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Financial Discussion - stock market community and forum - Interactive Investor
Financial Discussion - stock market community and forum - Interactive Investor
Pittsburgh Guy on payment rates per barrel
Pittsburgh Guy on payment rates per barrel
Tuesday, February 9, 2010
Monday, February 8, 2010
Sunday, February 7, 2010
GKP McQuarie presentation
http://www.gulfkeystone.com/uploads/macquarieexplorersconferencepresentation.pdf
GKP Daeyeon 7 Feb ' Valuation '
We don't know how many recoverable barrels there are. Could be 15%, could be 20%, could be 25%, could be 30%, could be 35%, could be 40%.
Extended testing will give us a better idea.
At the moment, just over 1B barrels are attributed to GKP, based on the P50 of 4.2B.
So, if the recovery rates are as follows, we can see my guess as to how much goes to GKP. For arguments sake, I'll use 25.5% as GKP'S share of the drill.
1.071 Billion x 15% recovery rate = 160.650.000 barrels to GKP.
1.071 x 20% = 214.2M
1.071 x 25% = 267.75M
1.071 x 30% = 321.3M
1.071 x 35% = 374.85M
1.071 x 40% = 428.4M
Now, if S1 is filled to spill......
Being a long term investor, I'm looking forward to the program ahead, testing results at Shaikan, AB, S2, S3, SA, BB, commencement of production, and hopefully satisfactory contract resolutions.
These are just my views of course. I'd advise people to look at Gramacho's excellent post from the other day.
I still feel these are early days for GKP. If in a year or 18 months, billions more barrels are proved up, via Shaikan 1,2,3 and the other licences (two at 40% excites me).
Just to dream, imagine P1 at S1 is 13B (where's the water?), 3.315B to GKP?
Let's say a very pessimistic value of $2 per barrel. One must be convervative in estimates whilst investing, margin of safety and all that.
3.315B X $2 = $6.63B.
$6.63B X .6 (apprx. exchange rate) = 3.978B quid.
Divide that by (pessimistically diluted to 570M shares for funding)
we have 6.97 pounds per share, but valuing the oil is difficult as it'll only be worth what someone is prepared to pay for it. National oil companies I'd imagine would be most likely to pay more, due to the less important placed on profit and more emphasis placed on supply. This week I really need to look into historical cases of oil company take overs. Addax is my starting point, thanks to millymog for the info the other day. Sinopec were prepared to buy Addax, the Chinese has written off a lot of Iraqi debt. Will Iraq upset the Chinese? I imagine plenty is going on behind the scenes.
Furthermore, although not directly related to oil in the region, I know quite a lot about Korean investment in the area, with the likes of SK Energy, UI Energy Corp, Samchully, Daesung Industrial, KNOC, Ssangyong Engineering, Doosan Construction, Kukdong Construction, and UIENC Anheung Development among others happy to invest in Kurdistan specifically. The korean work colleagues consider Kurdistan to be safer than further south in Iraq.
Although there are many political problems to overcome, I feel secure knowing that GKP has the oil, whereas SEY and DES for example doesn't, which makes those plays decidedly more risky. Furthermore SEY is expensive at the mo imo, and the extraction costs down by the Falklands would worry me, even if oil is found.
The potential upside, as alluded to by many on the board, DGA and the GKP management excites me. Lots of news to come.
A target price of 2 pounds 17 buys the apartment I'm currently renting. Hopefully I'll make the wife happy.
Actually, buying at 11.94p felt like a bigger risk to me, as they had no oil. Buying at 80p doesn't worry me in the long term.
Good luck all.
Extended testing will give us a better idea.
At the moment, just over 1B barrels are attributed to GKP, based on the P50 of 4.2B.
So, if the recovery rates are as follows, we can see my guess as to how much goes to GKP. For arguments sake, I'll use 25.5% as GKP'S share of the drill.
1.071 Billion x 15% recovery rate = 160.650.000 barrels to GKP.
1.071 x 20% = 214.2M
1.071 x 25% = 267.75M
1.071 x 30% = 321.3M
1.071 x 35% = 374.85M
1.071 x 40% = 428.4M
Now, if S1 is filled to spill......
Being a long term investor, I'm looking forward to the program ahead, testing results at Shaikan, AB, S2, S3, SA, BB, commencement of production, and hopefully satisfactory contract resolutions.
These are just my views of course. I'd advise people to look at Gramacho's excellent post from the other day.
I still feel these are early days for GKP. If in a year or 18 months, billions more barrels are proved up, via Shaikan 1,2,3 and the other licences (two at 40% excites me).
Just to dream, imagine P1 at S1 is 13B (where's the water?), 3.315B to GKP?
Let's say a very pessimistic value of $2 per barrel. One must be convervative in estimates whilst investing, margin of safety and all that.
3.315B X $2 = $6.63B.
$6.63B X .6 (apprx. exchange rate) = 3.978B quid.
