Sefton Resources Inc - Re: SER Stream Log - Sefton Resources has followed a...

Sefton Resources has followed a very shrewd strategy of picking up assets right at the bottom of the market, betting there would be a rebound. It acquired the Tapia Canyon heavy oil field in south-west California in 1997 when crude was selling for less than $20 a barrel. Similarly, its portfolio in Kansas was bought against the backdrop of record low gas prices. In this sense Sefton operates like the majors by assessing the long-term potential of an opportunity rather than trying to make a quick buck. However, a major transformation could occur if the group decides to go ahead with plans to use a process called full field wide steam flooding. Currently it is cyclical steaming individual wells where steam is injected into a producing well, which is then shut-in for a short time before being put on production again. An initial report from Dr Farouq Ali, of Heavy Oil Recovery Technologies, suggests it could lift recoveries to between 51-78 per cent in a full field wide steam flood, with daily output potentially rising to 1,750 barrels a day. In Kansas it has 50,000 acres in the Forest City Basin prospective for coal bed methane and conventional oil and gas, more than 56 miles of gas pipeline, and a 10million cubic feet a day gas processing facility. The pipelines were picked up for approximately $300,000 - and already they look a shrewd investment. Initially at least they will be used to liberate the region’s stranded gas deposits thanks to its link into a national distribution network. 'Anyone who wants to sell gas in that area of Kansas has to come to Sefton. 'Other people’s gas will be charged at around $1.25 per MCF. Although gas prices have come down, transmission prices haven’t. 'It also means our gas won’t cost that much to bring to market.' once the company’s pipelines are fully connected to the interstate system. The company has borrowings of $6million on very good terms, but is looking to swap this for a debt package with 'a little more flexibility' that might allow it to make opportunistic acquisitions. There is also the potential for joint venture financing, and farm-ins. The independent 'competent person's report', prepared by Dr NafiOnat, of Denver-based Sure Engineering, suggests Sefton’s Kansas acreage is prospective for 1.97million barrels of oil, and just under 56 BCF of gas. The hydrocarbons, combined with the Vanguard and LAGGS pipelines, are worth $140million, discounted at 10 per cent, according to the CPR. Meanwhile, the proved reserves of Tapia and Eurka Canyon, its other California asset, are valued at $138million. Meanwhile, the proved reserves of Tapia and Eurka Canyon, its other California asset, are valued at $138million. So clearly there is a disconnect between the current share price Meanwhile, independent research house Hardman & Co has placed a 15p target price on the stock. And its analyst Stephen Thomas has acknowledged that the impact of bringing the company’s Kansas acreage into production could more than double the net asset value per share to 32.9p.