Manas (MNAP)

A preliminary write-up on something that seems a bit of a gamble, but the pay-off seems way better than any casino to us. They are (or rather, their farm-in partner Santos) about to start drilling, and if successful, this could quickly become a multi-bagger. They also have wide ranging licenses that offer more opportunities, so even if the drilling is not immediately successful, some option value should at least remain.

Properties in

  • Albania, potentially 3 billion barrels of oil (according to independent evaluator Gustavson). This is 100% Manas and in January they had $3.8M (of an $6.2M bank guarantee made in 2006) left
  • Kyrgyzstan, potentially 1.2 billion barrels (Scott Pickford), farm-out deal with Santos ($54M). Manas part is 25% here.
  • Tajikistan (90% Manas), also a possible farm-out with Santos, which has a $50M option
  • Chile (20% Manas), local farm-out for a joint natural gas play (with IPR from the US). This property is in an area full of quite torrent activity by big players, like BP’s Pan American
  • Mongolia (74% Manas), geological work is commencing. BP has shot seismics in the past and these look quite promising. The property is next to two producing oil fields

Of immediate interest are the developments in Kyrgyzstan, were drilling is about to start and by mid May we will have first results, after which a second well will follow more or less immediately.

You also would like to know:

  • Market cap of just 27 million (117 million shares outstanding)
  • The share price has, as so many small independent energy exploration stocks (especially ones that have no income), completely collapsed. However, there are signs of life lately, from a low of 8 cents the price has veered up to 24 cents yesterday, and on increasing volume
  • We have to say, the involvement of Santos, which paid top dollar in a declining energy market, and earlier independent potential resource evaluations do make this quite a bit more than just a pure gamble.
  • We would also be inclined to say that even if the two wells that are to be drilled soon come up empty, the residual value of the properties will keep this stock above zero for quite some time as a pure options value

We will look tomorrow whether there are any nasty financing deals lurking deep in the SEC filings (like diluting convertibles), but we’re fairly optimistic that there aren’t any because their overhead is small and then they had that farm-in deal with Santos (and possibly a second one). That’s the only thing that could spoil this attractive picture. Yes, there is a considerable degree of risk, but then again, the potential reward is, well several fold at least, and the buying seems to have begun in earnest.

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