Matra Petroleum. 10p or not 10p? That is the question!

10p Or not 10p? That is the question!

“It’s game on at Matra Petroleum” So says Matra as the company fight tooth & nail to bring back production on A13 for the end of this month (February). Beleaguered share-holders have had a torrid time resisting the siren calls of the basher brigades that have plagued the feisty little oiler.  Indeed the Blog has come under fire on many occasions for sticking with the company. It’s the bigger picture that we see not the day-to-day online shenanigans.

The Blog spoke to Matra last week in what can be described as a robust manner. I went through the technical difficulties the company have been trying to overcome regarding the water ingress on A12 and why A13 succeeded in isolating the problem while A12 failed. The problems encountered have certainly been the main driving factor on Matras’ fall from grace with some, understandably, deciding to throw in the towel as sentiment hit an all time low. But as explained during the interview problems can over the longer-term be turned into an advantage. The data gleaned from A12/A13 IS INVALUABLE & should help to give the company a better understanding of the Sokolovskoe oil discovery. Poor quality well operations and completion techniques are now understood by the Blog to be the reason for the water-cut. Old seismic data also played its part. Investors should note that geological/reservoir characteristics are not thought to be the cause which certainly bodes very well for the up coming A14 drill and associated seismic. There’s a further 10 million barrel upside from A14 alone.

Matras’ latest presentation on the company web-site should help to restore confidence. Copies of the presentation can be viewed by clicking this link. http://matrapetroleum.com/docvault/Corporate%20Presentation%20Jan%202012_With%20Footnotes.pdf   It should be noted that this presentation is the corporate presentation for Brokerages/Institutions. You’ll note that on slide 1  Matra say thus; “Most likely upside  of an additional 38 mmbbl to be appraised during development drilling” That could give investors an oil bonanza of 53 mmbbl. Now here’s a question; What price Matra on 53 million barrels?

The latest note from Fox Davies can also be viewed by clicking this link. http://www.matrapetroleum.com/docvault/matrapet_updatenote_rev3updated.pdf  While Fox Davies are on the whole a decent outfit I personally don’t set too much store on Broker-notes especially when they have a vested interest in the company. But it does contain some good historical data.

The analysis is in my opinion fundamentally flawed & conservative. Particularly when it comes to ascribing NAV figures which have been ridiculously discounted and cut to the bone. If you compare the NAV per barrel being quoted which is $7.5 discounted from $8.2 dollars this is at odds with my own figure of $10 per barrel which I might add was confirmed by the company to me last week.

If you look at the present company valuation (approx £10 million) then take in to account the recent favourable tax changes in Russia which on 15.1 million barrels add a further $17 million dollars to the company value. Remember the oil in place here will increase, if it doubles to 30 million barrels then you can add an extra $17 million dollars which gives the company a tax break of $34 million dollars on 30 million barrels if as is looking increasingly likely this figure is surpassed then it will be much more. Matras’ present value is below the ascribed tax break of $17 million dollars never mind the actual oil in place figures. It’s a crazy world. The company are trading significantly below true value.

The key to success for Matra is production and sustained production at that! Once we have production then I can guarantee that good old FD will be releasing a revised note with figures substantially increased. 10p!

Viva!

Dan