Divide that by (pessimistically diluted to 570M shares for funding)
we have 6.97 pounds per share, but valuing the oil is difficult as it'll only be worth what someone is prepared to pay for it. National oil companies I'd imagine would be most likely to pay more, due to the less important placed on profit and more emphasis placed on supply. This week I really need to look into historical cases of oil company take overs. Addax is my starting point, thanks to millymog for the info the other day. Sinopec were prepared to buy Addax, the Chinese has written off a lot of Iraqi debt. Will Iraq upset the Chinese? I imagine plenty is going on behind the scenes.
Furthermore, although not directly related to oil in the region, I know quite a lot about Korean investment in the area, with the likes of SK Energy, UI Energy Corp, Samchully, Daesung Industrial, KNOC, Ssangyong Engineering, Doosan Construction, Kukdong Construction, and UIENC Anheung Development among others happy to invest in Kurdistan specifically. The korean work colleagues consider Kurdistan to be safer than further south in Iraq.
Although there are many political problems to overcome, I feel secure knowing that GKP has the oil, whereas SEY and DES for example doesn't, which makes those plays decidedly more risky. Furthermore SEY is expensive at the mo imo, and the extraction costs down by the Falklands would worry me, even if oil is found.
The potential upside, as alluded to by many on the board, DGA and the GKP management excites me. Lots of news to come.
A target price of 2 pounds 17 buys the apartment I'm currently renting. Hopefully I'll make the wife happy.
Actually, buying at 11.94p felt like a bigger risk to me, as they had no oil. Buying at 80p doesn't worry me in the long term.
Good luck all.
GKP Zengas 30 Jan 'Analysis of finance needs'
ZENGAS - 30 Jan'10 - 19:13 - 68530 of 68535
To those calling for the supposed financing to be done and it's weighing on us - why not be patient.
There are many things to consider but only the company can decide on their best course of action and judge the way forward. We've had no problems raising financing to date and successfully increasing the value of the shares even with dilution. I've no doubt that they will succeed again as the directors have not sold and 1 director more recently buying 2m 8 weeks ago at 94p.
With production scheduled for May/June - I would think that the 3rd party interests could be decided soon.
Not only are we carrying pro-rata the KRGs 20% but also pro-rata the 15% 3rd party interest at Shaikan.
Seda drawdown during the past week was £4m. (approx $6.5m).
Seda remaining £12.94m (approx $21m).
Seda facility was £30m when arranged in May 2009 and could just as easily be increased if need be.
Capital needed was $73m as of November 2009 (after the 13/11 Seda drawdown).
Since that - almost $9m has been drawn on the Seda.
That reduces the capital required as in the presentation - down to $64m.
There's been perhaps almost $60m already spent at Shaikan by GKP.
Once the 3rd party is awarded to anyone other than us, that would be circa $9m we'd get back from them immediately (if awarded before MAY).
That would take our capital requirements down to about $55m - whilst having $21m left in the Seda and Algeria still for sale.
GKPs figure of needing circa $73m in the November presentation is also on the basis of us carrying the 3rd party interest costs until awarded. The future costs associated with Shaikan in that estimate are at least another $40m - so that could shave another $6m off our capital needs, if the 3rd party player is introduced at Shaikan (before May).
That could leave us with needing about $49m from here.
(We also have about $2m in 3rd party back-in costs for Akri-Bijeel provided there's a commercial discovery).
In my opinon we might at this time really only need circa $50m then - while also having Algeria for sale and a payment from whoever is awarded the 3rd party back in rights.
We have $21m available with the Seda.
Sheik-Adi/Shaikan 3d seismic is not scheduled until May 2010.
Shaikan -2 scheduled May.
Sheik-Adi -1 scheduled July 2010.
Shaikan- 3 scheduled October 2010.
The capital needed prior to May drillng is for Akri-Bijeel/Overheads, Shaikan testing/Production facilities = circa $23m and we have drawn down almost $9m since that presentation - thus needing another circa $14m - while having $21m left in the Seda.
There's absolutely no real need to have capital raised possibly prior to mid April and by which times we could have the Akri-Bijeel results and maybe something on the Algerian asset - so there could yet be a window of 2-3 months before we need that capital.
.
First production is also showing as May (though i think it could be June before we see it).
I think we are in a very comfortable position financially.
If the 3rd party interest is awarded to another player before May - this definitely will reduce our capital needs !!!
That's why i think the 3rd party interest has to be sorted in the next few months - hopefully prioor to May. After all we are doing the majority of the hard work and i'm sure GKP don't want to see us possibly proving everything up only for a 3rd party to come in and get 15% easy pickings while they pay us maybe $20m. It wouldn't surprise me if GKP want this issue resolved prior to spudding Shaikan 2 in May.
But the other IMPORTANT scenario is this -
TK/AQ/AS and DGA are saying the potential is 18 billion barrels of oil and another 5 b/boe (gas) in place at Shaikan.
