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[albertusstrasse48] 28/12/2006 16:48

PETREL RESOURCES


Petrel Resources: Riding the risks in Iraq
By:Orson Carter

Vital statistics Date: 14th December 2006
Epic: PET
Shares Issued: 68.98 million
Share Price: 44p
Market Cap: £30.35 million
range: 72p - 35p
Sector: Oil and Gas Exploration
News: Latest
Market Data: Charts
Website: Petrel Resources
Other Articles:





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Oil is a risky business, and present day Iraq is probably one of the riskiest places for a company to try its luck. But Petrel Resources (AIM: PET, Berlin: PQ4) is undeterred.

Iraq undoubtedly has huge reserves of oil waiting to be exploited. The question is: which companies are both willing and able to do it? Petrel has been trying since 1999, and carried on through the invasion that deposed Saddam Hussein and ushered in the current state of affairs, which in many areas seems to resemble chaos. Petrel's Managing Director David Horgan contrasts this commitment on Petrel's part with the world's major oil companies, none of which he believes are in any real hurry to enter Iraq.






To its credit, Petrel has managed to make progress, and appears to be going effectively about the rehabilitation of the Subba and Luhais oil fields in the south of Iraq. This is being carried out as a joint venture with Iraq's Makman Group under an Engineering, Procurement and Supervision of Construction (EPC) contract awarded by the Iraqi Ministry of Oil. Horgan reports that security issues have been manageable, the south being Iraq's least trouble prone area.

A Basic Design Package (BDP) for the facilities needed to bring the Subba and Luhais fields on line has been completed, and Petrel has submitted it to the Iraqi Ministry of Oil's Project Company (SCOP) for review. When the BDP is accepted then a payment, which Horgan says will be of $8-12m, from SCOP to the joint venture is triggered and a Detailed Design can be finalised. An initial payment, of $20m, was made in March.

The Subba and Luhais contract is basically for the provision of services – it does not qualify Petrel for any share of future production. But it is a high value contract - $197 million to be exact, and it does provide the company with good experience of working in Iraq and with the Iraqi government – experience which should come in handy for future projects. Indeed, for Horgan, this was half the motivation for entering the agreement, although of course, Petrel expects to make money out of it too.

Petrel has an alliance with the ITOCHU corporation of Japan, which is involved a diverse range of businesses - one being oil & gas. ITOCHU is a big player in the trading and distribution of oil and oil products, as well as financing and project development. It is therefore a good, heavyweight partner for Petrel to have. ITOCHU funds some of Petrel's expenses and has right of first refusal on any of its Iraq projects.

Petrel has a Technical Cooperation Agreement (TCA) with the Iraqi Oil Ministry to evaluate the Merjan oil field in west central Iraq. Petrel expects to have completed the evaluation by around the end of the year, after the company may or may not remain involved with the field, depending partly on the Iraqi government and partly on Petrel's assessment of the security situation in the area, which is worse than in the south.




The Iraqi government is currently working to establish laws to govern the extraction of hydrocarbons in the country and Petrel anticipates that this process will be complete by the end of 2006 give or take a few weeks. The company is confident that Iraq will adopt the sort of Production Sharing Agreement (PSA) that is the norm in many of the world's oil producing countries.

Speaking of PSAs– Petrel has agreed the terms of a PSA for the East Safawi Block in Jordan with the Jordanian government, although the arrangement must still be ratified by the Jordanian parliament.

Once Iraq's new hydrocarbon laws are in place then Horgan says that Petrel's priority will be to negotiate a Production Sharing Agreement, preferably in the south. He expresses some hope that the EPC on the Subba and Luhais fields could be converted into a PSA, although this is far from a certainty. But he also says that Petrel has its eye on other fields from a PSA standpoint. As he puts it – 'We didn't come to Iraq to be an oil services company.'

Prior to the removal of Saddam Hussein, Petrel negotiated access to Block 6, an exploration area in Iraq's Western Desert, and hopes to have this access confirmed when the new package of laws comes out. The Western desert though is a tough operating environment and Block 6 is early stage – the top prize for Petrel would definitely be a PSA on a known field down south.

[jolgajojo] 28/12/2006 16:39

Great start for Sound Oil.
Up 10% today..........only another 990% to go.

[robbiepaul] 28/12/2006 07:34

LED.
LED International, a manufacturer and distributor of large light emitting diode (LED) screens and lighting listed on AIM on the 23rd of October 2006. The company was founded in February 2004 and it develops and sells large LEDs from a flexible low-cost assembly base in Shenzhen in Southern China. The company aims to become a leading supplier of large block panel LED screens and LED lighting in China and hopes to expand its activities in the overseas markets.

The LED market is expected to hit £55Billion in 2008 in China alone.

Low cost base producing very high margins(25% in 2005)which allows LED to undercut all competition.Trading update due(remember SOLA)which should ignite the share price.

Good Luck.

RP.

