##{"id":60365,"date":"2012-08-03T11:41:19","date_gmt":"2012-08-03T01:41:19","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2012\/08\/03\/neon-energy-with-conviction\/"},"modified":"2012-08-03T11:41:19","modified_gmt":"2012-08-03T01:41:19","slug":"neon-energy-with-conviction","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2012\/08\/03\/neon-energy-with-conviction\/","title":{"rendered":"Neon Energy With Conviction"},"content":{"rendered":"

\n\t – Neon Energy operating in US and Vietnam
\n\t – Further drilling at Paloma<\/span> project a potential catalyst
\n\t – Vietnam acreage appears prospective
\n\t – DJ Carmichael rates the stock a “High Conviction' Spec Buy<\/strong><\/p>\n

\n\tBy Chris Shaw<\/p>\n

\n\tJunior oil and gas explorer Neon Energy ((NEN<\/span>)) has operations in both the US and Vietnam and a site visit to the US operations by DJ Carmichael has reinforced the broker's Speculative Buy rating on the stock.<\/p>\n

\n\tNeon Energy has an 85% working interest in The Paloma<\/span> Deep project in California, where two additional appraisal wells were recently completed. Results were encouraging in the view of the broker, as Paloma<\/span> Deep-2 confirmed the lateral extent of pay zones encountered in the Paloma<\/span> Deep-1 exploration well.<\/p>\n

\n\tAs well, DJ Carmichael notes the Paloma<\/span> Deep-2 results support the current resource estimate of 26 million barrels of oil and 22 billion cubic feet of gas. There is scope for this to be increased, as a deeper sandstone reservoir was also encountered.<\/p>\n

\n\tProduction testing of Paloma<\/span> Deep-2 is set to begin this month and the broker suggests this could be a key near-term catalyst for Neon Energy, as unrisked<\/span> upside is estimated at $0.26 per share. The Paloma<\/span> field is in a highly prospective area, as US-listed Occidental Petroleum is conducting an extensive shale program in fields close to Neon Energy's operations.<\/p>\n

\n\tIn offshore Vietnam, Neon Energy recently announced global energy major Eni<\/span> would be the farm-in partner for blocks 105 and 120. Eni<\/span> will take a 25% working interest in both blocks and will carry Neon through one exploration well in each block.<\/p>\n

\n\tThe location of each well to be drilled will be determined after seismic data is obtained, DJ Carmichael noting exploration drilling is unlikely to commence before the first half of next year. Two prospects under consideration for drilling in block 120 are estimated to potentially hold unrisked<\/span> resources of between 460 million and 611 million recoverable barrels as a best estimate and 1.3 billion to 1.7 billion recoverable barrels as a high case estimate.<\/p>\n

\n\tAdding to the value of the acreage, ExxonMobil recently announced a second discovery in a block close to Neon Energy's block 120. The ExxonMobil discovery is thought to be on the same geological trend. <\/p>\n

\n\tFor block 105, the Cua<\/span> Lo prospect has been assessed to hold between four trillion and 14 trillion cubic feet of recoverable gas. While market reaction to Eni<\/span> farming-in was relatively neutral DJ Carmichael viewed the news more positively given Eni's<\/span> credentials in terms of successful exploration.<\/p>\n

\n\tThe potential for positive news flow from Neon Energy in coming months remains high in the view of DJ Carmichael, enough for the broker to rate the stock as one of its top 'High Conviction' calls for 2012. The Spec Buy rating is accompanied by a price target of $0.81, which is more than double the current share price.<\/p>\n

\n\tNeon Energy has a market capitalisation<\/span> at present of around $170 million, meaning the company receives little coverage by brokers. As evidence of this, none of the brokers in the FNArena<\/span> database provide research on the company.<\/p>\n

\n\tShares in Neon Energy today are slightly higher in a weaker overall market and as at 11.15am the stock was up 0.5c at $0.38. This compares to a range over the past year of $0.245 to $0.59.<\/p>\n

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\n\tFind out why FNArena<\/span> subscribers like the service so much: "Your Feedback (Thank You)<\/a>" – Warning this story contains unashamedly positive feedback on the service provided.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"