The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Gudin, Zebra,
Clearly, the decision by CEG not to develop Cory Moruga would have been made by the executive management team, of which Geoffrey Leid was not a member. In fact, I find it interesting that Geoffrey only stayed with CEG for a relatively short time suggesting that perhaps he wasn’t very comfortable with some of the unprofessional actions of CEG’s executives?
More likely, Paul’s interaction with Geoffrey dates back to the latter’s role as MD of CERP during the successful collaboration at Innis-Trinity on the CO2 EOR pilot project (prior to CEG’s involvement). Presumably, Paul must have been sufficiently impressed with Geoffrey’s skill-set to have now employed him as MD of TRex.
And I strongly suspect that Geoffrey will be absolutely delighted to be now working with the executive team at PRD who have the vision, knowledge and business acumen to successfully develop assets such as Cory Moruga and also, hopefully, to re-start our CO2 EOR project in the short to medium term.
Just doing a bit of digging...
And it appears that our new in-country managing director for TRex, Geoffrey Leid, was previously on the board of Columbus Energy, who held the Innis-Trinity and Goudron fields before selling them to CEG. He then had a short spell (less than 2 years) on the CEG board as head of operations in T&T.
So I think the one thing we can know for sure about Geoffrey is that he’ll understand the current CEG assets inside and out, which may be very useful should Paul fancy taking control of Innis-Trinity (or all of CEG’s assets). I’m speculating here, but it’s potentially a very interesting connection…🤔
https://theorg.com/org/columbus-erp/teams/leadership-team
https://www.proactiveinvestors.co.uk/companies/news/921700/bahamas-petroleum-strikes-25mln-deal-for-columbus-energy-to-create-caribbean-and-atlantic-champion-921700.html
https://www.proactiveinvestors.co.uk/companies/news/976364/challenger-energy-unveils-new-head-of-operations-for-trinidad-and-tobago-976364.html
Morning Ibiza28,
The ITR gave us a very good idea of the potential future values of Cory Moruga:
“An appraisal well "Snowcap-3” is planned in the near-term by PRD intended to prove up the P90 resources case with an NPV @10% discount of £67 Million or 12 pence per share based on £159 million undiscounted post-tax profits for the Base Case of approximately 8.33MMbbl recoverable using a 15 year production profile peaking at 3,500bopd which equates to c. 58.2% of available 2C + P50 (Unrisked) Prospective Resources.”
Note that this relates to the P90 case; the P10 is 21.41mmbbls recoverable.
In addition, the figures are based on RFs of 23-24% but we know that RFs of 30% may be achievable via gas re-injection and, later on in the life of the field, there would also be an option for CO2 EOR to further increase recoverable volumes.
And then, as Keith mentioned recently, the utilisation of Nutech and Sandjet could add further resources via previously unrecognised sands. And it also appears there are old wells that may be able to drain untapped accumulations in the Moruga West field that extend into our block, as per Paul’s comments at the Proactive presentation: “...[Lonny’s] found lots of wellheads for us in the right place, and very interesting wellheads particularly in relation to the extension of the Moruga West field into our block.”
As I understand it, TRex still holds an 83.8% interest in Cory Moruga (as confirmed in the recent FY results) although, as per the RNS 12/1/24 “Discussions [have] commenced to acquire, subject to regulatory consent, the remaining 16.2% interest in Cory Moruga for an overriding royalty”. Hopefully we’ll receive an update on our discussions with TXP in the near future.
I think it was noteworthy in this morning’s RNS that our new T&T country manager’s remit included:
“… special emphasis on assisting to accelerate the processes required for the execution of the Cory Moruga field development project.”
The plan to accelerate the CM FDP has been mentioned a number of times already in company announcements and we know that MEEI is commercially aligned with PRD. So I get the distinct impression that Paul is very eager to progress matters in T&T as quickly as possible.
And there’s still the option that Paul may be interested in adding more assets to our T&T portfolio, perhaps Innis-Trinity (and other fields?), especially considering we know that CEG is now focused on Uruguay and is currently conducting a strategic review of its T&T business. We may have news on this around the mid-year offering the potential to re-start our CO2 EOR operations in the near-term.
