Borders & Southern – the volume was “on the money”

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The RNS just out on BOR confirming commercial quantities of gas condensate at their Darwin prospect is music to the bulls ears. We brought to our readers attention the “smoke signals” that were evident in the volume yesterday (link – http://www.spreadbetmagazine.com/blog/2012/8/22/borders-and-southern-here-we-go-again.html) and today management delivered –

The initial condensate yield from the Darwin gas samples, as measured in a laboratory separator test, varies from 123 to 140 stb/MMscf. The API gravity of the condensate is 46 to 49 degrees. Based on the condensate yield and ongoing reservoir modelling, the Company estimates the recoverable volume of condensate to be 130 to 250 million barrels with a mid case of 190 million barrels.

Following these positive laboratory results, the Board will approve a work programme that includes appraisal drilling of the Darwin discovery. Additional wells are necessary to confirm the initial resource estimates and establish a commercial development

Given the encouraging results from the Darwin well, the Company will start planning the next drilling programme, which is likely to include both exploration and appraisal wells. The timing of drilling will be dependent on rig availability, but realistically this will not occur before 2014. The Company is currently exploring the best way to fund the next phase of the programme, including the possibility of now bringing in partners.

SBM Take We have highlighted the salient sections of the RNS for shareholders. The company has basically opened their arms and invited partners in – question is who? As we saw with Rockhopper – the majors demand their pound of flesh in the curent environment. Still, the mathematics of the find and the current net cash of the company imply that there is more upside here relative to downside. 

We would expect to see the shares chased higher over the coming weeks towards the 40p level and which still reflects a large ‘farm-in’ discount.

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