Antrim Energy - Hist and Analysis ( April 2010 )

Antrim Energy

listed on Aim and the TSX in July 2003 at a price of UK 40p and CAN $0.85, at the time they actually had a large number of interests in a number of prospects from all over the world from Argentina to the Czech Republic to the North Sea and to as far away as Australia, New Zealand and Tunisia.

Only assets that were in production (producing at a rate of just under 500boepd). It was a very risky prospect, but they made this very obvious as they stated themselves about the company and its prospects

Antrim to change their focus to the North Sea where they had been acquiring a number of licences and over 2005

the credit crunch did to Antrim is

1) their assets were no longer as attractive as they once were with the oil price being so low
2) The capital markets dried up thus the massive financing that they needed to bring their fields to production was no longer available.

This scenario brings an old investor saying to mind, and that is ‘it’s better to have £10m cash in your hands then £100m in the ground’,

The new beginning

Antrim’s main assets

Argentina ( currently producing close to 1,800boepd)
But - due to a number of restrictions which include pricing these assets are never going to produce any significant profits.

Fyne and Causeway

Their new investor presentation they highlight how Fyne:

· has proven 2p reserve of over 16mmbbo,
· the Greater Fyne area has the potential to hold near 150mmbbls net to Antrim,
· production could commence in mid 2012,
· Fyne potential to produce near 15,000bopd net to Antrim at its peak.

Causeway:

· farmout deal with Valiant see all costs being covered to production (capped at $22.75m),
· will come online in 2011 and should yield a net production of between 2,000-2,500 bopd.

Other key points from their new presentation are:

· They have $31m in cash with no debt,
· They have net 2p reserves of 37mmbbls,
· They aim to ‘Secure growth without debt’.

The last point from above is a very interesting point to make as pre-crash their plans were to bring all their assets online through debt and rights issues, but now they plan to secure it without debt, and better still through farmouts.

It has to be said this has to be good for shareholders as considering their history of mass rights issues (this is the longest time they have ever gone without a rights issue since listing – near two years) and other financing deals, it will be nice to know that finally management may actually create some shareholder value without then destroying it via a discounted rights issue or financing deal of some sort.

Just to note there are some interesting exclusions from this new presentation that were in the last,

1) no longer show a projected economic model of the fields (i.e. possible earnings),
2) show a future production graph showing what their yearly production targets are for the next 5 years or so,
3) any real idea of the likely capex for Fyne (though there are a few minor hints).

It has to be said it is surprising to see these items excluded as you would think that these would be one of the biggest selling points of the company.

Conclusion

Antrim now are a very different company to what they once were, and though there are many disgruntled shareholders about lamenting the company, it is hard to deny that Antrim look a good company right now as

1) strong balance sheet with $31m in cash and no debt,
2) net 2p proven reserves of 37mmbbls,
3) Causeway fully funded to production which is expected in 2011 when they should start earning some substantial cash flow,
4) Fyne commercial discussions progressing with production targeted for mid 2012.

if all goes well they could be producing 15,000 bopd by 2012 (a low estimation assuming that they have farmed out half their interest in Fyne)

and it becomes hard to deny that they look good value at market cap of £90m, so what is holding them back?

1) disgruntled shareholders mentioned before had a reason to be disgruntled

2) Antrim’s downfall from grace started a year before the credit crunch and actually saw them fall over a period where oil went on its greatest ever bull run

3) Causeway deal which many felt was not great has not helped sentiment.

Nevertheless Antrim do appear a changed company with a renewed focus on shareholder value, and though management will need to prove themselves over time