Proactive weekly oil and gas news summary including Cluff Natural Resources, Genel Energy, Gulf Keystone and Greka Drilling


A fairly busy week for the small cap oil sector, newswise, and in the background the fall in oil prices

A notable story came this week from Cluff Natural Resources (LON:CLNR)  and its focus on UCG - a form of unconventional gas supply in a bid to help solve Britain's energy crisis.

It is building a portfolio of deep UCG licences since its foundation in 2012 and now has eight.

UCG stands for 'underground coal gasification' - a method of converting stranded coal into gas.

Its plans moved on this week as it revealed an initial resource estimate for the Kincardine licence in the Firth of Forth, Scotland.

This is a key step in building the UK's first deep offshore UCG demonstration plant, the company said.

Cluff said two of the coal seams identified have 43mln tonnes of coal in place (CIP), or the equivalent of 1.4 billion cubic feet (BCF) of natural gas-in-place. For context, 1bn cubic feet of gas could serve 11,000 homes for one year.

The JORC coal resource was confirmed at 335 million tonnes of coal, of which 247mln tonnes are in the measured and indicated category.

Elsewhere, Caza Oil & Gas (LON:CAZA, TSE:CAZ) reported an improved financial performance in its latest quarter and sees further growth ahead for 2015.

Revenues from oil and natural gas sales increased 180% to US$7,244,752 for the three months to Sep 30 compared to US$2,583,753 in the same period in 2013.

This is 15% higher than the second quarter (Q2) this year.

Adjusted underlying earnings (EBITDA) increased an impressive 729% to US$4,514,389 in the period, from US$618,933 in Q3 last year.

Elsewhere, the old stock market adage that it is better to travel than arrive was revealed this week to have some credence as investors gave what can best be described as a lukewarm reaction to updates from two of the UK’s Kurdistan-focused oilers.

Genel Energy (LON:GENL) and punter’s favourite Gulf Keystone Petroleum (LON:GKP) had enjoyed a strong run up ahead of the statements, mainly on the back of some reassuring newsflow from the semi-autonomous and rather combustible region of Northern Iraq.

Yet when the regulatory news statements dropped for each firm the reaction probably wasn’t what was quite expected. 

GKP shares fell giving back much of headway it made in the last five trading days, while Genel nudged up a tad after unveiling a landmark gas deal.

According to analysts, Gulf Keystone’s update was a solid one as it reiterated guidance that oil production would be 40,000 barrels a day by the year-end, almost double current output of 23,000 barrels.

“But given that this is northern Iraq it is not just a question of the company, as politics and geopolitical risk is now the most significant risk,” said natural resources boutique SP Angel.

In its statement, Genel Energy (LON:GENL) reiterated its end-of-year production as it unveiled breakthrough plans that will ultimately commercialise its gas assets in the country.

The group will take full control of the Miran and Bina Bawi fields following a US$150mln deal to buy the 36% of the latter it doesn’t own.

Genel’s role will then be to drill the fields and install the flow lines, while the Kurdistan’s Ministry of Natural Resources build the gas treatment facilities and agree offtake deals.

Ultimately, revenues will be shared equally between Genel and the Kurds, but initially the UK listed group will be allowed to claw back its start-up costs from production.

Also this week, China-focused gas explorer Green Dragon Gas (LON:GDG) has issued its first public corporate bond.

Worth US$88mln, the money will enable it to start drilling a programme of 150 LiFaBriC wells on the Shizhuang South (GSS) field. 

The bond will fund up to 50 of these wells. It is senior secured three year paper, is due 20 November, 2017, carries a 10% cash payment and is redeemed at 102 par. 

Broker Canaccord maintained its buy recommendation on Green Dragon and 925p target price.

Meanwhile, Greka Drilling’s (LON:GDL) performance has been tipped to improve markedly next year as exploration for gas in China ratchets up.

Research house Edison has put out a punchy note on the unconventional gas specialist forecasting bumper pre-tax profits of US$40mln for the firm in 2015.

Asia-focused Greka has experienced a weak level of drilling activity so far in 2014, reporting a 38% fall in first half revenue.

However, Edison expects a recovery and has predicted improving full-year revenues of US$35mln this year and US$179mln the next.

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