Now for the 3rd party interest - ie 15% of that figure above, represents potentially 2.7 b/bo and 750 mmboe (gas ) in place.
Using 30% and 70% potentially on oil/gas as recoverable - that's a potentially RECOVERABLE 810 mmbo and 525 mmboe (gas) in respect of the 15% interest that is up for grabs. Be mindful of Adnan Samarrais respectable successful career, contacts and being chosen by the current Kurdistan oil minister on the Kirkuk study.
Even if the figures are only half of that, the 15% interest represents a potential phenomenal amount of oil and gas for any incoming 3rd party. This is a figure that majors/super majors would be proud of !
With the company now knowing the potential, it would be unthinkable that such a vast amount of potential relating to that 15%, is not fought for tooth and nail by our company. Remember this data has only been verified recently by DGA and would also form the basis for the KRG pricing/valuing the 3rd party 15% interest.
There could be a real bargaining/deal making process going on - hence why we're in no rush or perhaps even in a position to do a deal or announce on major funding.
I'm sure not only would GKP wish to get their hands on the 15%, but also Etaminc and Mol.
Perhaps the KRG will award the 15% amongst the current partners.
The 15% could be priced at up to $200m given it's potential and now that a discovery is made.
A third of that figure could set GKP back circa up to $70m on that basis ?.
Let's face it - if you are prepared to participate in the Akri-Bijeel prospect at only 6.% net, why would you not want to grab a third, half or all of that 15% in Shaikan that has already thrown up a significant major discovery. and perhaps be looking at raising the finance to secure part of it.
One thing is - the KRG won't part with it for nothing and the sheer scale of the potential will make that 15% pricey - so imo it would have to be a fairly major player to stomp up that cash as well as the ongoing costs.
Personally i would be surprised given the sheer potential of Shaikan especially after the DGA report, if GKP is not already seriously considering securing a share of the 15% 3rd party interest as part of a wider or more complex deal that only a few here are considering. Imo it makes no sense to pass over this huge potential additional amount of oil and gas, but yet go and drill Berbar and Sheik-Adi at much greater costs where they have yet to find those kind of oil estimates.
What could likely influence the delay in any 3rd party award will be the testing of the remaining 70% of the zones discovered and the shallow adjacent well to Shaikan 1 to test the 313m section in between two discovered oil zones - this would make a substantial difference to the overall figures and to how the KRG see fit in placing a valuation on the 15% 3rd party interest.
I would stop worrying about why GKP haven't raised finance (they don't need it yet from what what i can see). and there are other factors to consider which i've stated that may be influencing this. Remember the report is only a few weeks old. With the directors buy of 2m at 94p 8 weeks ago in addition to the amounts already held by TK etc - i'm expecting this to be worth much more than where we now sit.
To those calling for the supposed financing to be done and it's weighing on us - why not be patient.
There are many things to consider but only the company can decide on their best course of action and judge the way forward. We've had no problems raising financing to date and successfully increasing the value of the shares even with dilution. I've no doubt that they will succeed again as the directors have not sold and 1 director more recently buying 2m 8 weeks ago at 94p.
With production scheduled for May/June - I would think that the 3rd party interests could be decided soon.
Not only are we carrying pro-rata the KRGs 20% but also pro-rata the 15% 3rd party interest at Shaikan.
Seda drawdown during the past week was £4m. (approx $6.5m).
Seda remaining £12.94m (approx $21m).
Seda facility was £30m when arranged in May 2009 and could just as easily be increased if need be.
Capital needed was $73m as of November 2009 (after the 13/11 Seda drawdown).
Since that - almost $9m has been drawn on the Seda.
That reduces the capital required as in the presentation - down to $64m.
There's been perhaps almost $60m already spent at Shaikan by GKP.
Once the 3rd party is awarded to anyone other than us, that would be circa $9m we'd get back from them immediately (if awarded before MAY).
That would take our capital requirements down to about $55m - whilst having $21m left in the Seda and Algeria still for sale.
GKPs figure of needing circa $73m in the November presentation is also on the basis of us carrying the 3rd party interest costs until awarded. The future costs associated with Shaikan in that estimate are at least another $40m - so that could shave another $6m off our capital needs, if the 3rd party player is introduced at Shaikan (before May).
That could leave us with needing about $49m from here.
(We also have about $2m in 3rd party back-in costs for Akri-Bijeel provided there's a commercial discovery).
In my opinon we might at this time really only need circa $50m then - while also having Algeria for sale and a payment from whoever is awarded the 3rd party back in rights.
We have $21m available with the Seda.
Sheik-Adi/Shaikan 3d seismic is not scheduled until May 2010.
Shaikan -2 scheduled May.
Sheik-Adi -1 scheduled July 2010.
Shaikan- 3 scheduled October 2010.
The capital needed prior to May drillng is for Akri-Bijeel/Overheads, Shaikan testing/Production facilities = circa $23m and we have drawn down almost $9m since that presentation - thus needing another circa $14m - while having $21m left in the Seda.
