Medoil Share Discussion Threads

[skyship] 31/12/2006 16:57

RebelsRUs - This is the first time i've clicked onto this site (see 2007 thread) & I know I cannot be the first to say it, but yr intro header is EXcellent. As a matter of interest, just how do you manage to post the graphics and bulletpoints in that way. Was the whole thing originated elsewhere then somehow given a discrete URL?

[rebelsrus] 25/12/2006 21:21

Happy christmas everyone.

[greatfull dead] 23/12/2006 12:34

Happy Christmas All.
GD

[petemorr] 21/12/2006 11:07

Happy Xmas all!

[duplicate book] 20/12/2006 11:04

Hey Ho! Merry Christmas all and best wishes for a prosperous New Year in all that you do. Doubt we'll get any news this side of the New Year, but I reckon first quarter of 2007 is going to give us some idea of where we are heading with MDL!! Don't know if anybody from the Company ever reads this site, but just in case, Merry Christmas to you too, keep up the good work, and lets get MDL up there where we belong!!!

[dodman2] 19/12/2006 19:55

Hey happy Xmas MDLers - off on holidays now - fingers crossed for 2007 eh! Very very long here but not unhappy about it - in fact will top up further if she drops much below 15. Have tried to get some news out of them about the Malta license renewal but no reply as yet.

[duplicate book] 07/12/2006 19:49

Its a rollover guys. If whoever has rolled them doesn't take em up in T10 or maybe T20, they'll be going back to the MM's as a sell!!

[chill3hill] 07/12/2006 16:37

They look like buys to me. Someone getting in before a drilling programme is announced I expect.

[petemorr] 07/12/2006 14:19

13:51:35 17.00 60,000
13:51:25 16.94 60,000
Selftrade shows these as 2 buys...

[duplicate book] 05/12/2006 16:29

Its going to be difficult to get this one motoring northwards as long as we have somebody dumping stock onto the market! Another T sell today at 15p.

[farnham] 01/12/2006 15:02

yep ,i added yesterday to my year long holding,patience!

[cat100] 01/12/2006 12:54

duplicate book I'm with you on that.

[duplicate book] 01/12/2006 08:13

Didn't think we would be still down at this level by this time of the year I must say. Thought we would have had more positive news flow this last quarter to take us back upto 25-30p, but it now looks like the first six months of 2007 are going to set the mark. Am still more than happy to hold,nothing has changed, and the only news that has been released has been of a positive nature.

[cat100] 29/11/2006 18:17

All's quite on the Med. Still waiting for the next bit of news . Hope this comes to life soon .

[duplicate book] 10/11/2006 20:09

A couple of nice buys today, but once again a couple of sizeable T trade sells to cancel them out. Any of you guys on here close to the Company? Would be interesting to find out if they are aware of anybody offloading onto the market.

[chrissey] 02/11/2006 14:43

Thanks Knowing, cause and effect comes to mind! Needs a lot of punters piling into this one to have a view that you will ever cover the spread.

[dodman2] 02/11/2006 09:51

Nice one Knowing - thnx. Looking good.

[knowing] 01/11/2006 08:32

Chris purely because this is quite an illiquid stock.

[chrissey] 01/11/2006 08:20

Pity about the spread, tells you enough in my view.

[blueliner] 01/11/2006 08:09

Buy note from GE&CR covering Medoil on UK Analyst this morning.
Whilst I take all these UK Anal write ups with a pinch of
salt generally as they issue them like confetti.
It does a fairly comprehensive job on MDL which is little known plus spreads the word around.
edit reproduced above

[knowing] 01/11/2006 08:03

1st November 2006 Editor-in-Chief Monisha Varadan
[e-mail]
020 7033 9389


Medoil Plc - Buy at 16.25p

Key Data

Share Price 16.25p
Spread 15.5p - 17p
Market Cap 9 million pounds
12 Month Range 15.25p - 29.5p
Shares issued 53 million shares
Market AIM
Cash 1.15 million pounds
Website www.medoilplc.com
Contact David Thomas
0207 921 0001


Medoil is an early stage oil and gas exploration player, focused on the Mediterranean and North African regions. It owns a portfolio of assets in Tunisia, Albania and Sicily with near term production potential, offering significant investment upside. The company stands apart from a string of AIM listed exploration minnows for a few reasons:

Key Points:

It has strong portfolio of projects in the Mediterranean region

Independent analysts believe that its main prospect, the oil discovery M'Sela at Tunisia, contains 109 million barrels of recoverable reserves.

