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ECO ATLANTIC OIL & GAS LTD <ECOE.L> : BERENBERG STARTS WITH 110P TARGET PRICE -

Reuters News
11-Jan-2019 05:52:52

Courtesy of maccamcd on a d v f n

Finncap research out today

2019 Top Picks - It is always darkest just before dawn and we are starting to feel that – disaster aside (eg no-deal Brexit followed by a Labour Government) – after a proper correction in Q4 2018 the market will soon start to find a level from which the best stocks will again emerge. On this basis, we have chosen ten of our favourite ideas for 2019.

Our top pick for 2019 in the Oil sector is Eco Atlantic. Investors learnt the hard way in 2018 that exploration is a high-risk business. However, if you’re going to own any frontier exploration play, probably best one that sits next door to >5Bboe of discoveries in the most exciting exploration province since the pre-salt Santos basin in Brazil. Following a strategic alliance and farm-out, Eco is cashed up and ready to start drilling this acreage. The first well on the 250mmbbl Jethro-Lobe prospect, worth an estimated 18p/sh risked (88p/shunrisked), is slated to start drilling in Q2. Eco’s Orinduik block also contains an extension of XOM’s Hammerhead discovery, which is a candidate for the second drilling slot. We have a risked-NAV for Eco of 96p. However, given the attractiveness of its acreage, a bid for the company cannot be ruled out. Under this scenario, we believe a large IOC could justify paying north of 300p/sh.

The Exxon PSA also allows it to recover all investment costs out of profits.

"The Production Sharing Agreement (PSA) between Guyana and ExxonMobil’s affiliate, ESSO Explora-tion, and Production Guyana Limited, and partners CNOOC NEXEN Petroleum Guyana Limited and Hess Guyana, states that 75% of the revenue earned from production will be used to recover the companies’ investment. This was estimated at US$5 billion by the year 2020, when production is set to begin at the Liza-1 well. The remaining 25% —profit oil — is to be split evenly between Guyana and ExxonMobil.

Exxon has already racked up over US$900 million in recovery costs as of 2017, for which some US$460 million is attributed to pre-contract costs."

https://www.stabroeknews.com/2018/news/guyana/12/16/projected-cost-for-exxons-liza-phase-1-slashed-by-us700m/

According to advertisements in yesterday’s Sunday Stabroek, Exxon’s local subsidiary, Esso Exploration and Production Guyana Limited (EEPGL) is set to begin a three-month drilling operation on January 5th, 2019 at the Tilapia-1 well site within the Stabroek Block. Tilapia-1 is located 3.4 miles (5.5 kilometers) west of the Longtail-1 well. Eleven vessels will be involved in this operation: Noble Tom Madden, M/V Cat Island, M/V Eland, M/V Oryx, Clarence Triche, Liam J Mc Call, Paradise Island, Sanibel Island, Horn Island, Robert Adams and Jack Edwards.

The drill site is approximately 111.4 nautical miles from the coast of Guyana and covers an area of one square kilometer.

Meanwhile, on January 2nd, 2019, EEPGL will begin a three-month operation at the Haimara-1 well site. The Stena Carron is the drillship and it will also be supported by the same vessels being used for the Tilapia-1 well.

https://www.stabroeknews.com/2018/news/guyana/12/31/exxon-drilling-two-new-wells-offshore-guyana/

Held at the same place, near enough the same day of the year and same AGM and special resolutions as last year.

IJwT

FinnCap, in their recent note, also expect the final 3D report in Jan/Feb. Good job Total didn't wait for the official farm-in criteria of final report+120days!

"?January – February, we also expect a Guyana final 3D seismic report – this should derisk prospects in the western section of the Orinduik block and identify additional Tertiary prospects. Of note is the fact that the first prospect to be drilled, Jethro Lobe, is Tertiary."