So Cory Moruga clearly has a very attractive baseline production level which, contingent on a successful appraisal well, would alone be worth more than the current share price. And then there’s substantial upside potential in T&T that’s not yet being factored in to any valuation, IMO.
(cont... 2/2)
The other issue to consider - and I’m thinking very positively here – is that, should upcoming operations proceed successfully, then sometime in H2 this year we may find ourselves the operator of only one project i.e. Cory Moruga. PGVL may well be sold leaving us with non-operator stub equity in Morocco, and Vermilion (presumably) will take over operatorship of Corrib South should the SA be granted (and the other Irish assets require minimal oversight at present).
So I realise that PRD looks like a 2-person team but it’s really (up to) a 5-person team (as required) and a team with significant experience in relevant sectors all of whom I’m sure will be positively contributing to the company’s activities during this busy time.
Finally, a comparison between CHAR and PRD has often been made on various metrics and I feel that the difference in sizes of the respective boards and management teams (and therefore salaries / expenses etc) is also noteworthy. Importantly, I certainly don’t consider that CHAR’s higher head-count has in any way resulted in improved outcomes or adherence to stated time-frames:
https://chariotenergygroup.com/about/board-of-directors/
Others clearly have different views on this and I respect that but, ultimately, this issue, IMO, comes down to trusting Paul’s judgement with regard to him deciding if additional personnel would add value; at this time, he clearly thinks that this would not be in the best interests of the company and shareholders.
All IMO, of course.
Afternoon Obadhia and all,
Just a few of my thoughts on our current management team…
Although on paper it may look as though PRD is just Paul and Lonny, I do think it’s worth recalling the very relevant skill-set of our non-exec team, and I’m sure that all the NEDs will be making an invaluable contribution during this vital stage in the company’s journey.
Moyra Scott is the Drilling Manager in Morocco and NED (although not stated as such on the PRD website) and is strongly aligned with shareholders via 3 million options (exercisable at 10p) [as per the RNS 29/3/23]. Her experience is considerable and she’ll undoubtedly be working closely with Lonny on all operational matters on the ground:
https://polaris.brighterir.com/public/predator_oil_and_gas/news/rns/story/x5zgq0x/export
“Moyra Scott has an MSc in Petroleum Geology from Heriot Watt University Edinburgh with 32 years of experience in the oil industry. She is a highly experienced Senior Drilling Engineer and Well Delivery Project Manager in Europe and Africa. Previously she has worked with BP, Tullow Oil and Lundin Petroleum amongst others.
From 2021 Moyra has been responsible for executing two drilling programmes for the Company in the Guercif Licence onshore Morocco and is currently planning the next phases of drilling for 2023.
Moyra is expected to lead the Company's operational well planning for Trinidad too...”
In addition, both Alistair Jury and Carl Kindinger bring a lot of experience, and Paul and Carl appear to go back a long way (to at least 2006).
https://www.predatoroilandgas.com/about/directors/
Carl’s experience is likely to be particularly invaluable over the coming months:
“His experience has been gained in small and medium sized companies in Africa, the Middle East, Ireland and Romania. He has participated both at executive committee and board level in strategic decision making. His major achievements include identifying, evaluating and promoting major investment projects, raising finance in difficult circumstances, a tax saving-led equity and debt restructuring, and mergers and acquisitions. He is seasoned at high level negotiations with JV partners, suppliers and principals. He has considerable experience in Stock Exchange and IFRS reporting, IPO requirements, business plans and performance evaluation.”
Clearly, the near-term focus will be on Morocco and I don’t think either Ireland or T&T will be a distraction. In particular, the workovers in T&T can be undertaken without Paul or Lonny needing to be in-country, as per the RNS 26/1/24:
“Cory Moruga planning work is being progressed in Trinidad this week to put in place a small operations teams to implement the proposed workover operations after planning is complete and environmental approvals have been received.”
