California Dreamin’ for Magnum Gas & Power

Published at Sep 20, 2017, in Small Caps

Californian oil and gas is progressively making its way onto world markets via the ASX.

The latest case of an ASX-listed junior proving up a sizeable oil & gas Resource could come in the form of Magnum Gas & Power (ASX:MPE), as the company prepares for its highly-anticipated appraisal well, dubbed Tulainyo-2.

If successfully drilled, Magnum hopes Tulainyo-2 will serve as a catalyst for the company to raise its market valuation, and potentially, raise its level of participation at the Tulainyo project as part of a burgeoning exploration programme in California.

However, this is a very early stage company and a highly speculative stock so investors should seek professional financial advice if considering this stock for their portfolio.

In a market update to shareholders, Magnum says its planned well in California is due to spud in October 2017, and on schedule according to past estimates. Magnum has confirmed a well permit has now been granted and that a rig has been contracted to drill its appraisal well.

According to Magnum, the Tulainyo-2 well will “appraise a potentially giant-scale, over-pressured gas discovery in the Sacramento gas basin,” that according to a recently published risk assessment, “hosts up to 6 TCF of recoverable gas”. Magnum estimates that the in-ground value of the gas locked up in its tenement ground, could be worth up to US$6 billion at current market prices.

Given the scale of the potential discovery at Tulainyo, Magnum is earning an effective 20% interest by appraising the 2015 Tulainyo-1 gas discovery, and could ultimately farm into around 33%, subject to capital expenditure commitments reached as part of the original JV agreement struck with Bombora Natural Energy.

Currently, MPE holds a 60% interest via a subsidiary — Gas Fields LLC, which also includes Bombora Natural Energy which holds a 40% stake. As it stands, Magnum has the contractual rights to earn into 33.33% of the Tulainyo project.

Its recently completed $4m capital raising has been primarily designated to facilitate drilling at the Tulainyo Project, commencing with the Tulainyo-2 well and then moving onto depth targeting and further project development later this year.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

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