NXS - Nexus Energy

[chops_a_must]

I had mentioned previously that amongst the turmoil I had been buying a few things. NXS being one of those. Excellent technicals, and a whole host of absolutely fantastic fundamental announcements.

Might be worth all of those oil and gas fundies taking a really hard look at this, because it appears to be an absolute ripper.

Here is the latest installment, with NXS up 7% and holding on the news:

Progress Report No. 6
Crux-3 Appraisal Well
“Crux-3 Flowing at 50 MMscf/d”

Nexus Energy Limited (“Nexus”) is pleased to advise that the Crux-3 appraisal well is now being production tested and at 6:00 am (ACST) was flowing at a rate of 50 MMscf/d with an associated average condensate rate of approximately 2,000 barrels per day through a 1” choke with a flowing well head pressure of 2,770 psi.

The interval being tested is the Montara Formation over the depth 3,595 metres to 3,608 metres. This top sand intersected in the well is now being tested, this has not previously been tested in the field. The main reservoir section (“A” and “B” sand) is in pressure communication with this top sand and is not being tested because it was previously tested in the Crux-1 well.
The condensate ratios recorded from this test are as expected given the test separator conditions and confirm that the gas will produce a condensate to gas ratio of approximately 35 barrels/MMscf when processed by the facilities planned for the Crux liquids project. The flow rate has been limited by the capacity of the testing equipment.

The information gathered from the production test will be used in the detailed design of the production facilities for the Crux liquids project.
PAGE 1 OF 3
NEXUS ENERGY LTD ASX CODE: NXS
DATE: 14 JANUARY 2008
Once gas and condensate samples have been taken, the well will be suspended and retained as a production well.
The Crux-3 well is the first of three wells to be drilled in the greater Crux area over the next three months. Suspension of the Crux-3 well and moving of the rig to the Crux-4 well location should be completed within the next week. The third well will be drilled in the adjoining AC/P41 exploration permit to test the Libra exploration prospect, in which Nexus holds a 50% interest.

Nexus managing director, Ian Tchacos said, “The Crux-3 well is now the second production/injection well drilled in the Crux liquids project. The identification of the younger Montara sands in the well (and proof of their excellent productivity) has provided Nexus with further exploration and appraisal potential in both AC/P23 and the surrounding AC/P41 permit. We now look forward to the drilling of Crux-4 and Libra-1 wells.”
Participants
Nexus Energy WA Pty Ltd (85%)
Osaka Gas Crux Pty Ltd (15%)

Location
The Crux-3 well is located in AC/P23, in the offshore Browse Basin, Western Australia.
Latitude: 12 deg 57' 32.63” S
Longitude: 124 deg 26' 50.07” E
Map showing location of the Crux field in permit AC/P23
PAGE 2 OF 3

 

[jman2007]

I had mentioned previously that amongst the turmoil I had been buying a few things. NXS being one of those. Excellent technicals, and a whole host of absolutely fantastic fundamental announcements.

Might be worth all of those oil and gas fundies taking a really hard look at this, because it appears to be an absolute ripper.

Here is the latest installment, with NXS up 7% and holding on the news:

Hey Chops

Jumped on board with NXS back in May, definitely had a great run over the last few weeks, amidst a declining market I have to add. I think there are some really great positives here, possible weaknesses imo include no likely production until 2009, and possible funding pressure being placed on NXS with the development of Crux. Although I have to say that given the nature of the releases lately, financing may not be such a big hurdle....

jman

 

[Col Lector]

The NXS/AZA merger is a very good outcome IMO. Plenty of synergies. Immediate cash-flow.
Interesting structure to the deal. Leaves ARC totally out in the cold...largely due to the combination of certainty,choice & upside it offers AZA shareholders.
The dilutive impact will (likely) be minimised by cancellation of AZA's holding of NXS; & by the cash component of the offer.
Success at the imminent Crux-4 &/or Libra drillings - to add to the positive Crux-3 results - will leave this deal looking good for all parties with NXS likely to head north towards/beyond $2/share.
Regarding Basker/Manter/Gummy (BMG), the predicted potential for field extensions into adjoining NXS/AZA leases gives the merged entity huge upside
The BMG project also benefits greatly by gaining the ability to process/market BMG biproduct gas (currently reinjected) via NXS's nearby Longtom facilities.
BPT is a beneficiary of NXS merging with AZA due to :
exploration upside of extensions onto NXS adjoining leases
new efficiencies & advanced processing/marketing opportunities for both BMG gas (& oil) by access to NXS Longtom facilities
Introduction of NXS industrry backers (eg, Viking) to the BMG expansion
Potential scale efficiencies at every level by BPT & NXS project cooperation....

Current SP's of NXS (1.46)or AZA (1.55) do not IMO recognise the potential of the merged entity.
IMO, buying into AZA is an attractive means of gaining exposure to NXS upside, given the limited downside inferred by the NXS terms.

 

[Col Lector]

The way I see it
NXS & the merged entity will benefit hugely from a smooth merger.
Deal istructure is attractive forAZA holders
Current NXS & AZA SP's have been impacted by current slump & pullback in oil but the entities reserve upside potential (possibly in near future following Crux-4) is where the real benefits, & basis for a rerating lie.