Indeed schlemiel. This border dispute to the north has been going on for decades, with a previous seizing of a seismic survey vessel over 5 years ago.

https://www.caribbeanlifenews.com/stories/2018/7/2018-06-29-bw-guyana-venezuela-border-cl.html

It's not new news and Venezuela dont have a hope in hell of winning, especially when they don't even want to defend themselves before the ICJ.

"Does anyone know if any part of Orinduik is within the disputed zone?"

No

On the subject of exploration, The Stena Carron will be back in Guyana next week after it's 10 year scheduled maintenance, having left Gran Canaria last weekend.

Hess has previously said the company will spud the Aimara prospect in late December.

So that will be 3 drill ships on Stabroek and from what I've read and heard from Hess/Exxon...Noble Bob Douglas to continue development drilling on Liza, with the Stena Carron and Noble Tom Madden split between exploration and appraisal in 2019.

Correction
-non
"area still to be surveyed that is not in the disputed waters"

IMO, it just means that Exxon may need to look outside their block, if they need more acreage :-)

I'm really surprised that Exxon chose to survey in the disputed waters of Stabroek 200km NW of Liza, before the international court of justice ruled on the border dispute!

After all, there's a massive area still to be surveyed that is not in the non disputed waters to the NW. Serves themselves right IMO.

By OilNOW - December 19, 2018

Stabroek is the “gift that keeps giving” offshore Guyana, but industry analyst Wood Mackenzie reminds that “it’s not the only block in the country” as drill campaigns are set to get underway in two other blocks with potential for major discoveries.

“In-board of the Stabroek Block we have two blocks that we expect to be drilled over the coming 12 to 18 months. The Kanuku Block, which is operated by Repsol and the Orinduik Block which is operated by Tullow. We’re hoping to see some wells going down in those blocks and we’ll see how they do,” says Julie Wilson, Wood Mac’s Research Director, Global Exploration.

Tullow is confident that it will strike oil off the Guyana coast where it has a 60% equity in the Orinduik Block and 37.5% equity in the Kanuku Block. Executive Vice President, Ian Cloke, said favourable prospects offshore the small South American country point to a discovery by the company when it undertakes its 2019 drill programme. Cloke’s confidence is buoyed by a record 10 discoveries made by US oil major ExxonMobil in the adjacent 6.6 million acres Stabroek Block.

3-D survey acquisition was completed in September 2017 in Orinduik, and Total got in an option agreement with Eco Atlantic to acquire a 25% working interests of the block. 3-D survey acquisition was also completed this year in the Kanuku Block, and Repsol sees Kanuku as a good prospect for medium-sized discoveries up-dip from the Liza trend.

Wilson says the Kanuku and Oriduik blocks, being in-board, are likely to be canyon type prospects rather than the fan, further outboard.

https://oilnow.gy/featured/kanuku-and-orinduik-are-next-blocks-to-watch-offshore-guyana/

From 4th Dec

http://info.oilandgascouncil.com/presentation/Gil-Holzman

and :

Without even commenting on why they would do it in 2019, when they haven't done so in the last 6years when the price was low so would have got them a lot cheaper, or that any option price would be at a premium to the share price(using Black-Scholes model) if they decided to award them...

That's the problem with reading Blogs, which in this case is written by someone who looks like he's just out of college(check his Twitter)

If this person paid a bit more attention to detail then he wouldn't come out with 40%(8 directors x 5%).

Its not 5%, it's up to 2%, as nearly all the executive team are consultants to the company under their agreements.

The Company, its wholly owned subsidiary Eco (BVI) Oil & Gas Ltd. (collectively and individually “Eco”, as the context requires), and Gil Holzman Holdings Ltd., a company wholly-owned and controlled by Gil Holzman, are parties to an Amended and Restated Consulting Services Agreement (the “Holzman Agreement”) pursuant to which Mr. Holzman agreed to provide his services to the Company in the capacity of President, CEO, and director

Eco and The M&S Group Inc., a company wholly-owned and controlled by Alan Rootenberg, are parties to a Consulting Services Agreement (the “Rootenberg Agreement”) pursuant to which Mr. Rootenberg agreed to provide his services to the Company in the capacity of CFO.

