Byron Energy (ASX:BYE)

This is from todays MarcusToday Newsletter, which looks interesting, but highly speculative. The shareprice had a small bump today on the strength of the news article. I will probably have a punt on it if the price comes back to between 7 and 8 cents. The re is nothing to analyze in the financial s other than to say it appears to have enough funds to bring the oil field into production.

Byron Energy (BYE)

One of the benefits of working in the finance industry is that you get invited to company roadshows. Sure, you can look at them online and analyse the slides but nothing beats the opportunity to chat with a company executive. Usually the reason they are out and about is that they are rattling the tin for more money to develop a company making project. They tend to do this once or twice a year usually to pay executive salaries and expenses for the next roadshow. Lifestyle companies really. Not your lifestyle though it’s theirs. So yesterday I went along to a presentation from Byron Energy (BYE) from oil and gas veteran, Doug Battersby.

Now junior oil and gas explorers do not always make the transition to producer but this is what BYE is doing. Next year when its Gulf of Mexico SM71 project comes on line. Sure, it is going to cost $27m to bring it on line but the company has just raised the money to do this. The success of the 7c placement has enabled it to move ahead.

The company directors are all Petsec and Eastern Gas veterans and have done this before. The stock will not pay dividends but management is looking for a trade exit in three years at a much higher valuation.

The key catalyst is near term and fully funded production starting early next year. BYE's location in The Gulf is shallow and there is no damage from recent storm events. The company will be generating $2m a month in cashflow from production. It also has a number of other projects in the pipeline which are exciting. It is not ambitious and aiming for elephants. Elephants are huge discoveries. This is not the company's game. It is using new survey technology to narrow the odds of discovery and then move to production. It believes that a US producer will ultimately take the company over at a much higher price. Given that the team was behind taking Petsec (PSA) from a minnow of $20m to a $700m company (before it went another way), at least it has form. Management also has considerable skin in the game.

Now it is thin liquidity but the story is a good one. Worth a look for speculative traders. Use present capital raising to buy around 7c-8c.

There is a full report from one of the best oil and gas analysts around on the web site which can be accessed here. Breakaway although was paid to produce the report, but the analyst is fiercely independent (well as much as you can be if you are being paid), is ex JP Morgan and has a good reputation to maintain - so his recommendation cannot be bought