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Further to my article this month putting my own thoughts down about selling shares in both (LSE:ARG) Argos Resources and (LSE:BOR) Borders and Southern Petroleum. I now go into more detail regarding Argos Resources which has been pumped ready for a dump in the market and is primed for a classic short.
The main reason for doing this article is to warn investors playing around with the weaker companies in the Falklands will end up in losses. Rather than the stronger two (LSE:RKH) Rockhopper Exploration and (LSE:FOGL) Falkland Oil & Gas which not only are fully funded but drilling on the rig with first well Zebedee 52% COS low risk in less than two weeks.
Argos Resources has acreage in the North Falklands Basin with no commercial discovered assets. Johnson wet gas contingent 3.5tcf is non commercial based on the fact it would need to be 15tcf in the Falklands based on todays low gas price environment given development needs of an LNG Plant on the island.
I have read the CPR claiming that the acreage contains billions of barrels of prospects but looking down the average is less than 15% COS. For example Helios has a 6% COS, Zeus is a 14% COS, from the geo viewpoint this is uninvestable to most professional investors.
Argos does have Rhea stacked prospect which the company tells us is another Sea Lion at 31% COS. But wait just a second that is an eight zone multi stacked well with only one tiny zone at a 31% COS, the other severn zones are back into poor percentages again.
Not surprisingly, Rockhopper Exploration walked away from a farm in mentioned at Oil Barrel post Q&A because of the maths. But what concerns me is when the company says that Rhea prospect is similar to the Chatham under Sea Lion discovery. That is a complete different discovery miles apart by Sea Ocean with faults. It is a bit like saying that Rachel failed prospect drilled by Desire Petroleum in 2010 was part of Sea Loin in the last campaign.
3.1 billion barrels across the Argos acreage was mainly drilled by Shell in 1998 and found nothing, even with new 3D the chance of sucess of finding an oil discovery on average is less then 15%! Hardly first drill Zededee 52% cos Sea Lion extension type wells with Rockhopper or Falkland Oil is it ?
Argos Resources had $2.1m in cash left at June 2014. So i assume the company has burnt through $1.1 million by end of March 2015. That leaves $1m in the bank which is not enough to keep the lights on until much into the Autumn. Argos needs to raise funds. That is why rampers and odd traders are out in force messing around with the share price be warned.
As no one wants to drill its acreage the company has two choices wait with Borders & Southern till late 2016 for a slot on this drill or find another rig. But no one wants to farm in so even if a rig becomes available how will Argos find $80m plus needed to drill and test even one well ?
I have been vindicated by my thoughts regarding (LSE:BOR) Borders & Southern Petroleum and its only a matter of time before sense will return on (LSE:ARG) Argos Resources.
The company may benefit from other Faklands Companies but the fact remains that on fundermental grounds Argos Resources offers zero value for todays shareholder at the current price. Its a best a cash shell.
My target price has increased to 2p given that the options were excercised at 2p in September 2014. The only way to make money out of this company is to short it. ( I declare i do not have a position so free to comment )
If you are interested get signed up to advfn which gives you access to excellent data and level 2 on the Falklands by registering below.
Please see my Chris Oil Blog for the two main Falklands Companies that are investable by listening to Podcast interviews and reading my advfn Falkland articles http://www.chrisoil.blogspot.co.uk
Until the next time more ramblings from the castle @chrisoil
http://www.chrisoil.blogspot.co.uk
