HOG - Hawkley Oil and Gas

[RNI]

There has been one piece of good news out recently, that was the results of the Moyes report (reported via a company update recently in January 2012). It backed up the earlier much higher reserves in Soro 201 well and will need 4 more wells for get it all out eventually.

Moyes report has assessed Soro reserves NOW at 56Billion up from initial report assessment of 13 Billion, which is HUGE. Some now used and sold on, but 51 Billion still there and needing the extra 4 wells to get it.

Soro-202 is very soon to be spud and this will double the output with these two wells draining together.

Old gas plant can cope with this amount, but will be needed when 3rd well is drilled and producing.

So all in all good news. Also they are getting 2D AND 3D seismic done over Soro and also Chets which will give more accuracy in where to drill wells.

Patience needed on this one and many not understanding full value and also not willing to wait the long stretches it takes to drill wells etc.

I'm keeping all mine for sure and understand the long stretches will continue UNTIL they really begin growing and production increases revenue and have new gas plant etc
and they are hopefully, able to get more modern equipment which will take less time and reduce chances of breakdowns with equipment etc.

 

[basilio]

I think RNI has accurately summed up HOGs position.

I'm quite disappointed (very!) that the Chets drill seems to be a dud. But with a healthy cash flow, $15m in the bank and another Soro drill within 8 months in a now proven field HOG is not a dead duck by any means.

At 16c I think it is severely undervalued. Capitalization is $45m yet it is currently netting $2m a month after taxes ! (See December report).

This is not an explorer trying to find the value of the next drill but a significant oil producer with quite clear upsides

 

[basilio]

A lot of stop losses have been hit on HOG. Heavy sales and now 14.5c

I think this is irrational given the positive cash flow from the first Soro well and the proven reserves in that field. It will be interesting to see if confidence can be recovered over the next 12 months. Obviously if the next Soro drill doubles income as anticipated we would see a $42m company with a $40m + income !!

 

[nchardon]

A lot of stop losses have been hit on HOG. Heavy sales and now 14.5c

I think this is irrational given the positive cash flow from the first Soro well and the proven reserves in that field. It will be interesting to see if confidence can be recovered over the next 12 months. Obviously if the next Soro drill doubles income as anticipated we would see a $42m company with a $40m + income !!

I hold

 

[WRONG'UN]

Well I hope the last vestige of negative Chernetska sentiment has been wrung out of the sp so it can get on with appreciating the value of Sorochynska.

Sooner or later a vulture will swoop on the carcase (like SEH and JPR), but who knows when that will be. Whatever, I'm not risking missing out - I (still) hold.

 

[Dinipants]

Oh man, 13c. Didn't think I'd see it back down here again.

Pretty much everything's been said that needs to. Good post by RNI. Shame about chet but that doesn't change any of the company's fundamentals. I hold and intend to hold.

Gl to all involved.

 

[poverty]

The board won't buy any shares even at these prices. They're spending 2 million a quarter on administration - this company is having a fantastic time on our dime.

 

[trendline89]

Well I hope the last vestige of negative Chernetska sentiment has been wrung out of the sp so it can get on with appreciating the value of Sorochynska.

Sooner or later a vulture will swoop on the carcase (like SEH and JPR), but who knows when that will be. Whatever, I'm not risking missing out - I (still) hold.

Sometimes you just have to bite the bullet and cut the dog loose. I did and I have already recouped back my loses.

 

[WRONG'UN]

You are right, Trendline - this is the last time I give the fundamentals so much of the benefit of the doubt.

I see the vultures are circling!

 

[basilio]

HOG at 13c is quite depressing. It is way undervalued at current earnings and reserves. But obviously sentiment and momentum are kicking the sxxx out of the SP.

As I see it this has happened because :

1) There just hasn't been any focused marketing of the company in the last few months. That has meant a gradual deterioration of the SP which has then become self reinforcing.

2) There have been a series of missed deadlines. The last oil drill kept getting delayed. So did the start of the next one. We seem to have lost the new gas plant. These don't give confidence to the market.

3) The failure of the Chets drill. The market could probably have handled the other disappointments better if there had been a positive result on the Chets drill. And if the SP had been somewhere in the high 20's range then it may have fallen only a few more cents - unlike the present situation.

4) The lack of any prospective news for at least 5 months. Hopefully the new Soros drill will boost production if/when it bears fruit. But that is at least 5 months away and after the last disappointments you wouldn't be betting the house on the timing or the result. With that time frame why would anyway hang around with a stagnant stock ? And what else is there to look forward to ?

I suspect the Russian oil industry culture and skills may be behind the continual failures of deadlines. I'm not sure how this can be effectively addressed by the company.

