(Disclosure: The following represents my opinions only. I am not receiving any compensation for writing this article, nor does Hydra Capital have any business relationship with companies mentioned in this post. I am long VLE.TO)
Valeura Update: A Wild Weekend in Turkey
Valeura has provided a corporate update this morning after a failed coup attempt in Turkey over the weekend. The company's operations have not been directly affected to date and all staff are safe. There's plenty of information on the web about the "coup" itself, but that's a long discussion and the implications are not yet clear. The attempt appeared to be poorly organized and grossly lacking in support, with the apparent net effect being the strengthening Erdogan's control in the country.
VLE suggests that "good progress" is being made toward finalizing the Statoil farm-in deal by the July 29th target date.
Link to VLE's press release from today, here:
Valeura Operational Update
In the above release, VLE also provided an update on the ongoing shallow drilling operations. Results were uninspiring, but should be viewed as preliminary. Bati Gurgen-2 was drilled low on the structure and is now being sidetracked to a structurally higher position that is projected to be updip of the producing sands in Bati Gurgen-1. That should end up making for a good gas well at the end of the day and is not an uncommon outcome in a field appraisal well. As for Yayli-1, VLE looks like they tagged into a water-saturated zone in one of the multiple sands they tested and are going to plug them all off before starting again by only perforating the highest zone.
All in all, today's news appears to be a non-event, but I will be watching closely for the Bati Gurgen-2 sidetrack well results. In my view, the successful appraisal and development of the Bati Gurgen discovery is key to ramping VLE's cash flow in the near term. I'd also like to see the company drill at least one shallow gas wildcat well this year into one of the many other targets they have identified on the 3D survey.
I think there could be some weakness in VLE shares today as some holders hit the bid and move on, but typically such weakness is short lived if the underlying thesis remains intact... but first things first... let's see the company 1) make a well out of Bati Gurgen-2 and, 2) finalize the Statoil deal.