Canadian Overseas Petroleum – have the shares been oversold?
In the last few weeks there has been a considerable amount of investor interest built up in this company, especially since the issue in January this year of its 336-page document for listing new shares on the Official List.
With its Head Office in Calgary, Alberta the £20m capitalised Canadian Overseas Petroleum (LON:COPL) is engaged in the exploration, appraisal, development and production of oil and gas assets with producing assets and reserves principally in the Converse and Natrona Counties in the US state of Wyoming, where it is the operator and majority working interest owner of three oil producing units.
The Wyoming operations are environmentally responsible with minimal gas flaring and methane emissions combined with electricity sourced from a neighbouring wind farm to power production facilities.
The group also has interests in sub-Saharan Africa through its ShoreCan joint venture in Essar Nigeria, as well as independent interests in other countries.
The ‘game changer’
However, the ‘game changer’ was declared by the company in late December 2022.
That was at its Frontier 1 11-27 recompletion which has been defined as the oil-bearing reservoir covering a large area at its Cole Creek asymmetrical anticline, some 9 miles in axial length with around 2,500 feet of structural/stratigraphic closure.
There are five known conventional oil reservoirs at Cole Creek – Lakota, Dakota, Frontier 2, Frontier 1 and the Shannon. The group has a 100% working interest in the Cole Creek leasehold on all rights below the Shannon.
An ‘Oil Down To’ elevation at the base of the Frontier 1 perforations has been determined.
This elevation is some 760' below the crestal elevation of the Cole Creek Anticline. The area within the ‘Oil Down To’ elevation is about 8,000 acres with reservoir sand thickness ranging from 50-115', thinning in the northern area.
In late January the announced the first oil production from the Frontier 1 reservoir sands.
In an Operations Update issued at the start of March the company reported that severe winter storms from late December to late February had impacted production operations at its Barron Flats Shannon Unit and its Cole Creek field.
The high winds, very low temperatures and drifting snow caused it to suspend operations during the storms.
The Group’s Strategy
The strategy of the group has two key elements: the first is to accelerate production at the company’s Wyoming assets through increased gas injection, drilling and development; the second is to expand its activities in Sub-Saharan Africa and elsewhere by accessing exploration, un-appraised and undeveloped assets as well as producing assets.
Conclusion – taking a positive out of the negative
Some 19 pages in the early part of the Prospectus were Risk Factors, negatively covering almost every eventuality.
In the last year the shares of have fallen 85% from 39p to around the current 5.9p, the big question now is - are the shares oversold?