MXP on the move – just spiked up

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.

Gulf Keystone Broker Note Update – Mirabaud.

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

Gulf Keystone
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.

Comment:
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.

GKP adds a possible 2.2bln to oip with SH-3

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.

Today’s Round up – Hotlist 2011

A very solid start to 2011 by all the Hotlist stocks with just the one exception being GKP. Key story today was without a doubt – the Varadero Discovery. Fantastic news and a great start to 2011. Here’s a couple of Broker comments.

Broker comments as follows…

Note from Cenkos on Encore (and relevant to Nautical)
“After weeks of waiting the Transocean Galaxy II has finally made it out of Dundee harbour and will await a weather window to be positioned on the first of 4 E&A targets in Block 28 – which include the Catcher discovery. We saw management 2 weeks ago and think the market could be missing something here….management believe that Catcher East is an “injectite”, a play type that has never been targeted in the North Sea (although by chance the Alba and Gryphon fields are injectite plays). This team has an unmatched track record (having discovered the 2 biggest N.Sea finds in 25 years with Buzzard and Catcher) and if they are right Block 28 has 8 potential injectite targets making a conservative target volume of 800mb for the block vs. Estimates for Catcher alone of 220-300mb,if this works this could be the start of a whole new phase of N.Sea exploration. Block 28 and Cladhan drilling campaigns over the next few months could be transformational. We still expect that either Premier or Wintershall will look to buy the company in the near term. Well worth meeting management. BUY.” END.

And a comment from Oriel Securities…
“The Catcher Area partner group (Premier, Nautical and operator EnCore) have announced that the Varadero exploration well has made a new oil discovery

The discovery is located to the west of the Catcher field and was targeting the Tay injectite play which was successful in the Catcher East sidetrack. The well intersected 84ft of net oil pay over a gross interval of 185ft in-line with pre-drill expectations with no oil-water contact encountered. A further 22ft of net pay was also encountered in thinner sands above the main Tay reservoirs. Oil quality is good at 27deg API (a key pre-drill risk, given concerns that oil quality could degrade further westwards from the original discovery) as is reservoir quality with an average porosity of 33% in the main Tay sands.

Pre-drill resource estimates were c40mmb which appear to be largely underpinned by this result. Unrisked this would be worth c101p/sh net to Premier, c56p/sh to Nautical and c18p/sh for EnCore over and above our carrying values for the main Catcher discovery

In addition, this result has significantly derisked the follow-on potential of the Catcher plays on Block 28/9. The rig will now move to drill the Burgman prospect to the south-west which has multiple objectives within the proven Tay injectite and Cromarty sand plays in addition to a deeper untested Fulmar target. The Tay and Cromarty targets have pre-drill resource estimates of c45mmb worth unrisked 114p/sh to Premier, 64p/sh to Nautical and 21p/sh to EnCore.

Our NAV’s (excluding exploration upside) stand at 1811p/sh for Premier and 490p/sh for Nautical before the addition of this latest discovery.

We re-iterate our BUY recommendations on Premier and Nautical whilst we have yet to formally initiate on EnCore.” END.

And here’s an insight from CS regarding Aussie floods and Beacon Hill resources are mentioned as possibly benefitting.

From Collins Stewart…

“Australia’s position as the dominant seaborne exporter of both thermal and coking coal means the flooding in Queensland has disrupted a major amount of coal supply.

The situation is worse than the 2008 flooding when the coking price moved above $300/t for the first time, as the number of mines and transportation infrastructure affected is larger. The mines affected in 2008 took at least 6 months to recovery from the interruption and return to full capacity. This fact is just hitting home on the world coal markets. Any producer or company with coal operations, particularly coking coal, outside of the affected areas should perform well with the rising prices. In London, obvious names already on the rise are Coal of Africa (CZA), New World Resources (NWR), Beacon Hill Resources (NHR) and Ncondezi Coal (NCCL).” END.

Reuters UPDATE 1 – Premier, Nautical, Encore find oil at North Sea well.

I’m surprised Nautical hasn’t moved higher on this news today as the significance of Varadero is huge in terms of the over all drill program. Had it failed, the 4 drill plan would have reduced to just one further drill – the Catcher appraisal. TheShareHub target price of 700p remains, until further drills on the area are completed.

UPDATE 1-Premier, Nautical, Encore find oil at North Sea well | Reuters

Bowleven due to reach TD soon

Bowleven’s last update was on November 25th and the RNS stated…

“Forward exploration and appraisal programme

It is now planned to drill to a target depth (TD) of approximately 4,450 metres to test further prospective horizons, including the deeper Cretaceous, a play untested within this part of the Douala Basin.

Drilling activity is expected to take a further 20 to 30 days (excluding testing). In the meantime planning for testing and appraisal drilling/sidetracking activities on the Omicron discoveries is underway.  The forward plan will be reviewed by the joint venture on reaching TD.

The Company plans to issue an update announcement on reaching the target depth of the well or, as appropriate, on completion of logging activities.

Kevin Hart, Chief Executive of Bowleven plc, commented:
“Whilst we recognise that further evaluation and appraisal are required, the additional pay encountered in the Miocene section provides further support to our view that the Omicron discoveries are potentially transformational. We look forward with anticipation to recommencing drilling and intersecting the deeper cross-cut event and Cretaceous Epsilon targets.” END.

As shown by recent ‘Heads Up’ on Nautical, an RNS can come at any point during the trading day and investors should not assume all RNS’s are issued at 7am each morning. Many companies differ on their RNS policy, although ‘material’ news has to be reported to the market as soon is possible.

Bowleven’s current drill is getting close to TD based on previous timings and updates on 20 to 30 days timeframe. Any further significant discoveries in the targetted Cretaceous Epsilon zones will likely see the stock rerated higher subject to the findings. All eyes on Bowleven in the coming days.