There's absolutely no real need to have capital raised possibly prior to mid April and by which times we could have the Akri-Bijeel results and maybe something on the Algerian asset - so there could yet be a window of 2-3 months before we need that capital.
.
First production is also showing as May (though i think it could be June before we see it).
I think we are in a very comfortable position financially.
If the 3rd party interest is awarded to another player before May - this definitely will reduce our capital needs !!!
That's why i think the 3rd party interest has to be sorted in the next few months - hopefully prioor to May. After all we are doing the majority of the hard work and i'm sure GKP don't want to see us possibly proving everything up only for a 3rd party to come in and get 15% easy pickings while they pay us maybe $20m. It wouldn't surprise me if GKP want this issue resolved prior to spudding Shaikan 2 in May.
But the other IMPORTANT scenario is this -
TK/AQ/AS and DGA are saying the potential is 18 billion barrels of oil and another 5 b/boe (gas) in place at Shaikan.
Now for the 3rd party interest - ie 15% of that figure above, represents potentially 2.7 b/bo and 750 mmboe (gas ) in place.
Using 30% and 70% potentially on oil/gas as recoverable - that's a potentially RECOVERABLE 810 mmbo and 525 mmboe (gas) in respect of the 15% interest that is up for grabs. Be mindful of Adnan Samarrais respectable successful career, contacts and being chosen by the current Kurdistan oil minister on the Kirkuk study.
Even if the figures are only half of that, the 15% interest represents a potential phenomenal amount of oil and gas for any incoming 3rd party. This is a figure that majors/super majors would be proud of !
With the company now knowing the potential, it would be unthinkable that such a vast amount of potential relating to that 15%, is not fought for tooth and nail by our company. Remember this data has only been verified recently by DGA and would also form the basis for the KRG pricing/valuing the 3rd party 15% interest.
There could be a real bargaining/deal making process going on - hence why we're in no rush or perhaps even in a position to do a deal or announce on major funding.
I'm sure not only would GKP wish to get their hands on the 15%, but also Etaminc and Mol.
Perhaps the KRG will award the 15% amongst the current partners.
The 15% could be priced at up to $200m given it's potential and now that a discovery is made.
A third of that figure could set GKP back circa up to $70m on that basis ?.
Let's face it - if you are prepared to participate in the Akri-Bijeel prospect at only 6.% net, why would you not want to grab a third, half or all of that 15% in Shaikan that has already thrown up a significant major discovery. and perhaps be looking at raising the finance to secure part of it.
One thing is - the KRG won't part with it for nothing and the sheer scale of the potential will make that 15% pricey - so imo it would have to be a fairly major player to stomp up that cash as well as the ongoing costs.
Personally i would be surprised given the sheer potential of Shaikan especially after the DGA report, if GKP is not already seriously considering securing a share of the 15% 3rd party interest as part of a wider or more complex deal that only a few here are considering. Imo it makes no sense to pass over this huge potential additional amount of oil and gas, but yet go and drill Berbar and Sheik-Adi at much greater costs where they have yet to find those kind of oil estimates.
What could likely influence the delay in any 3rd party award will be the testing of the remaining 70% of the zones discovered and the shallow adjacent well to Shaikan 1 to test the 313m section in between two discovered oil zones - this would make a substantial difference to the overall figures and to how the KRG see fit in placing a valuation on the 15% 3rd party interest.
I would stop worrying about why GKP haven't raised finance (they don't need it yet from what what i can see). and there are other factors to consider which i've stated that may be influencing this. Remember the report is only a few weeks old. With the directors buy of 2m at 94p 8 weeks ago in addition to the amounts already held by TK etc - i'm expecting this to be worth much more than where we now sit.
Asia Times Online :: Central Asian News and current affairs, Russia, Afghanistan, Uzbekistan
Asia Times Online :: Central Asian News and current affairs, Russia, Afghanistan, Uzbekistan
Future pipeline plans for supplying oil / gas from Iraq to Europe.
Future pipeline plans for supplying oil / gas from Iraq to Europe.
Ten deals makes a happy minister - Iraq Oil Report
Ten deals makes a happy minister - Iraq Oil Report
Ten deals makes a happy minister
By Ben Lando of Iraq Oil Report
Published February 4, 2010
BAGHDAD - Even in the cut-throat world of modern Iraqi politics, there may be no one who has persevered like Iraq's Oil Minister, Hussain al-Shahristani.
He holds a highly politicized job as Iraq decides how decentralized and denationalized its oil sector will be. He's being urged to act fast, since Iraqi oil sales are nearly the sole source of revenue for the country, which needs to fund expensive reconstruction efforts.
Iraq has massive reserves – the world's third largest discovered and plenty more to find – but wars, sanctions and dictatorship have left Iraq under-producing and its oil infrastructure in a dire state. Efforts to streamline an overloaded system have been caught up in political battles, including multiple pieces of legislation to set ground rules for governance and investment.