(cont... 1/2)
Indi123,
You may recall Paul’s comments from the Proactive presentation on March 14th:
“So this year we’ve applied for another extension to June 5th. That’s gone in and been all approved by ONHYM, it’s actually with the Ministry now and we expect a joint ministerial approval within the next 3 or 4 weeks. So the whole process is now running very smoothly and I got involved in that process at the end of last year directly, I normally get involved but I took my eye off the ball for a couple of months, and now that’s all progressing smoothly. So we’re very happy with the regulatory process in Morocco.”
It’s been a month since the presentation so presumably ministerial approval will have already been granted, or will be very soon.
It’s also worth remembering that Paul will be in Morocco from tomorrow:
“I’m out there 15th April for a management meeting and I’ll be on my field trip then, and I’ll send you back some lovely photos of the rain and the wind and the snakes (!)”
In addition, the CTU and Sandjet equipment should be on site imminently:
“Our [CTU] was coming in from Tunisia, then it went to Italy and now delivery time is mid-April from Itafluids. So we will get that in mid-April, it has to go through customs too.”
“...our testing has to be delayed until mid/late April when we can get Sandjet in.”
So expect news on all fronts over the next couple of weeks... including maybe a few nice pictures of rock formations via Lonny’s Twitter account from Paul’s field trip in Morocco.
And don’t forget possible notification from the GSRO that our Corrib South SA has been granted…
And updates on workovers at Cory Moruga…
The newsflow should be coming in pretty thick and fast, possibly starting this week.
Blueglow,
My use of the term ‘no-brainer’ didn’t in any way assume a 100% success rate from drilling but was used in relation to evaluating the risk / reward of drilling the Jurassic up-dip prior to initiating M&A activity for PGVL. Not drilling MOU-5 would, IMO, leave far too much potential value on the table prior to any such deal.
I’m fully aware of the risks involved and would never assume that anything is a certainty. Paul also made this fact very clear in the recent Proactive presentation:
“I don’t see any major risks. [However] the risks with the testing is getting through the formation damage. We believe we’ll get through the formation damage but we can’t be 100% certain, nobody can be 100% certain of anything in the oil and gas business, but we believe everything’s lined up to do that, and we’ve got the most powerful tool that we need – Sandjet – to do that”.
However, and as you point out, there will be a requirement for additional funds should the upcoming flow-testing be unsuccessful (which, btw, I consider to be a low probability event, especially considering what we now know about the reduced formation damage in the A sands). In this unlikely situation then it would obviously be prudent to postpone drilling MOU-5 and direct the use of funds to ensure that commercial flow rates are achieved for CNG (e.g. via acid wash / squeeze; side-track; a new well etc.). I am extremely confident that Paul and Lonny will have pre-planned for every eventuality.
So I agree with you that the overriding priority is flowing gas and Paul said as much recently:
“We are however fully aware that we need to flow gas from our main zones in the most effective manner after accounting for formation damage, and we have confidence in Sandjet achieving that objective." [RNS 20/2/24]
As such, I’ll re-phrase my earlier post and say that, assuming commercial flow rates are achieved from the upcoming testing programme, then I’d consider spending $3.5M on appraising the Jurassic to be a ‘no-brainer’ in terms of the risk / reward proposition, with the aim of optimising shareholder value via a corporate transaction.
Hi Keith,
The only thing I’d add (slightly tongue-in cheek) is that the $14Bn revenues for the Jurassic is based on the 3P numbers of 637Bcf gas and 79mmbbls of condensate.
But the 3P numbers are based on only 50m of reservoir and, as we know, we’re targeting nearly 5x that in our 249m of closure.
So I don’t want you to be accused of having joined the FUD brigade by claiming we’re ‘only’ targeting $14Bn in gross revenues 😉!
Also, from the Proactive interview Paul did last July, he said:
“… we are more than excited by the Jurassic which is a brand new play, everybody that’s reviewed what we’ve done at present recognises the potential of the Jurassic structure.”
So if possible farm-in partners have recognised the potential of the Jurassic it makes perfect sense for Paul to want to better define its value before any M&A.
