PROACTIVE NEWS SUMMARY: Gulf Keystone Petroleum, Genel Energy, DNO International, Mediterranean Oil & Gas, Lo-Q, Paragon DiamondsReported by Proactive Investors on Tuesday, 26 June 2012 (on June 26, 2012)
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*Gulf Keystone Petroleum (LON:GKP )* found itself under the spotlight today after unveiling initial results from Shaikan-5, its deepest well to date, which reached the Kurre ChineDolomite formation in the Triassic interval.
Chief operating officer John Gerstenlauer said the results confirmed the “massively prolific nature” of the Jurassic interval of the structure.
The results pointed to a continuous column with 237 metres of net pay oil (economically viable oil) and porosities consistent with results obtained elsewhere in the field.
“Good hydrocarbon saturations were calculated throughout the Jurassic, where fracture intensity appears to be comparable to or exceed those seen in other Shaikan wells,” GKP said in a stock exchange statement.
Oil shows were also recorded whilst drilling in the Triassic formation. The deeper lying Triassic and Permian horizons will be tested by the Shaikan-7 well next year.
In all today’s results add up to steady progress for GKP in the semi-autonomous region of northern Iraq.
Shaikan is already deemed a world-class discovery with oil-in-place of between eight and 13.4 billion barrels.
Today’s data serves to underline this potential, according to Gerstenlauer.
"These solid preliminary results obtained with the Shaikan-5 appraisal well confirm the massively prolific nature of the Jurassic interval of the Shaikan structure,” said the GKP chief operating officer.
“We look forward to completing the Shaikan appraisal programme, including further testing of the Jurassic and Triassic intervals with the Shaikan-5 and -6 wells, and incorporating all the new results into our independently audited gross oil-in-place estimates for the world-class Shaikan discovery.
“Deeper potential of the Triassic and Permian horizons will be tested with the Shaikan-7 exploration well in 2013."
Speaking of Iraqi Kurdistan, Credit Suisse said today that Turkey’s involvement in the region’s emerging oil industry should encourage more international oil companies (IOCs) to enter the semi-autonomous region, according to Credit Suisse.
The City heavyweight’s comments come after the news that a previous plan to build an Iraqi oil pipeline in Kurdistan has now been superseded by a new plan for a pipeline into Turkey.
Credit Suisse says Turkey has moved strongly in support of the Kurdistan Regional Government (KRG).
“Iraqi leverage over IOCs is diminishing with IOCs moving out of the South and moving into the North,” analyst Thomas Adolf said in a note.
Adolf highlights that ExxonMobil – which is reported to have entered Kurdistan recently – is now in talks to sell Russia’s Rosneft a portion of its West Qurna 1 oilfield in Iraq, while Statoil has already exited and he says Total is mulling a move into Kurdistan.
“We think the backing of Turkey should encourage more IOCs to enter Iraqi Kurdistan.”
Last year a wave of new entrants into Kurdistan helped buoy a number of UK listed stocks – including Gulf Keystone.
And Credit Suisse believes the market has yet to properly respond to these latest developments in Kurdistan.
“Shares of Iraqi Kurdish oil companies have seen a rather muted reaction to what is, in our view, a significant event,” Adolf said.
Ex-BP chief Tony Hayward’s Anglo-Turkish oil firm *Genel Energy (LON:GENL)* is also among the UK listed Kurdistan players, while smaller firms like *Afren (LON:AFR)*, *Petroceltic International (LON:PCI)* and *Heritage Oil (LON:HOIL)* also have interests in the region.
Also DNO International, one of the few companies with current Kurdistan oil production, is expected to come to London in the future now that it has completed its merger with UAE’s Rak Petroleum.
Via the new pipeline, Turkey will buy the ‘Iraqi oil’ produced in Kurdistan but it will pay the KRG directly rather than via Bagdad, Credit Suisse explained.
We also covered a note on *Mediterranean Oil & Gas (LON:MOG) *from Liberum Capital, which started coverage of the company with a ‘buy’ recommendation and a 13.9 pence price target.
In a note, analyst Andrew Whittock said a revitalised MOG is now back on its feet and looks ready to embark on a growth path.
He believes the current share price reflects the value of the 20 percent controlled Guendalina onshore gas field but almost ignores other Italian and Maltese assets and assumes the wholly-owned Ombrina Mare offshore oil field is never developed.
“We believe that is too pessimistic and initiate coverage with a 13.9p price target and Buy recommendation,” said Whittock. The stock last traded at 8.375 pence.
