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Cheers BillyRay.
Hi again CLT,
As Wiggly has said, Anchois is a discovered resource. Have a read of the CHAR RNS from 7/9/20 "Significant Resource Upgrade on Anchois, Morocco". Anchois is 2C 361Bcf but with upside of around 1Tcf if the C, M and O sands come in. As Julian said last week in his interview on Proactive, the 361Bcf values Char at an NPV10 of $500M , but the upside in the Lixus licence is 7x this... as he said there is "lots and lots and lots of running room"! Plus there's Rissana to come potentially, so even more upside. So the scale of the development is only likely, IMO, to get bigger and bigger and more and more valuable over the coming months and years.
Directly comparing PRD and CHAR is difficult and, in my view, they are both companies with huge potential - with a fair wind, I can see both being £1+ (and I may be being conservative here?!). So I wouldn't necessarily choose between them, hence why I hold both. In % terms (cf my overall holdings) CHAR is the bigger simply because I've been in it the longer (since 2012) but I have very high hopes for both. Yep, drill costs are much cheaper at PRD as Guercif is onshore, but CHAR has a confirmed resource and defined route to monetisation and, ultimately, the fact that both are ESG-friendly 'energy transition' companies means they are both in the right sector at the right time, IMO. So my theory was not to choose between them but to hold both!
And yep, CHAR has 75% but carries ONHYM through appraisal (though I think it becomes pro-rata costs for development). The farm-in partner will of course take a %, the question is how much? But from all the interviews so far, it doesn't look like the CHAR board is prepared to give Anchois away, so I'm expecting us to hold on to a significant % and stay as the main operator.
Finally, I do understand your concerns that the new ventures could potentially mean that the board takes its eye off Anchois. However, in all the interviews so far, the board has been at pains to stress that Anchois is their main asset and absolute priority so I personally don't see the new ventures being a distraction and they could, potentially, add a huge amount of value.
Good luck if you decide to add a few CHAR!
Both EOI's take into account the estimated capex required to bring the development online, anticipated to be in the region of US$300-500 million, but they also identify Lixus as being an important strategic asset, with strong Environmental, Social and Governance ("ESG") credentials, that has the potential to help Morocco transition to a low carbon economy, as it seeks to satisfy an anticipated doubling in domestic demand for energy over the next 20 years.
Clueless,
Lixus/Anchois is a discovered resource;
Lixus licence covers an area of approximately 2,390km2, 30km north of Chariot's existing Moroccan acreage, with water depths ranging from the coastline to 850m. The area has been subject to earlier exploration with legacy 3D seismic data covering approximately 1,425km2 and 4 exploration wells, including the Anchois gas discovery.
The Anchois-1 well was drilled in 2009 in 388m water depth some 40km from the coast and encountered an estimated net gas pay of 55m in two sands with average porosities ranging from 25% to 28%. A new independent audit of this discovery by Netherland Sewell and Associates Inc. ("NSAI") estimates a 2C contingent resource of 307Bcf. A deeper target not penetrated by the well has 2U prospective resources estimated by NSAI of 116Bcf, with the Anchois discovery containing a remaining recoverable resource of 423 Bcf.
The Anchois discovery is in Tertiary-aged turbidite reservoirs that occur above a nappe emplaced during the Alpine orogeny and the pay sands have a characteristic and anomalous seismic signature. The Company has identified five satellite prospects to Anchois that have tie-back potential, three of which have been audited by NSAI, and Chariot estimate that Anchois and the satellites holding remaining recoverable resources in excess of 900 Bcf.
An additional five prospects have been identified in Lixus in similar geological settings as Anchois but currently without the appropriately conditioned 3D seismic data to confirm comparable anomalous seismic signature, and these prospects have gross mean prospective resources ranging from 66 Bcf to 330Bcf, as estimated by the Company. Seismic reprocessing will be undertaken to reduce the risk for these additional prospects. NSAI will be preparing a Competent Persons Report on these prospects and on Anchois N and Anchois NW. Chariot is also evaluating leads identified in the section below the Nappe which has the potential for giant scale prospective resources.
