I noticed EOG in Shares Magazine last week, and having done some research, think they may be a decent producer / exploration play.



Europa Oil & Gas (Holdings) plc, is involved in the exploration and production of hydrocarbons in Europe. The Company has a balanced portfolio of 12 European oil and gas exploration and production assets in the UK, Ukraine, Romania and Poland. The portfolio contains proven plus probable and development reserves of 7 million barrels oil equivalent (mmboe) net to Europa and exploration potential of a further 28 mmboe. Wellhead revenues are currently in excess of 200,000 per month from a volume of 340 barrels of oil equivalent per day (boepd). These figures are set to rise substantially by the year 2007 when projected production will be above 7000 boepd.


The Company has an active near term drilling programme with three wells scheduled to spud in the first quarter 2005. The drilling programme mimics the balanced portfolio with one appraisal well on the recent Bilca Gas discovery in Romania, one development well on the West Firsby Oilfield in the UK and one exploration well in Romania.



Europa is set to become a significant producer of hydrocarbons in the near future and intends to develop a substantial independent upstream oil & gas business. The management has a strong mainstream oil and gas background, which enables Europa to continue to identify, acquire and develop profit-making oil and gas assets.



Europa Oil & Gas (Holdings) plc was admitted to the London Stock Exchanges Alternative Investment Market on November 11, 2004 and trades under the symbol EOG.





Corporate website : Click HERE

well researched st-it looks very promising. I actually bought because one of the city boys who seems to make money out of anything he touches told me he's into this one! oil and gas seem to be doing well whatever-I'm happy to be in CHP as well. Don't know much about buying warrants-you buy for 10p and hold for how long? my Marconi shares were turned into warrants and ended up worthless! If you're interested the other shares my friend is into are IAM-said to be a future man group and HML, and KCOM. so I have just a few of each!

Thanks for the info MP - will look into.

I'm glad you found my "research" helpful - but I have to warn you that I have since discovered that EOG holds minority interests in some of these prospects (something that wasn't often mentioned in EOG's reporting). Therefore my maths may be off-beam! The figures for Bilca may be a little high too, so PDYOR.

FYI warrants are tradeable like ordinary shares and their price fluctuates similarly. Warrants give you the right to subscribe for shares at a fixed price, within a specific time period. You can trade the warrants or exercise them at any point up to and including the Final Exercise date.

At present the warrants are trading at Bid: 8p Offer: 9p and have until 11Nov2007 to be exercised. The exercise price of the EOG warrants is 30p, giving the warrant holder the right to buy the underlying share at 30p each.

Therefore the value of warrants is in part an expression of the current share price minus the exercise price, here 34p - 30p = 4p. You could call this figure the asset value of the warrant.

However, there is a "time value" to warrants as well, in that if they have plenty of time left to run, they will carry a premium - here the residual value of 5p in our 9p warrant price. This time value could also fluctuate considerably depending upon perceptions of how likely it is that the share price will make big advances in the time up to the Final Exercise Date.

Needless to say calculating the price of warrants is complex and dependent upon a number of interrelated factors. I have tried to summarise as I see it

I don't know what happened with Marconi, but it sounds as if the SP didn't really take off and the warrants' validity period simply ran out. In some circumstances the warrants' validity period can be extended, but I wouldn't bet on this.

I have to add that I haven't traded warrants before and I don't know how they are treated for tax and/or ISA purposes.

The attraction of warrants is, clearly, that you gain more leverage regarding the share price. If I invest 1000 at present prices, I would get approx 3,000 shares or 11,000 warrants. If the SP hits 100p on the Final Exercise Date, I then come away with 3,000 for the shares or 11,000 x (100p - 30p = 70p) = 7,700 for the warrants. "Time value" may cause the warrant price to peak some time before the Final Exercise Date is reached - in some cases even if the share price continues to advance.

When it comes to EOG there's no question which I'd rather do, HOWEVER one has to be aware of the risk that the shares will not perform in which case I lose my entire investment AND / OR that if I forget to exercise or sell the warrants by the Final Exercise Date then I also lose all my money.

Warrants, therefore, are not for the unwary or amnesiacs. However, for consenting and informed adults they might be a faster way to a bigger profit.

I think EOG has every chance of making at least 100p a share by end 2007, and that's making my most conservative estimate - but you know what E&Ps' timetables are like for slipping; for example, they may turn out not to be able to hit the figure of 7,000 bbl/day by end of 2007. However, they need only a couple of thousand barrels/day to be somewhere in sight to make 100p/share and so I'd feel confident that I could make some sort of multi-bagger profit holding the warrants.

