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Gold/Mining/Energy : ALCRY-A billion barrel equivalent of natural gas -- Ignore unavailable to you. Want to Upgrade?

To: Charles Broderick who wrote (21)	11/23/1999 1:28:00 PM
From: Charles Broderick	Respond to of 22

Analysts report from Hoare & Co. London! Atlantic Caspian Price as at close: 9«p (Bid) 10«p (Offer) Recommendation: Speculative Buy Bid/Offer Spread: 9.5% No. Ordinary shares: 457,387,492 Market Cap: 45.7m 1999 Year High: 11¬p Low: 4¬p Listing: AIM Brokers: T. Hoare Canaccord Hoodless Brennan & Partners Plc Market Makers: 6 Size on screen: 50,000 NMS: 1,000 (Source of information: Offer Documents from 30.6.99 and Reuters unless otherwise stated.) Company Atlantic Caspian is an exciting high risk play, with a very attractive license in Kazakhstan. It has a 70% share of what could be a 1 billion barrel oil field. In 1998 the Company entered into a partnership agreement with BN Consulting, a firm owned and run by Bulat Nazarbayev, who is the brother of Kazakhstan's president. Atlantic Caspian's high level contacts in Kazakhstan should help it to do business and move forward more quickly. Since June 1998 Cedric Brown, the former chief executive of British Gas has held a consultancy agreement with Atlantic Caspian. In July 1999 Cedric Brown became Chairman of Atlantic Caspian. The Company has a 70% stake in East Caspian Oil Inc and through that, a 70% interest in the Akkul field which is just North of the Aral Sea. The remainder of Akkul is largely owned by the Kazakh government. Kazakhstan has formed many joint ventures with Western oil giants and established strict rules on the ownership of mineral rights. The Republic of Kazakhstan is a sovereign democratic republic formed upon the dissolution of the Soviet Union in 1991. Economic and structural reforms undertaken since 1991, including significant privatization, have helped to revive Kazakhstan's economy after the decline experienced upon the dissolution of the Soviet Union. GDP grew 1.1% in 1996 and 2.2% in 1997. Kazakhstan has experienced decreasing inflation, which dropped to a year-on-year rate of 16.4% as of 31 July, 1997, from over 30% in 1996 (Source: Proposed Acquisition of East Caspian Oil, Document, 30.6.99). According to the State Committee for Investments Foreign capital accounted for 25% of total investments in Kazakhstan in 1997. Kazakhstan recently received credit ratings from Standard & Poors (long term B+, short term B) and Moody's (long term B1 and short term not prime) and completed two Eurobond offerings. In 1995, a new constitution was put into place establishing executive, legislative and judicial branches of state. Kazakhstan has large oil and gas reserves. The British Petroleum Statistical Review of World Energy put total oil reserves at the end of 1996 at 10bn barrels of oil equivalent. The Economist published a reserve figure as high as 70bn barrels of oil equivalent. By comparison, the US has 22bn barrels of reserves, demonstrating Kazakhstan's potential future influence in the world oil markets. After Russia, Kazakhstan is the largest oil producer among the former Soviet Republics. In 1997, Kazak production averaged over 500,000 barrels per day. Atlantic Caspian is pursuing a policy of asset accumulation in oil and gas properties in Kazakhstan. Mr Salai Ozturk, a substantial shareholder in the Company as a British and Turkish national, has been conducting business in Central Asia for over 40 years. During this time he has built up an extensive network of contacts in commerce and government. Mr Ozturk is seeking oil and gas investment opportunities in Kazakhstan and assisting obtaining any licenses for Atlantic Caspian. The Company's ADRs trade on the electronic bulletin board of NASDAQ. The Company intends as soon as practicable to submit an application to have its shares traded on the NASDAQ small cap market. The Akkul field had preliminary drilling and seismic work analysed by mining consultants Scott Pickford, which showed that the field could well contain 1.068m recoverable barrels of oil or 4.4 trillion cubic feet of gas (Source: Proposed Acquisition of East Caspian Oil, Document, 30.6.99). In October 1999 the Company undertook a review of the seismic and technical data at Akkul and were greatly encouraged by the review (announced 28.10.99). The results of a test drilling are expected to be known by Spring 2000 at which time, if the results are good, a partner will be sought to continue development of the Akkul field. Interest in the Akkul Field has been expressed by two large oil independents and two multinational oil companies (Source: Proposed Acquisition of East Caspian Oil, Document, 30.6.99). Financials 31st March(œ)000 1998* 1999** Turnover 156 405 Profits after tax -13,333 -541 Loss Per Share -0.075p -0.003p * 6 months to 30 June 1999(unaudited) *12 months to 31 December 1998 (audited) Source: announcement of interim results 28.10.99 Valuation The Scott Pickford report estimated 1068m barrels of oil. Due to the 70% interest that equates to 748m barrels. The probability of them finding the oil is estimated as approximately a 1 in 5 chance by T. Hoare Canaccord which gives them a net risk potential of 150m barrels. Each barrel is given a net present value of $1. Therefore $150m equates to œ94m for the prospect. T. Hoare Canaccord are assuming 25m more shares are issued to raise funds for the drilling of the first exploration well, and if options are exercised, we get a fully diluted value of 18p per share. This is a risk valuation, if the well is successful the value could be a lot higher (source T. Hoare Canaccord). Risks are high and include; There are less reserves recoverable than expected or it is not commercial for extraction. Price of oil or gas decreasing. Spring test drilling produces inconclusive results. The future of the Company is dependent on one field. There are operating and economic risks associated with Kazakhstan. Hooodless Brennan View Chairman Cedric Brown's strategy for the Company is to seek oil and gas opportunities in Kazakhstan. In addition to this continuing with the exploration work, proving reserves to a certain stage in development and then finding a partner to take over. At his time at British Gas, Cedric Brown developed a good knowledge of the oil and gas business, carried out business in Kazakhstan on a certain field project and held high level negotiations with parties in Kazakhstan and Russia. In addition he knows most of the major players and has an extensive circle of contacts, which should help significantly in finding partners. The key strengths of Atlantic Caspian are its management team, its good technical expertise` in interpreting test data, its ability to oversee the drilling and understanding of legal rules. The Akkul field which has indicated it could contain over 1 billion barrels of oil has been given a risk valuation of 18p per share by T.Hoare Canaccord which could be very conservative if things go to plan. We therefore recommend the stock as a SPECULATIVE BUY. Risk Warning - Alternative Investment Market This is a market designed primarily for emerging or smaller companies. The rules of this market are less demanding than those of the official List of the London Stock Exchange and therefore carry a greater risk than a company with a full listing.