The group has 1.15 million pounds in cash and is actively pursuing an acquisition strategy with the intention of adding to its portfolio over a short period of time. Medoil is fully funded to deliver on its stated strategy over the next 12 months.


On the basis of our conservative valuation, we believe the shares should be worth 61p. This is based purely on the company's single well discovery at Louza. The price does not take into account upside offered by surrounding prospects, or any of Medoil's other acreage.

This report cannot be regarded as impartial as GE&CR has been commissioned to produce it by Medoil Plc. RSH, the ultimate owner of GE&CR also owns Bishopsgate Communications, the PR adviser to Medoil. However the opinions and valuations contained within are those of GE&CR.









Background

Medoil was formed by David Thomas and Joseph McKniff in 2004 as a vehicle to acquire exploration assets in the Mediterranean region. The company floated as a cash shell in January 2005 with several licence applications pending. In the same year, it was awarded two licences - Louza in Tunisia and Area 3 in Malta.

The company has, since the IPO, carried out a focused technical analytical campaign on both licences. Independent analysts have looked at both properties and found the results to be highly encouraging. While the focus remains on the M'Sela discovery in Tunisia, the company is actively adding licences to its portfolio.





Assets

Tunisia

On 30th March 2005, three months after Medoil's AIM listing, the company announced news of its first prospecting permit - the El Louza Block. Louza lies offshore to the east of Tunisia and covers 4,100 km2. The permit was awarded to Medoil in partnership with
TGS -Nopec, an international geophysical services company.

The Louza block is adjacent to the Isis oil field and 60 kilometres away from the Miskar gas production facility, operated by British Gas International. Approximately 10,700 of 2D seismic was shot on the block between 1968 and 2000.

The licence was previously explored by operators including AGIP, Total, Shell and Union Texas, which conducted seismic, gravity and magnetic surveys across the permit and drilled four wells. Of the four wells drilled, one well encountered a 150 metre gross oil column which lead to the discovery of M'Sela. M'Sela, classified as an existing oil discovery, flowed 1,200 barrels of oil per day from one reservoir and 118 barrels of oil from a deeper horizon. The geologists from Medoil believe that there are four other undrilled prospects surrounding M'Sela.

The licence has a term of two years (starting September 2005) and allows both Medoil and TGS-Nopec the exclusive right to enter into a seven year exploration permit and a production permit covering 30 years. Medoil and TGS Nopec have committed to carry out a 600 km2 seismic campaign within the two year period. While TGS Nopec will remain operator and own a 5% stake, Medoil will own 95% of the block. However, it is liable for only 2/3rds of the cost of the seismic campaign, the remainder being paid by TGS. When the licence is converted to an exploration permit, Medoil has an agreement with TGS to become operator with a 100% interest, TGS at that stage will only retain an overriding net profit interest.



Medoil announced its intention in September last year to shoot 600km2 of 3-D seismic. On 26th October this year, the group issued a statement confirming that the 3-D seismic survey had been completed. The data is yet to be processed and interpreted but results are expected in January 2007. The results should confirm the exact structure and formation, economic viability of the well, surrounding prospects and reserves contained in the lower leg of M'Sela.

In November 2005, Medoil published results from an independent report. Merlin Energy, the independent consultant, completed a scoping study of the area and concluded that the M'Sela 1 prospect contained high levels of good quality oil. The oil in places volumes range from 260 million barrels to 850 million barrels, with indicative recoverable reserves ranging from 48 million to 225 million barrels. The Merlin data suggests that the main source of production appears to come from fractures within the volcanic reservoir. The report also identified four other exploration targets in the immediate vicinity of M'Sela 1. These structures are believed to contain between 480 and 1,110 million barrels of oil. M'Sela alone is believed to contain 109 million barrels of recoverable reserves and the surrounding prospects together with M'Sela are believed to contain 262 million barrels of recoverable oil.

Malta

Following the Tunisian acquisition, in May 2005, Medoil signed an Exploration Study Agreement with the Maltese authorities for offshore permits Block 3, Areas 2 and 3. The permits span 4,000 km2 and are located north of the island of Malta.

The agreement was valid for a year and was subject to mutually agreeable work programmes. At the time of signing the contract, Medoil believed that this high cost but potentially high impact exploration play contained at least three oil bearing structures. Over the one year allocated, Medoil planned to consolidate the work already done on the block, verify the integrity of these structures and carry out further seismic to evaluate the potential on Areas 2 and 3. In December 2005, ECL, the independent exploration consultants issued a report on the company's Maltese permits.