I see drilling MOU-5 as a no-brainer at a well cost of $3.5M particularly since, as you mention, “The Company is fully-funded to drill MOU-5 using currently uncommitted, discretionary, cash on the Company's balance sheet.”[RNS 5/2/24]
Morning all,
The TRACS CPR outlines the commitments for the various stages of the Guercif licence (see p6 [p99 of the Prospectus]) and there’s a requirement in the first extension period to “Acquire and Process 200 sq. km. of 3D seismic over Tertiary prospects including AVO, Rock” at an estimated budget of $2.5M ($12.5k / km2, consistent with Keith’s estimate of costs).
https://wp-predatoroilandgas-2020.s3.eu-west-2.amazonaws.com/media/2023/08/20230810-Project-Allossaurus-Prospectus-FINAL.pdf
Also, back in February of 2023, Paul covered the issue of 3D in the IMC presentation Q&A (from 47m12s):
https://youtu.be/7xbTMWdGHtQ?si=CJ6Vaki3-gsJ4PwD
“Yes, in the next phase we will have to shoot 3D seismic and that’s part of the commitment. However, we’ve got at least 18 months to 2 years to do that. We do not see that as being a key objective for us… there are parties that are more interested in the oil potentially, one or two parties at least are more interested in the oil. It would be advantageous to us to allow them to shoot the 3D over that part of the licence for equity in Jurassic oil, basically. And we will initially focus on the gas. We have MOU-NE but we’re developing a number of other prospects on the licence. We have to relinquish 25% of the licence this year but we have plenty of fallow areas to relinquish. So I would prefer that we found a partner to progress the 3D in the Jurassic.”
It’s interesting that Paul mentioned 3D over the Jurassic when the licence commitment specifically mentions it being over the Tertiary, but perhaps there will be some wriggle room with ONHYM with regard to slightly amending the terms for the 3D requirement. However, ultimately, I suspect the issue of shooting the 3D will be the responsibility of the next operator, not Predator.
Afternoon Jimmy
As you say, that’s a lot of reservoir! And we only need 1-3mmcfgpd to reach the minimum threshold for a commercial CNG development, which is why I remain very relaxed about my investment in PRD.
At the Proactive presentation last month, Paul stated that the most significant residual risk was the degree of formation damage:
“The risks with the testing is getting through the formation damage. We believe we’ll get through the formation damage but we can’t be 100% certain, nobody can be 100% certain of anything in the oil and gas business, but we believe everything’s lined up to do that, and we’ve got the most powerful tool that we need – Sandjet – to do that.”
So the comment that really caught my eye from the RNS released the other day was relating to the A sands:
“We have also encountered shallow higher pressure gas that was better protected from formation damage whilst drilling by the setting of a shallow casing string. This can also be perforated and tested now using Sandjet, even though it sits behind two casing strings.”
So the probability of successfully flowing gas above the threshold of commerciality from the A sands has increased significantly due to the relatively low levels of formation damage in this zone. As Paul said last month, the A sands alone hold about 30Bcf of gas which is worth around $150M net-backs to PRD (cf our current Mcap of £55M).
And then there’s the huge upside from all the other reservoirs as you mention.
As for the rationale for drilling the Jurassic in the near-term, my feeling is that Paul’s preference will be to sell PGVL asap after successful flow testing. However, if we don’t drill the Jurassic before any sale then this would potentially leave too much value on the table, IMO. Again, in the Proactive presentation, Paul stated clearly that he has no intention to develop the Jurassic as it’s far too big an undertaking. But a successful MOU-5 result will hopefully ensure an extremely competitive M&A process.
Finally, on the topic of O&G companies being grossly undervalued (as discussed earlier), it’s interesting to read that ADNOC has been sniffing around BP. With BP’s P/E of ~7.5, it’s no wonder it’s a potential target... as I’m sure we will be too once the flow rates and MOU-5 drill results are announced:
https://www.reuters.com/markets/deals/uaes-adnoc-recently-eyed-bp-takeover-target-sources-say-2024-04-11/
A quick update on the activity of the SVR 101 from Sound’s Q&A today:
https://vimeo.com/932588030?share=copy
From 2m 43s
“We’ve also got the SVR 101 rig coming to us after its activity that it’s doing at the moment. It’s drilling a well in the west of the country, then it’ll move to a different operator and drill a couple of wells. These are quick, shallow wells so we expect to see the rig in Tendrara end of May for commencement in June”
So it does sound like SDX is currently using SVR 101 after all, then it’ll go to CHAR for 2 wells as expected. But it’s still not clear if we’ll take the rig for MOU-5 after CHAR or after SOU? But it seems that, at best, we’ll have access to the rig towards the end of our Apr-May drilling window or, perhaps more likely, there may be some drift into June?