Thus, while Shahristani was condemning the oil deals signed by Iraq's Kurdish region, he was criticized for simultaneiously being too stern and too generous to foreign oil companies in a one and a half year process that culminated with two auctions last year and 10 oil contracts awarded to some of the world's biggest oil companies.
Iraq Oil Report Bureau Chief Ben Lando caught up with Shahristani after a recent deal signing ceremony.
Ben Lando: You seem to have a smile on your face everywhere I see you nowadays.
Hussain al-Shahristani: It is a big accomplishment for a country that has been deprived of its oil resources for decades and where revenues have been used to wage wars and to destroy Iraq and the neighboring countries. For the first time the people of Iraq feel they are going to have a significant production of oil, based on contracts that preserve for Iraq its control over its oil and the type of the contract, being a service contract, has been very welcomed by the Iraqi people. The level of production that will be achieved is very significant.
BL: More than 12 million barrels per day, yes. Is this a vindication of your policies? You've had a lot of detractors and you've still gone forward.
HS: We have full confidence in our policy and we knew that we and the international oil companies working together can reach very high levels. But quite frankly I was not expecting to see 12 million barrels (per day) within six years. But now this is contracted for. This is not wishful thinking anymore but this is something we have signed with these oil companies. We are very pleased to see such an enthusiastic acknowledgement, acceptance by the Iraqi people, by the Iraqi politicians, at all levels, actually.
BL: You still have this lingering dispute with the government in the north (the Kurdistan Regional Government). How is that going to be overcome? It seems that it still is at a standstill.
HS: The difference in the views about the oil deals that the KRG has signed has nothing to do with these contracts. As you know these contracts are in the south and the center and some of them near Mosul.
BL: Sure, but politics can always stall things.
HS: The politics, or differences in views in this particular case, has no affect whatsoever on these contracts. As a matter of fact these are going to go ahead.
BL: Will there ever be an acceptance from your Oil Ministry or Baghdad of the contracts in the Kurdish region?
HS: We have always said and told them that these contracts have to be reviewed by the ministry of oil. We have to make sure that they provide Iraq with the best or highest revenue possible and they have to be approved by the Iraqi government like any other oil contract. All of these have to go to the cabinet for approval. And without that we cannot really accept them. That position remains the same. However, recently they've indicated they're willing to send these contracts for review and we will be happy to do that. Without reviewing them we cannot really say. But now, everybody realizes the kind of contracts that Iraq is able to get, the kind of service fees the companies are willing to pay and we have to be in conformity basically with the general form of contracts in the country.
BL: So you've set a benchmark for the minimum you're willing to accept form contracts so if the contracts in the north don't meet those standards of return on investment, the production, generating the wealth for the Iraqi people, then there's no way that you'll accept them?
HS: No, I didn't say that. I said I cannot comment without viewing them. Without reviewing those we cannot really comment.
BL: But these are production sharing contracts, something that you've said you are not at the stage of signing if you ever will be at the stage of signing. You've gone for service contracts. These are definitely different contracts than what you have signed and they give a lot more return on the investment to the foreign companies.
HS: That's why we have been saying that they have to be reviewed and amended accordingly.
BL: How similar to your numbers that you've been able to reach do they have to be? Do they have to be at those numbers of returns?
HS: I cannot really answer that question without seeing those contracts and without talking to the cabinet, because after all the decision is not only of the oil ministry. These contracts have to be approved by the government.
BL: is there any timeline for this? Are there any meetings set up to review these contracts?
HS: There are discussions now and there are proposals. Not for approving the contracts because that will take much longer and a lot of discussion, as you said, there are serious differences between these contracts that cannot be resolved so quickly. But there are other suggestions without having to accept those contracts how we can start moving forward
Ten deals makes a happy minister
By Ben Lando of Iraq Oil Report
Published February 4, 2010
BAGHDAD - Even in the cut-throat world of modern Iraqi politics, there may be no one who has persevered like Iraq's Oil Minister, Hussain al-Shahristani.
He holds a highly politicized job as Iraq decides how decentralized and denationalized its oil sector will be. He's being urged to act fast, since Iraqi oil sales are nearly the sole source of revenue for the country, which needs to fund expensive reconstruction efforts.
Iraq has massive reserves – the world's third largest discovered and plenty more to find – but wars, sanctions and dictatorship have left Iraq under-producing and its oil infrastructure in a dire state. Efforts to streamline an overloaded system have been caught up in political battles, including multiple pieces of legislation to set ground rules for governance and investment.
Thus, while Shahristani was condemning the oil deals signed by Iraq's Kurdish region, he was criticized for simultaneiously being too stern and too generous to foreign oil companies in a one and a half year process that culminated with two auctions last year and 10 oil contracts awarded to some of the world's biggest oil companies.
