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SEFTON RESOURCES INC - UNDERRATED OIL PRODUCER (SER)     

ptholden - 04 Aug 2006 19:53


???

Sefton Resources is an independent AIM quoted Oil and Gas company operating in the US. The companys principal current assets are two producing oilfields in California (Tapia Canyon Field and Eureka Canyon Field); it is also in the process of buying up prospective coal bed methane acreage (CBM) in Kansas.

Update from July 2007 AGM

Finance

I revealed in my annual statement that discussions were well advanced with
Banking institutions. The final phase of the agreement with a suitable bank
without complex and restrictive terms is now very near. This is weeks away
rather than months.

Oil

Oil production at Tapia has averaged 4,100 BO during the last five months. Which
is in line with last years levels. Once this finance is in place we will be able
to move ahead with drilling.

Drilling

We have stayed close to drilling contractors and we are ready to move forward
quickly when this finance is available.

Steam generation

The equipment is now in place at Tapia. Preparation time is needed to connect
the equipment and carry out the necessary trials required to get the main work
started. We anticipate this steaming will start in the next couple of months. If
successful a significant amount of oil resources will move into the Proven
Producing Reserves category.

Joint Ventures

Discussions continue with a number of interested parties to develop our Anderson
counties gas assets.

New finance team

A new CFO has been appointed with good knowledge and experience of the oil
industry. A new assistant to undertake all the daily needs has also been
appointed.


SWOT ANALYSIS

STRENGTHS:

Sefton has two oil fields, both producing. One is already profitable, and the other is breaking even. This should generate good cashflow for the company over the medium term.
Sefton owns 100% of both its major oil interests and is now demerging its non-controlled oil interests in order to concentrate on those where it has full control (Sefton has recently disposed of its Canadian assets for CDN450k cash).
Sefton is establishing a track record of using modern extraction technologies to improve the efficiency of its fields.

WEAKNESSES:

Sefton has suffered from a number of one-off factors. While these were out of the companys control the problems it has faced since 2002 have held back development and taken up management time. Investor disenchantment may account for the current low rating.

OPPORTUNITIES:

Sefton has acquired acreage for CBM (coal bed methane) in Kansas. CBM gas production is a thriving market and Sefton believes it has acquired the acreage at advantageous prices. While this is a longer term prospect it is an exciting one and could eventually eclipse the oil interests.
There are a number of other fields in the Ventura Basin and more generally in California as a whole that Sefton may look to target now its cash flows are stronger.
Eureka is a semi-exploration play which may contain further upside. This cannot yet be evaluated.
At this valuation the company may prove an attractive target for a larger player.

THREATS

Owing to its geographical location the company continues to be exposed to the threat of bush fires, canyon floods and geological interruption (earthquake risk). Sefton is taking steps to mitigate this risk by investing in Kansas and although Forest Basin area is susceptible to tornados - gas facilities have a minimal surface footprint.

LINKS:

Sefton Resources Web Site

Quarterly Update (Mar 08)

Operations Update Dated 14 January 2008

Hardman Report

Final Results - Year Ended 31 Dec 2006

2007 AGM & Update

In The News - Oil Barrel Dated 31 January 2007

Daily California Crude Oil Prices (MIDWAY SUNSET 13)

Chart.aspx?Provider=EODIntra&Code=SER&Si

ptholden - 04 Aug 2006 20:02 - 2 of 2350

As promised a new SER thread, mostly cut and pasted from the Hardman Report. But this time including a few links and charts for the TA affcionados. Happy to make any further (sensible) additions, just ask.

pth

cynic - 04 Aug 2006 20:17 - 3 of 2350

this company is too small for CFDs, but does the use of steam for extraction imply that the oil being extracted is heavy, and thus of considerably less value than light crude?

aldwickk - 04 Aug 2006 20:32 - 4 of 2350

Nice looking new thread, well done pth.

capetown - 04 Aug 2006 20:41 - 5 of 2350

great thread,
Hope the ramper keeps away

canary9 - 04 Aug 2006 20:42 - 6 of 2350

Pete, much more informative....easier to track progress or otherwise.... thanks.

ptholden - 04 Aug 2006 20:47 - 7 of 2350

Cynic, not too sure of the link between CFDs and the type of oil, but.....
Heavy crude oil, also called sour crude, trades at a discount because it requires complex refining and yields less gasoline per barrel than does sweet crude. The Tapia Field is classified as Heavy, whilst that from the Eureka Field, Medium. I have added another link, the SER Presentation that gives a little more information with regard to the use of steam. But, essentially the process eases recovery, but more importantly increases proven reserves.

