30 March 2006 Oil & Gas MARKET COMMENTS Oil US$/bbl % chg. Gas % chg. Brent 65.40-0.23 Nymex Natural Gas 7.51 +0.72 WTI 66.45 +0.58 IPE Gasoil 578.50 +0.52 Dubai 59.21 +0.51 Henry Hub 7.15 +0.14 Bonny Light 66.41 +0.71 Zeebrugge 43.25-0.57 Burren Energy (BUR.LN) Price: 953p Rating: Buy Burren Energy - 2005 Preliminary Results Burren reported a rise of 196% in Pre tax profit to US$254.6 million compared to US$86.2 million in 2004. EPS was up 218% to 159.0 cents from 50.1 cents in the prior year. The full year dividend increased fourfold to 12.0p per share up from 3.0p. Net cash flow from operations rose 167% to US$277.8 million, and free cash flow was US$103.9 million, compared to negative US$1.0m in 2004. Burren had net cash of US$125 million at year-end. Burren reported that average production was up by 72% to 31,380 bopd. On an entitlement basis production rose by almost 60% to 22,430 bopd. Over a three-year period Burren has brought down its production cost per barrel, on a working interest basis, by 27% to US$2.27 per barrel in 2005. There was a 34% increase in proven reserves to 84.7 million bbls; 7% reduction in proven and probable reserves to 214.2 million bbls. Burren's proved and probable reserves represent an 18 year reserve life based on 2005 working interest production, and 7 years for proved reserves alone. Burren has extended its activities outside its core producing Burun and M'Boundi fields towards exploration of new areas. Over the past two years it has carried out extensive seismic activity in Turkmenistan and the Congo, and a new survey is about to commence in Egypt. Exploration drilling is continuing in Turkmenistan, Congo and Egypt, and eight heavy rigs have been secured for the 2006 exploration and development programme between these three countries. Burren plans to drill up to 20 exploration wells in 2006 to evaluate an unrisked prospect inventory of over 400 million barrels. Burren also reported that two out of five recent exploration / appraisal wells found hydrocarbons. In order to mitigate the risk of a tigher rig market Burren is proceeding with the purchase of a second drilling rig. During the past year, Burren has also acquired a 26% share holding in Hindustan Oil Exploration Company, and acquired new license interests in Yemen and Oman, and partially disposed of its shipping interests. Contact Tel: + 44 (0) 20 7321 2508 Tel: +44 (0) 1733 375 953 21 St James's Square London SW1Y 4JP United Kingdom.
Burren expects its working interest production this year to average between 36,000 and 37,000 bopd, compared with 31,380 bopd in 2005. Burren, in a separate press release announced that on the 24 March 2006 the Congolese parliament approved the terms of the La Noumbi production sharing contract. As announced in August 2005, the percentage interest in the M'Boundi field being sold by Burren to SNPC is 3.5%, as a result of which Burren's current 35% interest will fall to 31.5%. The new final licence expiry date is 2030. Brian Lavers CBE will be stepping down as Chairman. He will be replaced by Keith Henry. Following the placement of shares held by pre-ipo shareholders the free float of Burren has increased to 71.9 % of Burren's share capital. Comment: These are good results. Burren is financially robust, and generating good cash. Concern as to the Congo M Boundi sale of 3.5% to SNPC has weighed on sentiment. Nevertheless, Burren is expanding outside its core area with an aggressive exploration programme. There is a very healthy Reserve profile. On a historic PER of 10.5 and a Yield of 1.25%, and a further 15% forecast increase in production in 2006, Burren offers good relative value. Buy. Disclosures: None Equator Exploration (EEL.LN) Price: 340p Rating: Hold Equator spuds Owanare AX1 well in OML 122 Equator announced that they and Peak Petroleum have commenced drilling their second well in the OML 122 licence area, offshore Nigeria. OML 122 is located 25-60 km offshore in water depths of 40-300 metres and covers an area of 1,295 sq. km on the Western Niger Delta, east of Shell's giant Bonga Field (estimated 1.4 billion barrels) on OML 118 and southwest of Shell's EA Field on OML 79. The Owanare AX1 well was spudded this week on the Owanare prospect, which lies in a water depth of 135 metres. The 3D seismic data covering the prospect has been re-processed and interpreted and suggests that Owanare has gas-in-place potential of 3 TCF. The aim of the Peak/Equator drilling program is to prove-up significant volumes of gas as potential supply for gas-utilisation projects currently underway or in planning stages in Nigeria within close proximity to OML 122. The secondary objective is to find commercial volumes of oil on the block. Comment: Equator has had a very strong run of-late driven by enthusiasm for the B-DX1 well, also located on block OML 122. Equator believes that the AX1 well has potential for 3Tcf of gas, that, however, still needs to be established. Though Equator has great prospectivity, we believe it has run far enough for the moment. Hold. Disclosures: None Solana Resources (SORL.LN) Price: 102p Rating: None Solana Resources Financing Solana has announces that a total of 21,000,000 common shares will be issued at the price of C$2.00 per share for total gross proceeds of C$42 million under the financing by short form prospectus first announced on March 27, 2006. Comment: Mirabaud is part of the syndicate undertaking the Solana fund raising. Disclosures: 2