The Italian ban on offshore drilling in 2010 scuppered MOG’s plans to develop its main asset – Ombrina Mare – and undermined market confidence in the company, according to the analyst.
After a difficult 18 months, the outlook now looks brighter following last year’s restructuring, the commencement of production at the Guendalina field and the appointment of new management.
Looking forward, Whittock continued, MOG is a full cycle exploration and production company with a strong position in Italy and no debt.
“We believe the management team has extensive experience of international E&P activities that belies the current market capitalisation. With the capacity and ability to manage more assets, we expect the team to move down an ambitious path to deliver significant growth within and beyond Italy.”
The current portfolio looks like first base, he said.
Guendalina cash flow can be reinvested in new ventures; a farm out of the Malta exploration licence later this year could be used to access other opportunities; and when Italian drilling restrictions fall back in line with the rest of the world, Ombrina Mare offers the currency to consider many other options.
In the meantime, we talked to Tom Burnet, chief executive of *Lo-Q (LON:LOQ)*, which today released its interim results.
The theme park specialist is currently setting its sights firmly on Asia, which it says is a booming market.
The growing theme park business there makes it a clear target for the company, whose products use cutting edge technology so that theme park users spend less time in queues and more time on rides.
“You don’t need to be Warren Buffet to work out that Asia’s growing at three times the rate of anywhere else,” Burnet told Proactive.
“And in a couple of years they’ll have overtaken America in the top theme parks by attendance.
“So that just says to me that there’s a market with which we are not engaging formally at all at the moment.”
This is something Burnet is looking to change in the future, with a move into the region to add to Lo-Q’s solid grounding in the US and Europe.
“On reflection, it’s probably through partnership and it’s probably through working with a vendor or vendors already engaged, already have networks, already have relationships and see if we can progress the business in that way; and that’s definitely what we’re looking at.
“It will be a vendor that focuses on our market and somebody that knows the movers and shakers and knows the people that are the economic buyers of our product.
“So if the data’s saying it would be bonkers not to go there, then it’s about what’s the strategy to best engage with it.”
The company revealed today revenues rose to £3.7 million (2011: £3.27 mln) in the six months to April, driven by a 14 per cent rise in average revenue per guest, which outweighed a 1 per cent fall in the total number of people using Lo-Q’s products as poor weather hit European attendances.
Lo-Q’s customers are theme and water parks and given the seasonal nature of the business, the year’s second half results will be far more significant for the company.
Using Lo-Q’s products, thrill seekers can reserve their place in a queue electronically and are notified when their turn is up.
US theme parks operator Six Flags is the largest customer for its Q-Bot queuing product.
Another article by Proactive was dedicated to *Paragon Diamonds (LON:PRG)*, which is putting together a compelling proposition using a blue-print more commonly found in the gold sector.
It has discovered a low cost project in Lesotho offering the prospect of near-term production whose revenues will then be used to develop a potentially world-class opportunity in the same country.
For investors interested in blue-sky, then it has the Kaplamp lamproite pipes first discovered by the giant De Beers in the 1970s.
In Lemphane, the group has a project that is similar in size (and hopefully geology) to the Lucara’s Mothae mine and, to a lesser degree, Letseng, owned by Gem Diamonds.
In fact if you look closely there is more than a passing resemblance between Paragon and Gem with their mix of projects, though Gem is, of course, several years more advanced than its smaller rival Paragon.
“We feel we have got the pipeline of projects to be a producer the calibre of Gem Diamonds in four or five years’ time,” said managing director Stephen Grimmer.
In the meantime Grimmer and his team must confirm the potential of Lemphane, which is also a near neighbour of the Liqhobong and Kao kimberlite pipes.
Unlike others in the region Paragon’s is a greenfield project with none of the legacy issues or past mining depletion associated with some of those mines.
“We are having to do the basic science first, but we are dealing with a virgin project which has not been subject to mining or other degradation in the past,” said Grimmer.
“This brings with it a little bit of risk, but also brings the advantage that you are not dealing with the legacy issues some other projects might have.”
If Lemphane shapes up in the same way as Mothae and Letseng, then it will be a low-grade, high-quality mine producing large diamonds.
“Kimberlites in the Lesotho are generally very low grade,” Grimmer explained.
“We are generally talking about two-to-five carats per hundred tonnes, whereas the world average is closer to 100.
“It does make them rather technically challenging to develop and evaluate and you have to be very careful with sampling and statistics.
“But it is a price everybody is very happy to pay for entry into such a niche market for big stones.”
Links:  Full news story
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