If you’ve still got room in your portfolio for a purely speculative oil & gas play – one with an explicit aim to realise value from the business within three years – then take a look at Fastnet Oil & Gas (FAST).
- Proven management team
- Near-term monetisation
- Support of oil heavyweights
- Scale of Deep Kinsale licence
- Fears of global oil surplus
- China slowdown
Initial interest in Fastnet was guaranteed as several figures within its executive and advisory boards had been instrumental in developing Cove Energy, an East Africa focused driller that was sold to Thai state oil firm PTT Exploration & Production last August for $1.9bn (£1.25bn). Therefore, Fastnet can draw upon the same well of geological expertise behind Cove, including founder John Craven and geologist Dr Stephen Staley. Another Fastnet geologist, Carol Law, was responsible for the team from Anadarko Petroleum (Cove’s senior partner in the region) that successfully identified the Prosperidade gas complex in Rovuma, Mozambique.
Having the right team in place obviously provides no guarantee of success, but their collective track record of rapidly realising value from frontier oil & gas projects augers well for the company’s five offshore licences in Ireland, in addition to its 18.75 per cent net carry in the highly promising Foum Assaka licence area, offshore Morocco.
The scale of Fastnet's Irish Deep Kinsale licence area was recently the subject of an independent assessment by SLR Consulting, which established the presence of an unrisked resource of 2.37bn barrels of oil (based on a median 50 per cent chance of recovery). Increased detail of the potential resource will soon be provided through analysis of 3D seismic data covering 500 sq. km of the Irish Sea. The project may be in its infancy, but its potential is brought home by the fact that Fastnet has already arranged a contingent farm-out arrangement with PSE Kinsale Energy – a subsidiary of Malaysian state-owned oil giant Petronas. The update on Deep Kinsale followed news of a significant increase in the resource estimate for Fastnet’s Shanagarry licence in the North Celtic Sea. SLR gave the licence an unrisked median resource of around 1.3bn barrels of oil, together with 1.34 trillion cubic feet of gas.
| FASTNET OIL & GAS (FAST) | ||||
|---|---|---|---|---|
| ORD PRICE: | 17p | MARKET VALUE: | £46.9m | |
| TOUCH: | 17-17.5p | 12M HIGH / LOW: | 34p | 14p |
| DIVIDEND YIELD: | NIL | PE RATIO: | NA | |
| NET ASSET VALUE: | 5p | NET CASH: | £8.38m | |
| Year to 31 March | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (c) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | na | na | na | na |
| 2013* | nil | -1.01 | -0.4 | nil |
| 2014* | nil | -1.67 | -0.6 | nil |
| % change | - | - | - | - |
NMS:25,000 Matched Bargain Trading BETA: 0.0 *Forecasts provided by Edison | ||||
Executive director Carol Law, a near 30-year industry veteran, is no less confident of achieving success in the offshore licences in Ireland than she was when she commenced work on the Rovuma Basin. But the most likely near-term price catalyst could be provided though a farm-out agreement at Foum Assaka, where Fastnet is junior partner to Atlantic Margin specialist Kosmos Energy. Both Kosmos and Carol Law were involved in the massive Jubilee discovery off the coast of Ghana, so their involvement in Foum Assaka hasn’t gone unnoticed within the industry.
Given that Fastnet’s projects in Ireland and Morocco are in their infancy, the market is placing a considerable amount of faith in the company’s lineage, its personnel, and the partners it has attracted, particularly when you consider that the FTSE Aim Oil & Gas index has halved over the past two years. Appetite for junior oil & gas explorers is inexorably tied-in to an oil price that is currently being undermined by worries over China’s economy and fears of a global surplus growing on the back of US shale oil production, but we think that these fears are overdone.
