What a fantastic start to 2011 for the Hotlist oilies. Nautical struck on Tuesday, Gulf Keystone struck on Wednesday and now Max Petroleum confirmed a massive find this morning after doing numerous tests on its Uytas well.
This is a huge result for MXP and very significant for a company with a market cap of just over £100mln. Investors should turn a keen eye to the next 3 months as MXP continue to drill 3 further quick shallow wells on the same licence area and more importantly – all 3 of the drills are based on 4-way closures – the same as the Uytas success. It should also be noted that MXP are in need of funding to enable them to drill their deep prospects later this year – this could come in the form of a placing or a farm in from a partner. The deep prospects are truly mouth watering and in essence is what MXP is all about. More updates and broker comments will follow throughout the day.
From this mornings RNS…
“Based on a probable oil/water contact at 161 metres as indicated by revised petrophysical analysis and current mapping, the potential oil in place for the Cretaceous reservoir is estimated to be between 85 and 135 million barrels of oil. While other Cretaceous fields in the Pre-Caspian Basin from similar depths report recovery factors between 20% to 30% of original oil in place, long-term testing and pressure analysis of the discovery well, combined with confirmation drilling and a new seismic survey specifically focused on these shallow reservoirs will be needed to more accurately define recoverable oil reserves. Enhanced recovery techniques, such as water flooding, may also be needed to improve recovery from such shallow depths with low reservoir pressure.” END.
Another exciting day for the Hotlist stocks. On Tuesday we had Nautical’s discovery of a possible 45mm to 55mmbls at Varadero. Today, we had Gulf Keystone announcing a discovery at SH-3 with p50 estimated at 220mmbls and a p10 near 2.2bln mmbls. Two days into 2011 and we have two hotlist stocks sporting seriously tasty discoveries. That’s what it’s all about for E&P’s. GKP started the day at 163.5p and closed up 9p (5.5%) at 172.5p. Nautical also continued its run from yesterday, closing up 11p (2.6%) to 441p
Also of note today was Max Petroleum’s sudden spike and strong volume. As mentioned at the time via “Heads Up’ post, the volume was circa 3.5mln which is average for MXP before suddenly jumping to 7mln within 45mins. The sp started the day at 18.25p and closed at 22.75p with a very fine 4.5p (24.7%) daily gain and not a whiff of news anywhere.
A possible farm out deal or update on the UTS well test could be behind the rise. MXP is certainly one to watch tomorrow.
Another Hotlist stock to keep your eye on is Bowleven (BLVN). News is due imminently on their offshore cameroon exploration well Sapele-1. Sp currently firm at 397p.
Dominion (DPL) which featured in the ‘B’ List (or alternative picks) closed today at 6.2p. Its highest close in a month and second highest since July’s 6.23p close. If it can break 6.2p and close above 6.3p tomorrow, then it might be tempted to push on further and test the 7.4p high last seen in May.
As per previous ‘Heads Up’ on Dominion (last week) when they were 5.8p, they are on the move past the 6p barrier today (3.15pm). Past attempts at 6p have seen them slip back and the trading range of 5.5p to 6p reminds a lot of RRL (Range Resources). Very similar trend patterns and investors should try running the charts in comparison as a matter of interest.
DPL has dropped back from 6p each time it has tested it – so today it could close above it.
RRL made a strong follow through when it successfully cleared the 6p resistance and is now trading near 8.6p to 9p ranges. If DPL can sustain decent volume and interest – then a strong run to test 7p+ could be on the cards and sooner than many think. 8p+ might require news to support the rise. They are currently looking at partners for their licence blocks – are they close to finding one?
Could be nothing as volume is average at 3.5mln traded, however news is expected soon on the UTS drill test results as mentioned in the 2011 Hotlist summary.
It’s been a while since Max Petroleum broke through the 20p barrier and it’s well known that they are seeking either funding for the deep prospects through a farm in or via a share placing.
Any farm in deal on the deep prospects will be very well received by the market as fears over dilution have been pegging the stock back.
Might just be technicals – but one to watch. MXP is currently featured in the 2011 hotlist.
A fair summary and as with Fox Davies note – Targets have been kept at 200p. If Seismics are better than expected – then I would imagine that some brokers may revise targets upwards. Although – until Politics/PSC’s are confirmed, GKP will trade at a significant discount based on their assets/resources/reserves. Goldman Sachs has a target of 160p but adds that this is 50% discounted due to their views/concerns on iraqi politics.