Afren (AFR.LN) Price: 69p Rating: Spec. Buy Afren 2005 Preliminary Results Afren has announces its maiden preliminary results for the year ended 31December 2005. It reported a loss of 4.6 million for period to 31 December 2005 and a Net cash balance of 17.2 million. Afren listed on AIM in March 2005 and raised 31.2 million raised through its IPO and two subsequent equity placements in July and December 2005. The IFC has acquired a 7.5% shareholding in Afren and has signed an agreement in principle to provide a US$50 million revolving credit facility. During the course of the past year, Afren acquired an effective 4.41% interest in Block 1 of the Nigeria Sao Tome & Principe Joint Development Zone ('JDZ'). The initial drilling of exploratory well, Obo-1 has been completed and the results are currently being evaluated. In addition, Afren negotiated interests in two proven undeveloped discoveries in OML 90, offshore Nigeria. Afren also acquired participating interests in Iris Marin and Themis Marin blocks and signed a Technical Evaluation Agreement over the Ibekelia license area, offshore Gabon. A rig has been secured for two wells to be drilled on development assets offshore Nigeria in 2006. Decision on further exploration on Block 1 of the JDZ pending review of exploration results. Afren is targeting first oil production in H2 2007. Afren is undertaking 3D seismic reprocessing in Gabon. and an exploration well expected late 2006 / early 2007. Afren aims to continue to expand its portfolio and to achieve 15,000-20,000 bopd of production by the end of 2007. Comment: Over the past 12 months Afren has moved within a rough 20p band. Since its flotation it has made good progress in acquiring assets, nevertheless, the market is now waiting for some positive operating results. If its target production can be shown to be achievable then Afren has upside. Speculative Buy. Disclosures: None
Ratings, Certification and Disclosures. Ratings System BUY: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months. HOLD: The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months. SELL: The stock is expected to generate negative risk-adjusted returns during the next 12 months. Risk Qualifier: SPECULATIVE Stocks bear significantly higher risk that typically cannot be valued by normal fundamental criteria. Investments in the stock may result in material loss. Investment Analyst Certification All research is issued under the regulatory oversight of Each Investment Analyst of whose name appears as the Author of this Investment Research hereby certifies that the recommendations and opinions expressed in the Investment Research accurately reflect the Investment Analyst's personal, independent and objective views about any and all of the Designated Investments or Relevant Issuers discussed herein that are within such Investment Analyst's coverage universe. Investment Research Disclosure Any relevant disclosures will be indicated through reference to the following Disclosure Table: 1. This is a commissioned or a non-objective research note/comment. 2. In the past 12 months, / or its affiliates have had corporate Finance mandates or managed or co-managed a public offering of the relevant Issuer's securities or received compensation for Corporate Finance services from the Relevant Issuer. Excluding acting as a corporate broker and or nominated advisor, on a retained basis, for the Relevant Issuer. 3. / expect to receive or intend to seek compensation for Corporate Finance services from this company in the next 6 months. Excluding acting as a corporate broker and or nominated advisor, on a retained basis, for the Relevant Issuer. 4. The Investment Analyst or a member of the Investment Analyst's household has a long position in the shares or derivatives of the Relevant Issuer. 5. The Investment Analyst or a member of the Investment Analyst's household has a short position in the shares or derivatives of the Relevant Issuer. 6. As of the month end immediately preceding the date of publication of this report, or the prior month end if publication is within 10 days following a month end, / and/or their affiliates beneficially owned 1% or more of any class of common equity securities of the Relevant Issuer. 7. A senior executive or director of /, or a member of his/her household, is an officer, director, advisor, or board member of the Relevant Issuer and/or one of its subsidiaries. 8. / makes a market in the securities of the Relevant Issuer. 9. / acts as corporate broker and or nominated advisor, on a retained basis, for the Relevant Issuer. The Investment Analysts who are responsible for the preparation of this Investment Research are employed by, a securities broker-dealer. The Investment Analysts who are responsible for the preparation of this Investment Research have received (or will receive) compensation linked to the general profits of
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