Penny Shares Guide

Irvine Energy Plc is an independent oil and gas exploration and production company focused on the development of onshore projects, both conventional and unconventional. Incorporated in the UK, the company operates exclusively in the U.S., currently working on projects within the highly prospective Kansas/Oklahoma region. Historical production in the area dates back to the 1800’s and cumulative outputs are in the billions of barrels and trillions of cubic feet for oil and gas respectively. The company currently has interests in three projects, the Niobrara project in Kansas, the Kansas project, and the Oklahoma project, jointly developed with one local partner who is also the operator for all projects. By combining conventional and unconventional plays, the company hopes to assemble a balanced portfolio of low risk and high capital yet efficient programmes.

Niobrara Project

Irvine Energy has 50 percent interest in the Niobrara project, which holds mainly shallow chalk gas. About one hundred wells have been drilled progressively over the years and many have quickly come on line to sales. The shallow nature of the gas formation makes it possible that the wells can be drilled and completed in surprisingly short periods, even less than a week, at very low cost.

Kansas Project

75 percent interest has been obtained by the company in the Kansas project. The project includes many oil-rich areas that have a prolific oil production history. What it has been lacking is the application of the state-of-the-art exploration technique, like 3D seismic. This provides significant upside potential for Irvine Energy as an exploration company. Various exploration drilling has been initiated and surveys have identified several prospects.

Oklahoma Project

The company holds also 50 percent interest in the Oklahoma project, which contains both conventional oil and unconventional gas. Some over 20 conventional production wells were included when the company purchased the property. Currently the company is focused on areas where unconventional shale gas exists. Vertical wells, and horizontal ones are being planned. Successful development of the shale could be huge with an estimate of net recoverable of over 200 billion cubic feet of gas.

Shares (IVE) of Irvine Energy Plc is currently delisted from LSE’s AIM sub-market.

Pantheon Resources Plc, incorporated in the UK, is a small, independent oil and gas exploration and production company operating mainly in the U.S. Its principal area of focus is in the onshore Gulf of Mexico region, specifically Texas and Louisiana. Such places offer lower drilling and development costs than offshore and other less-known, unproven territories. The lead times to commercial production are therefore shorter. These are the factors that the company must consider as a small player with limited capital. But a series of fund raising activities has been implemented and successful in addition to the £10 million IPO in 2006. The funds have allowed the company to pursue a portfolio of diverse projects with different risk profiles. The company’s strategy is committing to both high risk/high reward, under-explored plays with potentially high impact and lower to moderate risk, extension/development plays with current drilling success.

Projects Intended for Future Payoff

Pantheon Resources Plc initially focussed on deep geological plays with potential for major growth in reserves and production. Two farm-in agreements that the company entered into early on are the Texas Padre Island project and the South Louisiana project, both of which are large, high quality natural gas plays in the under-explored deep sections of the Gulf of Mexico region. Two wells have been drilled so far without success on Padre Island, which is near Corpus Christie, Texas, with one well later plugged and abandoned for being non-prospective on deep reservoirs and the other bringing on-stream only moderate production and shut in eventually. The South Louisiana project has experienced similar results as for now. The first well was abandoned for mechanical reasons after the drill pipe stuck in the hole twice unable to reach deeper and second well found non-commercial quantities of natural gas.

Projects Concerned with Current Cash Flow

Out of the total five projects in which the company holds various interests, the other three projects were later entered into in a shift in focus from high risk deep play to low risk development play. Two such projects are in Texas, the Tyler County project and the Project Wharton, and the third one in Louisiana, the Bullseye project. North of the company’s Tyler County project, there has been drilling success by two operators that will also operate, with interests, the company’s wells here. The area is considered an old play first discovered in the 1930s. Early success has been achieved at Project Wharton, which spread out from Houston to Corpus Christie. The project operator has a long, successful drilling history in the Gulf region. Drilling for the Bullseye project has been conducted in areas that were discovered by a predecessor of ExxonMobil back in 1944 and is producing positive cash flow from two wells with more on the play.

Shares (PANR) of Pantheon Resources Plc are listed on LSE’s AIM sub-market and were at 23.50p as of 12 July 2010.