Iraq Oil Report Bureau Chief Ben Lando caught up with Shahristani after a recent deal signing ceremony.
Ben Lando: You seem to have a smile on your face everywhere I see you nowadays.
Hussain al-Shahristani: It is a big accomplishment for a country that has been deprived of its oil resources for decades and where revenues have been used to wage wars and to destroy Iraq and the neighboring countries. For the first time the people of Iraq feel they are going to have a significant production of oil, based on contracts that preserve for Iraq its control over its oil and the type of the contract, being a service contract, has been very welcomed by the Iraqi people. The level of production that will be achieved is very significant.
BL: More than 12 million barrels per day, yes. Is this a vindication of your policies? You've had a lot of detractors and you've still gone forward.
HS: We have full confidence in our policy and we knew that we and the international oil companies working together can reach very high levels. But quite frankly I was not expecting to see 12 million barrels (per day) within six years. But now this is contracted for. This is not wishful thinking anymore but this is something we have signed with these oil companies. We are very pleased to see such an enthusiastic acknowledgement, acceptance by the Iraqi people, by the Iraqi politicians, at all levels, actually.
BL: You still have this lingering dispute with the government in the north (the Kurdistan Regional Government). How is that going to be overcome? It seems that it still is at a standstill.
HS: The difference in the views about the oil deals that the KRG has signed has nothing to do with these contracts. As you know these contracts are in the south and the center and some of them near Mosul.
BL: Sure, but politics can always stall things.
HS: The politics, or differences in views in this particular case, has no affect whatsoever on these contracts. As a matter of fact these are going to go ahead.
BL: Will there ever be an acceptance from your Oil Ministry or Baghdad of the contracts in the Kurdish region?
HS: We have always said and told them that these contracts have to be reviewed by the ministry of oil. We have to make sure that they provide Iraq with the best or highest revenue possible and they have to be approved by the Iraqi government like any other oil contract. All of these have to go to the cabinet for approval. And without that we cannot really accept them. That position remains the same. However, recently they've indicated they're willing to send these contracts for review and we will be happy to do that. Without reviewing them we cannot really say. But now, everybody realizes the kind of contracts that Iraq is able to get, the kind of service fees the companies are willing to pay and we have to be in conformity basically with the general form of contracts in the country.
BL: So you've set a benchmark for the minimum you're willing to accept form contracts so if the contracts in the north don't meet those standards of return on investment, the production, generating the wealth for the Iraqi people, then there's no way that you'll accept them?
HS: No, I didn't say that. I said I cannot comment without viewing them. Without reviewing those we cannot really comment.
BL: But these are production sharing contracts, something that you've said you are not at the stage of signing if you ever will be at the stage of signing. You've gone for service contracts. These are definitely different contracts than what you have signed and they give a lot more return on the investment to the foreign companies.
HS: That's why we have been saying that they have to be reviewed and amended accordingly.
BL: How similar to your numbers that you've been able to reach do they have to be? Do they have to be at those numbers of returns?
HS: I cannot really answer that question without seeing those contracts and without talking to the cabinet, because after all the decision is not only of the oil ministry. These contracts have to be approved by the government.
BL: is there any timeline for this? Are there any meetings set up to review these contracts?
HS: There are discussions now and there are proposals. Not for approving the contracts because that will take much longer and a lot of discussion, as you said, there are serious differences between these contracts that cannot be resolved so quickly. But there are other suggestions without having to accept those contracts how we can start moving forward
GKP Various posters 1 Dec ' feedback to TK CNN interview '
ZENGAS - 1 Dec'09 - 21:49 - 55064 of 55066
Spent 3 - 4 hours taking the time to study and record the detail of what TK said today. It's impossible to fully grasp unless you take the time and patience to listen and refer back to the DGA report as published.
Imo we can now see clearly why and how the Etamic deal surfaced. Shaikan was no good without Sheik-Adi and vice versa. Both needed each other due to the uncertainty of structure closure.
In my opinion he is talking about potentially and a very high chance of 10-15 billion barrels in place at Shaikan and potentially 10-15 billion barrels in reserves across the 4 licences.
Bear in mind a particular point where DGA themselves have already and clearly said that the oip figure (though conservatively now given as 'mean) may lead to the upper figure, ie circa nearly 11 billion bls due to spill points full/no water etc.
This does not include the triassic flowed discovery section, nor the over pressured oil discovery in the deeper triassic nor the potential again from the Permian. The water may be a few hundred mts below this as they correlate to a well some 26 km away.
I think it's not only Todd Kozell who is allowed to be this bullish, but his main man Mr Samarrai who for 42 years and at the top of the system knows every Iraqi field inside out.
Just my opinion, but i now feel that we are looking at potentially 1 - 3.5 billion barrels of possible reserves across the 4 licences net to GKP.
The prospect of wells that can produce 50,000 boepd is distinctly possible - but at the same time may lead to an early opportunistic bid before full potential can be realised.