Worth referring to page 17 of yesterday's investor briefing,
http://www.asx.com.au/asxpdf/20080123/pdf/3171xn0xxzlmd3.pdf
At NXS sp $1.50 the value per AZA share is estimated at $1.75, falling to $1.61 value per AZA share if NXS falls to $1.30.
Currently AZA is trading below $1.55 & NXS ~ $1.48.
Is AZA a cheap entry??..even assuming no higher bids come along (still a possibility...but fairly remote).
Opinions sought on this.
The upside scenario...possibly with upgrading of reserves post Crux-4, is catered for under the merger terms ie, NXS sp rises to $2.30/share, confers a value per AZA share of $1.88.
Obviously the preferred scenario for both NXS & AZA holders.

Note AZA shareholders accepting the offer also stand to gain from a 7c/share special dividend pre-merger. Appears this is additional to figures above but this not clear .... Anyone got ideas on this??

 

[jman2007]

Well I'll be damned

I have to admit I didn't really appreciate the full-scale of the proposed meregr and the potential of this development until I read through the NXS Jan08 Investor presentation, and imo the proposal looks like an absolute ripper.

I don't really have too much to add to Col Lectors excellent analysis of the merger proposal, which was backed up with substansial hard evidence. This looks like it was a real street-fight between ARQ and NXS with the latter company being comprehensively left battered and bleeding in the gutter.

I always felt that the smaller-mid cap companies in the sector had the ability to move manouver a lot faster than the top-heavy big boys, and take advantage of opportunities like this.

Needless to say, shareholders on both sides of the fence should be very pleased

I'll continue to research this development and come back with something a bit more objective perhaps :iamwithst

jman

 

[Happy]

If good news doesn’t push price up higher, and price goes lower, based on technical analysis, there is good support and resistance at 0.75 to 0.85 range.

 

[pajm]

Anyone got any thoughts on where SP may head with planned merger? Does it dilute value in short term? I thought SP would have gone better last couple of days with market up and proposed merger being good long term outlook for NXS.

 

[jman2007]

Patience is the name of the game here pajm,

The merger is fairly complex and I haven't fully got my head fully around all the conditions, and just exactly who is issuing shares to who yet.

Over the short term it'd be a brave man to try and predict the sp amongst the current market volatility. With Basker online we should see some positive impact on the cashflow scenario this year, but the full sp value may not be realised until Crux comes online in 2010.

The market might also be hedging its bets to see how this merger plays out imo, it will be a real challenge for management to streamline and coordinate the immense potential here, but the long-term potential looks great. Defintely a long-term hold for me.

jman

 

[pajm]

That's true jman. Needs time to see how the merger pans out and difficult at the moment with the volatility. Was hoping in the interim for bit of a lift with sp with the news - imagine could have been hit a lot harder with recent fall. I am long term holder also. Merger certaintly good for long term for NXS and great in short term with cashflow from Basker, as you mention. Wonder if NXS may look for further acquisitions down the track after consolidation?

 

[Col Lector]

Jman...thanks for the backpat. IMO the merger+Crux-4 currently drilling make things doubly(+) interesting for both NXS & AZA holders.
Crux-4 success has the potential to push NXS sp past the 2.05 price level....unlockng more merger value per share for AZA holders.
At 6am Jan 29 Crux-4 was at 1833m of total planned depth 3958m. The next week...or 2 should be fairly rivetting....
Gidday Pajm...
A possible explanation for NXS relatively weak finish to week ....The quarterly suggests a possible delay of Longtom gas production. IMO this could be a part of the evolving strategy of NXS that will seek to harness the gas resources at BMG by processing/maketting them in tandem via Longtom faciliities. A small delay may be a small price to pay for the scale efficiencies & marketting clout this delivers to NXS..to AZA/NXS holders ...and by association BPT...potentially significantly.
Santos declining to take up the NXS Longtom option is also interesting....some have taken it as a lack of confidence in the project...but are there other strategies at play here from STO??.
Currently holding NXS, AZA & BPT ...so have more than a passing interest in how this all unfolds.
PS. Hey Happy are you posting to the right thread?? NXS TA has support at 75c?? Currently ~ $1.50. That's really going out on a limb.....

 

[pajm]

Hello Col Lector. Many thanks for your information. Did not realize STO did not take up Longtom option. Love to see BPT in on the merger action in the future - they have performed really well. Have been on NXS since 2004 and believe they have good management, so will be interesting to see how this pans out with STO. NXS really have been kicking goals, particularly due to great mangement. I agree with your comments regarding 'happy'. Would require a big bad bear for NXS to fall below 0.90. Any holder of NXS pre May '07 will be still 'licking their lips' if they took up May SPP @ 0.80, while sp went nth. before close of extended SPP

 

[Col Lector]

Pajm....would be enlightening to know how friendly the relationship is between NXS & BPT.....or NXS & STO for that matter.
Noticed BPT (as BMG partner) has been strangely quiet with regard to AZA merger but surely must have views on NXS's involvement ....probably v.positive given the synergies that flow their way...

