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Fox-Davies Capital

Fox-Davies Capital Wednesday Energy and Mining News Wrap

Cadogan Petroleum (CAD)  released its Interim Management Statement and Licence Update highlighting that it is on track to commence commercial production from two major fields in early 2009 and its operational plans remain on track. Cadogan also reports that following its successful challenge against the nullification of its Pirkovskoe and Zagoryanksa licences, appeals have been lodged with the Kharkiv Administrative Appeals Court in relation to the Licences, though it has yet to receive written confirmation or information as to the substance of such appeals.

In the context of the current economic and financial markets backdrop the company also highlights that it is managing its cash resources and cost base while maintaining its focus on optimising the potential of its most attractive assets and is undertaking a full review of its development plans. The company reports a cash position of GBP93.
 
Comment: The appeal on the licences is not good news for Cadogan and the market may react negatively to the news and to what appears to us as a slippage in production start-up from December 08 to Q1 2009. However, we have already risked the licence issues at 50%.
 
Gulfsands Petroleum  (GPX)  announces a discovery on the Yousefieh No.1 exploration well which has encountered 63 metres of net oil pay in the target Cretaceous aged formations and flowed oil to surface, under natural flow, at approximately 900 barrels of oil per day.

A flow test was conducted over the top 19 metre interval, flowing oil of approximately 23 degrees API gravity to surface, under natural flow and through a 48/64 inch choke, at an average rate of approximately 900 barrels per day over a 3 hour period with no water produced. The preliminary results of the test indicate very good reservoir permeability and an average porosity of 18.6% while the gravity of the oil from analyses indicates 23API.

Following this early success on the play, the joint venture is planning to acquire additional 3D seismic data to assist in the identification of further prospects and leads in this play in the areas surrounding the Khurbet East field and Yousefieh discovery. A more extensive production testing programme over the reservoir section of the Yousefieh well is expected to commence in the next few weeks.
 
Comment : We previously reported on the early encouraging findings from the Yousefieh-1 exploration well, however the possibility that the prospect could over shadow the Khubert East Field find places the significance of the results in context and underscores the prospectivity of the region. Given the expected ramp up in production from Khubert East facility and short time to production that was recently achieved, this latest success could present a similar opportunity for Gulfsands and its partners to monetize this opportunity in the near term.
 
Ovoca Gold  (OVG)  announced that it has agreed to a proposed disposal of its wholly owned subsidiary Ayax, which has a 100% interest in the Goltsovoye silver deposit, to JSC Polymetal. JSC Polymetal is a Russian based mining and production company with a listing on the London Stock Exchange, and on the Russian MICEX and RTS exchanges. The consideration payable under the Proposed Disposal comprises a cash payment of US$11 million and 7.5 million JSC Polymetal ordinary shares which had a market price of USD2.67 as of the close of business on 18 November 2008.