Incidentally, I would imagine that when the SP consolidates above 10p, CFDs and SBs will become possible. IG for example do provide this service for most if not all companies above 10M capitalisation.

pth

driver - 04 Aug 2006 21:04 - 8 of 2350

ph
Excellent new thread well done.

markusantonius - 04 Aug 2006 21:06 - 9 of 2350

Splendid SWOT analysis, Pete. But what about doing a PEST analysis, as well? Anyway what's with this amber background? You just have to be different, don't you? :o) I will be monitoring with interest!

M.

ptholden - 04 Aug 2006 21:16 - 10 of 2350

Err, thanks guys (looking sheepish!).

Mark, wtf is a PEST analysis? The amber background is an accidental bi-product of me messing around with HTML code for the first time. I could change it back, but as you say, it is different :-))

pth

aldwickk - 04 Aug 2006 21:20 - 11 of 2350

I like the amber background.

cynic - 04 Aug 2006 21:27 - 12 of 2350

pth .... you're right ..... for IG, cap must be >10m .... I mentioned it merely to indicate that i had no subjective view ..... i was also aware of why steam was used ..... perhaps more importantly, not only is heavy oil at a significant discount to sweet, but % recovery from reserves is also considerably reduced

ptholden - 04 Aug 2006 21:47 - 13 of 2350

Hence the steam process Mr Cynic, it considerably enhances the recovery process!!

pth

cynic - 05 Aug 2006 08:07 - 14 of 2350

doh! quite so, but i still think (almost certain) what i wrote holds true.

ptholden - 05 Aug 2006 18:57 - 15 of 2350

Mr Cynic, which bit?

I have included a link in the header to update the spot price of California Crude - 02 Aug = $69, which is actually not much of a discount to Brent or anything else. Read up a little on 'huff n puff' techniques, recovery of the reserves will probably see both me and you out!!

pth

bosley - 05 Aug 2006 19:50 - 16 of 2350

nice thread , pete.

cynic - 05 Aug 2006 20:11 - 17 of 2350

that although steam assuredly increases the recovery by lessening viscosity, the % recovered is still significantly less than from light crude reservoirs

Mr Turbot - 05 Aug 2006 20:44 - 18 of 2350

I am considering an investment in Sefton. Excellent llink ptholden.

Gives me a good insight. I guess amber is for caution as with all these oil stocks at the moment , but looks to have potential. Still watching BLR thats having good coverage at the moment

ptholden - 05 Aug 2006 20:55 - 19 of 2350

Mr Cynic

Whats the 'significantly less' percentage? I don't know, please enlighten me.

pth

ptholden - 06 Aug 2006 17:07 - 20 of 2350

I'll answer my own question:

STEAM ASSISTED GRAVITY DRAINAGE (SAGD)

Until very recently, heavy oil fields were produced either by primary production techniques, or through huffn puff. These techniques improve the percentage of reserves recovered but still leave behind significant quantities of the original oil in place.

SAGD involves injecting steam through some wells and producing oil through others on a continuous basis. The heat reduces the viscosity of the oil thereby significantly increasing production rates and the percentage of oil in place that is recoverable. The benefits of his continuous process have been demonstrated in other oil fields where actual flow rates and projected total reserve recovery ratios have shown a considerable improvement.

This technique, particularly when used together with other steam recovery processes, can result in recovery rates of up to 80% of the original oil in place in a heavy oil field such as the Tapia Canyon field.

ptholden - 06 Aug 2006 22:18 - 21 of 2350

It would appear that SER are not overly keen to commence SAGD recovery at present. As the process stops oil recovery whilst that particular well is being injected, SER prefer to concentrate on revenue generation. Later in the year 9 new wells are planned for the Tapia field, I would imagine that once these are brought on line they will provide spare capacity for SAGD to commence, if SER consider implementation appropriate.

pth
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