Empyrean Energy Plc, based in London, is an energy investment company providing funds through direct participation or farm-in agreement to oil and gas exploration, development, and production projects. The company’s management team has years of experience in both the investment and energy industry. A typical financing process begins with identifying and analyzing opportunities of prospective projects. Having determined on the appropriateness of risk versus reward within a project, the company proceeds to negotiating with potential partners for a percentage funding of the project. The company seeks projects primarily in geopolitically stable environments and thus far has solely focused projects in the U.S.

Project Participation

A non-operator in its project involvements, Empyrean Energy Plc pays its share of drilling cost based on the percentage of working interest it has acquired. Partnering with various U.S. companies, Empyrean Energy is currently participating in four U.S. projects, three in Texas, and one in southern California.

The California project, Eagle Oil Pool Development, in which the company holds 48.5% interest, the most among all projects, has a recoverable reserves of 7.1 million barrels of oil and 12.3 billion cubic feet of gas. In the Texas Sugarloaf Hosston Project, which comprises of Block A and Block B, the company has interests ranging from 3% to 9% in a total of 9 different wells. Recoverable reserves from each of those wells are estimated at 2-10 billion cubic feet of gas equivalent. The company retains an equal 10% interest in the other two Texas projects with an estimated potential of 80 billion cubic feet of gas equivalent for the Riverbend Project and 21.4 billion cubic feet of gas equivalent for the Hercules Project.

Financial Backing

Empyrean Energy Plc had two placings in 2009 raising £1.54 million. The funds were used to finance the company’s investment of 10% share in the Riverbend project, as well as provide working capital. In 2010, the company is more than doubling its fund raising effort, bringing in £3.6 million and making available fund uses for any further participation in its existing Texas and California projects. The company has in the past expressed its belief in the sustainability of its project portfolio. In fact, nearly 70% of its investments have either produced or currently in production.

Shares of Empyrean Energy Plc (EME) are listed on LSE’s AIM sub-market and were at 5.75p as of 5 July 2010.

Sterling Energy Plc is an independent, upstream oil and gas exploration, development, and production company with a focussed portfolio of highly prospective projects in three western Africa countries and the Middle East, namely Kurdistan in northern Iraq. The company strives to secure interests in high impact exploration assets through direst licensing, farming in, or acquisition. Once discovered, the strategy is to promptly develop the exploration asset into a production asset that is both cash generative and profitable. The company, in most cases, is the on-site operator, which includes operating all projects in which it has 100% equity interest and others, like the Kurdistan development, where it has only a partial interest. The goal of the company is to become integrated among exploration, development, and production activities.

Selling U.S. Interests

In order to be more focussed and productive, the company constantly reviews its existing projects in order to assign resources to programmes in places that deemed to have the best chance to deliver value for shareholders. For example, field of declining production capability, once after full evaluation, may be given the option of abandonment, such as Chinguetti field in Mauritania. Elsewhere, applications for licence extensions for smaller projects may be withdrawn so that the company can focus on the more material projects and the identification of new ventures.

However, the most noticeable of all is the company’s selling its several producing U.S. gas fields in the Gulf of Mexico, where the company also served as the operator for most of its projects. The performance of the U.S. business had been very disappointing, including the very weak U.S. natural gas pricing at the time. All together, the company sold it for $90 million following decisions to focus on new opportunities on the African continent.

Self-Funding Operations

The proceeds from the U.S. sale was used to repay the company’s entire outstanding loan, making the company currently debt free. Relieved from the interest-paying burden, the company should have more leeway to plan its operations. Currently, the company is fully funded with its own resources for its 2010 work and possibly beyond. In the past year, the company had two rounds of share placements, one private and one public. Net of expenses, it raised a total of more than £80 million. Shares (SEY) of the company are listed on LSE’s AIM sub-market and were at 130p as of 29 June 2010. Note that current price level takes into account a share consolidation that the company implemented after the issuance of new shares in December 2009, when 40 existing ordinary shares were converted into 1 new ordinary share.

Baltic Oil Terminals Plc is engaged in the oil and gas infrastructure and port business. Incorporated and registered in England and Wales, the company bases its activities in Kaliningrad, the Russia’s coastal enclave between Poland and Lithuania on the Baltic Sea. The company’s operations are aimed at providing terminal and related services for hydrocarbon product export from Kaliningrad, as well as local distributions within the Kaliningrad region. The company currently have two export terminals, a refined-product storage for local distribution, one waste-disposal facility, and client trading and agency services.

