The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen here.
Beetaloo turns into multi-play asset May 15 2018 | Job Langbroek | 5 page(s) | Print or Download PDF Davy View A technical paper by Origin, the operator, informs us that the Beetaloo Basin in Northern Australia has the potential to be a multi-play asset. At its simplest, greater resource density creates greater value. It will take some time to work through the implications and complete the physical investigations but Falcon shareholders hold a more valuable asset. Multi play/multi targets At the Australian Production and Exploration Association in Adelaide, Origin, the operator of the Beetaloo Basin project in the Northern Territory, presented a paper outlining the fact that four additional potential plays have been established in the basin. It states that the existing dry gas play in the Velkerri shale remains the primary and most technically advanced target. The other four targets include a liquid rich play in the Velkerri itself, two further plays in the Kyalla shale as well as a hybrid formation and, finally, an oil/condensate play in the Hayfield sandstone. Implications The data presented clearly point to a much richer basin with multi-target potential. This has a number of implications. It creates potential material additional value and goes some way to explaining why Origin was very determined to maintain its position in the Beetaloo. It also increases the amount of data gathering and could well change the target modelling of the follow up wells in the basin. In any event, with drilling not likely to commence before next year there is likely to be additional news flow on how the consortium will pursue this new perspective of the basin. For Falcon, with its five well carried interest, the Beetaloo has become a more valuable asset and the range of possible outcomes for the basin has increased. How this is managed will play out over the next couple of years but, for now, the news underpins the fact that at around 22p per share an awful lot of risk is discounted into the share price and the stock looks good value.
At an oil and gas conference in Adelaide, Origin Energy said initial indications are that each of them is a �material multi-TCF� [trillion cubic feet] play, although it added that the Velkerri shale dry gas play � the one the two have been focused on � is still the most mature resource. Potential to redefine Oz energy market Each of them has the ability to redefine Australias energy market More drilling at the four new plays is required to get a better understanding of their viability, but Origin believes each of them has the �potential to redefine Australia's energy market�. Falcon chief executive Philip O�Quigley said: �The Beetaloo sub basin provides us with an exciting diversified portfolio, having exposure to all five identified plays. �When activity resumes, the JV will look to demonstrate improved well deliverability through longer laterals in the Velkerri shale while simultaneously seeking to prove up high value plays with increased liquids potential with lower well cost and improved economics.� O�Quigley added that a forward exploration and appraisal drilling programme will be announced in due course. READ: Falcon ready to reward patient investors News of the four new potential plays caps a good month for Falcon and its investors. In mid-April the company was boosted when authorities lifted a moratorium on fracking in the area where the Beetaloo basin is. The fracking hiatus came into effect in 2016 and it effectively cut off what had been a very encouraging programme of wells and flow testing. With that behind them, Falcon and origin expect to get back to work as soon as practical, meaning new drilling is likely to start in 2019.
Currently, the 14-day ADX for Falcon Oil & Gas Ltd. (FOG.L) is sitting at 22.33. Generally speaking, an ADX value from 0-25 would indicate an absent or weak trend. A value of 25-50 would support a strong trend. A value of 50-75 would identify a very strong trend, and a value of 75-100 would lead to an extremely strong trend. ADX is used to gauge trend strength but not trend direction. Traders often add the Plus Directional Indicator (+DI) and Minus Directional Indicator (-DI) to identify the direction of a trend. The RSI, or Relative Strength Index, is a widely used technical momentum indicator that compares price movement over time. The RSI was created by J. Welles Wilder who was striving to measure whether or not a stock was overbought or oversold. The RSI may be useful for spotting abnormal price activity and volatility. The RSI oscillates on a scale from 0 to 100. The normal reading of a stock will fall in the range of 30 to 70. A reading over 70 would indicate that the stock is overbought, and possibly overvalued. A reading under 30 may indicate that the stock is oversold, and possibly undervalued. After a recent check, the 14-day RSI is currently at 40.48, the 7-day stands at 27.4, and the 3-day is sitting at 9.74.
