Today we look at Mx Oil a company that I’ve talked about for quiet sometime, MXO was originally put together to venture into the Mexican oil space however the proposition of buying into a potentially high yielding oil field in Nigeria, had left the board with the dilemma of diversifying on pretty attractive terms or remain solely focused in Mexico. On reflection of the terms its seemed the obvious choice to add good valued production against risk whilst holding it’s primary focus in Mexico.
Using simple tools and basic metrics you can see that the $5m Mx Oil paid for its 5% stake in OML 113 = approx $1m per 1% against the $35m proposed valuation by YFP to purchase Afrens 16% of OML 113 = $2.2m per 1%.
Yinka Folawiyo Petroleum (YFP) are already the 25% owned local in country operator of the Aje asset, with there valuation of $2.2m per 1% of the OML 113 assets highlighting the value in which Mx Oil secured its 5% stake should help present shareholders with clarity of value. On Friday (16th October 2015) Panero Energy updated the market on its progress at the Aje Field (OML 113) where they announce the expected flow testing of the first drill along with its forecast 4 week turn around of the second drill / well work-over, this update will surely be the start of news surfacing from Nigeria.
When investing into Aim listed companies it is imperative to focus on news flow, deal flow and value. Mx Oil appears to have many catalysts to stimulate the market. Assuming its good news and not bad then I’d anticipate brighter days ahead. The Mexican oil patch has been threatening to yield rewards for decades and as MXO are at the forefront of winning one or more onshore assets then its clear to see why investors could be frothing up during Q4 2015 – Q1 2016.
Far to often important facts are overlooked and naturally the caveat is funding expansion, although growing rewarding assets is a darn sight easier than ploughing good money after bad into a continued disappointment.
I see Mx Oil at 2.3p a pretty decent entry going forward.
Hear my rambling on the DLC audio here.