It identified 24 prospects of which 2 looked particularly promising. Prospect D was estimated to contain anywhere between 580 and 1,080 million barrels, on an unrisked basis. Prospect M is believed to contain between 1,100 and 1,960 million barrels of unrisked oil. ECL recommended further investigation, Medoil was planning to carry out a 2D seismic study to firm up ECL's estimates. However, the exploration study agreement expired in May 2006. Medoil is still believed to be negotiating a renewal with the Maltese authorities.

Albania

In September 2006, Medoil announced the latest addition to its portfolio, a Petroleum Sharing Agreement with the Ministry of Economy, Trade and Energy in Albania. The agreement has been presented to the council of Ministers and subject to approval from the Council. Medoil expects to hear from the government over the next few weeks.

The Joni - 5 offshore permit covers 2500 km2, is located in southern Albania and extends to the northern boundary of Greece. Medoil has a permit for seven years, a drill or drop decision will be reviewed after the second and fifth years. The company's initial obligation to acquire 400km2 of 3D seismic with a minimum financial obligation of $2.05 million. The permit lies adjacent to an onshore oilfield where the estimated oil in place is around 3.4 billion barrels. If approval is received, the acreage clearly offers excellent exploration upside.



Other outstanding applications

In an interim statement published in May this year, the company alluded to new and exciting opportunities and confirmed that it had applied for offshore exploration licences adjacent to the Vega oilfield in Sicily. Medoil is waiting for government approval on the Sicilian acreage but is also looking at onshore projects in Italy, Spain and North Africa.





Strategy and Drilling Intentions

Medoil's strategy is no different from various oil exploration plays on AIM. Since its listing on AIM, it has sought niche opportunities which it hopes to develop to a drill ready stage through extensive exploration. On appraisal success, Medoil seeks to realise shareholder value by negotiating further carry of development costs to first production or the sale of the asset or company. This method offers potentially high upside with minimal cash spend. The challenge is to find the right opportunities.

With a strong focus on the Mediterranean region, the group has already acquired acreage in Tunisia, Malta and Albania, is seeking to add to its portfolio of properties and has made applications in Sicily and Spain. In Tunisia, results from the 3D seismic survey just completed will decide whether Medoil will drill its first well. In Malta, negotiations with the authorities continue and in Albania, the company is waiting for a final sign off to begin initial exploration.





Most recent set of results and cash

The last set of results covering the six months to 31st March 2006 show a loss of 193,801 pounds. This reflects the technical expenses incurred in Tunisia and Malta. Administrative expenses for the half year came in at 208,019 pounds, which suggests that the company's monthly cash burn is just over 30,000 pounds a month. With a step up in overheads in the current year, group costs are forecast to be around 340,000 per annum.

Medoil listed on 7th January 2005 with 1.2 million pounds in the bank, cash that had been raised at the pre-IPO financing at 7.5p (valuing the business at 2.7 million pounds). The acquisition of the Tunisian and Maltese acreage resulted in a reduction of cash levels and by September 2005, Medoil was left with 930,000 pounds in the bank. The 3D seismic in Tunisia was estimated to cost just over 2 million pounds (net to Medoil) while a limited 2D seismic program in Malta was estimated to cost 500,000 pounds.

In March this year, the company successfully placed 18.05 million shares raising 3.25 million pounds for the company at 18, above the current share price. 2 million of the proceeds have been used towards exploration in Tunisia. The remaining will be used to acquire further interests in the Mediterranean region and for general working capital. At present, the company has 1.15 million pounds in the bank.

Over the short term, Medoil has to cover costs of seismic processing in the fourth quarter which is estimated to be around 90,000 pounds. In the first quarter of next year, Medoil has set aside 30,000 pounds to cover costs of reinterpretation and integration of 3D seismic data recently acquired. Once the government signs off on the Albanian permit, Medoil is committed to spending $2.05 million to complete a seismic acquisition program. Therefore, the company has just enough cash to cover overheads for a year and take it through its current projects - Tunisia and Albania. If the Sicilian and Spanish permits are secured, the group will need to raise further equity.








Risks

Political - At least three contracts are subject to successful negotiation with various governments. A decision by the local authorities to decline the application could result in a significant change in the fundamental business. As seen with Malta and the delay caused by the authorities, much is dependent on local government's decision.

Geological - Independent analysts have warned that M'Sela contains a fractured system. Fractured reservoirs with little porosity are known to produce oil at great initial rates with a rapid drop off as the fractures empty. Medoil has to prove the economic viability of M'Sela and other surrounding discoveries.

