Junior Oil Firms: Not All Doom and Gloom

If operating offshore, junior firms involved in shallow water rather than deep-water developments will be in better shape than most.

"There are a couple of interesting firms around, Lekoil and Sirius Petroleum in Nigeria, that would be two examples of that," Henderson said.

"They both have marginal fields in shallow waters. What you are talking about there is well re-entries, which are pretty simple. You can get production going pretty quickly.

"Again, operating costs would be relatively low. They typically operate under what are called 'Financial and Technical Services Agreements', so they front up the capex but they are on an accelerated cost recovery. So, they get all the cash flows until their costs are recovered."

Juniors involved in gas production but close to important local markets should also be able to cope well during a period of low oil prices. Henderson uses the example of Circle Oil plc in North Africa.

"It's got some quite nice, gas-producing assets in Morocco and it's distributing that gas to industrial customers not far from the fields," he said. "It's got a very good price and the fiscal terms are exceptional, so that's [a] very highly free cash flow generative [company]."


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