Tap Oil

The Finucane oilfield was to add 1,000 barrels of oil per day (bopd) to output, but Tap Oil has instead decided to sell the asset pre-production for $22m to joint venture partner Santos. This is the second time within two months Tap has sold a newly discovered asset.

This time, however, Tap is a reluctant seller. Production at Finucane involved piping resources into existing facilities at the Santos-operated Mutineer-Exeter project off the coast of Western Australia. Indeed, the proximity to existing infrastructure was one of the key attractions of the discovery. As the only partner without a stake in Mutineer-Exeter, however, Tap found itself cornered; the tolling fees being charged to use the facility were so high that the minnow's only choice was to sell. Doing business with giants is tough (see Minding the minefields on 12 Dec 11).

Although Tap will not see any output from Finucane, it did manage to extract a reasonable price. In Hope and hurt at Tap Oil on 02 Nov 11 (Speculative Buy - $0.72) we valued the Finucane discovery at between 8c and 12c per share, with a best guess of 10c. Tap squeezed 9c a share out of Santos, a reasonable sum under the circumstances. The additional funds will be used to get the Thai-based Manora project started by 2014. The share price has fallen 13% since 02 Nov 11 and remains well below our asset valuation. SPECULATIVE BUY.

Note: The Growth portfolio owns shares in Tap Oil.