Bargain Barrel: These are some of the ASX’s most intriguing small cap stocks
Link copied to
The Australian Stock Exchange runs the gamut from giant miners and banks to penny stocks that have one or two too many decimal places in their share price.
Yet, it is at the bottom end of the barrel that punters sometimes find some absolute gems that, with a little polishing, could truly shine.
In this column, we will examine some companies with market caps around the $10m mark that may well be a bargain hunter’s fondest dream.
We kick off this little showcase with oil and gas explorer Talon Petroleum (ASX:TPD), which has built up a tidy portfolio of exploration licences in the UK North Sea, a well-respected hydrocarbon province.
The company is currently in the process of farming out its Skymoos prospect that has best estimate prospective resources of 107 million barrels of oil and is considered to be a direct analogue of the Upper Jurassic Buzzard field, which is the largest producing oil field in the UK North Sea.
“We are a new setup in the sense that we have repositioned the company in a new region with new assets and a new team,” Talon managing director Matt Worner told Stockhead.
Skymoos came packaged together with Encounter Oil, which the company acquired in May this year.
While the acquisition included Skymoos and the Rocket oil prospect, it is the addition of veteran North Sea explorers Graham Doré and Paul Young that could be the real prize.
Both were involved in the foundation of EnCore Oil in 2005 up and until its acquisition by Premier Oil in 2011. They subsequently founded Encounter Oil, which successfully farmed-out and drilled the Bagpuss heavy oil discovery in 2016.
“They bring a wealth of understanding and knowledge that a company based in Perth is very lucky to have,” Worner said.
Speaking on Talon’s offering, Worner said there was still plenty of potential in the North Sea to make oil and gas discoveries, which could then leverage the robust existing infrastructure in the region.
“There is a real way to leverage yourself into and grow an exciting portfolio and if you are successful you can get things on production cheaply and quickly.”
He added that the company had built an interesting portfolio that would provide an inventory of potential activity year on year.
“The initial jump start for us will be if we can land some good farmout deals on Skymoos and Rocket, that will demonstrate that we are moving those good, exciting prospects forward.
“Beyond that there is the drilling activity, and in the longer-term if you find something meaningful and success comes with that, that is where you are really delivering.”
Talon also has a 10 per cent interest in the upcoming Curlew-A appraisal well in Block 29/7b that is due to spud in the first half of 2020.
“That is the first asset we picked up in the North Sea. It is an appraisal opportunity with a discovered resource of about 39 million barrels of oil in the gross case,” Worner said.
“There is potential for early cashflow, there are a couple of opportunities to tie back that asset (to existing infrastructure) if drilling is successful.”
The next petroleum explorer shares a non-executive chairman Peter Stickland with Talon.
XCD Energy (ASX:XCD), formerly Entek Energy, recently completed the acquisition of a 150,000 acre tenement package over the highly prospective Nanushuk formation in Alaska’s North Slope from Elixir Petroleum.
These leases are sandwiched between ConocoPhillips’ half a billion barrel Willow oil development to the north and the 1 billion barrel Umiat oil field to the south.
“We picked these things ground floor late last year and since then we have taken it forward with an independent prospective resource expected later this month…we will be looking at bringing in partners to help us fund a drilling program sometime in the next 12 to 24 months,” managing director Dougal Ferguson told Stockhead.
High on XCD’s target list is the Merlin prospect, which is located on the same clinoform as the Willow oil discovery about 35km to the north and has prospective resources calculated at 255 million barrels of oil.
Clinoforms are like long beach systems that, over time, become the reservoir that hosts oil and gas.
“Does that mean we have oil in our area, we don’t know, but we have some real seismic lines over both Willow and our area, and it looks the same. You will never know until you drill it,” Ferguson said.
He added that the company might bring in a mid-sized partner and use a cheap drilling option that is currently being put together by a new group in Alaska to drill an exploration well.
“And at that point maybe jointly with that company we will bring in a much bigger company to come and do the heavily lifting on the development down the track,” he added.
Over on the minerals front of the resources sector, Tanga Resources (ASX:TRL) recently completed its maiden drilling program aimed at unlocking the potential of its Hagenhof copper project in Namibia.
The initial diamond holes returned results of up to 17m grading 0.82 per cent copper from 111m down-hole and 24m at 0.54 per cent copper from 86m while assays from the larger reverse circulation component of the program are still pending.
Tanga also has an earn-in and joint venture agreement with Namibian Government mining investment company Epangelo Mining for the Katerina gold project.
A number of historical regional copper and gold occurrences have been reported at Katerina though there has been no modern exploration conducted there.
“In the next six months, we have the initial drilling results from Hagenhof, we will be announcing the maiden program on the Katerina gold project with Epangelo Mining Company, commence electromagnetic ground survey over Hagenhoff that will assist with target for the next drill program that will start later this year,” managing director Matthew Bowles said.
“We are still aggressively consolidating or growing our footprint in Namibia. You need to build a really strong strategic footprint in the area, it enables you to have more discoveries in the area and makes you more attractive to larger companies if they want to farm-in and other types of transaction.”
Reffind Group (ASX:RFN) investment in blockchain loyalty and rewards business Loyyal is expected to be a substantial asset for the company.
Loyyal recently raised USD$1.15 million from leading Asia-based investors and is preparing to carry out a regional expansion of its unique technology.
Its platform makes transferring rewards between loyalty programs seamless, allowing users to receive and redeem points in real-time.
The platform’s latest iteration, released in February, is capable of nearly 8000 transactions per second, per program operator on its network.
Shares in Reffind have doubled since the end of August.