Mirabaud Oil Update
Mirabaud Securities – Energy Research
5 January 2011
Shaikan-3 confirms significant oil volumes in the Cretaceous
“This morning, Kurdistan explorer Gulf Keystone Petroleum (GKP LN, Buy, PT 200p) announced that it had completed drilling and testing operations on the Shaikan-3 well. Located on the Shaikan block (GKP 51% fully diluted WI), the well is effectively a twin of the original Shaikan-1 discovery well, drilled to a shallower TD with a less powerful workover rig. Shaikan-3 tested the Cretaceous and Upper Jurassic intervals which had not been completely logged or evaluated in the discovery well, due to drilling difficulties. Two open hole and two cased hole flow tests were conducted in the Cretaceous, but no rate was reported.
As a result of log evaluations and recovered fluid samples, the company estimates that in-place P50 to P10 volumes of 220 million to 2.2 billion barrels of oil-in-place were discovered in the previously unevaluated Garagu interval (1060-1157m). The wide range of variation between the P50 and P10 figures results from uncertainty over the extent of the oil-bearing reservoir throughout the anticline structure. The lack of a test result suggests that the oil is likely to be heavy and viscous and therefore some form of heating may be required to mobilise the crude. The well has been completed as a second producer from the Sargelu interval (Upper Jurassic) to be tied back to the Shaikan-1 test production facility.
The Shaikan-3 well has successfully demonstrated that the significant in-place resources at the Shaikan discovery extend into the shallower Cretaceous interval, and the well has again illustrated the scale of the resource potential across Gulf Keystone’s acreage in the Kurdistan region. The lack of a test result and therefore the likelihood that the oil contained in this interval is heavy is not out of line with expectations, but may be viewed by some in the market as a minor disappointment. Heavy oil fields can be developed with standard, proven enhanced recovery techniques such as steam-flood. Nevertheless, at this stage we have not elected to add the Garagu reserves to our Shaikan valuation model.
Gulf Keystone’s multi-well exploration and appraisal programme continues with the deeper Shaikan-2 and Sheikh-Adi-1 wells currently drilling, and Shaikan-4 due to spud in the coming months, while results from a 3D seismic shoot can also be expected. Overall, the company has a high-impact work programme for 2011 offering plenty of catalysts for the stock. Following the recent share price move towards 160p/shr we have a BUY recommendation with unchanged 200p/shr price target.” END.
Great news – long awaited RNS on SH-3 just released and the headline number is …P50 to P10 estimate of Garagu oil in place volumes is 220 million to 2.2 billion barrels.
Key points from Jan 5th (today’s) RNS… “The well drilled the entire Cretaceous interval and on into the Jurassic Sargelu formation. A total of two open hole and two cased hole flow tests were conducted in the Cretaceous. As a result of these tests, log evaluations and recovered fluid samples, the Company’s current P50 to P10 estimate of Garagu oil in place volumes is 220 million to 2.2 billion barrels. These Garagu resources are in the lower portion of the Cretaceous (between 1060m and 1157m). The Shaikan partner group will formulate a development plan for these resources.
The large spread between P50 and P10 volumes is due to the uncertainty with respect to the exact nature of the Cretaceous down dip, on the flanks of the Shaikan structure. If the Cretaceous is oil bearing near the flanks, then the P10 volumes become more likely and it is possible that the oil will also be less viscous and of higher API gravity.
In the mean time, due to the different characteristics of the Cretaceous oil, the Shaikan-3 well has been completed as a second Jurassic producer from the Sargelu formation and will flow into the same test facilities as the Shaikan-1 well.
John Gerstenlauer, Gulf Keystone’s Chief Operating Officer commented “The Cretaceous resources evaluated by the Shaikan-3 well are massive by any standard. They represent a significant oil resource for Kurdistan and Iraq. It is a further demonstration of the huge hydrocarbon potential of the area.” END.
This is clearly good news and it comes after a long period of quiet from GKP as many ongoing operations are still very much in progress. The significance of the link up to SH-1 for production is a welcome addition. This should push production much higher than the cited 8k to 10k bopd. Also – the note on the ‘flanks’ if proves true could see the current OIP numbers for the Shaikan Asset rise from 4.2bln to 6.4bln. Although, worth noting that without the ‘flanks’ coming into play, the current numbers based on p50 would be 4.2bln + 0.22bln = 4.42bln boe.
Next news due up should be data/ results from the recent Seismics and also an update on the sales/tenders for the Production/internal oil sales.