[papalpower] 28/12/2006 06:30

A 10 bagger - now they are difficult to get in a short space of time, unless you have some major news. HML was nearly a 10 bagger for me in the past, but I cannot see anything thats a clear "10 bagger" for 2007 as of now.

The only one I would risk a wager on, is ELP, IF, big old IF, the Guinnea prospect delivers to expectation then at the present 15p it potentially could hit 10 times. The well is now a free carry for ELP, so their money in the bank is safe on failure, and the well is due to spud early January (decent North Sea weather permitting it to).

The margin traders moving out as the well spudding got delayed due to bad weather gives a good buying in opportunity again IMO.

[chill3hill] 28/12/2006 02:02

One I have great hopes for is Medoil (MDL) who are due to start drilling an existing discovery in January if they can get hold of a rig but they have a NAV of 82p and currently sit at 16p with very few shares in issue.

To have an existing discovery just waiting to be re-spudded I think this takes away the dry hole scenario which has plagued so many other AIM floats this year.

[soulsauce] 28/12/2006 01:38

RIFT : Rift Oil

As above DYOR:-

[run rabbit] 27/12/2006 22:35

YOO : YOOMEDIA

If this company can sort out it's finances then it will rise again from the ashes as it has in the past. The market for Digital TV and interactive gaming is phenomenal and this will drive the price far higher that it's present 2p purchase price.

[pec2004] 27/12/2006 22:32

Very interesting responses so far.

A strange irony that Simon Cawkwell should be the first response given his short stance on SOLA when this is, and has been my biggest ever long.

Regardless of all that, it is very interesting to read what other posters think the share to lay the golden egg will be in 2007.

I have been interested in Encore Oil and will now certainly look at Nexus and the others highlighted here.

2006 was a year where many companies promised much and delivered very little. VOG, SUB and HML initially spring to mind and no doubt we`ll see the same dogs in `07.

Good luck to all and lets hope we get the 2007 ten bagger.

I think FEP may come good if they can get a farm-in on their recent massive gas discovery so that is my choice for the 2007 ten bagger.

[deltrotter] 27/12/2006 20:50

Encore Oil - currently 23.75p mid (market cap c£70m with £22m in the bank). Operates in teh North Sea and was floated last year by the team that discovered the Buzzard field (one of the largest in the UK). They sold that company for c.$1bn.

They are due to drill their Golden Eagle prospect in January (they have a 15% stake and the drilling is being paid for by their US partners). They have also recently signed some significant deals, including one the week before Christmas with Star. Star are going to assess an abandoned gas plot Encore have in the North Sea to ascertain whether it is suitable for gas storage. If it is (and Star have to complete this by the end of June) then it is estimated it could be used to provide storage for up to 5% of the UKs needs. Encore also hold two other similar sites very close by.

Quite simply, Encore have one of the best and most respected management teams out. Watch out for them in Jan as they get closer to drilling the Eagle prospect. It has its risks but if it comes in we will see Encore at multiples of the current price. Note - a placing went through to raise £7m at 24p a week ago.

Not one for widows or orphans, or to lump the farm on (although I have), but worth a closer look.

OilBarrel article here for some general further info:



Cheers

Del

[myoldmate] 27/12/2006 20:14

Simon Cawkwell - 27 Dec'06 - 19:40 - 1 of 2


Gentlemen,

Am I really the first to respond?


Seeing as your reply was only 3 minutes after the thread was started are you really surprised?

APN, Appian Technology. Don't think it'll ten bag, but after a year of sliding downhill it's now moved into profit, and being a micro cap any further good news will cause some sharp moves as time goes by.

Edit.

Forgot to mention they're forecast to 560k profit in 2007 putting them on a forward PE of 24.

[james 2] 27/12/2006 20:04

ALL

Independent II Research [IIR]

Should be 300% higher based on last weeks update just to bring the PE in line with industry peers. Yet the forecast only included contracted business, ignores the current & new pipeline + FX business revenues & new product development.

Plus Google litigation could net them several million if discussions come to fruition, last offer from google was turned down, 3rd party hedge fund are funding the litigation !

Insinger update from last week;



Regards

[johnsoho] 27/12/2006 19:55

Good evening,

I think Network Data Holdings (NDH) because Home information packs are going to be a legal requirement in England & Wales for the sale of residential properties as from 1 June 2007........I think many estate agents will use NDH to create these.

Johnsoho

[simon cawkwell] 27/12/2006 19:40

Gentlemen,

Am I really the first to respond? Well, Nexus (NXS) can go up 300% from its current 1.4p and it might do 500%. First stop right now is 3p.

Simon Cawkwell

[pec2004] 27/12/2006 19:37

There must be one or two lurking out there.

Which small/micro cap company will make it big in 2007.

[cymbelline] 16/8/2006 08:10

Great stuff Blackstone!

SPX from Feb03 to present is quite similar to Dow from Mar33 to about Aug37: