Madagascar Oil (Moil:Ln)

Madagascar Oil (MOIL) has today confirmed a raft of board changes. We kind of knew these were happening anyway – it was part of the deal for the semi-emergency refinancing agreed earlier this year. Will that be enough to amend the 18 month downtrend in the shares which closed today up 10% at 10.5p valuing the company at £61 million?

Certainly investors might feel they need a break or two having suffered an appalling 2012 with missed development targets meeting chronic overspend to deliver an annus horribilis.

On the plus tack, Madagascar has had a great deal of support from institutions like Benchmark, Persistency, Outrider and The John Paul Dejoria Family from day one (pre-listing).

The company has real assets – relatively low risk heavy oil onshore development projects, notably in the Tsimiroro field. If it can make it through to production it could well fit in as part of a blended portfolio of mid cap producers. Note, I used the word IF.

The new management has reviewed the pilot scheme (25 well steamflood program) and now aims to build on that as a platform to deliver a full evaluation of Tsimiroro with the $78 million it raised in February 2013. The pilot scheme will deliver near term cashflows which should partly fund the full development if the maths stack up.

Operating in the current “hot region” of East Africa the P50 resource is estimated to have a value of c$1 billion based on 1.7 billion barrels – the company aims to be producing at tens of thousands of barrels per day within a few years.. That is the upside. It is all down to whether this time around the company can deliver. To me it looks like an attractive risk reward play. Now it is all down to delivery…I am watching carefully.

Why Zak Mir reckons that the stock is set to rebound click here:

Doc Holiday is a seeker of value among small caps. You can follow him on twitter at or see more of his work on his own blog at
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