 

[pajm]

Interesting Col Lector. Have been wondering for sometime what other consolidation is in store in the mid cap range. I have thought for awhile whether STO may make a play for NXS. I am a holder of AWE and they were one of the suitors for AZA. So.....will be interesting to see how it plays out in the future. Have a bit of confidence with NXS with the way they shook off AZA's initial advances and then NXS turned the tables, obviously assisted with market downturn and ARQ's crap sp performance in recent times.

 

[kash]

I have now seen it twice that NXS has a ta support of 75cent. How did you arrive at that figure. thanks

 

[EZZA]

Been watching this one all day, this stock did not want to drop below $1.50.
Bought in at 1.505, lets hope price shoots up after drilling results.

 

[jman2007]

Been watching this one all day, this stock did not want to drop below $1.50.
Bought in at 1.505, lets hope price shoots up after drilling results.

I wouldn't be overly concerned Ezza,

The trading environment is very volatile at the moment, and investors are still very edgey re further sub-prime woes coming out of the woodwork. The assets NXS have acquired WILL take time to develop too. NXS have gained substansial experience through negotiations and agreements over the past 12 months, but imo their ability to deliver on key projects has not yet been fully tested, which is the key here. I have faith in the management however, and I believe they will eventually unlock the immense potential this company offers.

jman

 

[EZZA]

yeah, looks like management have done a good job so far. if they keep tracking the way they are nxs will be looking the goods. been offloading a most of my portfolio, so nxs is a one of the few that i'm holding. don't really want to be margin called if so i'll hold the ones i believe in.

 

[Col Lector]

Excellent results announced yesterday for Crux-4 appraisal well in exploration permit AC/P23, Browse Basin. This follows success at Crux-3 and ensures a substantial upgrade of reserves is imminent. Net to NXS stood at approx 56mbbl prior to Crux-3 & 4 so expectations are for new reserves to exceed 100mbbl+. With more drilling to come....
NXS still trading substantially below broker targets (see Paterson's on NXS website) prior to Crux-4 success. Last $1.65.

The Crux-4drill intersected approx 110 metres of high quality net gas bearing sand over a 190 metre gross interval confirming the field extends into the previously undrilled South East Horst block.
This discovery could have significant positive implications for exploration prospectivity in the eastern part of exploration permit AC/P23.
As at 06:00 am (ACST), the Crux-4 appraisal well had reached a depth of 3,760 metres true vertical depth sub sea (“TVDSS”). The final suite of wireline logs are currently being acquired.
The Crux-4 well has confirmed that the Crux field extends into the previously undrilled South East Horst block, intersecting the top gas sand at the highest point seen in the field approximately 20 metres above the highest gas sand seen in the Crux-3 well.

The uppermost sand intersected in the well lies over 310 metres above the field-wide gas water contact. Pressure measurements obtained from the well confirm that the gas intersected at this location is in pressure communication with the gas column encountered in the core area of the field and is likely to have the same gas water contact.

The forward plan will be to set the 9 ⅝ inch casing before drilling ahead to the planned total depth of 3,958 metres TVDSS. The well will be suspended as a future production well.
The Crux-4 well is the second of three wells to be drilled in the greater Crux area. The third well, Libra-1, will be drilled in the adjoining AC/P41 exploration permit in April 2008. Nexus holds a 50% interest in AC/P41 in conjunction with its partner, Shell Development (Australia) Pty Ltd.
Nexus managing director, Ian Tchacos said, “We have encountered a very significant gas column in a previously undrilled portion of the field. This well has encountered the largest gross gas column seen in the Crux field to date. These results confirm the extension of the field into the South East Horst block and have positive implications for exploration prospectivity in the eastern part of AC/P23.”
“The Crux-4 gas reservoir intersection follows on from the excellent results obtained at Crux-3 and is expected to further enhance the commerciality of the Crux liquids project scheduled for project sanction by August 2008. Crux-4 is the third well drilled to date that will be kept as a future development well, thereby contributing to the value of the project.”
Mr Tchacos said, “The Crux-4 well was located to test the South East Horst extension of the Crux field. The South East Horst lies outside of the Crux ‘core’ area and the reservoir distribution information which is expected to be obtained from this well is likely to have significant implications for further field appraisal and near field exploration such as the nearby Auriga prospect in the AC/P23 exploration permit.”
Location
The Crux-4 well is located in AC/P23, in the offshore Browse basin, Western Australia.
Latitude: 12 deg 57' 52.97” S
Longitude: 124 deg 27' 38.19” E
Participants
Nexus Energy WA Pty Ltd (85%)
Osaka Gas Crux Pty Ltd (15%)

 

[EZZA]

nice moves of late, anyone with a new valuation?

mac d crossed up. dmi says trending.
21 day ma is pointing up, hope it keep moving.

 

[EZZA]

good day today a lot of interest in this stock, sold some shares, hoping to pick them up again if there is a retraction.

other oil stock i noticed moved was aed, 40% wow even though its trending down.