Hope this isn't too complex - please get some advice if you're unsure of anything and as ever PDYOR.

thanks st-warrants sound a bit like CFDs. interesting I'll think about a few!

Moneyplus, warrants are very different from CFDs in their construction - apologies if I didn't make that clear. Warrants give you the right to buy the underlying shares (for this reason they are sometimes called options). However, you can lose all your investment if you fail to exercise the warrant before it expires - obviously you are at risk of this occurring if the price of the underlying share fails to perform and the warrant cannot be exercised. With a CFD you would make a loss if the share price moved against you but you could limit this at any time by closing the contract. With warrants, if things turn out badly, you could potentially see the value of your investment slump to nil overnight and not recover in time to recoup your losses before expiry.

Please, please ensure that you are fully up to speed with how warrants function before investing.

I realise you are an experienced investor; I simply don't want to be in the position of talking you into investing in something on the basis that it appears to be an easy way of making money.

Lecture over - I wish you every success!!

ST

.

Anyway, getting back to the main point of this thread:

RNS out from EOG today - new licences awarded in Egypt (seen on oilbarrel.com).

For immediate release:

Europa Oil & Gas (Holdings) plc

Egypt Licence Award

The Board of Europa Oil & Gas (Holdings) plc - AIM: EOG - the hydrocarbon
production and exploration company, is very pleased to announce that Europa has
been offered the West Darag exploration concession by the Egyptian General
Petroleum Corporation (`EGPC') as a result of an application in the EGPC 2005
bidding round. The award is subject to government approvals and execution of a
Production Sharing Agreement (`PSA') with EGPC.

The concession covers a large under-explored onshore area in excess of 5,300
km2 (1.3 million acres or the equivalent of 25 UK North Sea blocks). It lies on
the northwestern margin of the Gulf of Suez and has a Mesozoic sequence similar
to that in the prolific Egyptian Western Desert oil province.

Saharan Africa, with resources of over 160 billion barrels equivalent, half of
this in Mesozoic basins, is becoming vital to the European oil and gas markets.
Egypt in particular had 36 oil and gas discoveries in 2005 alone and continues
to deliver exploration success in both new and established plays.

Paul Barrett, Managing Director, said, "This is a highly significant award for
Europa and part of our new venture programme across Saharan North Africa,
coming quickly on the heels of two very large licence awards in Western Sahara.

We look forward to exploring West Darag and will release a more detailed
technical review of the concession area once the PSA is signed."

About Europa Oil & Gas (Holdings) plc

Europa Oil & Gas (Holdings) plc - AIM: EOG - focuses on the production and
exploration of hydrocarbons in Europe and North Africa. It currently produces
210 barrels of oil per day from UK onshore fields and 25 barrels of oil
equivalent from the Ukraine. Production is expected to rise significantly after
its Romanian Bilca Gas Project comes onstream later this year. Operating a
balanced portfolio, Europa currently has field appraisal activity on projects
in the UK Southern Gas Basin and onshore Romania and exploration activity on a
further eight licences across the Europe - North Africa region. For more
information please visit www.europaoil.com.

Moneyplus, I am sorry; please accept my apologies. I did not wish to give offence.

none taken-I just couldn't think of a reply! very pleased to have your advice and input on this thread nothing offends me except some of tvc15's drivel!

Good to know, thanks!

PS if you'd still like to know more about warrants, then looking up "warrants" on this BB's search function turns up some interesting info on some older threads. Some of it relates to covered warrants, which are not quite the same as those issued by a company (e.g. the EOG warrants), but a lot of the theory applies to both.

PPS am getting an itchy trigger finger when it comes to buying those warrants, but at present I have to wait for my account to be enabled (some brokers make you fill in a little questionnaire before they enable your account for warrant trading, in order to protect the unwary).

If this one does what I think it will then I will personally hand-deliver a bottle of something delicious to Andy the next time we're both in Bournemouth.

Mediterranean Oil + Gas directors have just exercised their warrants.
London Stock Exchange RNS.

Looks like they made a tidy sum!



barclay

ST, think 1 or 2k, maybe 1k initially, then if they move to 20p another 1k maybe an astute trickle or funds into these, I'm going to track, if I get chance I'll do it tomorrow, otherwise it'll be Monday, plenty of time imo to move on these, but they do look tasty, given eog's prospects.

