Posted by Malcolm Graham-Wood - Malcy's Blog
A quiet day in the oil bourses in which the problems being encountered by Mrs Merkel meant that the market ended in a listless and slightly concerned manner. This morning the market is up by around 30c, again on very little news. As we run up to the Opec meeting there will be the usual tittle tattle as ad hoc meetings are reported but hold steady for November 30th.
Reuters reported last night that BP ‘is in talks with Cairn Energy about buying a 30% stake in its deep water SNE field offshore Senegal'. According to reports this stake would be valued at around $600m and is awaiting validation by the state of Senegal. This morning Cairn has totally debunked the story calling it ‘nonsense' although I must admit it had a ring of truth about it. My view remains that should Cairn want to part company with all or part of their stake it carries significantly higher value to shareholders if done when the operatorship is still up for grabs, ie before next spring when it transfers.
In the meantime Far has some good news in The Gambia in which it holds an 80% stake in two offshore blocks adjacent to the SNE field and in the Mauritania-Senegal-Guinea-Bissau Casin. Following a detailed geotechnical evaluation of these two blocks it has completed an assessment of the potential for hydrocarbon resources. An independent resources review conducted by RISC for blocks A2 and A5 in The Gambia supports Far's assessment.
The combined Prospective Resources for the two blocks have been assessed at 1.1bn barrels (unrisked, best estimate, recoverable 100% basis) with 926.4m barrels net to Far. Far are planning ahead and expect to drill a well in late 2018, meanwhile the farm-out procedure is fully underway. With such a good record in the area and with strong support from partners and shareholders Far must be a most exciting prospect as it starts work in The Gambia.
A CPO-5, Llanos Basin update from AMER this morning but realistically there isnt yet much to report. The initial phase of the LTT on Mariposa-1 started on November 18th with a clean up and it has now been closed for a pressure buildup test. Shortly the well will come back onstream at a commercial production rate which will be higher than any of the numbers during clean up. This is very good news for Amerisur, obviously as what looks like a very good commercial discovery on a large block that might lead to further success but also as a welcome diversification in Colombia. At change from 20p AMER looks exceptionally good value and with some very exciting wells to be drilled in the south to come I expect significant upward movement before long.
After I wrote yesterday Sound reported on completion of the Airborne Full Tensor Gravity Gradiometry (FTG) and magnetic survey acquisition in Eastern Morocco. The company report ‘highly encouraging results' with a far more detailed view of the deep, thick Paleozoic basin extending over the three permit areas. The survey clearly offers significant paleozoic opportunities and by mid- December the company ‘expects to have an improved understanding of the exploration potential of the licence areas'.
And this morning Sound has said that it has completed 56% of its phase 1 seismic programme at Tendrara in Eastern Morocco. There will be much for CEO James Parsons to say in his ‘fireside chat' on Friday morning and of course there is a triple bill of Sound, Echo and Coro on December 6th to look forward to.
Results from SDX but there is nothing we dont know after recent announcements on well success in Morocco and developments in Egypt. Revenue growth y/y is very strong and predicted to grow substantially as the benefits of the Circle acquisition become tangible. With a raise of $10m and shareholders incredibly supportive the outlook is very exciting, 2 from 2 wells in Morocco and coming onstream very quickly plus a busy programme in Egypt means I expect a stream of good operational news from SDX over the winter.
The deal Serica has announced this morning looks like it should be transformational for the company and certainly de-risks its current asset base. The deal also marks the return to Serica of Mitch Flegg who left as COO and returns as CEO after an unfortunate spell at Circle. They have acquired from BP substantial holdings in the Bruce, Keith and Rhum fields in the North Sea and have taken all the BP staff and also have a production sales agreement for the hydrocarbon offtake.
With BP on the hook for substantial elements of the decommissioning, Serica are buying some good assets with little in upfront payments and a significant addition to reserves and production. 2P reserves will rise 16 fold to 50 mmboe and production 7 fold to 21/- boe/d of which 85% is gas. I am looking forward to sitting down with Mitch to look at it in some detail and also to restarting coverage of Serica, after this most interesting deal.
Back to the Champions League tonight as the HubCap Stealers are in Seville, the Noisy Neighbours host Feyenoord and Spurs are at Borussia Dortmund. Tomorrow I notice that Chelsea are in Baku, Azerbaijan…..
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