Whatever the precise schedule (and, IMO, a week or two here-or-there isn't of great significance), that does fit with Paul’s recent comments that there will be “...of course, Titanosaurus to whet the appetite before the summer holidays for the equity market.”
See RNS 7/11/23:
"MEEI and PRD have jointly agreed to work collaboratively together with a shared common goal of
developing and realising new oil production from Cory Moruga.
Under the Letter Agreement in Relation to Various Outstanding Matters Regarding the Moruga Block Exploration and Production Licence dated 27 August, 2007 (the "Agreement") the MEEI calculate the HOFO incurred by previous operators to be US$4,192,690.
It has been agreed with the MEEI that this will be satisfied by a payment oUf S$ 1 million to the MEEI by PRD on the Completion Date together with a quarterly arrears payment of 7.5% of gross revenue derived from the sale of all production on Cory Moruga up to 250 bopd and 12.5% of gross revenue derived from the sale of all production on Cory Moruga above 250 bopd until the balance outstanding of US$3,192,690 of the HOFO is recovered by the MEEI.
Through these negotiations with the MEEI there is now commercial alignment and a common
objective of accelerating the production from Cory Moruga at the earliest opportunity.
For the avoidance of doubt there is an element of risk-sharing in that if production is not achieved then the HOFO liability falls away."
Interesting to note that the reservoirs for MOU-4 have increased in thickness compared to the values given in the RNS of 13/7/23 (‘MOU-4 update with results of NuTech petrophysical analysis’):
“Unexpected 58 metres of gross M1 Sand potential reservoir interval, interpreted by NuTech as gas-bearing” [was 50m]
“21 metres of gross sand in primary target with improved reservoir characteristics compared to MOU-3 and interpreted as gas-bearing by NuTech petrophysics.” [was 12m]
Reminds me of the saying: “Big fields always get bigger...”
We also now know that the CNG development can be fully accommodated (50cfgpd) by the shallow and intermediate reservoir sands… meaning the primary target Moulouya fan is surplus to requirements! (at least for CNG). This reminded me of Paul’s comments during the Proactive presentation back in May last year:
“What the h*ll do we do with all the gas….?!”🤯
(cont...)
"In terms of value….
Ram Head: it’s the largest undeveloped gas field off-shore Ireland. On the CPR, it’s over 2Tcf recoverable gas. I don’t believe it’ll ever reach those heights but it shows you the scale of the opportunity, it’s a huge Jurassic structure.
Gas can contribute to security of supply and ameliorating energy price rises in Ireland – they [govt] are beginning to realise that.
The minister even talked about a possible explosion on the inter-connector. We told him 3 yeas ago that that was a possibility… so finally, it’s beginning to dawn. Unfortunately, the rest of Europe has moved on and Ireland is at the back of the queue for everything.
When it comes to value, we look at Corrib South of being of interest to the Corrib owners, naturally, because that’s potentially discovered gas, it’s into the infrastructure.
And in Ram Head, we have gas storage opportunities… we have a legal right [to the Kinsale pipeline]… nobody else has that right (apart from Barryroe…)… there’s absolutely nobody else that can say that they have some form of legal right to utilise that infrastructure. Why’s that important? Because for our Mag Mell project, FSRU LNG, would utilise that infrastructure for putting gas into the infrastructure and for storing gas at Ram Head as well. So it puts us in a unique position – nobody else can compete with us offshore Ireland on an offshore FSRU LNG solution and that’s what we’ve been plugging away at for the last 9 months.
We’re very confident that, ultimately, there is value in Ireland, significant value. But we are never going to develop our assets in Ireland, we’re going to move them on to someone who does want to develop a big position in Ireland and who has the capacity to do it."
