Wednesday, 3 July 2013

Antrim Energy's Fyne back on the table, but Casimir Capital remains cautious

Casimir Capital analyst Ryan Galloway left his speculative buy rating on Antrim Energy (TSE:AEN) unchanged Wednesday after the company said it formed a non-binding partnership to re-evaluate the development of its Fyne asset in the UK North Sea. 
In an effort to retain its UK license containing the Fyne Field, Antrim announced this morning it had received consent from the UK Department of Energy & Climate Change to submit a revised full development plan for the field by January 31, 2014.
The company partnered up with Enegi Oil Plc and Advanced Buoy Technology in its effort to seek lower cost production methods, to conduct engineering studies and prepare a full development plan using buoy technology. In return, the Enegi and AB Technology partnership has an option to earn a 50 per cent interest in the UK License, P077 Block 21/28a, on approval of the revised plan. 
"While the latest announcement brings Fyne back on to the table at no initial cost to Antrim, we remain cautious on the viability of the project," wrote Galloway in an emailed research note sent Wednesday.
"The effectiveness of using buoy technology in the UK North Sea remains to be seen, and should the partners advance a project, we speculate that Enegi ($15mm market cap) could be challenged to finance their share of the project with Antrim."
Antrim announced earlier this year that the estimated cost for developing the Fyne field through the Hummingbird Floating Production Storage and Offloading had risen so dramatically that the project was no longer economic. The company has been working since then to evaluate alternative development methods for extracting reserves, culminating with the announcement today. 
Fyne has been extensively appraised, with five wells drilled to date. It currently has 9.9mln barrels of oil reserves and has been tested with free flow rates of 4,000 barrels per day.
Galloway adjusted his target to 15 cents, based on two times expected 2013 cash flows, and maintained his speculative buy rating. Shares of Antrim were trading at 11 cents on Wednesday morning in Toronto.
"While we are encouraged by the potential to see Fyne continue, partner Ithaca’s disclosure last week that Causeway is likely to see 6 weeks of operational downtime in H2/13, has forced us to revise down our full year average production to 870 boe/d from 974 boe/d previously," concluded Galloway. 

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