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Sirius Petroleum (LSE:SRSP) and BG Group (LSE:BG.), virtual David and Goliaths of the oil industry made public discoveries of significant and previously unexpected recoverable resources in their fields off the coast of Africa.
Discoveries
Sirius announced that an independent assessment by Schlumberger, the world’s largest petrochemical service company has confirmed 35.2 to 44.1 million stock tank barrels of P50-P10 oil in place in its Ororo field off the coast of Nigeria. The significance is that this is much higher than originally anticipated and that it should be the way out of the financial doldrums the plague young petroleum companies. Sirius’ share price was up 6.9% to 3.875 prior to noon today.
BG Broup announced discovery of an additional 4.7 trillion cubic feet of total recoverable resources at its Mzia field and across Blocks one, three and four, off the coast of Tanzania. This discovery brings the overall total recoverable resources at the project to 15 trillion cubic feet. BG’s share price declined 0.36% to 1,233 by mid-afternoon. Go figure.
Same Dream, Same Difficulties
It is exciting to know that the resources are there. Those resources generate dreams of dollar signs (or pound signs, as the case may be) at night for stakeholders and some shareholders. But a daunting question must now be answered: “What is it going to take to recover the recoverable?”
Different Companies, Different Dynamics
For BG, the task is probably not so daunting as it is routine. With a market cap of £42,101.9 million, it is a giant, a member of the FTSE100, and a world leader with operations in 20 countries. BG has access to over 18 barrels of oil equivalent. BG specializes in the production of Liquid Natural Gas. It has a net working capital of 99.55 per share.
By comparison, Sirius is still fighting the uphill battle typically faced by young companies towards getting some return on its investment. It has a market cap of a mere £36.7 million and it’s operations are narrowly focused in Nigeria. It has a negative cash flow and a negative EPS. However, their announcement this morning also said that it will be floating 9.375 million ordinary shares on the AIM at a price of 4.0 pence per share on 16 December, which will put the company in a better cash position to achieve the dream.
The company’s CEO, Bobo Kuti, expalined that “The Independent assessment of the oil in place in the first of our portfolio of assets to be exploited, the Ororo field, indicates a greater asset base than we had originally expected. The long awaited decision to proceed with this development is a major first step for the Company, from which it can build value for shareholders.”
That, my friends, is why Sirius’ share price will begin to fly. BG Group soars on eagle wings, whilst Sirius is ready to leave the nest for the first time.