And a reminder of Paul's concluding remarks from the podcast:
"Your market cap is always not going to reflect what the potential value of the company is… it only takes one well or one agreement to change that value and it will be changed overnight…"
Just as a re-cap, these were Paul's comments on Ireland from the Sunday Roast podcast last April:
"I did the original exploration work on Corrib… always saw Corrib South as an analogue of Corrib, it’s a relatively similar-sized structure, similar geology and only 18kms from the Corrib field.
Shell decided it [CS] was too small and they dropped it.
Gas prices have increased about 5X since then so size doesn’t matter any more, it’s the value in the ground.
CPR gave us just over 900Bcf recoverable (gross)
There is a partner, Theseus Ltd., with 50%. That partner was created before our IPO way back in 2014/15. I own 50% of Theseus which is all declared and my partner Vivian Caston (see links) owns the other 50%, and that is reversible at any time into Predator to gross the asset up to 100% and then, effectively, 100% of the resources. That’s about the size of Corrib in the upside case… it has been vetted by two Corrib owners over the last 3 or 4 years and nobody has said ‘no’!
I won’t say we’re winning because you never win in Ireland, it has to be a compromise, but only last week the Minister gave an interview with the Sunday Business Post in which he talked about a 180-degree U-turn on LNG in Ireland. That’s the beginning of of the finger coming out of the dyke in my view, that the realism has to happen, irrespective of the small-scale political opposition to LNG which will always be there. This is bigger than that, this is about the survival of security of supply, this is about the energy crisis, this is about spiralling energy costs… spiralling energy costs are only occurring because the energy transition wasn’t thought through at an early stage to allow indigenous gas and LNG to be developed to cushion price rises…
[Ireland] had the opportunity to be the first-mover in Europe, we gave them the first opportunity with the Mag Mell project in 2020, they turned themselves round 180 degrees to be the last in Europe, and they will move eventually, they have no choice.
(cont...)
Hi MEM,
After Paul’s recent comments regarding communication with the GSRO and the information within DECC’s ‘Securing Ireland’s Gas Supplies’ report, I think it’s reasonable to assume that there’s a decent chance that the SA will be granted in the near-term.
I do wonder, though, about the precise nature of any farm-out deal and hence its absolute value to PRD in the near-term.
The main negative regarding the farm-out is that, as we know, it’s likely to be uncompetitive. Vermilion is really the only company in town (literally). Without DECC opening up Ireland’s offshore licences and encouraging new O&G companies to enter Ireland, which the above-mentioned report suggests is highly unlikely, I suspect the best that we can expect from a tie-up with Vermilion will be a ‘realistic’ deal, but hopefully one that is good enough for both parties.
I’d be interested in what others with industry experience think is possible here, but I’m provisionally pencilling in a free carry on a 3D survey plus an option on a well (full or partial carry), with Vermilion taking over as operator and gaining perhaps 60% of the licence. That’ll leave PRD with 20%, with the other 20% held by Theseus (although, of note, Paul also mentioned in the Sunday Roast podcast back in April of last year the option to reverse Theseus’ holding into PRD, to effectively give PRD 100% of the licence). However, I’m not personally that hopeful that any deal will mean that we’ll receive much, if any, cash... although I’d be delighted to be proved wrong of course!
Clearly, any deal for Corrib South will still be a huge step forward especially as it seems that the market is currently assigning zero value to our Irish assets. My feeling is that the granting of the SA and a farm-out with Vermilion may have a near-term value in the order of our current Mcap (up to £50M), though I’m speculating here. But even this will mean that our considerable assets in Morocco and T&T will then be in the price for free, showing just how incredibly undervalued PRD is, IMO.
I’d be really interested if anyone has any further thoughts on what a potential deal with Vermilion might look like. Thanks in advance.
Morning all,
I’ve just been listening into Malcy’s interview with Eytan Uliel from CEG and there was a brief discussion on Trinidad which may be of some relevance to PRD:
https://youtu.be/1-h4CieFoV4?si=X78oR00TT5qj45nE
See from 27m41s
“Trinidad washes its face, it produces 300bopd, churns along day-in-day-out. IT’S NO LONGER CENTRAL TO ANYTHING, all the value here is in Uruguay.
