas production at the asset should allow the company and its partners to recover most of its 2P gas resources from Podere Maiar-1d. Thus, using long-term gas prices of £5.44/mcf and fixed OPEX costs of £251,000 per annum, the broker has ascribed a value to Prospex’s interest of £4.7m.
However, the broker goes on to stress that, the Podere Gallina licence contains plenty of contingent resources beyond the Selva Malvezzi Gas-Field. Most of this potential is housed within two prospects called Selva North and Selva South, and which both sit within the same stratigraphic concept as Podere Maiar-1d.
And despite being called prospects, the two structures have already produced gas to surface in commercial quantities from previous wells, leaving significant volumes of gas updip in each accumulation. As such, the broker views them as ‘attractive low-risk, potential additions to the longer-term Selva production profile’ and has assigned the prospects net un-risked and risked valuations of £5.59m and £2.34m respectively, highlighting that successful drilling will boost these numbers further.
Then there’s the Tesorillo project. At 831 BCF gross P50, the prospective resource size is substantive. The permits are located in farm land close to the gas trunkline from Africa to Europe and gas prices in Europe are attractive. A commercial discovery by Tesorillo-1 should create significant value. However, further appraisal drilling is likely to be required to confirm resource size before a development decision can be taken. Novum has, nevertheless, ascribed a risked valuation to Prospex’s 15% interest of £12.3m.
The EIV-1 Suceava Concession (onshore Romania), on the other hand, and which still holds multiple prospects and leads, including a gas discovery, has been ascribed a risked valuation to Prospex’s 50% interest of £3.13m.
That being said, however, the ‘mother of all assets’ has got to be the El Romeral gas power project. The asset, previously owned by Chevron, includes three blocks with existing gas production and a gas-to-power station housing three Jenbacher gas engines that convert gas to electricity. The facility was built at a cost of £8.3m and currently generates annual revenues of £669,000. Prospective resources for the three blocks currently stands at 90 BCF alongside two proven, but undeveloped, discoveries (5 BCF gross contingent resources). Thus, there’s significant opportunity to scale-up production. Using long-term gas prices of £5.44/mcf, and allowing for increased revenues, house broker Novum has ascribed a risked valuation to Prospex’s 49.9% interest of £19.7m.
Howard Stanley Marks, the billionaire serial investor and founder of Oaktree Capital Management, once opined that:
"When looking for the best stocks to buy, it pays to follow the money.”
Indeed, investing alongside some of the world’s wealthiest can be very profitable.
Take the London-listed, energy-focussed, investment company, Prospex Oil & Gas (PXOG), for example. It currently boasts millionaire entrepreneur and value investor, Simon Chantler (of Meadow Foods), as its largest shareholder.
The extremely well-heeled (estimated net worth of circa £74.5m) northerner owns close to 11% of the company and is one of the most highly regarded executives in the UK.
Known for his innate ability to unearth mispriced opportunities, Mr Chantler is one of those high-net-worth investors who prefer to keep things pretty simple; invest in well-run companies, with significant growth potential, in ‘safe’ sectors, and within ‘safe’ jurisdictions, that sport a substantial discount to NAV.
Thus, cue Prospex Oil and Gas Plc.
The company has a considerable portfolio of oil and gas assets but is only valued at a fraction of those assets.
And until the recent announcement of its latest investment, a 49.9% stake in a Spanish gas power project, the company had, largely, flown under the radar of even the most avid follower of the energy sector.
But that is rapidly coming to an end.
Private investors appear to have spotted a glaring market anomaly;
Did you look on nex