Company shares are listed on LSE’s AIM sub-market and were at 27.50p as of 21 June 2010. The Company’s objective is to generate significant operational cash flows to provide a recurring dividend stream for its shareholders.

Export Terminals

Baltic Oil Terminals Plc has a 50 percent interest in the new Rosbunker terminal. Unlike other terminals in the area that are located inside the city of Kaliningrad, it is outside the city to be closer to the Baltic Sea. The terminal handles mazut, a heavy oil, and diesel using insulated and heated tanks and pipelines. A pair of side tracks connecting to the main railroad has been built and pumping and handling equipment are fully operational. By allowing the docking of oil tankers carrying loads of up to 40,000 tonnes, the terminal becomes the only deep water terminal in the Kaliningrad region.

Additionally, through a Russian company in which Baltic owns 65 percent interest, Baltic also leases an oil and refined product export transhipment terminal from the Russian Naval Authorities. Other than refurbishment, the company intends to rely on the terminal’s existing infrastructure and storage tank capacity. With a throughput rate of around 30,000 tonnes per month, it further increases the company’s planned terminal operations.

Local Storage

The company has a separate storage and terminal facility to handle refined products, namely gasoline and diesel, for local distributions on behalf of third party clients. Products are brought in by rail for storage and later delivered to retail outlets in the Kaliningrad region. The storage has a capacity of about 10,000 tonnes with a throughput of close to 15,000 tonnes per month.

Waste Disposal Facility

The facility was half acquired by the company in 2006, 5 years into the business. It does both marine and land reclaim sludge and waste disposal. Specially converted vessels are used to service the facility.

Trading and Agency Services

Through a 50% owned subsidiary called Baltic Hydrocarbon, the company matches buyers and sellers of oil products without taking open positions itself. The company also acts as an agent to introduce clients to terminals in the region. If clients wish, the company further offers handling service to move products from source to a terminal prior to export and when within the Baltic region, using a charter vessel, the company could as well ship a client’s products to a destination, extending its terminal services offered.

Aurelian Oil and Gas Plc, focussed exclusively on Central Europe in countries like Poland and Slovakia, was founded in 2002 to gain first mover advantage by entering a proven but underexplored region. Central Europe has produced oil and gas for over 150 years, but due to the history of the region, especially what happened during the Soviet Union years, it has seen very little modern exploration. With “Unlocking Value Through Technology” as the company’s slogan, Aurelian intends to bring in conventional, successful technologies that have been utilised in the rest of the world for a round of renewed exploration activities. The company is also uniquely positioned in its production operations in terms of technology, most noticeably in its unconventional gas productions. In 2006, Aurelia (AUL) floated LSE’s AIM sub-market and shares of the company were at 41.50p as of 16 June 2010.

Exploration

Aurelian has up to nine exploration and appraisal wells planned for 2010 and 2011, of which six are high impact growth prospects. The company’s exploration, appraisal and development activities are focussed in two core areas: the Southern Permian Basin in central and western Poland and the Carpathian Thrust Fold Belt in southern Poland, Slovakia and central Romania. Both areas have the potential to deliver at least 50mmboes (Million Barrels of Oil Equivalent) of proven reserves. Their strategy is to transfer well-known technology in commercialising proven and underexplored resources, which can be hard if a target is too small to cover development costs.

Production

Aurelian’s most significant current asset in production is the Siekierki gas field in Poland within the Southern Permian Basin, which is a tight gas accumulation discovered in the 1980’s. Like shale gas, which came to be widely known to the public after its recent large-scale productions in North America, tight gas reservoirs are also low in porosity and permeability and considered another type of unconventional gas. To develop tight gas, similar to what was used to develop shale gas in the U.S., a method of horizontal drilling and fracture stimulation is required and Aurelian will be the first to use such technology in Poland, which along with the rest of Central Europe has a significant unconventional gas potential.