Financial - The group has net cash of 1.15 million pounds. This is following costs incurred at M'Sela to complete the 3D seismic survey. Once authorisation is received at Malta and Albania, the group will be ready to launch its first drill campaign at both prospects. As we pointed out earlier, the group has resources to take Tunisia and possibly Albania to the next stage. However if Medoil continues acquiring prospective acreage with the intention of building data towards a planned drill campaign, it will need to raise further funds.




Board and Directors

The management team bring over 100 years of combined experience to the board.

John Lander - Non-executive Chairman - has a proven track record in adding significant value for shareholders. He started his career as a geophysicist with Shell. In 1982 he became Exploration Director of RTZ Oil and Gas Ltd, which was subsequently acquired by Elf UK. John Lander has also held board level responsibilities at Pict Petroleum, Premier Oil, British Borneo Petroleum Syndicate Plc and Tuskar Resources. He was more recently Managing Director of Tullow Oil UK Ltd. John brings direct exploration and commercial experience in North Africa, notably in Tunisia, a country where Medoil has its key asset.

David Thomas - CEO - is a geologist with 30 years of experience in the oil and gas industry, mainly in North and West Africa. He spent the late 1970's and 1980's working in Libya for Occidental Petroleum and then in Tunisia for Tenneco. He returned to London as International Chief Geologist for Kuwait Petroleum . In the late 1980s, he formed a consulting company offering a broad range of petroleum advisory services, clients included major oil companies and foreign government agencies.

Graham Wrafter - Finance Director - has worked in Corporate Finance since 1987. He started off with ICC Corporate Finance, specialising mainly in oil and gas companies. He was an early adviser was responsible for floating companies like Tullow Oil and Dana Petroleum. He moved on to working with Bloxham Stockbrokers where he established two funds and brought companies like Celtic Resources and Premier Oil Plc to market. Wrafter went on to leading a team which acquired Petroceltic Resources from Dana Petroleum and negotiated Petroceltic's acquisition by Ennex International. He is also a founder director of Smart Telecom.

Joseph McKniff - Executive Director - has held positions as a geophysicist with Esso Exploration in Denver, Barcelona and London and has served as a production geologist with Occidental Petroleum. He was also regional manager for all exploration activities in Europe, Africa and South America. Since leaving Occidental in 1996, he worked for several Canadian, South American and US companies establishing exploration projects and offices in Morocco, Tunisia and Egypt. McKniff has extensive experience of the Mediterranean and Africa.





Shareholdings

Total Number of Shares in Issue - 53 million

John Lander - 4.92%
Joseph McKniff - 8.48%
David Thomas - 8.48%
Gerard Walsh - 10.79%
Michael Faherty - 5.5%
Graham Wrafter - 2.8%
Glasgow Investment Managers - 4.62%
University Super Annuation Scheme - 8.18%
Credit Agricole Asset Management - 3.14%






Valuation and Conclusion

The value of Medoil's portfolio, should ideally be determined by a sum of parts asset based assessment. However, given the various stages of application or renewal of the permits in Albania and Malta, it is best if we limited our valuation to the company's largest and most advanced asset to date - the Louza permit. The permit contains one oil discovery, M'Sela 1. According to independent analysts, the main discovery is said to contain 109 million barrels of recoverable reserves. Applying what we believe is a conservative risk weighting to this prospect (90%), and using a valuation of 3 pounds a barrel for oil in the ground, M'Sela alone is worth 32.7 million pounds or 61p a share. This figure does not take into account the lower oil horizon which flowed 118 barrels of oil per day and as yet has no resource estimate attributed to it.

Medoil shares currently trade at 16.25p valuing the business at 9 million pounds. If we strip out the cash, the company is valued at 7.85 million pounds. We must stress that we have not included the upside offered at M'sela by its surrounding prospects which are believed to contain higher quantities of estimated reserves. We have attributed no value to the company's Maltese or Albania acreage. Therefore, on the basis of its Tunisian acreage alone, the shares are significantly undervalued.

It is worth comparing Medoil to some of the recent floats on AIM, companies that have minimal cash, a few early stage licences in the North Sea and a market capitalisation significantly in excess of their net asset value. In comparison, Medoil trades at a steep discount to NAV. We have used an extremely conservative valuation model for its Tunisian prospect. The upside is presented by projects at Albania and Sicily, thus any exploration success could see our valuation increase dramatically. But even on our current, conservative valuation, and ahead of possible drilling and evaluation, we recommend the stock as a buy at 16.25p.

[jumbo66] 26/10/2006 22:14

[hd] intresting