Eco and Colin Kinley are parties to an Amended and Restated Supplemental Consulting Services Agreement (the “Kinley Agreement”) pursuant to which Mr. Kinley agreed to provide his services to the Company in the capacity of COO and director

Eco and Rivonia Capital Inc., a company wholly-owned and controlled by Alan Friedman, are parties to an Amended and Restated Consulting Services Agreement (the “Friedman Agreement”) pursuant to which Alan Friedman agreed to provide his services to the Company in the capacity of VP and director of the Company

Eco and Ninety Six Capital Ltd, a company wholly-owned and controlled by Gadi Levin, are parties to a Consulting Services Agreement (the “Levin Agreement”) pursuant to which Mr. Levin agreed to provide his services to the Company in the capacity of Finance Director.

Effective January 1, 2014, the Company entered into a consulting services agreement with to GP International Consultants Ltd, a company wholly-owned and controlled by Moshe Peterburg (the “Peterburg Agreement”),pursuant to which Moshe Peterburg agreed to provide his services to the Company in the capacity of Chairman of the Board and director.

Dutchover(first ever post)

I already made my thoughts known on this on Stockhouse, why didn't you post that too? :

Those exact words and terms for issueing Options have been in every MIC and have been voted on(and passed) in every AGM since at least 2012!

Yet since 2012(6 years) they haven't been at the "trough", as only 250,000 options have been granted and that nunmber split over 3 years.

On June 8, 2017, the Company issued 250,000 stock options to a director of the Company pursuant to the terms of the Company’s stock option plan. 1/3 of said options vested on June 8, 2017 and 1/3 will vest on each of the next two anniversaries thereof.

Stock options aren't "free", with the option price normally set at a higher price to the current share price.

On admittance to trading on AIM:LSE in Feb 2017 there were 7,870,000 options outstanding which were granted in 2012 at $0.30 CAD, for a period of 10years.

1.2m were excercised in 2016 and the company received $360,000. Yes they paid for them, they weren't "free".

On January 19, 2018, the Company announced that it had issued 1,200,000 new common shares in the Company pursuant to an exercise of share options at a price of $0.30 per common share for total proceeds of $360,000.

7,870,000 -1,200,000 + 250,000 = 6,920,000, which is the number outstanding today

Not any sign of feeding at the trough in the last 6 years when the price was low.


Ps There are already 8 Directors, so no more.
Read more at http://www.stockhouse.com/companies/bullboard/v.eog/eco-(atlantic)-oil-gas-ltd?postid=29109776#WTKUzEz977Mv6Sr2.99

Hasn't ECO already discovered oil with Hammerhead extending onto its block? Tullow, Total, Exxon, Hess and Cnooc all know to what extent, which gives them an advantage in offering under 325p/share.

Courtesy of maccamcd11 on A D V F N


Close-ology
Investors have learnt the hard way this year that exploration is a high-risk business.
However, if you’re going to own any frontier exploration play, it’s probably best to
have one that sits right next door to >5Bboe of discoveries in the most exciting
exploration province since the pre-salt Santos basin in Brazil. Following a strategic
alliance and farm-out, Eco is cashed up and ready to start drilling this acreage in
2019. The first well on the 250mmbbl Jethro-Lobe prospect, worth an estimated
18p/sh risked (88p/sh unrisked), is slated to start drilling in Q2. Eco’s Orinduik block
also contains an extension of ExxonMobil’s Hammerhead discovery, which is a
candidate for the second drilling slot. We set our risked-NAV based price target at
96p. However, given the attractiveness of Eco’s acreage, a bid for the company
cannot be ruled out. Under this scenario, we believe that a large international oil
company could justify paying north of 300p/sh. We initiate coverage with a Buy rating
and 96p price target.