The excellent quality reservoirs in the Anchois discovery offers the potential for high rate wells and the consequent possibility of a low-cost development. In combination with excellent commercial contract terms in a country with high gas prices in a developing market and growing energy demand, the Anchois discovery offers the potential for a material, high-value project. The low risk prospect inventory offers running room with additional, low-cost tie-back opportunities.
The initial licence commitment, for which the Company is fully funded, includes a technical programme of 3D seismic reprocessing and evaluation to access the additional exploration potential of Lixus. Chariot will also further evaluate the gas market, test development concepts through a feasibility study and seek strategic partnerships and alliances to progress towards a development of the Anchois discovery.
Hi BillyRay - Cheers for your response. Good to see you are in PRD as well.
PRD and Char seem a lot similar in terms of their TCF scale prospects and geography.
Apologies for basic questions but in terms of char, is it already declared a commercial discovery I.e. has it been drilled and confirmed commercial previous to the latest CPR or is it similar to PRDs where there have been gas shows and CPR created but full drill and commercial discovery yet to be confirmed and announced? Both can be termed as appraisal depending on who you ask...
But the main difference between the two seems to be that PRD is onshore and Char being offshore Morocco which might explain why the drill costs are so different. But honestly, surprised it's that high for CHAR I.e. $30mn+ seems pretty high in comparison to drill cost that PRD is looking at of $2.5 mm, and especially comparing the drill costs to their respective market caps.
$30 mn in the current rig climate is definitely high and do you think it's gross or net to char? Also if a partner comes in I'm guessing char will have to reduce its 75% stake in exchange for drill carry/ flow testing?
And Chars new ventures move is very intriguing - it will be very ironic if they enter CO2 EOR business, which is what PRD has just proven in Trinidad! It's very strange though that char is looking to move in to new ventures when they have such a big development to focus on? Surely you would want to focus all the companys energy on such a big project if it's as valuable as they say - why would you move to a new venture when you already have such a big potential project to deliver value from unless you are hedging your bets against the gas project?
Cheers for your response.
All IMO dyor
Hi CLT
Have been reading your posts over on PRD so nice to see you popping over here for a look at Char! I only hold two stocks - CHAR and PRD - so I'm keeping a particularly keen eye on Morocco at the moment!
To try to answer a few of your questions:
Off the top of my head, I think the costs of the appraisal drill (plus exploration of CMO sands, plus conversion to a future producer - i.e. not just an appraisal well) were quoted during one interview last year as $30-40M (I'll try to find a link to confirm this). However, in the interview that Julian (CFO) did last week, he mentions (6m30s) that they're thinking of using the same drilling team they used in 2018 (Namibia) and that drill came in significantly under budget, so there's a potential for a reduced drill costs here I think (which would be a nice upside surprise for the market)
https://www.youtube.com/watch?v=9CrH4PF83Wc
The company's always been very clear that Anchois drilling will be funded via farm-out. Any talk of a fund-raise has, as far as I know, always been in relation to funding the 'new ventures' and not appraisal drilling on Anchois. Initially, I think many holders thought that a farm-out of Anchois would be just for the costs of the drill but, will excellent progress being made including resource upgrades, it's made Anchois (plus the wider Lixus and Rissana licences) look even more financially attractive, so there's been some discussion on here that the farm-our may actually include drilling costs PLUS a significant cash payment to cover back costs etc. Clearly, this is speculative until the deal is actually announced but any extra cash from the farm-out would be able to fund the new ventures and negate the need for any additional equity fund raise.
I don't know what specific flow rates they're expecting from the appraisal and exploration well, but they're targeting 70MMscfd at plateau for Anchois development. (see p11, AGM presentation):
https://www.chariotoilandgas.com/wp-content/uploads/2020/09/Chariot_AGM_Presentation_Sept2020.pdf
Hope some of this helps?
A few questions on Char - can anyone help with these please?
Is there an estimate for the appraisal well drilling cost? The CEO seems to suggest char doesn't have enough cash and doesn't rule out raising money if no partner to drill? Any rough idea what the appraisal drill will be looking to flow and how much it could cost? At 22 Mins in this video he seems to suggest about the appraisal drilling but no specific cost estimate?
https://youtu.be/OAIVFNtn0Qg