We tried several iterations of how to improve the business in Trinidad, none of them worked. I’m the first to admit that we tried this, we drilled a well there and that didn’t work. We tried some EOR techniques, that didn’t work.
And really, the thing in Trinidad is that you need scale, you need to have a bigger production base given the fiscal terms, given the nature of production in that country. SO OUR ASSETS BELONG IN SOME STRUCTURE WHERE YOU HAVE GREATER SCALE.
And now that I’ve got the farm-out done with Chevron and that was taking 99% of my attention, the ATTENTION OVER THE NEXT FEW MONTHS [IS] WE NEED TO FIGURE OUT A SOLUTION FOR TRINIDAD. How do we grow that business, or GET IT IN WITH OTHER ASSETS, or do something where you can turn it from being a small production business that makes no money, but doesn’t lose money, to being something better than a small production business that makes a little bit of money.
AND THAT WILL HAPPEN OVER THE NEXT FEW MONTHS I HOPE.”
Of course, we don’t know precisely what Eytan has in mind...
But we do know from previous RNS’s (and as previously discussed on here) that PRD and CEG had “agreed to establish a collaboration in relation to CO2 EOR activities and projects in other areas in Trinidad” [PRD RNS 30/8/23] and that, according to the CEG RNS of the same date “the parties HAVE PROGRESSED DISCUSSIONS seeking to re-establish partnering arrangements in relation to OTHER ASSETS, including in particular a POTENTIAL JOINT-VENTURE OR ACQUISITION OF THE INNISS-TRINITY FIELD.”
[all emphasis my own]
So it’s clear that:
• PRD and CEG have been having discussions about the various CEG assets in Trinidad
• CEG considers its Trinidad assets to be non-core and so would presumably be open to an exit
• Eytan hopes to have a solution to Trinidad within the next few months
This is all speculation, of course, but might this be the perfect opportunity for Paul to re-establish our CO2 EOR operations in Trinidad via acquiring some or all of CEG’s assets? If so, it’s possible that we’ll have news on this fairly soon.
“Lonny and I were very upset this morning about the share price reaction to what we put out. And you can see from the portfolio we have here. So we decided that we’ll keep all options open, so we are looking at a private equity buyout as another option for us to secure the value in the assets. So that’s something we’ll be looking at over the next couple of months but it makes sense to us because the market is simple not giving us the value for our assets.”
“It’s not really a bombshell, it’s just pretty obvious right that believe that the value in what we have, particularly in Morocco, is not being expressed in the market. So if private equity are willing to offer a lot, lot more that what the market values it for, why wouldn’t that be good for shareholders?” [Q&A]
“So the testing will create the value. We wouldn't look at private equity now before the testing but you can see from those figures it would be easy to structure a deal where you’ve got value for what you’ve tested and then you’ve got increase in value through royalties and bonus payments etc. down the road. And for private equity to get into CNG development in Morocco, for example, would be a fantastic deal for them. And maybe we would structure it where the subsidiary is the one that goes into the private equity vehicle, all different ways of structuring it. But we are not going to sit around the let the public market destroy our value and our creditability and the effort we’ve put in over many years to create this situation, and then just like Eytan in world-class farm-out he’s just done, we’re not going to sit there are just lose value. Our peers understand the value and, in fact, every time the share price drops, it makes it more attractive to private equity, it makes it more attractive to be bought out at a low price and that does not serve to benefit our shareholders.” [Q&A]
“I don’t see any major risks. The risks with the testing is getting through the formation damage. We believe we’ll get through the formation damage but we can’t be 100% certain, nobody can be 100% certain of anything in the oil and gas business, but we believe everything’s lined up to do that, and we’ve got the most powerful tool that we need – Sandjet – to do that. In terms of the exploration, the risk is that the trap isn’t charged for some reason or that it’s not as big as we think. But the bottom line is that we don’t have to find too much for it to be commercial in Morocco. So, in some ways, better to find less because it’s easier to develop than more. In some ways, it’s better to find gas not the gas-condensate, so that would be a risk. In Trinidad, we have very little risk, everything’s producing, we work very well in the country. Ireland, well the risk is the next general election and making sure that it’s not the same coalition that it is now…” [Q&A]
“Now everybody sneered at the NuTech logs when we started this process, everybody. However, NuTech has been proven right in every single case without exception since then. So we believe NuTech is the key to unlocking value, not just here in Morocco but also in Trinidad where it’s never been used before.”