Main sequence of the interview - (anything in backets is my comment).
" Shaikan-2 site chosen -
It's a little bit of a step out. We say there are big structures in Kurdistan.
We're stepping out 9km for an appraisal well. In most parts of the world this would be an exploration well - This is one giant structure - it is 30km east and west by 6km north and south.
We've proved multiple horizons.
We found oil and gas in the lower triassic. We stopped drilling because of over pressure. We still have that as an exploration target and the Permian as an exploration target.
Well was completed on 23/11 at 2950mts.
Various well tests accumulated at 20,000 boepd.
We had equipment failure on 1 zone.
Engineering reports will boost that to 31,000 boepd
and that is out of one third of the net pay.
It's an amazing well.
As I said when we started drilling this our expectations were 1-2 billion barrels in place - 2 billion in our wildest imagination.
We started encountering oil in the Sergelu and we drilled roughly 1460 mts of reservoir section.
The net pay is 215 mts - If you don't add an addition to that - the fracture system which we beleive is full of oil raises that number to 250.
At the bottom - the Chia Zaira is where we saw the oil and the over pressured reservoir and we're gonna come back on the next well and drill. It's quite interesting.
These numbers are from the DGA report published a couple of months ago.
Oil in place - now this is just from the Jurassic - the 1st half of the well we drilled.
Anywhere in a range of P90 of a billion to P1 of 10.5 billion.
We'll get to the significance of that and why we're even talking of that number.
Generally in the industry we would not look that far down a reserves chart - In this case it is quite significant.
That's why (presumably pointing to the slide).
We drilled this well to 2950 mts.
We have yet on any log or well test to see one drop of water.
The next well we can correlate to is 26 kms away and from that we can tell the water is probably a few hundred mts below where we plugged this well.
So without further exploration drilling, without further appraisal drilling on this structure, we've gotta look at it and say alright fine, let's be conservative and that number is 2 - 5 billion.
If you start factoring in these and future appraisal, that is where under management expectations - I said it on CNN it was 10 - 15 billion barrels.
Management expectations based on this info could very well be just for Shaikan, let alone the package of the 4 licences.
We could be looking at potential reserves in the range of 10 - 15 billion barrels for these licences in Kurdistan.
Sheik-Adi - We fortunately ran a failed farm-out process for Shaikan before we drilled this well and i say fortunately because we hung on to the half we were trying to farm out at the time.
One of the difficult parts about Shaikan and the biggest risks pre drill was there could be not be closure to the west on the 2D seismic.
Once we got information on Sheik-Adi we realised why.
The closure is actually on Sheik-Adi and actually spills over to the Barbehar licence as well.
This has the potential to be one massive structure.
Just for framing our expectation numbers (he gives details on the usual oip figures for the blocks).
Sheik-Adi - The well in May will tell us alot about the extent of the structure from Shaikan.
Berbehar - It is the intention of both companies to drill this in 2010.
Akri-Bijeel - Our view of this block has changed immensely since the drilling of Shaikan.
It has a prospect in the foothills and 2 very large anticlines.
We chose the lower risk foothills prospect first - It's smaller - it's 700 - 750 million barrels.
Once again in my life I can't beleive i was saying small at 750 million barrels - but we've derisked with the jurassic discovery in Shaikan.
We've derisked the 2 very large anticlines.
Merril Lynch the other day on MOLs behalf brought out a buy rating and suggested those 2 may be as large as the Shaikan discovery.
I don't know - we don't have an opinion on that yet.
We'lll spud this thing as soon as the rig gets moved over in December.
We can assume 4 or 5 months to get this well drilled and tested.
We have a contract with Weatherford jointly with Mol.
It's one well Shaikan, one Akri-Bijeel, one Shaikan, one Akri-Bijeel - a total of 4 wells.
Shaikan 2 is a 9km step out and the next is a 6 - 8 km step out - hopefully drilled and spudded 2010.
Shaikan production - There is a local market for production. There is capacity available at refineries. We've had discussions with the KRG.
The production in May will roughly throw off net $2.5m a month to Gulf Keystone.
Sheik Adi well in bidding process and 3d seismic.
Berbehar is not on here, but we would hope to slot that in next summer as well.
So we'll have in Kurdistan on 3 untested structures in 2010 at any time have 2 - 3 rigs running for exploration and or appraisal.
Will be an exciting year for us and a lot of news flow.
Finance - The budget itself is approximately $73m net for 2010 so it's not a very large budget.
(Inaudible question) -
(TK reply) -
Management opinions on Shaikan is 10 - 15 billion barrels.
The DGA upper limit is just shy of 11 billion barrels just from the jurassic.
Now we have tested roughly 20,000 boepd from the triassic and we are unable to test the oil zone underneath that, so it is not out of the realms of possibility from both a combination of the DGA report on the jurassic, but further appraisal is going to be required of the structure - and it's a very large structure - and time is going to tell it is not out of the realms of potential 10 - 15 billion barrels is possible. "
Well, I've listened to the webcast very carefully (shame that given modern technology the audio was so poor and we were unable to hear the questions), and I've read through some of the resulting posts. I wish I had taken the day off!
