MPO - Molopo Gas

The Managing Director Stephen Mitchell has transferred some shares to his super fund. He has also exercised 250k options.

However what is very interesting about these transactions, and something that we can speculate about is this:

Why were the options exercised now given that they did not expire until August? Are they trying to get their hands on as many shares as possible, as soon as possible

Why transfer some of those shares to his super fund now? Is he expecting the share price to dramatically rise between now and August, and wanted to get them into his super fund as soon as possible, so as to minimize the capital gains tax impost on the gains.

All very positive activity as far as I am concerned.

Hope you're right Financial Chat. The fact MPO has some of its biggest projects in low tax Canada instead of Comrade Rudd's super profit tax environment is perhaps also a good thing.

Following Shell's most recent acquisition, Ivor Ries has commented as follows:

The flurry of US shale gas transactions is relevant to Molopo as the company owns 2.2 million acres of shale gas lease covering most of the Utica and Lorraine shale formations in Quebec. While at an earlier stage of development, many petroleum geologists consider the economics of the Utica and Lorraine shales to be as good as if not better than the Marcellus.

Molopos high grade thermogenic Quebec acreage totals 375,000 acres and is estimated to contain up to 6Tcf of recoverable gas. Based on the Shell-East Resources deal valuation, MPOs Quebec project should have a market value of approximately US$800 million once the company has proven the production characteristics of its lease holdings. Molopos first exploration wells in Quebec are expected to spud in the next few months.

Shale gas land grab heating up. Over the past six months the US oil and gas industry has been in the throes of a shale gas land grab of unprecedented proportions. The race to acquire unexploited shale gas stems from the widely held view that the current over-supply of natural gas in the North America is a product of the explosion of unconventional gas drilling that occurring prior to the Global Financial Crisis.

While Molopo seems determined to push ahead with sole risk exploration wells in the Utica Basin, the farm-out of some or all of the companys shale gas acreage cannot be ruled out. In our view any firming of the North American gas price over the next 12 to 18 months would see MPO besieged by larger players seeking access to its extensive acreage.

looking more bullish

http://www.buysellsignals.com/BuySellSignals/report/Australia/Stock/PDF/Daily/Australia_pdf_1432.pdf

The following (minus any tables) is the latest from Credit Suisse:

Molopo Australia
INCREASE TARGET PRICE - upgraded our target price to $1.70/share

FY results

MPO announced on 27 August its FY10 results with a headline NPAT of $2.6mn coming in slightly ahead of Credit Suisse forecast ($1.8mn). We have increased our target price to $1.70/share.

While the result was reasonably positive at the bottom line, it was buoyed by oneoff items, namely proceeds from asset sales amounting to $14mn in the year.

Catalysts for the stock moving forward will continue to be drilling activity, particularly on Canadian oil, with the resultant increases in production rates towards target volumes. In the longer term, drilling activities should lead to increased reserves and commercial definition in a number of its assets.

We have had made minor adjustments to our production and costing assumptions, which along with rolling forward our valuation, has slightly changed our earnings estimates over the forecast period.

As a result of our changes to our forecast earnings, we have slightly upgraded our target price to $1.70/share (from $1.65/share), which is underpinned by our 1.69/share valuation.

Our rating remains OUTPERFORM.

FY10 results

MPO announced its FY10 results with a headline NPAT of $2.6mn coming in slightly ahead of Credit Suisse forecast ($1.8mn).

Details
Headline NPAT of $2.6mn;
Revenue from oil and gas sales of $6.1mn;
Net cash balance of $65.7mn (including a $15mn term deposit);
EPS of $0.01/share; and
No dividend declared.

While the result was reasonably positive at the bottom line, it was buoyed by one-off items, namely proceeds from asset sales amounting to $14mn in the year.

Although MPO still has a thematic as a long-term gas story, the short- to medium-term interest is its Canadian oil play, which continues to build.

Catalysts for the stock moving forward will continue to be drilling activity, particularly on Canadian oil, with the resultant increases in production rates towards target volumes. In the longer term, drilling activities should lead to increased reserves and commercial definition
in a number of its assets.