Company Overview:

Ascent Resources Plc, an European focused, independent oil and gas company, has a balanced portfolio of projects ranging from revenue generating production projects, low-risk development and redevelopment projects, to high-return appraisal and exploration projects. Headquartered in London, the company conducts its operations primarily onshore in five western and central European countries: Italy, Switzerland, The Netherlands, Hungary, and Slovenia.

The European onshore focus strategy has provided the company with a range of low-cost oil and gas projects, well-developed infrastructure, and a stable legal and political framework. Doing business right here in Europe, the company, an operator for most of its projects, is able to utilise local operating entities maximising their expertise.

Shares in the company (AST) are quoted in LSE’s AIM sub-market and were at 3.63p as of 8 June 2010. Although priority is now on reserve growth over production, 2010 is expected to be cash flow positive. The company relies on its highly experienced management team to provide a solid platform to grow and generate value for shareholders.

Operations Breakdown:

Ascent Resources uses a combination of debt and equity to fund its development projects, but farms out exploration projects to mitigate risk. The company currently has six development and redevelopment projects, four appraisal projects, and five exploration projects. The utilising modern exploration and development techniques of 3-D seismic has provided 100% success in the company’s last 4 wells.

All the company’s development projects involve shallow, conventional, either oil or gas, reservoirs that require relatively low production costs. Two redevelopment projects mainly concern the recovery of the remaining reserves that had been previously developed and later were in production but probably without the benefit of using 3-D seismic.

Appraisal projects center on prior discoveries that are never fully developed. In many cases, appraisal wells are drilled to confirm the development of these discoveries. Two of the company’s five exploration projects are multiple gas plays, which are a bright spot, considering there is a strong demand for gas production in the market .

The scale of its portfolio has kept the company on an active footing and it has gotten a significant amount of work scheduled across the portfolio for 2010.

Gold Oil Plc, a 6-years-old small, independent oil and gas exploration and production company, was set up to acquire oil and gas projects in Southern and Central America, particularly in Peru and Colombia, areas that have seen intensified oil and gas interests with their friendly governments in the backdrop, plus low tax regimes. Shares in the company (GOO) are quoted in LSE’s AIM sub-market and were at 3p as of 25 May 2010. However, equity shareholders fund on the company’s balance sheet has increased substantially over the years, from a mere £305,000 in 2004 to about £8m in 2008. The company’s goal is to build up the capital value of its projects to a point where it can pay dividends.

Operations Overview

Gold Oil intends to seek low risk cash flow projects by establishing significant license positions within a few geographic areas. It is recognised as both an onshore and off shore operator in Peru and on shore in Colombia. At the end of fiscal year 2009, the company had two exclusive license interests in peru, Block XXI and Block Z34, and three partial license interests in Colombia, the 58.5% Burdine-Maxine-Nancy, the 49% Rosa Blanca, and the 20% Azar Block. Activities on all five licence interests are being actively pursued. Negotiations to farm out part of the 100% interests in Peru have been planned. The main focus on Nancy and Burdine in Colombia is to increase production. An exploration well on the Azar Block may be carried out pending results of seismic interpretation. Exploration on Rosa Blanca has been ongoing, with one testing well drilled back in 2008 and a planned seismic shooting in late 2009. New activities will depend on further seismic and geological work.

Selective Financials

Revenue for fiscal 2009 increased to £1.004m and gross profit was £79,000. But development expenditure and administrative expenses over weighed, resulting in a loss after tax of £3.039m. The situation should be improved after more productions come on line. The company had £2.179m of cash at bank in hand at the end of fiscal 2009, after undertaking two share placings during the year, with one issued at 8p for 22.92m ordinary shares to raise £1.8m and the other at 4p for 16.125m shares to raise £645,000. Because of the capital intensive nature of the business, having that access to capital in building up cash reserves in the current constrained credit market environment provided a much needed funding relieve for the company to allow it to continue operations and move forward with all of its assets.

Rockhopper Finds Oil According to a recent article on Rockhopper Exploration PLC from Interactive Investor, the AIM-listed small oil and gas exploration company licenced to survey and drill in the North Falkland Basin has reported on not only its first oil discovery, but also potentially good quality of the reservoir, and is now waiting for lab results to further confirm that the oil is indeed moveable without any free water. So far, investors have responded to the two reports quite positively, pushing shares up almost three folds, from around 70p before the news to 195p at the close of 11 May. It looks like that the field is to be commercial, said Evolution Securities in a note, as long as the flow rate is in line with the rock properties.

