Encore/Nautical. Reiteration. Hold!

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Many emails on the above two companies seeking advice on sell,hold buy etc.

So the best course of action is for the Blog to give a full reiteration of where these two companies are headed.

ENCORE OIL

There is no doubt that Encore are sat on two oil discoveries in the North sea Cladhan is currently estimated at 100/200 million barrels, the oil column is in excess of 273ft. “Drill stem testing will now be performed after which the next phase of the appraisal programme will be to drill a second side-track down dip of the original discovery well in order to confirm the extent of the reservoir and seek to establish the oil water contact.” Encores stake is 16.6%. The possibility of increased oip on Cladhan alone is high once the extent of the field discovery/DST is known. Hold for 150p

Cladhan is located 225 miles north-east of Aberdeen in a 536 feet water depth.

Catcher is approximately 110 miles off the coast of Aberdeen.

Encores’ Catcher discovery is certainly going to be in excess of 300 million however let us stick to the original estimates which i might add have increased several times since the news broke. 100/300 million. Encore has a 15% interest and are the operator. The Catcher discovery could very well prove to be the single most important find of the last decade in the UKCS. The company responsible for the find (Operator Encore) consists of the management team who were responsible for the Buzzard discovery some ten years ago. They are almost certainly one of the most experienced teams in the UKCS/NORTH SEA. Now throw into the mix the operational and financial highlights year ended 30th June 2010! And don’t forget the Tudor Rose oil accumulation, the Cobra gas discovery and the 100% owned Esmond gas project. I could go on.

Highlights

Operational highlights

·      Significant oil discovery at Catcher, up to 300mmbbls Oil in Place to date with substantial potential upside in the rest of the block

·      One well and two side-tracks drilled during the period

·      Completion of the sale of 15 per cent. interest in Breagh gas discovery to RWE Dea for a consideration of US$68.8million

·      Agreement signed for divestment of onshore portfolio to Egdon Resources plc for 39.2 million Egdon shares (29.998 per cent. of Egdon share capital) plus £100,000 cash, which completed post year-end

·      Commencement of a share buy back scheme at less than inherent cash value per share – 17 million shares purchased for cancellation

·      Strengthened Board of Directors with the appointment of a new Non-executive Chairman, a Non-executive Director and a new Executive Director

Financial highlights

·      Profit of £11.4 million for year ended 30 June 2010

·      Cash of £41.9 million as at 30 June 2010

·      Debt free

·      £22.9 million gain on the sale of Breagh gas discovery.

Now mix in Encores’ raison d/etre. It doesn’t get any better than this. Investors who are currently selling are in my opinion unhinged.

WHY in the name of GOD would ANY investor want to sell their current Encore holding? Just wait until they breach 120/130 etc.

Nautical Petroleum.

Have a 15% interest in Catcher they are currently ahead of schedule on their Kraken discovery and have a 35% stake as well as a 10% interest in Keddington which is flowing at 1800 bopd plus gas. Mariner discovery, Tudor Rose etc. A truly remarkable performance this year by Nautical will see them become one of the major players in the UKCS. Their recent share issue was over subscribed.  Of course they’ll end up taken over. It’s common-sense.

Why given the proximity of news on Kraken and Catcher would any investor sell their stake in Nautical? Hold until you get your price certainly in excess of 400p!

These two companies represent a fantastic opportunity for small investors.

Hold your nerve. Then sell when they rise. Take your profit!

Daniel

Related Articles

• Sterling Resources confirms North Sea Cladhan find (reuters.com)
• Encore, Wintershall find more North Sea oil-report (reuters.com)
• EnCore completes asset sale to Egdon (newstatesman.com)
• Sterling Resources announces UK North Sea operations update (newswire.ca)
• Sterling resources announces second quarter operating and financial results (newswire.ca)
• UPDATE 1-EnCore, Nautical say Catcher test confirms light oil (reuters.com)
• Sterling Resources Ltd. – Cladhan Appraisal Well Confirms Excellent Thick Oil Bearing Channel Sand Reservoir (newswire.ca)
• STOCKS NEWS UK-ARM rises after Intel-Infineon deal (reuters.com)
• UPDATE 1-EnCore, Nautical find oil at Catcher; shares jump (reuters.com)
• Sterling Resources provides operations update (newswire.ca)
• New oil field ‘one of region’s largest finds’ (independent.co.uk)
• North Sea oil find cheers three UK explorers (telegraph.co.uk)