?Highly prospective acreage. Eco’s Guyana acreage sits next door to ExxonMobil’s
Stabroek block, where since 2015 it has enjoyed over an 85% drilling success rate,
discovering >5Bboe of oil in 10 fields. Geology does not respect borders and one of
these discoveries, Hammerhead, is believed to extend into Eco’s acreage.

?Catalyst rich. ExxonMobil’s Guyana partner, Hess, will hold its Investor Day on 12 December, which will see the Stabroek block and its development potential high up the agenda. At least two wells are expected to be drilled on Eco’s neighbouring Orinduik block in 2019. The first well will be on the 250mmbbl Jethro-Lobe prospect,
starting in Q2. This offers investors exposure to near-term, relatively low-risk, highimpact drilling, more akin to appraisal than exploration. We estimate that this prospect has a risked-NPV net to Eco of 18p/sh (unrisked 88p/sh).

?Funded for multiple wells. Following the recent $12.5m farm-out to TOTAL in Guyana and a Strategic Alliance with Africa Oil, Eco is well funded. Cash of C$27.3m at end-November should be sufficient for multiple drilling events.

?Commercial management team. This is not a management team that will look to pursue development in the event of exploration success, preferring to sell up and move on. Looking at our NAV through an M&A lens: a large suitor would have the balance sheet to drill/develop without partnering, removing the need for commercial
risking. It would also be able to accelerate the pace of drilling activity and hence development timing. In the event of a competitive bid situation, it could also factor in a lower discount rate due to a much lower cost of capital. Applying these elements gives an M&A-based NAV of 325p/sh, or 500p/sh in a competitive bid situation.

Spot on Maverick, obv didnt get his price

Nothings been delayed, what are you talking about?

First drill is coming earlier on a new tertiary prospect, which an amazing COS of 44%, with the second coming straight after likely to be Aurituk.

From the Total CMD presentation Aurituk looks like it would also be part of Hammerhead, but is divided by a fault, so it's a seperate prospect.

As for Latuk, it's updip of Liza in the UC zone. Drilling of tertiary zone prospects have all been derisked with Hammerhead so close.

Meanwhile they're analysing the geofizz on Hammerhead, with the outcome of who owns what likely(imo) before Jethro is even spudded. Plus the group saves $40m.

Like Gil says you don't need to drill a "sure thing"

I can't see ECO still being around at the spud, with a discovery around the corner in hammerhead being over our block and the high CoS of Jethro. What price though now? A cheap $200m(£1.50) now might get us.

As we thought, ECO are highly likely to already have a discovery in Hammerhead as it goes into Orinduik, so no need to drill a well there, which the following Upstream article talks about...

“We consider Hammerhead in many ways to extend into our block, meaning that Hammerhead is a discovery also on our block,” Holzman said.

“We believe that it will be some time in the near to mid-term future subject to unitisation talks and we (will) try to start those talks based on the geophysics, which are very clear to all parties, instead of spending some $40 million on a well that basically nobody needs to drill.”

Holzman said the partners may be in a position in January or February to nominate the second well on Orinduik, although he agreed it is most likely they would drill on Aurituk next, with both wells possibly drilled back-to-back.

“I think eventually this block can easily be a target for 10 or more wells,” he said.

Eco, which is a 15% stakeholder in Orinduik, has put the estimated net cost to it of the first well at $7.6 million, although Holzman cautioned that the company was being conservative on the high side with that estimate.

With Tullow on 60% and Total on 25%, this would assume a gross well cost of $50 million, which would be very high considering current drillship dayrates.

However, Holzman explained: “Because it is the first well, we are probably going to put some extra casing, etc, just to be on the safe side.”He also said the cost assumes a duration of 43 days to drill the well, whereas ExxonMobil in reality is drilling its wells on Stabroek in 20 days or less, he added.

“There are two candidates at the moment, both with the same daily rates, both confirmed that they can drill in our timeframe,” Holzman said of an impending rig charter, without identifying the finalists.