EnCore Oil ..

Key Data
EPIC EO.
Share price 24.75p
Spread 23.5 - 26p
NMS 3000
Market cap. 51.7 million pounds
12 month range 15.75p - 34.75p
Market AIM
Website www.encoreoil.co.uk
Sector Oil and Gas
Contact Alan Booth
Nada Chebib
020 7224 4546

A busy month for oil explorer Encore as it released a trading update, announced news of a placing at 24p and published a new alliance with Star Energy. Encore's newly acquired subsidiary, Virgo Energy has entered into an agreement with Star Energy to farm into Virgo's UKCS block 43/8 Forbes field in order to undertake a feasibility study and a 3D seismic survey to determine the potential to use the Forbes field as a gas storage facility. Star Energy expects to undertake a full feasibility, if the study proves positive it will carry out a subsequent Front End Engineering and Design Study. Star will pay 1 million pounds towards the cost of a 3D seismic and assign 50% of its interests in Eskdale, an onshore licence to Virgo. The farm out allows Star to earn up to 50% of the Forbes licence and become an operator if the field is developed into a gas storage facility. Forbes has produced 48 bcf, it estimated that the gas in place is as high as 100 bcf. The feasibility study must be complete by June 2007 as per the agreement.

The trading update served as a round up of the group's activities over the last six months, since it reversed into AIM listed Oil Quest Resources. Drilling on block 18/5 has been delayed due to delivery of the drill rig, the rig is expected to arrive on location next month. Encore has applied to the DTI to convert its five North Sea based promote licences into traditional licences, it is committed to drilling three firm wells and two contingent wells on the acreage over the next two years. The group is waiting for a decision from the 24th UKCS Licensing round - Encore has made eight new applications. The group also applied for two onshore licences in France, a decision is expected in 2007. And on its UK onshore prospects inherited through Oil Quest, Encore has begun discussions with an adjacent chemicals factory with a view to supplying gas on a long term contract.

Encore also placed 29.1 million shares at 24p raising 7 million pounds to fund the group's expansion plans. Encore has appointed KBC Peel Hunt as joint brokers with Hanson Westhouse.

Based purely on its assets in the North Sea - the Golden Eagle parcel and block 18/5; its assets in Kirkleatham and Westerdale we believe the shares are worth 72.4p. On that basis, Encore is still a buy.