NIKO Resources* (NKO : TSX : $3.20), Net Change: -0.28, % Change: -8.05%, Volume: 743,871
Niko’s share price remains under pressure…According to Canaccord Analyst Christopher Brown, the company continues to fight a storm of controversial media reports coming out of India, which in his view, have more to do with Indian politics rather than oil and gas policy. Nevertheless, opposition parties in India tend to capture media attention with controversial statements that eventually stream into the North American markets. Until Reliance begins to demonstrate production growth on the offshore D6 block, Brown believes there will be ongoing negative pressure on Niko’s share price.
Brown believes the combination of unsubstantiated rumors and Niko’s stressed financial situation continues to raise the
question of how Niko will survive another year. In his view, the value of Niko’s asset base is multiples above the company’s
current trading price, but in order to unlock that value, Niko needs to strategically deploy or conserve capital.
Niko’s recent move to halt drilling offshore Indonesia postpones some interesting exploration opportunities for an indeterminate length of time. Compounding this delay is Diamond Offshore’s (DO) most recent rig report, dated September 19, 2013, whereby Diamond Offshore states that Niko is delinquent on its payment obligations. Niko confirmed that it is overdue on payments, and has indicated that it is currently in negotiations with the rig provider to manage payments going forward.
In Brown’s view, the report highlights Niko’s precarious financial situation. While production and gas prices in India are set to increase for the first time in years, Niko’s working capital remains in a negative balance, and its debt facility is at risk of being reduced .