Oil & Gas Has A Day In The Sun

on Jul 25, 2012

Oil and gas stocks continue to perform solidly on bourses internationally, at least relatively speaking in equity markets which remain spooked by never-ending negativity from the Eurozone, from the US housing market, from a war-torn Middle East. There’s a lot to be negative about today, without even starting to think about global warming and our species’ need to wean itself off fossil fuels.

So good news tends to be welcomed with open arms on the markets, even where it involves said fossil fuels. The fact is, we are still almost totally reliant on oil and gas for our energy needs, so exploration and extraction companies are closely watched by investors and market observers.
A case in point was last Thursday, 19 July. Three very differently configured oil companies had news which saw the stocks of all three rising appreciably, on a day which saw the equity markets edge up across the board. First came Tethys Petroleum’s (TPL) announcement of a sizeable upgrade in the provable reserves in its Tajikistan holdings, to an impressive 27.5 billion barrels. The Telegraph quoted chairman and CEO David Robson as saying that the explorer’s estimates for potentially recoverable undiscovered resources in Tajikistan “are significantly greater than the estimated remaining reserves and unrisked resources in the UK North Sea”.

!m[](/uploads/story/187/thumbs/pic1_inline.png)Tethys also holds prospects in two of the other ‘stans’ – Kazakhstan and Uzbekistan – and trades on the London Stock Exchange. The news out of Tajikistan appealed to investors and its shares rose nearly 10 percent on the day, to 45 pence, though they’ve since settled back to 40.
Another prospector with a distinctly regional approach also had some positive news. Afren plc (AFR), also LSE-listed, is primarily focused on acquisitions and prospecting in Africa, with holdings on the west coast, in southern and eastern Africa. But it also has a prospect in the Kurdistan province of Iraq. The announcement of discovered reserves in the Simrit-2 field, in which Afren has a 20 percent interest, saw its share price rise to 128 pence before settling back to 124.50, a healthy gain on the mid-90s of a month earlier.

The other oil stock to do well that day was Gulf Keystone Petroleum (GKP), listed on the LSE’s AIM (alternatives) exchange. Also centred on Kurdish Iraq, the company spiced up its AGM on 19 July with the announcement of a major upgrade of the gross oil-in-place volumes for the Shaikan field in the Kurdistan Region of Iraq, up from 10.5 to 13.7 billion barrels. Chief operating officer John Gerstenlauer described the upgrade as “a timely reminder about Gulf Keystone’s stellar drilling performance in the Kurdistan Region of Iraq”. The market agreed and upgraded Gulf Keystone’s stock 8 ¾ to 221 pence.

With all the focus on the development of green alternatives to fossil-fuel energy, it’s easy to overlook that there are many companies out there prospecting for and extracting oil and gas which rarely make the business news. And that they’re operating all over the world, from southern Africa to the Arctic Circle. Of course, the shift in energy focus towards renewables is going to continue but meantime oil & gas remains an attractive equities play.


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