Reserves

We have written previously that Molopo.s growth is becoming increasingly linked to its Canadian portfolio, particularly the acceleration of the work programme on the Bakken/Spearfish oil plays. On 10 August, Molopo announced a significant reserves upgrade on its Canadian oil plays.

Operations

Canada

Spearfish
MPO is looking to spend 2011 drilling extensively in the Spearfish project with the back-end of the 2011 programme to be determined once results from its initial 25 well portfolio are reviewed (expected in October). The company noted that it expects costs to decrease from >$20/b to c.$10/b over the next several years noting that the economics of the project are looking robust at or around current oil price levels.
We have slightly adjusted our modelled assumptions to reflect these comments.

Bakken
Results remain encouraging (oil found in five of six wells drilled thus far) and 2011 will see MPO continuing to assess results over what is a very large acreage (42,420 acres).

New South Wales and China
Concluded sales of assets during the period.

Queensland CSG
Although the main focus for the company has been pursuing its high-margin oil play, we note there has been significant movement on other parts of the portfolio.
The company has executed a purchase in relation to the ATP564P and 602P JV securing an additional equity stake and operatorship. As a result, MPO has increased its equity
positions in these permits to 67.12% (ATP564P) and 62.88% (ATP602P), respectively, from 50% for a total cost of A$7mn.

Indicatively, this gives the company additional leverage and control of work programmes.

Although the company maintains an .asset development. attitude to its Queensland CSG holdings we see their relevance as becoming less important, initially from the ramp-up of Canadian oil and later from the development of the company.s shale gas plays.

South African gas
Molopo (through its subsidiary company) has signed a GSA with Novo Energy (Pty) for the supply of gas on an .as available. basis for approximately 0.6mmcfd from the Virginia gas field. The contract term is for ten years. First gas is expected in March 2011. Ultimately,
Novo has the right to purchase additional gas up to 8.2TJpd.

A small but perhaps significant first step in the establishment of a South African business, although we see it at this time in the same context as Queensland CSG . small and likely to remain small when weighed against the upside opportunities potentially to emerge from the Canadian assets.

Earnings changes
We have had made minor adjustments to our production and costing assumptions, which along with rolling forward our valuation, have slightly changed our earnings estimates over the forecast period. We note that while the numbers are significant in percentage terms, they are not significant changes in real dollar terms.

We have increased our expected NPAT for FY11F by 18% from $14.5mn to $17mn. There is a flow-on effect to FY12F earnings of 4%.

Valuation and target price
As a result of our changes to our forecast earnings, we have slightly upgraded our target price to $1.70/share (from $1.65/share) which is underpinned by our $1.69/share valuation.
Our rating remains OUTPERFORM.

macquarie have commenced coverage

Initial target $1.60 set at 20% discount to their NPV of $2

And it looks like it has generated some interest.

impressive initial bounce albeit from extremely low levels.

according to the data for settled transactions for this month, Macquarie Retail have bought a net 318k.

one of the advisers that was very close to this stock at Baillieus, George Varlamos has moved to Macquarie this month and I think that he may have been responsible for Macquarie commencing coverage of the stock.

Molopo recently presented at Macquarie's Asian conference which was probably the introduction of Molopo to Macquarie.

I have been told that the analyst report on MPO has been distributed to Macquarie's Canadian office. If their is any genuine interest (which there should be because of the prevailing share price) we could see some very large buy orders coming through in the near future.

ord minnett buying

from the report of trades settled this month I noted that Ords were one of the main buyers this month.

I have just had another look at that report and I note that the net 250k bought is represented from 49 trades and that they have had no sell trades at all.

Does anyone know whether they have also commenced coverage of the stock?

http://www.theaustralian.com.au/bus...renewable-energy/story-e6frg9lo-1225922987254

Basking in the glow of renewable energy

CRITERION: Tim Boreham From: The Australian September 15, 2010 12:00AM

Molopo Energy (MPO) $1.095

EVEN if renewables make inroads, there's still the wee imperative to find more oil to satisfy insatiable demand in the meantime.

In North America, there's been a rush on shale and other unconventional oil and gas -- "tight" reserves that have been hard to extract economically. Advances in horizontal drilling and fracturing techniques mean that's no longer the case.