Falcon Oil & Gas Ltd. (FOG.L) is on trader�s radar as the shares have moved above the MACD Histogram line, indicating a bullish trend. Shares recently touched 19.225 on a recent bid. The MACD is calculated by subtracting the value of a 26-day exponential moving average from a 12-day exponential moving average. A 9-day dotted exponential moving average of the MACD (the �signal� line) is then plotted on top of the MACD. Taking a step further, the MACD-Histogram, which was developed by Thomas Aspray in 1986, measures the distance between MACD and its signal line (the 9-day EMA of MACD). Like MACD, the MACD-Histogram is also an oscillator that fluctuates above and below the zero line. Aspray developed the MACD-Histogram to anticipate signal line crossovers in MACD. Because MACD uses moving averages and moving averages lag price, signal line crossovers can come late and affect the reward-to-risk ratio of a trade. Bullish or bearish divergences in the MACD-Histogram can alert chartists to an imminent signal line crossover in MACD. Investors may also be looking to gain an edge by following the current technical levels for Falcon Oil & Gas Ltd. (FOG.L). In terms of Moving Averages, the 50-day is 19.86, the 200-day is at 20.65, and the 7-day is 20.3. Using a longer term moving average such as the 200-day may help block out the noise and chaos that is sometimes created by daily price fluctuations. In some cases, MA�s may be used as strong reference points for finding support and resistance levels. Employing the use of the moving average for technical equity analysis is still highly popular among traders and investors. The moving average can be used as a reference point to assist with the discovery of buying and selling opportunities. Falcon Oil & Gas Ltd. (FOG.L)�s Williams Percent Range or 14 day Williams %R currently sits at -98.1. The Williams %R oscillates in a range from 0 to -100. A reading between 0 and -20 would point to an overbought situation. A reading from -80 to -100 would signal an oversold situation. The Williams %R was developed by Larry Williams. This is a momentum indicator that is the inverse of the Fast Stochastic Oscillator. Falcon Oil & Gas Ltd. (FOG.L) currently has a 14-day Commodity Channel Index (CCI) of -108.76. Active investors may choose to use this technical indicator as a stock evaluation tool. Used as a coincident indicator, the CCI reading above +100 would reflect strong price action which may signal an uptrend. On the flip side, a reading below -100 may signal a downtrend reflecting weak price action. Using the CCI as a leading indicator, technical analysts may use a +100 reading as an overbought signal and a -100 reading as an oversold indicator, suggesting a trend reversal. Currently, the 14-day ADX for Falcon Oil & Gas Ltd. (FOG.L) is sitting at 22.33. Generally speaking, an ADX value from 0-25 would indicate an absent or weak trend. A value of 25-50 would
Taken from Davy press release note May make u feel happier Valuation thoughts In our last valuation of the group, we suggested that the risked value was a shade over 40p per share. Of this, the lion�s share (31p) was attributable to its 30% share in the Beetaloo Basin. This was also after risking for the moratorium at 50% and adjusting by a further 52.5% for geological/success/development challenges. Clearly, the lifting of the ban results in a nominal doubling of the Beetaloo valuation as the outcome is known. While this suggests an indicative target valuation for Falcon of close to 70p per share � well ahead of current pricing � the quantum reflects the scale of the gas resource that Falcon is involved in rather than our specific unit value per acre ($5,500/acre post risking). However, we do not think that this upside will be realised seamlessly, rather the project will shift steadily upwards in valuation terms as the wells are completed and further risk is seen to be diminished in the project.
