from that other BB3 Jul 2019 21:31
northpole2: Spotted this extract from an "Energy Matters" note put out by Finncap this morning, they send a daily note to all their clients on what's happening of note in the oil & gas space. Makes interesting reading. Columbus Energy Resources AGM update CERP has been on a tear since our Trinidad & Tobago deep dive report in mid-June, with the shares up 22% since publication. Last Friday’s AGM proved a key catalyst, with the company providing greater clarity on its upcoming SWP (South West Peninsula) exploration campaign. CERP has so far identified 12 prospects in this region on seismic, two of which have been matured to drill-ready status: - Clove, a shallow prospect (2,200 ft) targeting the Upper and Middle Cruse with P50 oil in place of 1.7 mmbbls and a 66% Geological Chance of Success (GCoS). - Saffron, a deeper Lower Cruse prospect (4,000 ft) with P50 oil in place of 53 mmbbls and a 45% GCoS. The P10 upside case is 133 mmbbls! These are very low risk factors for exploration wells, reflecting historic drilling and production in the area. In both cases the biggest risk is the trapping mechanism due to geological complexity and compartmentalisation. Drilling of these prospects is cheap – US$0.5m and US$0.8m respectively – and a high powered Trinidadian rig has been selected. This rig has been idle for a year, so will need to undergo extensive testing before being used in the field. Nevertheless, drilling is expected to start in September and the wells take just 2-3 weeks each to complete. Critically, these prospects are close to existing infrastructure, so can be hooked up and start producing cash flow very rapidly. In addition, the potential economics of any development have been greatly enhanced by the renegotiation of the terms of their leaseholder licenses. The larger and deeper of the two prospects in particular, Saffron, is a potential game changer for CERP. Even assuming a conservative capex and production profile, CERP estimates Saffron has an NPV10 of $79m in the success case. Moreover, the development can be funded from cash flow if so desired. This is by no means the biggest opportunity in the drilling inventory either – the largest is ~400 mmbbls, but CERP needs to think about whether to pursue a farm-in partner for something on this scale. On the M&A front, a new country entry is expected over the next two months. The block being negotiated on ground floor terms is located onshore in a proven hydrocarbon basin and is adjacent to a producing field, so is close to existing infrastructure. It also has existing oil in place, so sounds more of an appraisal/development opportunity than pure exploration. In addition to this, CERP has acquired a second workover rig in the US which is expected to be in country and operational by September. This allows it to be master of its own destiny and avoid any local service sector issues/cost inflation as state-owned oil company, Heritage, ramps up its activity levels – with plans to move from 12 to
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