Today's Oil and Gas Update - Coro Energy, G3 Exploration, Mayan Energy and San Leon Energy.


28 February 2019


In Brief


Coro Energy (LON:CORO) – 2.15p

All Now as it Should Be


G3 Exploration (LON:G3E) – 38p

Fatal Flaw in Reserve Report


Mayan Energy (LON:MYN) – 0.13p

Austin Field Update


San Leon Energy (LON:SLE) – 35p

Akaso Marks Focus on Growth



News In Brief

​Coro Energy

(LON:CORO) – 2.15p


All Now as it Should Be

With the appointment of Andrew Dennan to Coro's board, all is now as it should be, in that the CFO should be a key member of the executive function.


The CFO, as a distinct and different entity from a finance director, is often a complicated dual role of chief of police and principal agent for the delivery of a company's strategic goals.


We believe that this broadens the Company's base and will help to ensure that the next stage of growth in the Company is delivered in as efficient a manner as possible.


Shareholders should be pleased with these latest events.

G3 Exploration

(LON:G3E) – 38p 


Fatal Flaw in the Reserve Report

The Company's update provides an interesting vignette as to the true scale of the destruction in value that this management team has inflicted upon its shareholders. As can be seen in the announcement, Green Dragon Gas, where the security packages have resided, has the overwhelming majority of the "Proven" value, while all of the exploration assets have remained with the Company.


In reviewing the categorisations, we can understand the extent to which the programme will expand across its portfolio, most likely focusing on "1P & 2P" wells, to maximise cash flow, before switching focus to some of the higher risk 3P locations, with the Contingent Resources locations last of all; Prospective Resource locations would only be drilled to maintain compliance with licence obligations.


Of course, what the reserve report assumes is that the management can execute a work programme that sees the value that is highlighted. However, on past performance, we do not have sufficient confidence in the management team to be able to execute such an interconnected work programme, let alone that it is in a manner to maximise value creation for the shareholders.


As this management team have shown, they have singularly failed to grasp the severity of the funding sources that they have utilised in the past, both debt and equity, and we have not read anything that gives us any confidence that they have learnt the lessons of the past.


Consequently, while the Reserve report underlines the potential value within the asset base, we are not entirely sure as to how this will be realised for shareholders' benefit.

Mayan Energy

(LON:MYN) – 0.13p


Austin Field Update

Today marks the start of the Company's focus on unlocking the value within its asset base, presumably driven by the technical committee of three members, only one of which is believed to have a technical degree.


It needs to be remembered that Attis's CEO, Thom Board, is ordinarily resident in the United Kingdom and is a beneficiary of the work that he opines on as a member of the technical committee, and while he may be a perfectly credible operator, that he is believed to be the sole technically trained member on both the technical committee and the board, it seems to us to be abysmal corporate governance.


To our mind, this approach is typified by the Company's latest transaction, which it also discloses in this announcement.


Ordinarily, we would expect the management when announcing a new transaction, to tell the Company's owners what obligations they have entered into on their behalf, and what the economic benefit they can expect to gain from entering into those obligations. We would then expect a technically or commercially competent management team to indicate to the Company's owners how it intends to unlock that value.


As it stands we are told that Mr and Mrs Morris will benefit to the tune of $5m within 30 days, but nothing else. There is no yardstick against which to measure the potential value creation of the acquisition, the risks that exist in the acquired assets, or whether those risks are worth the rewards that can be gained.


Until such times as this company's management, especially Charlie Wood, is removed from the Company, we do not see a future where any value is generated for shareholders. 

​San Leon Energy

(LON:SLE) – 35p


Akaso Marks Focus on Growth

Now that the contractual issues surrounding the flow of cash from Eroton is progressing as initially envisaged, the refocus on growing the underlying production volumes has recommenced. Given the potential within the asset, we believe that this marks the start of what should be three years of substantial activity.


What the Company can now start to look at is the issues surrounding the export line, specifically the losses, which have amounted to up to 26% in some instances. The Company has previously suggested that they may develop an independent export facility.


Under such a scenario, we would envisage losses dropping to an average of 3 – 5%, which means that by our estimate and utilising current prices, that the costs associated with the facility would be recovered within 12.


After the delays and headwinds that have buffeted the stock over the last 12 to 18 months, there now appears to be a clearer route forward, and one that will allow the management team to start focusing on the next phase of growth, not only within OML 18 but in its broader portfolio too.


We believe the Company's owners should be pleased with not only this news but for what this news means in the broader context of the progress that management is making in unlocking the value within its portfolio.

We may provide a further update on one, or all, of the stories above later today. However, if there is anything that you would like to discuss, please feel free to contact us. 


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