TAP 0.00% 7.8¢ tap oil limited

From this week's Oil & Gas Weekly:Tap Oil was up from 11.0 cents...

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    From this week's Oil & Gas Weekly:

    Tap Oil was up from 11.0 cents to a mid-week high of 14.0cents before falling back to end the week at 10.5 cents. That wouldn’t normallyearn Tap a place in the winner’s list, but we think the company is anoverlooked junior oiler worth bringing to subscriber’s attention.

    Tap Oil was founded in 1995 and over the years has seennumerous changes in the company’s focus and management. The Tap Oil oftoday is not the Tap Oil of a decade ago.

    Tap holds a 30% direct interest in the G1/48concession in the northern Gulf of Thailand operated by MP G1 (Thailand)Limited (Mubadala).

    The company also holds residual interests in threepermits in the Carnarvon and Bonaparte Basins offshore WA which it is seekingto monetise.

    Singaporebased Risco Energy Investments (SEA) Limited with Suncastle Equities havea 44.11% interest in Tap and Thai businessman Chatchai Yenbamroong and hisNorthern Gulf Petroleum Holdings 25.54%.

    On 9 July the company announced that a three welldevelopment drilling campaign was about to begin on the company’s Manora oilfield in the Gulf of Thailand. According to the media release the Manora JV partners had approved the drilling of the three wells and the Tap Board had approved the Authority for Expenditure of US$3.13 million (net to Tap) for the entire program.

    The JV expects the wells to add 3,000 barrels a dayof production to the gross 5,290 barrels a day the field is currentlyproducing.

    In 2018 Tap returned to profitability with aNPAT of US$13.3 million. It had A$42.0 million in cash at the end of April andno debt. Tap estimates it has a US$18.2 million abandonment liability.In the March quarter the company’s share of production from its primary assetthe Manora oil field in the Gulf of Thailand was 1,658 barrels of oil a daydelivering revenue of A$14.0 million.

    With 426 million shares on issue Tap hasmarket cap of $45 million at a share price of $0.105 and an Enterprise Value ofless than A$1 million.

    The Manora oil field is a mature field havingalready produced over 14 million barrels of oil. Production peaked at over14,000 barrels a day in the early years post first oil in late 2014. On thecurrent reserves base the field has another 4.5 years of life supported bynearfield development drilling and ongoing workovers. Tap has remaining1P and 2P net reserves of 1.08 and 1.86 million barrels respectively.

    The JV has taken several measures to reduce costsespecially drilling costs and Tap itself has been rigorous in pruningits own corporate administration costs.The company has taken the timelyprecaution of re-hedging some of its production going forward to protect itfrom a Brent oil price falling below US$60.00 a barrel in 2019.

    The company believes at least four high gradedprospects have the potential to deliver the JV new discoveries on its licencesin the Gulf of Thailand over the next two years. At least one exploration wellon the Inthanin prospect is expected to be drilled in the second half of 2019.

    Most of the current management team have only beenin place since 2018 after extensive changes to the executive line-up. Thecompany’s current strategy is to focus capital and capability on Manora Field highervalue, shorter lead time reinvestment opportunities and rationalise andmonetise its Australian portfolio.

    There remains the possibility that Risco Energywill come back with another takeover offer after the failure of its 2018 offerat 7.0 cents a share which was opposed by the Tap Board and by ChatchaiYenbamroong the second largest shareholder.

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