ST, are Europa going to be producing 6000 bopde or 1000 bopde by or in 2007
because on squaregains company profile it says 6000 bopde by 2007.

If this is correct, and spot prices average around 70 dollars, we are looking at some serious turnover for a company valued at only 15 million, 82.5 million pounds rounded off and exchanged to pounds at 1.85 exchange rate.

Even if we only achieve 1000 bopde the revenue at just under 14 million pounds
is nearly equal the current market cap.

What will this do to the shares and also our warrants if this is achieved?

The Annual report comes out in September, i reckon we will be up to at least the 1000 bopde mark by that date.

I am also thinking about buying some more warrants, but will wait until annual report. If they then become too dear i won't buy, but i will be in a win, win situation.

barclay,

You can't but we can - whats the new epic?

Ian

EOG

Hi Barclay,

Is the company selling @ spot prices. Often the case that oil companies hedge forward so are selling now at a price well below current levels. This is the case with venture production (VPC). Their hedges are due to expire around this time so it will be really the second half of the year that the company avails of the more lucrative high oil prices.......

Good question? No Europa are not hedging, their average oil price last year was around 60 dollars a barrel. A company cannot hedge it's production anyway
until it's wells are up and running,(only 300 bopde upping to at least 1000 bopde in a months time) or else it will make a loss because it can't sell the oil to offset the gain or loss on the hedge.

If the oil price goes a lot higher VPC may dehedge it's position: if it is financially viable, and then hedge again at the new higher price.

I don't like companies that hedge all their production, unless it is in a period of high
prices like now, they lose out too much, better to hedge part of it instead.

But having said that your company might be making lots of cash, and be good value
and that's all that matters.

Barclay, All,

Time for me to weigh in and finally adress Barclay's question, I think, in order to clear up a few important issues.

When calculating turnover for this company, I think it is potentially very misleading to use barrels of oil equivalent (boe). I am not an industry expert, but I have two serious misgivings about simply using the spot crude price as a datum. Firstly, EOG's main product is going to be gas, whose price does and will move independently from that of crude. Therefore the "boe" is almost meaningless as it changes from one day to the next (the comparative factor being price in any case). Global market gas prices have fallen considerably over the last six months while oil prices have risen dramatically. Secondly, EOG is selling much of its gas in a restricted market, that of Romania, where the prices are localised and last year were around $4.30 per million cuft if memory serves. However, the market is converging with that of Europe, which should hopefully see further price rises taking effect.

You can find both spot prices and graphs of oil and gas prices on oilbarrel.com

I am also reluctant to use such high figures as $60 - $70 when comparing oil and gas as these recent prices far exceed the prices used in the feasibility studies - for the sake of not getting your figners burnt I think you have to be a little more conservative.

My gut feeling regarding the potential production of what I believe was a target figure of 7,000 boepd by end 2007 is that this is likely to slip. If Quad 41 in the North sea is successful then it could potentially take EOG to the 7,000 boepd target (a better figure to use might be the 35 mmscf/d flow rate tested on Quad 41 when it was first explored). However, the 7,000 target has not been mentioned in recent RNS's.

It is difficult to say when exactly the Quad 41 field might come into production, even assuming it is successful, so you have to be careful about setting dates.

Further developments in Romania may see a rise in production rates there. Indeed I am beginning to think that the target of 1,000 boepd might be a conservative estimate as it seems that all of the Bilca and Fratauti sites are producing a little ahead of expectations (so I agree your comment, Barclay, that, "I also think although they say production will be aimed at 1000 boepd, they could exceed that depending on pressure at bilca"), but let's wait and see.

One thing that Europa is not good at is reminding us that they only own 28.75% of Bilca, which obviously casts the figures in a different light.

My maths based on quoted figures for Bilca is that the site could produce a minimum of 18 mmscfd gas. I'll take 1 mscf to be worth $4.30 as it was in the last full year.

so: 18,000 units of gas @ $4.30 = $77,400. * 0.2875 gives net turnover to EOG of $22,252.

Multiply by 360 = $8,010,900. Divide by 1.9 to convert to and you get Turnover 4.1 million annually from Bilca.

The current 210 bbl/day oil is worth approx 2.4 million, so that's a total yearly turnover of 6.5 mil.

This compares well with the figures from last year of average daily production of 266 boe/d, for which T/O of 1.44 million was realised.

I think there's a lot of potential in this company, but I'm sceptical of the higher turnover figures being quoted.

I remain hopeful that this will be a winner - i.e. with a share price well in exces of 30p - by the time those warrants expire in November 2007; I'll be watching my exits carefully, though, as I don't want to get landed with warrants that are underwater when they expire. Those who are risk-averse may prefer to hold the ordinary shares.

ST, good comment but i believe we shouldn't use 4 dollar gas prices as the only reason gas prices are low now is because we are in a hot summer, in england they go up to 12 dollars + in winter, and Romanian winters are even colder than ours with snow guaranteed from December to April. People use more gas in Romania because their summers are not as warm as ours.

this should add another 1.5 million pounds to your figure, roughly.
Your figures are better than mine though, i forgot about the 28% share thing.


Do't take my figures as dead certs... i just calculated the gas spot price and multiplied it by the gas flow rates at bilca and then calculated 1000+ barrels of oil
and the figures were very close, i think that's why they say boepd and they do take into account the change in gas prices during the year as they used 6 dollars
which is low because of the summer.

You also used a lower dollar price than me, i used the spot 1.85 which adds another mill... or so on top.

Lets see what they say at the Annual Results, we will get a lot of info then and can
work things out more clearly.

Thanks for your feedback, Barclay.

One or two clarifications: I used gas price of $4.30 because that was the average price quoted in the 2005 Interims released on April 18th 2006.

I quote: "Currently, Romanian domestic gas production is sold at a 20% discount to the previous year's import price resulting in a 2006 price of $4.30 per thousand
cubic feet (mcf). There are strong signals that the 20% discount will reduce
substantially with Romanian entry into the European Union in 2007 resulting in
an improved gas price."

Thus the domestic gas price equals 80% of the average price of imported gas for the previous calendar year. The figure of $4.30 for gas sold in the Romanian market is therefore a fixed quantity and won't change until the next calendar year.

Given recent international gas prices, the domestic price for 2007 should be higher yet - probably near $6, even allowing for the fact that the EU entry thing may not take effect until later.

I have to confess that having read it again I now understand better how the prices are set, but the point is that Romanian domestic gas prices are set according to a system of external/international and historical factors and not necessarily by on-the-spot demand.

I did indeed use a lower dollar price - intentionally because it produces a more conservative outlook. I take the attitude that if even the more conservative outlook is positive, you're onto a winner.


We shall see what comes of all of this - with the higher gas prices achieved in 2006 it augurs well for the 2007 full year results, which hopefuly means I'll be able to shoot those warrants out of the door at a decent price just before they expire :o)

Up a bit today - no news apparently but it's good anyway.

EOG Bid: 28p Offer: 29.5p Change: 3.25

Why have the warrants gone down instead of following the share price rise or staying at 5p bid?