By any means, investors’ jubilant reactions are justified, not to mention that their patience is finally being paid off. Investing in AIM-listed shares of small, start-up companies requires a lot of entrepreneurial spirit and taking on a new business adventure about the old oil commodity calls for a keen judgment in the mid of all the renewable-energy talks that are flowing around. Sometimes, narrower investor participation in smaller-scale business undertakings that are nonetheless well-planned and focused, like the one being conducted by Rockhopper, set up in 2004 to explore for oil and gas in the Falkland Islands, could potentially yield much greater investment rewards than the mass lingering at big oil establishments.

However, trading AIM-listed shares often entails greater precautions, as shares, if thinly traded, may be subject to price manipulation. Unless you’re an active trader, most likely trading through CFDs (Contract For Difference) using leverage, it’s a good idea to buy and hold your AIM-listed shares and keep an eye on the shares’ underlying business and do your research. Drilling by Rockhopper soon following the tests could potentially gush out oil in the thousands or even millions of barrels in a region allegedly holding up to 60 billion barrels. Its shares would then be worth much more than what it is now, which reflects only the good testing news so far.

No risk consideration is too much of a contemplation, especially for the oil industry. Oil production around the globe has been known for its political risk association because of many unstable corners of the world that happen to be rich in oil reserves. For Rockhopper, if Argentine government’s political stance on the Islands translates into any adverse business effects in the future, the company’s newly found fortune is surely to be affected and so are those of investors.

Oil and gas exploration company VOG (VOG) warned that further share dilution could be on the cards as it continues to pursue its drilling campaigns in Russia and Africa.

In a letter to shareholders on Wednesday morning, chairman Kevin Foo addressed investors’ fears at the level of dilution taking place.

In the last year, the group has raised $53 million through the issue of 926 million shares and Foo recognised shareholders’ fears as a “valid and important point” which undoubtedly contributed to a disappointing share price performance.

However, shares in the group tumbled a further 3.4% as it admitted that it would issue new shares for cash in the future as “such capital is the lifeblood of all growing companies.”

“We have some very attractive projects and until cash flow from Logbaba can cover our development costs we will pursue all financing options to avoid dilution. I want to assure shareholders that new share issues will only be approved by the Board if necessary to maintain schedule and when all other options have been eliminated,” Foo said.

In an effort to appease shareholders, the AIM-listed group said the last six months had been the most important in the company’s history as it battled to bring its flagship Logbaba project to fruition and assured investors that the steep drilling costs of the wells were now firmly behind it.

“We have faced and overcome some incredible challenges involving technical, operational and financing issues that at times have threatened the very existence of our Company. It is worth bearing in mind that one year ago, Logbaba was just a site in a region where no onshore drilling has taken place since the early 50’s, with no available infrastructure. Then, our budget to drill and complete the two wells was approximately $24 million and we anticipated that this would be done by the end of 2009. In fact, the total cost of the two wells and support in Cameroon has been about $49 million and only recently have we completed the second well.” Foo said.

For an alternative look at Victoria Oil, check out the iBall TV episode on the company

Drilling progress was also considerably slowed by the need for heavier mud weights, it added.

Tests have revealed La-105 to hold the capacity to serve demand from the group’s industrial customers after initial flow rates showed the equivalent of approximately 10,000 barrels of oil. Meanwhile, La-106 encountered in excess of 300 feet of gross pay in multiple gas bearing sands.

VOG anticipates first gas delivery to customers in the final quarter of this year.

“This has been a very successful campaign and we are expecting a substantial increase in Reserves and Resources from previously published figures of about 100 billion standard cubic feet of Proven plus Probable gas and condensate equivalent,” Foo said.

The group is now focusing on building gas production facilities and a pipeline at Logbaba.

Meanwhile, exploration activity has continued at the company’s West Medvezhye gas and condensate field in Russia. It is still aiming to collect as much information on unexplored areas as possible to ensure future wells will successfully supplement the existing discovery at well 103. Surveys commissioned on the area should be completed by the end of this month and its licence requirement calls for it to drill two new wells by the end of 2012.