One thing is for sure. While the currently SP is so low and targets being missed the management should not be taking more than very basic returns.!!

________________________________________________________________

That $2m a quarter administration cost seems very high with no breakdown of it's constituents.

 

[vas77d]

so much negatativity around this company.

 

[basilio]

so much negatativity around this company.

Vas it really doesn't deserve such a bad wrap - which makes it all the harder to understand. After all it is still quite solidly profitable and short of catastrophe seems very unlikely to collapse. Thats something that can't be said about most of the other mineral explorers.

It has proven excellent reserves in the Soris oil field and hopefully better seismic testing will identify where the gas/oil reserves are in the Chets field.

The downsides seem to be in the constraints of the local Ukraine workforce and technology, perhaps the lack of promotion of the companies prospects and the slow progress.

I also have another fear. At present HOG is making a comfortable $24m plus a year. One drill just pumping out oil and gas. Management costs are currently $8m a year . That seems prettygood to me for just ticking off the operations of an operating oil and gas field.

Perhaps its too comfortable ?

 

[prawn_86]

Perhaps its too comfortable ?

Reminds me a little of PPP (i think). They had good cashflow but their SP never really went anywhere. Although they did pay a dividend.

If management if happy just being comfortable then they should at least return some of that 'comfort' to the shareholders also

 

[basilio]

Interesting to see some actual buying pressure in the last few days.

At 15c HOG is grossly undervalued.There is an updated research report on the HOG website (Feb 7th) which outlines how cheap it is given it's production, proven reserves and a comparison to other oilers. I reckon there have to be a few new investors who think it is worth jumping in at the current price.



http://www.hawkleyoilandgas.com//me.../DJ-Carmichael-Research-Report-7-Feb-2012.pdf

 

[basilio]

Looks like the Chets drill might not be as barren as we thought.

Latest announcement from HOG is that they are casing the well and will be testing the gas they found in the wireline logs. Given that the current SP has no value for the current drill and vastly undervalues the existing production there should be a strong rebound in the next few weeks .

First in best dressed !

https://onlineinvesting.westpac.com...mpanyProfile/Announcements.aspx?stockCode=HOG

 

[reeftip]

Yes, it looks like it might not be a 'Duster' after all.

The drill crew must get paid by the hour - as they have got to be the
slowest I have ever heard about.

There are 60 year old rigs around that can drill down to their TD in around 3 weeks.

Might be time to go recruit an experienced crew from somewhere else to show the locals how it should be done.

Even if the drill rig is crap they could always lash out a few extra dollars for a 'Smith' drill bit.

Anyway that's my Monday morning whinge about an underpreforming company that I have shares in.

 

[poverty]

Might be time to go recruit an experienced crew from somewhere else to show the locals how it should be done.

Apparently there is a lot of local politics and bribery you need to tip-toe around to operate in the Ukraine and I'm guessing the slow moving local donkey-drilling crew is not something up for negotiation

 

[todster]

Yes, it looks like it might not be a 'Duster' after all.

The drill crew must get paid by the hour - as they have got to be the
slowest I have ever heard about.

There are 60 year old rigs around that can drill down to their TD in around 3 weeks.

Might be time to go recruit an experienced crew from somewhere else to show the locals how it should be done.

Even if the drill rig is crap they could always lash out a few extra dollars for a 'Smith' drill bit.

Anyway that's my Monday morning whinge about an underpreforming company that I have shares in.

I wouldn't even go outside in that weather.

 

[basilio]

I think Todster put his finger on the realities of working in blizzards and very hostile environments.

On the bigger picture it would be interesting to find any comparisons between times and costs for other oil companies working in the Ukraine and in this region. Any contributions ?

 

[RNI]

Great to see the Chets results out today which have finally given us hope with the proof there are hydrocarbons down there in B24/25 and possibly in B26 as well.....

'the B26 formation was also interpred to be gas saturated'

They are taking a cased hole test to obtain..... 'better understanding of the productivity of the reservoirs'. These results should be out (hopefully) by mid April and will help t identify areas with the largest amounts of gas and equally important those areas where the permeability is such to enable them to produce commercially, so thank goodness for that good news after all the doom and gloom and the share price at a shockingly low price.

Yes, exactly basilio...'First in best dressed'.... is hopefully correct. Will be great to see the share price gradually start to head North again instead of South, and soon I think.

Also Poverty, you are correct regarding the need for them to keep the local drilling crew. They employ the locals as they not only know the local area, but just as importantly, to keep the peace with the Ukraine Government, which is still known to be at times very difficult to work with. and there is still corruption occurring in that country. This at least helps them to be accepted and they are seen to be helping Ukraine by giving employment to it's people.

Anyway, good news at last, just when we all had accepted (reluctantly) that Chets was a duster!!!!