Flush with more than $100m from the sale of NSW gas assets to AGL, Molopo last year invested in shale oil acreage in Canada, in the so-called Bakken play in Manitoba province and Spearfish in Saskatchewan.

Molopo currently sits on 2P reserves of 9.2 million barrels in Canada -- mainly attributable to Spearfish -- but with a recoverable upside of 30-40 mb. The focus currently is on a 25-well, $30m push at Spearfish, but with a four- to five-year ambition to complete at least 380 wells.

While being unloved is a perennial complaint in the sector, Molopo points to the lustier valuations ascribed to Canadian-based unconventional stocks.

"It's hard for us to have North American assets valued here," chief executive Stephen Mitchell says. "They can see value in coal-bed methane, but they haven't seen it yet in oil or shale gas."

Supporting this plaintive cry, Macquarie's analysts yesterday ascribed a $2 valuation to Molopo shares. The firm ascribes an 84c-a-share valuation to Spearfish field and a further 33c to Bakken, which means Mopolo's other assets -- including the Mungi gas field in Queensland -- are thrown in along with the free steak knives.

Another supporting feature is that Molopo is not just about blue sky: it is producing from Spearfish at an attributable rate of about 520 barrels a day, but hopes to raise this to 2000 bopd by December when more wells come on stream.

We rate Molopo a speculative buy, given the evidence that local investors are yet to latch on to the Next Big Thing. The key risk is that funding for an expanded well program will dry up.

Stephen Mitchell presented at the Melbourne Mining Club tonight. Sounds like an intriguing play on shale gas in Canada and CSG in Queensland. The worry I have is that they have so many projects on the go, that multiplies the risk of something going wrong. I also thought that their reserves seemed to be rather low, especially in their Spearfish play, but perhaps I'm missing something.

I was asked by a friend that was unable to get to the meeting to take some notes, so I?ll also share them with you. I have been reluctant to post them on a forum as there is a bit of disenchantment of late, and I am not interested in getting into a slinging match with anyone about my observations. I do think that the time to become bullish about this stock is rapidly approaching.

It was a very interesting morning, and as you would have seen from the share price appreciation Friday and today, the market reacted positively to the presentation notes.

The Chairman opened the meeting, and wanted to express some comments before handing over to the MD. He started off stating how 2010 has been such a pivotal year for MPO, and nearly gloating about how successful that they had been making early acquisitions. He then went on to talk about how the industry had changed over the last year, to add shale to CSG. Don stated that they expected to make the same return from Wolfgang as has been expected from Spearfish. He even went on to state that it is ?exciting? to see how well the company?s assets are performing. But then in the next breath spoke of delays from Mungi! ?Africa is going swimmingly? he said. ?Quebec has become a millstone with problems about processing and from the greenies? and will now not be drilled until the first half of 2011. He also said that he was proud to report that operational income has increased from $750k to $6m.

At this stage, a question/comment came from the floor, to the effect that it was all very well for the Board to be happy about the development of the assets, but the reality was, that the market is the adjudicator by share price performance and that had been abysmal. Don acknowledged this and stated that they were amazed how ignored the company was, and made particular reference to the announcement of the initial oil reserves which should have added a minimum of 40c per share. Another person asked whether they had done any research as to why they were being ignored. The response was along the line of Australians don?t value overseas assets, and Canadians/North Americans don?t look to invest on the ASX.

As has been announced by the company, all the resolutions were carried, and without any drama or objection. Very few questions were raised, however regarding the Constitution, a question was asked as to why the MD was exempt from facing election! The answer was that it was in accordance with normal practice and the ASX rules.

Then came the vote for the increase in the maximum $ for the Director Fee Pool. I was expecting this resolution to cause discussion, and I was not disappointed, as a question about the possible TSX listing arose. The Chairman stated that he could only offer a personal view, and that was that he hoped that it would be completed by the end of this calendar year. That is not the decision, but the actual listing! And that the TSX listing would require more independent directors to be appointed. A further question was asked as to whether it was the intention to appoint directors for the Canadian listing or for the local Board (or from Australia). Don replied both.

The Employee Incentive Scheme was approved with no questions being asked. I thought sure that someone would raise a question about that, purely because I believe that it is misunderstood.

