Encore Oil: A Gas Storage Play

Over the last few week I have been following a discussion over on the fool of a small oil company called Encore and have subsequently taken a reasonable position.

Encore is somewhat of a special situation in that it has recently found that it owns an asset that is wanted by many larger companies. The assets in question are depleted gas fields in the North Sea which can be used to store Gas.

Gas prices are notoriously volatile and large companies are looking for storage so that they can take advantages of this by buying (and storing) when the prices are cheap. More info on this is given in the links provided below.

The gas fields in question were jointly owned by STAR petroleum, but following a successful feasibility study, has since been bought by Petronas who may well want to buy the other half.

The asset in question could be worth around double the current share price, once it became clear what they had on their hands the company announced plans to de-merge the company into on E&P company and one Gas storage company (which presumably would then be sold). I have seen the E&P part valued at 65p (current SP circa 50p)

Last week the company announced plans to delay the de-merger which resulted in a sharp drop (20%) but the price quickly recovered which bodes well in my view. The original time scale was April-May but I suspect this may take a bit longer so as the management can get the best deal.

The following video presentation by the company is worth warching

And pertinent Motley Fool links with prominant fool WShak backing it:

Post about gas storage which is essentially what this play is all about.
Posts of interest 1, 2, 3 and its 2008 Sharecomp Writeup.
ADVFN thread is here
Some speculation on price after gas demerger. JPGH valuation of 140-200p
Other blog detailing potential price cf with previous demerger
ADFN post comparing with PTG, and coming up with £2.05.

I have bought in at circa 50p.