Davy View The news that the Northern Territory in Australia has lifted its hydraulic fracturing moratorium is obviously positive for Falcon shareholders. The lifting follows on from the clear and concise outcome of the special scientific inquiry into the impact of fracturing as a method to recover oil and gas. While this outcome was based on science and evidence, the decision to lift the ban was political. Consequently, we do not think it was possible to be certain of this outcome so we believe the lifting of the moratorium is not reflected in the share price. Basic facts The Northern Territory government has announced the lifting of a hydraulic fracturing moratorium, which it imposed at the end of 2016 until a full scientific inquiry into the technology and process could proceed. The inquiry recently issued its final outcome, which stated that the risks associated with the process could be managed and, in some cases, removed completely. This clear statement opened up the way for the political decision to rescind the ban. The next steps Origin, the operator, has said that it will begin to design civil works as soon as practicable and it will look to recommence exploration and appraisal work. To this end, the farm-out and work programme requires a further five wells to be drilled. Falcon, with a 30% net share, will be carried through this work as a result of the cost carry agreement, which it entered into with Origin in May 2014. This envisaged a total of nine wells. The agreement ensures that Falcon is carried fully for the fifth well and up to a total gross spend of A$101m on the last four wells. Valuation thoughts In our last valuation of the group, we suggested that the risked value was a shade over 40p per share. Of this, the lion�s share (31p) was attributable to its 30% share in the Beetaloo Basin. This was also after risking for the moratorium at 50% and adjusting by a further 52.5% for geological/success/development challenges. Clearly, the lifting of the ban results in a nominal doubling of the Beetaloo valuation as the outcome is known. While this suggests an indicative target valuation for Falcon of close to 70p per share � well ahead of current pricing � the quantum reflects the scale of the gas resource that Falcon is involved in rather than our specific unit value per acre ($5,500/acre post risking). However, we do not think that this upside will be realised seamlessly, rather the project will shift steadily upwards in valuation terms as the wells are completed and further risk is seen to be diminished in the project.
Agree with you maribeau I would add though if you or I went in at present to sell 650000 shares market makers would not quote and if they did we would not get anywhere close to asking price , I suspect these trades could be between market makers
DAVY VIEW The largely unchanged nature of the final report of the scientific inquiry into hydraulic fracturing in Australia�s Northern Territory is a positive step for Falcon. The lifting of the current moratorium is a political decision, the timing of which is uncertain although expected locally in April. The nature of the current report means it cannot be used to justify a decision to uphold the current ban on hydraulic fracturing. POSITIVE FIRST STEP Falcon Oil & Gas holds a 30% share in a joint venture to explore and appraise the gas potential in the Beetaloo Basin in Australia�s Northern Territory. Its partner is Origin Oil & Gas. Earlier drilling and appraisal work by the consortium established a very large resource of gas in place. A technically recoverable amount of up to 85 TCF gross was estimated at the time. In the context of a gas short internal Australian market, the potential utility and value development of this gas stand out sharply. However, the imposition of the moratorium in the territory raised the possibility that using hydraulic fracturing to recover this gas would not be possible and activity on the licence was stopped when the programme was finished. At the same time, an inquiry into the process of fracturing was set up by the Chief Minister to establish the risks and potential impact of the activity. A very negative outcome would have provided clear support to the calls to maintain the ban on the activity in the future. The fact that the report�s conclusion states that risks can be controlled with best practice negates the efforts to maintain the ban on scientific grounds. This makes the final call a political decision and one that is expected in the relatively near future. � FALCON OIL AND GAS
O'Quigley said his confidence that the ban will be lifted was based on the findings of a draft final report on the matter, commissioned by the authorities. Fracking is controversial because opponents say there is a risk of groundwater contamination. It works by drilling into the ground and shooting rocks with a high-pressure mixture of water, sand and chemicals to release the resources inside. "Having considered the most current available scientific literature and data from a wide range of sources, and noting the recent and continuing technological improvements in the extraction of onshore shale gas, the conclusion of this Inquiry is that the challenges and risks associated with any onshore shale gas industry in the NT are manageable," the report found. "The panel is of the opinion that with enactment of robust and rigorously enforced safeguards, the waters shall continue to flow "clear and cold out of the hills". O'Quigley said he was confident that the relevant minister - Michael Gunner - would proceed on the basis of the final report's recommendations, given Gunner's previous indications. The final report is due to be released next month. Its All down to Gunner( a lot of the recomendations are probably standard procedure to the industry)
In so long as this gives the Government credence to lift the Moratorium it is positive, no one can be sure of time scales this is down to origin and the likes to prove up. Origins timeframe of 2019 before exploration may be more realistic now, all that matters at this time is that the moratorium is lifted once and for all.