Stephen then got his opportunity to speak. I think that he was fearing an assault from the floor, so came out punching from the start, about how he was so disappointed with the poor share price performance. He also thought that the Australian market overlooks the shale/tight oil or gas market. He added that the shale market should be no less spectacular than the CSG market. He thought that perhaps the market had taken an incorrect message from the Anglo sale. Mention was also made of the collapse of the gas prices in North America. Stephen then went onto say that MPO had a package of 1st class assets and a 1st class team working for it, and that they intend to crystalize the full value of the assets over the next year. I felt that he really meant what he was saying. He emphasized that no onshore energy company in Australia has the potential to build 100Pj of gas. Their short term focus is oil and the longer term is gas.

Quebec has been divided into 4 prospective areas.
Stephen stressed the point that MPO has adopted the forward plan as created/derived by Monty Bowers, and that MPO was not trying to impose a plan created by a bunch of Aussies.

Spearfish was originally drilled about 30 years ago and EOG started in that area in 2007. The technology now applied by MPO and the timing of its introduction could not have been better. They felt that it was a major achievement to get the initial reserve classification within such a short time and with such limited drilling.
Spearfish/Bakken is now running at over 1000bbls/d. This was news to me, but they referred to a recent announcement (but I cannot find it) and they are still focusing on 2000bbls/d by Xmas.

They want to emulate EOG results, but achieve it by drilling half the number of wells but twice the length.

p.12 of the presentation refers to the cost of each well. When they commenced it was close to $1.8m and now they have got that down to $1.5m and they are looking to drive that down further. Also note the estimated oil recovery rates on that page.

p.13 points out that they expect to make $40 per barrel.
Re Bakken, Monty is still hopeful of achieving the targeted 110blpd (but may take time).

Re Wolfcamp, in USA the landowner has the mineral rights to the land, so MPO have got someone going around offering farmers a price to acquire a lease to their mineral rights. Apparently this was going very well until El Paso came onto the scene and snapped up 120k acres @ $175 per acre. El Paso is only 10 miles from the boundary of MPO. The potential for the results from Wolfgang to be several times higher than Spearfish and many times higher than the Bakken. The acquisition of Wolfgang has caused a change of focus for MPO and has caused the board to look at the portfolio in a different light. We can expect a change of priority.

Re Qld., Stephen believes that they have made great strides in commerciality, but admits to being behind target and over budget. Mungi 21 & 23 are still in a dewatering phase but they are hopeful of having production rates prior to the end of 2010. I think that he also said that 2 rigs are currently drilling at Harcourt and Mungi.

Re Quebec, MPO will retain the sweetest spot but will look to farm out other areas. MPO is letting Talisman take the lead in the fight so that there is no opportunity for the Canadians to make leverage out of the company wanting to exploit the area being a foreigner, being an Aussie co.

The concluding remarks from Stephen was that the Board had a plan to unlock the true value of the company very soon. They will look to finance the development of the assets from a combination of:
A growing cash flow
Asset sales
Debt
Equity (from a TSX listing)

I have to state that the presentation was extremely good and Stephen was particularly convincing.

At the AGM last week, the Chairman indicated that the Board may be looking to add to their numbers, to add to its strength, and in light of the need of more independant directors should a TSX listing be pursued.

If one looks at the top 20 shareholder list, it is interesting to me to note a couple of additions that could be potential candidates:

Roger Corbett

Thomas Fontaine (Avatar Equities)

Holders of this stock would share my frustration with the lack of share price appreciation.

Many holders on a number of forums have linked the lack of performance to the inaction of the board.

On another site there is mention that a group known as Radar Group http://www.radargroup.com.au/ are telephoning shareholders to ascertain their views.

It is my understanding that this action has been orchestrated by a large shareholder.

It would be interesting to hear from other holders if they have been contacted, to learn what is being proposed to be done to rectify the lack of performance.

We haven't been contacted to date. Not sure what to make of the recent Canadian IPO announcement??? Thanks for your ongoing posts 'financial chat', I'll now have a glance at your radar group url. Hopefully management and results can get this companies price back to where it has been and then some more.

