Proactive investors

Stratic Energy (SE) announced today that the company is currently reviewing its investment programme and capital structure to prioritise projects in terms of returns, schedule and capital requirements. Following this review the company expects to expand its divestment activity to release capital to increase financial flexibility and maintain activity on the best projects.
This confirms our view companies will have to farm down assets or slow down projects development to cope with the financial liquidity crisis. Note that from a fundamental perspective slowing project development is the best option to preserve upside. Farming down implies important dilution. The media reports that Sacyr could sell its 20% interest in Repsol to Lukoil.
 
Afren  (AFR)  has announced the agreement of a farm-out deal of its Keta Block in the Eastern Basin Ghana to Mitsui E&P Ghana Keta Limited a subsidiary of Mitsui & Co.
Mitsui & Co will earn a 20% interest in the Keta Block in return for a significant contribution to the forthcoming Cuda-1X exploration well which was spudded on 16th November 2008 and will take approximately 50 days to reach Planned Total Vertical Depth of 15,750ft subsea. Afren will retain a 68% working interest post farm-down.
Potential resources for the Cuda prospect are estimated by Afren to be between 325 and 642 million barrels of oil. According to the company the play type is similar to Jubilee and Odum discoveries.
In Angola the Company has decided not to complete the acquisition of a 15% working interest in Block 16 from Devon Energy given the net financial exposure to Afren had increased significantly
 
Comment: The completion of this farm out deal is welcome news for Afren for this high impact exploration well together with what management describe as a significant promote. It is difficult to assess the impact of the deal given the limited visibility on the terms of the farm out deal if this farm.  
The exploration upside profile of the company, while still attractive, is somewhat less appealing than previous, given exploration prospect in Angola Block 16 is now unlikely to happen
 
Gippsland  (GIP)  announced an update for the Abu Dabbab project. The key points are that there has been an increase in the required capital expenditures of $48M to $173M. This increase also covers provision for additional plant and equipment associated with an increase in tantalum product grade from 20% to 55% Ta2O5 known in the industry as Syncon. The international engineering group Lycopodium prepared the definitive Abu Dabbab feasibility study. Directors are pleased to advise that independent technical due diligence review of the definitive feasibility study by Coffey Mining on behalf of KfW and DEG has been completed. The completion of this review was delayed due to additional work associated with the production of SynCon and general engineering industry work backlogs. Accordingly, the Directors anticipate that KfW and DEG will consider their position with respect to project finance for the Project by the end of February 2009.  Gippsland Directors are targeting an attractive 80% debt 20% equity ratio for the Project financing.
 
Kiwara Plc  (KIW)  announces further results from its ongoing drilling programme on the Kalumbila base metals target in Zambia. Highlights include 0.94% copper over 20.44m from 127.89m depth and 0.81% Cu over 19.22m from 139.50m depth. The strike length of mineralization has extended westwards by 400m. Additional borehole sample assay results are awaited.
 
Patagonia Gold  (PGD)  announced it has completed the Scoping study on its 100% owned Lomada de Leiva gold project in Santa Cruz Province, Argentina.  The scoping study was compiled by Chlumsky, Armbrust and Meyer, LLC. of Lakewood, Colorado, and was based on the previously released gold resource estimate on Lomada de Leiva. The study involved investigating three processing cases, with run of mine heap leaching clearly being the most attractive. Cash costs are forecast at US$299/oz.
 

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