Buy Africa Oil at 69p & Keep Selling Earthport
Argues Lucian Miers, the Bard of the Boleyn
Shares in Range Resources, the AIM and ASX listed oil tiddler doubled recently on news that the semi autonomous parliament of Puntland in Somalia had given the green light for an oil exploration project to commence in which Range has a 20% interest.
Oddly enough the price of Canadian listed Africa Oil (TSX AOI) which has a 65% stake in the project has remained static on the news at around CAD1.15, and in my view is the better play on one of the last great rift basins of the world namely the East African Rift Basin System. Large oil discoveries in Yemen across the gulf of Aden and to which Puntland was attached millions of years ago provide hope, as do discoveries at Albert Galen in Uganda.
Obviously there is a huge political risk but Puntland is seen as relatively stable compared to the more lawless areas of Somalia in the south. Africa Oil It plans to spud the first well in mid 2010. This will be the first oil well drilled in Somalia for almost 17 years. The company also has prospects in neighbouring Ethiopia and Kenya.
AOI had US$22 million of cash at 30th Sept 2009 and has the Swedish Oil giant Lundin petroleum as a major investor, so it should not have a problem financing its share of the exploration costs. At CAD 1.15 (69p) and a market cap of GBP50 million it is worth a punt for the brave.
Finally, those who read my update on Earthport last month (here) may recall that that the company announced that it was due to receive GBP3.25 million from a shadowy Panamanian start up by December 21st. Well guess what? Earthport stated that the money had not exactly arrived but that “once internal procedures. have been addressed” the dosh will arrive. You couldn’t make it up.
Posted by Lucian Miers on Dec 31, 12:26 PM in Comment- Post to: del.icio.us
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