Agreed, the prospects are good, although I might risk a bit more earlier on, on the basis that the safe money will be invested earlier (i.e. while the underlying SP is still low). As soon as my account is enabled, I hope to be on board. Thanks for the feedback too.

Good news (from my point of view anyway) - the warrant price has just come down 1p, following the fall in the share price.

EDIT: I'm seeing this on my online broker's reflection of the market maker's price, in case anyone is looking at the market and seeing something different. E.g. FT.com records no trades today and hence doesn't record the price change.

Currently we have EOGW Bid: 7p Offer: 8p Change: -1

Due for another drop in the next few days??

ST, even if the warrant doesn't reach the 30p exercise price and only reaches
50% of that at 15p you will still make some money 15p-8.5p = 6.5p per warrant held to sell at bid in the market(worse case scenario).

My broker says that company warrants are less risky than covered warrants because of less volatility and are quite liquid, and traded daily.

The same risk can be had from holding the shares which will cost more therefore even though you may not lose all your money because your outlay was more a 25% decline in the sp could equate to a bigger loss than you would suffer from the market rendering your warrant worthless.

EOG warrants never came to my attention until i saw your thread.
Thanks! I will put a small amount of money in them for the leverage.

Production is bound to increase between now and Nov 2007,it may not reach it's targets but it will make the shares rise along with the warrant.

You could always take profits by selling some of your warrants and leaving some
in to reach the exercise price.

barclay

Barclay, it is the underlying share which has to reach exercise price of 30p, i.e. the warrant allows you to buy the share, at any time, for 30p. The warrants are therefore exercisable now (just!).

This is one reason why the warrants look attractive, because they are "in the money" - i.e. exerciseable - but still cheap, with plenty of time left on them and with the company prospects looking good for a rise in the share price.

You may also want to check with your broker/accountant about the tax position, because I have a feeling that if you exercise the warrants and then sell the shares, you'll be able to offset the total purchase amount (i.e. the cost of the warrants plus 30p per subscribed share) against your profits for capital gains tax purposes. At some point this may be more beneficial than just selling the warrants, e.g. if the Final Exercise Date is near at hand and the "time value" of the warrants has reduced. Don't ask me about taper relief and please don't take what I've said as gospel but rather check it out for yourself - I am trying to get these questions cleared up with the Inland Revenue but am currently waiting for them to return my call. I will post any info I do get.

(I should add that in the final analysis I am much more clued up about German taxation having lived here for five years, but am reviewing the position with the UK tax authorities as I may be moving back to the UK shortly).

Trust this helps.
ST.

Thanks for the info, i am new to warrants i did my own research.
Are you saying that because the warrants are exercisable now it would be like
the same as buying the shares, but if the shares rise 5p to 35p i can exercise my warrants and i have made 5p per share profit per warrant held?

How do i excercise the warrant as opposed to selling them in the market?
I deal online with squaregain.

There is no stamp duty on warrants, but they are subject to capital gains tax at 20% uk.

I do not know how to offset it though but what your saying does make sense.

"Are you saying that because the warrants are exercisable now it would be like
the same as buying the shares, but if the shares rise 5p to 35p i can exercise my warrants and i have made 5p per share profit per warrant held?"

Yes - although the warrant price may move differently due to other factors (e.g. if the SP is perceived as being likely to advance very quickly, then that would push the warrant price up by a greater factor due to the "time value". Obviously if everyone starts wanting to buy the warrants then the warrant price will rise independently of the share price. This is basically what happened in April when EOG's SP went up about 50% and the warrant price tripled. Because of a variety of factors, though, you may not always see a penny-for-penny rise in the warrant price.

If things are moving more slowly, the "time value" of the warrant will show a decline and this will reduce the value of the warrant.

Also 1,000 invested in warrants will get you a lot more warrants than if you just bought 1,000 worth of shares - so for your 5p rise you get a lot more profit!


"How do i excercise the warrant as opposed to selling them in the market?"

Your broker will have the facilities for this. IMPORTANT: you may need to have your account set up to trade warrants before you can buy. Please check with your broker.

Offsetting is purely the maths of deducting purchase costs from proceeds of sales to arrive at taxable profits.

EDIT: see also my post #41. stamp duty is payable on traditional company warrants but not on covered warrants. The EOG warrants will therefore be subject to stamp duty.