CUE-> Pantheon of small oil stocks

[Corporate]

Have you expressed your concerns to management?

Regarding reserves. The operator will determine what they believe the reserves are but then it is up to the respective partners as to whether they adopt the operators number. And in this case HZN commissioned an independant consultant to review the reserve position. Each partner will use different "economics" to determine the field life and what reserves can be ultimately produced profitably. Having said this, I would take the independent assessment as fairly reliable.

Reserves are important. However, cash conversion is paramount and the major dissapointment with Maari has always been the rate the oil could be extracted. This doesn't mean I don't like CUE!

HZN will be adding 4,000bopd in production by Q1/2013 from China. The drilling results have only added to the potentially profitability of this development. This will be partially driving their share price.

There is a lot going on behind the scenes in PNG.

Anyway. I rate CUE and will keep buying!

Sorry rushed post.

[gazprom1]

Hi colinm,

IMO, China and PNG have been the main drivers behind the recent SP recovery for HZN not Maari. As Corporate pointed out, China comes on stream Dec/ Jan and the current exploration success will be tied straight back to further increase production during 2013. There are still two exploration wells to come - one result any day and they could move HZN's SP either way. That is, they will IMO have an impact on the SP one way or the other.

Yes, the company should be able to get accurate numbers in their financials.

Is CUE at T/O target at these levels?

Cheers
Gaz

Discl. Own

[macduffy]

Is CUE at T/O target at these levels?

Only from Todds, I would think. But they've had years to make a move had they wanted to, often at lower prices than today's.

Disc: Not holding.

[ELYOB]

It must be remembered that CUE has played with Apache ;BHPP;Woodside and others in the past months . These majors have been hurt , with a series of their own well disappointments . I guess they are all standing back to adjust strategy , and CUE is still right on the door step .... and no doubt will knock on the door again soon.

[colinm_au]

Hi Corporate, Gazprom1, macduffy & ELYOB !

Corporate - Yes, NPV (of reserves) is not just a concept !
I fail to understand why the partners have not added more producer wells sooner to utilize the unused production capacity available at Maari, given the rate of production actually being achieved. This would significantly improve the profitabilty of the field.
Given the field has been in production for almost 5 years ... someone has been asleep at the wheel !

I also see HZN as substantially undervalued and have a significant stake which I regret reducing to buy more CUE ... but my model indicates CUE is better value

Gazprom1, the trouble with HZN in China is that we have no idea of production cost, tax regime or rates of actual production ala Maari ... I have been disappointed that no details of flow rate or size of discovery have been announced for the recent discovery. My reading is that the drilling is really only appraisal drilling ...

macduffy, I am sure that Todd would be happy to sell their stake in CUE for the right price to Singapore (CNOOC) or anyone else. Given the SP was last at this level back in the GFC 2008/9, I tend to disagree with you about Todds having years to make a move ! In fact one could argue that Todd's have been waiting to de-risk the assets and after increasing board representation so that they can slow exploration ie. no activity for 18 months - can now put out a low ball offer.

ELYOB, it appears that OXX have had little trouble finding majors to drill similiar NWS acreage at much better terms than CUE managed ... In fact it was quite disapointing to see WPL able to farm out Benambra at much better terms than the original CUE farm down. Certainly, the market does not appear to be valuing the NWS acreage at all !!!

Certainly, my observations of recent trading (2mths) in CUE is that we have a couple of large sellers trying to keep the price 'range' bound and a large buyer who does not like to see the price at 13.5 cents !!! The OXX in specie distribution in April may have added selling pressure ... and may be proving irresistable to those looking to short the stock ...

Disclosure: I own a lot of shares in CUE and HZN !!!

[gazprom1]

CUE certainly has had a few disappointments on the exploration fron colinm. I do not want make ny excuses for what appears to be fairly tardy management. however, if any of the recent exploration wells had come in the SP would be well North of where it is today.

Re China, if you look at ROC's production costs and profitability from Zhang Dao(?) you can get a handle on costs involved in China. No, they have not been specific about production numbers and I am sure they have some numbers in-house. Annoying. ROC and HZN have stated that the recent discovery will add materially" to produiction and reserves. Good news is that project is coming in on budget (or under) and the timing of first oil is not slipping (as can be the case).

I prefer ROC to both HZN and CUE but believe they all have material upside. HZN is near the top of its trading range as is ROC but at some point IMO they will break out and find news levels much like SXY. Production will be compelling.

But for a duster in China today, market looks set for a good open...

Gaz

[Corporate]

Gaz I agree. ROC's operating costs at Zhao Dong were $9 per barrel for the first half of this year. This is absolutely fantastic for a quality oil! I think ROC/HZN will be looking for similar operating cost at the Beibu Gulf development.

Colinm, the Maari delivered first oil in Feburary 2009. It has been producing for less than 4 years. The partners have had a huge amount of trouble with the current wells and keeping the pumps online. You can't just go drilling new wells without a clear understanding of the subsea and part of this is having data of long term consistent production uptime. New wells could have the same issues are the current wells! I'm not making excuses for them, but this is risky business and hugely expensive if you stuff it up!

Regarding Horizon. They have a very large market cap and I think there is a lot of expectation built into their valuation.

CUE is great value at the moment. Market cap of $97m, less cash of $38m equates to an EV of $59m.

[Corporate]

Separately, what else are you guys eying up at the moment? I'm accumulating AJQ, AWE and OEL.

[ELYOB]

Plays = MEO SPS CTR QPN + the CUE ! sold HZN 39c [28c-39c] hold 83% cash . High risk being in market till next may2013

[colinm_au]

I would love to be holding 83% cash !!!

So many great opportunities ...

I expect that we will shortly start to see the energy sector rise on the back of takeover activity or the fall in the AUD ... which cannot be far away !