Tanzania extends Afren's oil/gas exploration licence
Wed, 17th Jul 2013 16:46DAR ES SALAAM, July 17 (Reuters) - Tanzania has extended an oil and gas exploration licence held by London-listed explorer Afren and its partner for four more years, the country's energy ministry said on Thursday."">Afren, the operator with a 74 percent interest, and joint venture partner Petrodel Resources Ltd hold a production-sharing agreement in the Tanga Block, which is located offshore and onshore north-east Tanzania."The first licence extension of four years granted to the company will enable it to continue with oil and gas exploration activities in the offshore deep-sea area and in the onshore area east of Tanga region," the ministry said in a statement.Recent natural gas finds in offshore Tanzania have led to predictions it will become a major hydrocarbons exporter in the years ahead. Tanzania itself estimates its recoverable natural gas reserves at over 41.7 trillion cubic feet.Afren announced a farm-in to Petrodel's Tanga Block in March 2011. Petrodel was awarded the block during Tanzania's 2005/06 bidding round.The licence includes onshore, shallow marine and deep marine areas.The Tanzanian block lies south of Afren's 100 percent owned and operated Blocks L17 and L18 in neighbouring Kenya."A 620 km2 3D seismic survey was completed in January 2013 and processing is being fast tracked in order to bring the deeper water prospectivity to equal technical maturity as the shallow water prospects and allow the group to optimise the prospect selection ahead of exploration drilling," Afren said on its website."Afren and partners have identified a rig to drill the deeper water Calliope prospect and have a Letter of Intent (LOI) in place with the rig contractor."The ministry's permanent secretary, Eliachim Maswi, said earlier this month Tanzania would require a signature bonus of at least $2 million from firms winning blocks in an October oil and gas exploration bid round.
Gary Parkinson's Market report. Goldman Sachs published bullish research on the prospects for oil and gas production in the Kurdish region of Iraq, titled On the cusp of delivery: Kurdistan the next giant onshore region. The broker urged clients to buy shares in two companies working there, Afren and Gulf Keystone Petroleum, which responded by rising 3p to 137.5p and 10.75p to 176.25p, respectively.
When you think of the oil sector, you tend to think of either the supermajors such as BP and Shell, or the small ‘wildcat’ explorers – of which there are hundreds. There is however a thin slice of mid-caps which can offer investors the best of both worlds. By that I mean they offer the exploration excitement and takeover potential of a small player but also offer the assurance from production and cash flow that the big boys provide. The reason there are so few mid-caps is that it’s not easy to make the transition from explorer to producer. Drilling success is far more common than commercial success. The money often runs out, which is why the junior end of the market is a graveyard of broken dreams. But every now and then a company makes the leap and comes out the other side. Afren is a prime example. Over the last 8 years, the company has gone from just another African explorer with no active wells, to a fully-fledged producer, delivering thousands of barrels of oil a day. In 2012, revenues reached $1.5 billion, up a remarkable 151% on the previous year. Pre-tax profits fared even better, up 169%. And this was against a backdrop of falling commodity prices. During the period, the average oil price fell 2% and the gas price actually fell 33%. Afren’s exponential revenue growth is down to booming production, particularly from its two big fields, Eok and Okoro, off the coast of Nigeria. On the exploration side of things, Afren is drilling like crazy. The company is now “firmly engaged in the most active phase of exploration activity in its history”. The way the oil industry measures your progress on this front is through the reserve replacement ratio (RRR) - effectively what you’ve discovered less what you’ve produced. Some of the big boys in the industry find it quite hard to replace the oil they’ve extracted. BP for example reported an RRR of 77% in March this year. But Afren delivered an RRR of 265%, demonstrating its excellent growth potential. Other than Nigeria, Afren has extensive drilling prospects in Ghana, Kenya and Tanzania. And outside Africa, the company also believes it could strike it rich in Kurdistan. As Aftren has the money to do so, it’s taking the approach that the more you drill, the luckier you get. In total, All up, the company has potential reserves (including unrisked highly prospective deposits) of almost 9 billion barrels. There are opportunities everywhere. We expect 2013 to have plenty of news surrounding its huge drilling campaign as well as a continued expansion of its production base as more wells come on stream. Given its turbo- charged growth, the shares look dirt cheap.
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