“[Re Titanosaurus]... this prospect, is huge. 177Km2 of closure. This is the limit of structural closure. Where we drilled we had maybe 5 or 6 metres of structural closure. Where we are going to drill we have 249m of closure within the carbonate. We’re using 50m only for the 3P case. And our source rock work recently shows that this source rock here, just below the carbonate, is in the oil window. It’s likely to be a gas-condensate source, sourced mainly from off-structure so that’s why we’re putting in a condensate case rather than an oil case or a pure gas case. It’s likely to be a wet gas... So it’s a world-class prospect.”
“Obviously, as I said before, to develop this prospect [Titanosaurus] would take a huge effort including building a gas-condensate processing plant. We’re not in that business, we’re in the business of selling it on. We’re not the junior BP here, we’re a small company, entrepreneurial, find it, talk it up, prove it, sell it.”
“… the value to us in Trinidad in gross revenues is again in the order of $1.66billion gross revenues. So Trinidad offers us that second string to our bow, onshore production. We’re re-inventing the economic model for Trinidad on the basis of Sandjet, going in and perforating things that have never been perforated before, and on the basis of Nutech, identifying those horizons that [had been] missed previously in the 1950’s and 60’s.”
(cont...)
“And the big bonus [with Sandjet] was it can actually perforate through 2 thicknesses of casing, so we can now perforate that shallow gas that we found at 339m safely in this well as well, instead of drilling a new well. So we can add that to our perforating programme, and that maybe is connecting with somewhere in the order of 30Bcf of gas which in real terms, net-back to us is like $150M, so not to be sniffed at to add that to our programme.”
“With Sandjet we can run one run and take 20 samples. So this is just the key sands in MOU-3, so for 20 penetrations we can perforate 20m of sand, versus 4m of sand with the perforating guns.”
“What we can also do is have an example here, this is the Rharb basin and this is our Ma sand. Similar thicknesses, our sand is a Feldspathic sand which means has a different mineralogy so it has a slightly different log character but it’s a clean sand on the gamma log. That well in the Rharb basin flowed 15mmcfgpd [from 4.4m of pay]. We’re being ultra-conservative saying we can flow maybe 3 or 4 mmcfgpd out of this. So the potential, and remember you’ve got 20m of sand in just this one well, is huge in just this interval, and that’s why we’re focused on this interval.” [bottom slide 11]
“Sandjet in Lithuania, for example, 10 years ago, they perforated a zone… that had been perforated with guns, it flowed 0.9 bopd [due to] formation damage. Sandjet came in, [and it flowed at] 917 bopd. So you can see the kind of uplift, proven uplift that you’re getting with Sandjet. This isn’t factored into our test results, or flow rates, or what we expect, but it’s a potential upside that will be a gift to us if it obviously transpires that it works in this way… which it will!” [slide 12]
“We’re in a very good area for the potential CNG development, there’s no major environmental issues, we’re right next to a highway. And then the real bonus, which is the eye-catching bonus, is when we sampled the gases when we were drilling MOU-3, we did some work recently and it’s biogenic gas, it’s up to 99.57% pure methane. Perfect for CNG, perfect for what we want, very little processing.”
“And just to put it in context, you might not know too much about biogenic gas, but 20% of the world’s gas reserves are biogenic gas. The biggest gas fields offshore eastern Mediterranean, including offshore Greece and further east are from biogenic gas fields. So it’s a great asset to have in this particular basin. And recently we’ve just completed an analysis of what could be generated in our area here of about 100km2 where we think all the potential lies, and that comes out as 7Tcf. And that is not a big number for biogenic gas. Biogenic gas will generate huge volumes of gas, so we know we have the potential not only to fill our traps but to fill any other traps that are developed.”
(cont...)