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

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.

PPS I would add once again that I am new to warrant trading as well, so please DYOR, etc!! Thanks.

Looking very cheap after today, may go for it tomorrow!

A correction to my post #31: 8,000 warrants were apparently bought yesterday, at a lower price than my online broker was posting. FT.com apparently only records these trades at the end of the day. Here's MoneyAM's breakdown:

Time Price Quantity Type Bid Offer Buy/Sell Total Buy Total Sell Total Unknown
04/05/06 16:32 8.0 3,000 T 7.0 8.0 Buy 8,003 0 0
04/05/06 14:01 8.5 5,003 O 7.0 8.0 Buy 5,003 0 0

ST, i have done a bit more research and found out that most warrants are never exercised, but traded instead. This warrant has 400% gearing. All being equal every 10% rise in the shares should make the warrant go up 40%.

This gearing in theory should converge to 1 as the sp goes higher.

When warrants are exercised, the company shares are diluted (although this will already be factored in prior by the market) but also funds are raised from the exchange of your warrants for shares. This raises money for the company.
You have to make sure if you are going to exercise them you have the money in your account available to purchase the shares along with handing in your warrant.

What is the benefit of exercising them rather than trading them?

Barclay

Barclay,

Many thanks for another interesting post.

I have had a quick dig myself and found the following free online course in warrants. EDIT: I have now skim-read the whole course (didn't take long) and found it very useful.

Free Online Warrants Course

There is also a course in covered warrants:

Online Covered Warrants Course

You should be aware that these products are different and indeed the Covered Warrants course draws attention to the fact that stamp duty is payable on traditional company warrants but not on covered warrants.

You may wish to ensure that the rest of the info you posted/learned pertains to company warrants and not covered warrants.

I would recommend anybody else having questions to take a look at these courses as they are very comprehensive and well thought-out.

Anyone with any thoughts about EOG/W?

Just that the EOAG share price only needs to rise by 50% and the warrant should rise 150%
in price. example: share price 50% of 32p = 48p - exercise price 30p = 18p intrinsic value, warrant price=7p + 30p exercise=37p. If the warrant doesnt increase to at least 17p a 10p increase, people buying the shares will buy the warrants instead and exercise them at 37p to buy 48p shares.

It is also likely there will be a premium on the warrant with so much time value left
raising the 150% gain to maybe 200% or more which is round about what the gearing on the warrant is at the moment.


There are two shares which I class as rare gems

Europa Oil and Gas/warrants and Mediterranean oil and gas
Both are producing oil and gas which puts a floor on the share price.
Both are increasing output, in eoags case a few thousand fold.

the last company i saw with similar attributes was dana petroleum
It was priced at ten pence with oil production and exploration upside.
I didnt act and get in, even though i knew it was going to be big, with hardly any risk due to its production. That was 3 years ago, the shares now trade at 1104.00p(yes i cant forgive myself!).

Med oil can be as big, but eoag is better played on the warrants for the massive gearing.

Northern petroleum is also good but it needs to start production to enjoy gem status. The reason being oil and gas in the ground are valued at absurd prices
But they can't do this to assets in production and making lots of cash, which are valued at spot prices at least for the year to estimate its eps.

pd1000, please read previous posts - this BB has been alight for a week or more with talking about the warrants (most of it posted by me, as it happens, but PDYOR, etc).

Jumped on board with the warrants yesterday, at 8p, having seen the way the wind was blowing with incremental price rises (on very low volume) every day since the end of last week.

Cumulative production from existing sources plus the forthcoming Bilca/Romania production could see the SP around 50p ?? All IMO, DYOR, etc.

Europa Oil & Gas (Holdings) PLC - Holding in Company

Europa Oil & Gas (Holdings) plc (the 'Company')

Holding in Company

The Company was informed today that UBS Global Asset Management Life Limited is interested in 3,295,667 ordinary shares of the Company, representing 5.40% of the issued share capital.

ST, have you got any more info on the 50p price target, i want to get in tomorrow
and i'm just deciding how much to buy.

I looked at the 3 month chart , and the warrants have risen to 9.25p over that period, a 30% gain, so these warrants do move, and will fly if the sp reaches 50p,
and travel at the speed of light if they go even higher.

If the 50p target is met, the warrants would have to rise to 20p in order to stop
arbitrage oppotunities, a 300% gain, in theory.

zipped in for a quick 25000 warrants at under 8p this am. good price imho and when imminent good news breaks they should be in the money pretty quickly!!

Good morning Barclay,

The 50p share price "target" is my back-of-an-envelope calculation of how much I think the Bilca production plus existing production could be worth, using a P/E suitable for a growing oil co. I also came out with a similar figure using EOG's end-2006 production target of 1,000 boepd. It's purely conjecture on my part, although hopefully conservative enough to be realistic.

The bottom line for me is that I can see very little potential downside on this stock at present. All the indicators are pointing in the right direction, and the fact that one can get warrants on an underlying stock which in itself looks like a relatively safe bet is for me a stunning bonus.

I'm prepared to punt on these because I think that over the 18 months for which the warrants are still valid, they offer significant opportunity for growth with a comparatively low chance of losing out.

You're right about the potential, but I would be wary about reliance on charts to predict the warrant price at this early stage due to volatility issues. The share chart may offer some indication that the SP's floor is set around 30p - of which I have a fair degree of confidence given how close we are to seeing Bilca come on-stream - but again it's early days. However, I'm not a chart expert . . .

Anyway, WDIK, best of luck if you're thinking of climbing on board.

PS I took a look at Dana after reading your post - I infer from the chart that at some point the stock consolidated at least 10 for 1? You didn't miss a 100-bagger, surely??

Pommy, welcome aboard! Good to hear from you and am pleased for your sake that you managed to get under 8p (clearly I'm using the wrong broker!).