Oh well, shareholders can now not only be frustrated by a lack of share price appreciation, they can be positively underwhelmed by 2 days of sharp share price depreciation. The market is certainly out of love with MPO. I've read a few post's on another forum by someone very down on MPO, the poster said some months ago that MPO would soon be at 80cents, it seemed remote at the time but its closer now.

Gotta say I am surprised at the last 2 days price action. MPO is a good company with good managment, in a good industry with some pretty darn fine real estate.

I think the latest action is a little bit of unloading before the end of the year. I picked myself up a parcel this afternoon at 90 cents. At that price (or any below $1 in my opinion) I'd say it is a bargain and I think we'll see it hold and trickle back up over the next week or so baring any major stock market catastrophes. We are also seeing large volumes trading hands (bigger buyers and smaller sellers from my observations during the day) which is another good sign.

Anyway - do your own research.

malachii

Well - didn't expect the correction to start quite this quickly but the announcement was pretty good - 33% increase in P1 oil reserves and 36% increase in P2 and P3!

malachii

And another good announcement - this time about the drilling and reserves in South Africa. They are really working on improving the communication. The price seems to have turned and is working it's way back up again.

malachii

Molopo Energy Limited (Company) has received a requisition from shareholders holding approximately 6.75% of the issued capital of the Company to call a general meeting under section 249D of the Corporations Act.

It is time for a changing of the guard.

For too long shareholders have had to wait to be rewarded.

It is time to revitalise the Board.

Some background information about Greg Lewin:

http://investing.businessweek.com/r...&previousCapId=527037&previousTitle=SASOL LTD



http://people.forbes.com/profile/gregory-arthur-lewin/148215



http://www.prnewswire.com/news-rele...non-executive-director-of-sasol-88408697.html

PRESS RELEASE

Molopo Shareholders Call for Board Renewal and Strategic Refocus


Molopo shareholders have today lodged a request for Molopo to call an extraordinary general meeting of shareholders (EGM) to elect two new Board members, former Shell executive, Greg Lewin and Melbourne businessman, Mr Max Beck.

Should they be elected, the new Board members intend to execute targeted strategies to build shareholder value and to arrest the stagnation of the company and its share price. These strategies will see the company focus on the rapid development of its most valuable assets, including those in Canada, and maximizing value. In order to achieve these strategies, the company will apply its energies to accelerating production and minimizing costs, thereby extracting value from its existing asset base.

The shareholder group has been moved to take this action following a prolonged period of share price underperformance. It also reflects feedback from a broader group of shareholders who have expressed a lack of confidence in the existing Board.

Shareholders need the Board to develop and implement a credible plan to realize the value of the company’s assets within in a reasonable timeframe and without significant dilution in value for existing shareholders.

Molopo shareholder, Mr Max Beck, commented, “This is not a step we have taken lightly. We made a friendly approach to the Board through the Chairman, Donald Beard on Wednesday 15 December but we did not receive a response within the agreed timeframe. We have called for an EGM because there is a strong desire for change and shareholders should be given the chance to decide for themselves.


“The market’s reaction to the company’s most recent major announcements reflects it’s skepticism about the Board and its ability to deliver.”

“Shareholders have heard enough excuses and Molopo needs a Board with a sense of urgency. It is time to generate value from the existing asset base by injecting new experience and bringing some hard nosed, commercial common sense to the Board”.

The EGM will consider a motion for board renewal to be effected by electing Mr Greg Lewin and Mr Max Beck to the Board of Molopo in place of existing directors, Chairman Donald Beard, and non executive director, Dr Bruce Hobday.

Mr Lewin, previously President of Shell Global Solutions has had over 30 years experience in the oil and gas industry. He is a non-executive director of Sasol Limited.

Mr Max Beck is a successful business man and major shareholder in Molopo. He has offered to join the Board to bring a strong commercial perspective and to act as a direct voice for shareholders. It is intended that his tenure on the Board would continue while the change in corporate focus is underway.




Media enquiries:
Nerida Mossop
Hinton and Associates
03 9600 1979
0437 361 433

Frustrated former holder here. Became fed up, and voted with my feet.

'...arrest the stagnation of the company and its share price...'

Click to expand...

...in the post above. Agree completely, more dynamic management is needed to realize the potential of this company.