Having read through the presentation before going to work, I was mainly listening for the 'extra, unscripted' comments. There were a couple I thought were really interesting.
TK says that GKP tried to farm out half of our stake in Shaikan. Luckily we failed. What does that tell me? Well, the BoD really did not believe that they had a find as big as this pre-drill. They must have been swimming in relief as the drill went down. How lucky are we PIs that this happened?
Why did the farm-out fail? Well, it seems that that potential suitors for this didn't like the fact that there is no closure to the reservoir within the license block boundary to the west. All sorts of legal and contractual issues could flow from that. Bit of a problem perhaps. Unless you have Adnan Samaraii on your BoD who can make a few calls to allow us to acquire the necessary block which is connected to the Shaikan reservoir.
So, does the Etamic deal now sit comfortably with everyone? It should. That deal now appears to have been absolutely critical in our future.
It seems that Sheikh Adi IS part of the same structure. TK also commented that Ber Bahr may well extend this (paraphrase).
The other notable point is that TK implies that they were not really that interested in Akri-Bijeel. He now seems rather bullish about it. We took the "safe" option of targetting the foothill prospect (no doubt due to MOL as the operator - as a much bigger O&G company they can take their time to firm up prospects). TK now seems to believe that the two big anticlines in the massive A-B block could be as big as Shaikan. What if that turned out to be the case? Astonishing!
Based on that speculation, GKP's blocks could contain a total of c. 40bn barrels. I emphasis "speculation" and "could". I also point out that that speculation could be total OIP, not GKP's share of OIP.
In summary, Today's presentation by TK was, IMO, an understated sales pitch (except in the case of our Algerian assets for which he quite happily asked for suitors).
He seemed to say: "We are for sale at the right price, but are prepared to go it alone for some time yet if you don't stump up enough cash. Over to you..."
What I like about TK is that he is not a polished, professional and cold public speaker. From the CNN interview on Friday and today's webcast he appears, to me, to be just a normal guy who works hard and has done well. He clearly values Adnan Samaraii's input and I am pleased he publicly acknowledged that (I have always thought that AS's involvement is crucial).
I cannot fault the way he has managed every aspect of the PR this year. Some things have been out of his control (MOL's reported comment), but he seems very focussed on managing expectations and news flow for us PIs.
I am happier with my holding now than I have been at any time. I will try to add more if I can.
In the meantime I am content to sit back, wait, and reap the rewards.
Jackozy
mr reliable, I agree. I have been considering "de-risking" for months, but the only other good E&P options I can see are also Kurdistani options.
Vast is the obvious choice (along with what used to be BBP). They have a HUGE anticline, but, IMO, there is less certainty as it is an un-proved structure. GKP's Shaikan has significantly de-risked all of A-B, S-A and B-B.
We also have to consider timeframes here. It is distinctly possible that GKP go to T/O before VST or BBP (sorry, ShaMarran). It may well be possible to benefit from both journeys. I hope so.
I would not sell any GKP shares in order to buy VST or ShaMarran (sorry, I know that's not the correct spelling) at this time. I hope I get the chance to max GKP and then go into those as they seem very good prospects to me.
We are in a period in the oil and gas E&P investment industry where lives can be changed. Borders are opening up, seismic interpretation is getting better and the world is desperate for oil, whose price in going to inexorably rise (unless there are a lot of SH-1 discoveries lol!).
I have said this before and I say it again. I feel lucky to be in this.
Spent 3 - 4 hours taking the time to study and record the detail of what TK said today. It's impossible to fully grasp unless you take the time and patience to listen and refer back to the DGA report as published.
Imo we can now see clearly why and how the Etamic deal surfaced. Shaikan was no good without Sheik-Adi and vice versa. Both needed each other due to the uncertainty of structure closure.
In my opinion he is talking about potentially and a very high chance of 10-15 billion barrels in place at Shaikan and potentially 10-15 billion barrels in reserves across the 4 licences.
Bear in mind a particular point where DGA themselves have already and clearly said that the oip figure (though conservatively now given as 'mean) may lead to the upper figure, ie circa nearly 11 billion bls due to spill points full/no water etc.
This does not include the triassic flowed discovery section, nor the over pressured oil discovery in the deeper triassic nor the potential again from the Permian. The water may be a few hundred mts below this as they correlate to a well some 26 km away.
I think it's not only Todd Kozell who is allowed to be this bullish, but his main man Mr Samarrai who for 42 years and at the top of the system knows every Iraqi field inside out.
Just my opinion, but i now feel that we are looking at potentially 1 - 3.5 billion barrels of possible reserves across the 4 licences net to GKP.
The prospect of wells that can produce 50,000 boepd is distinctly possible - but at the same time may lead to an early opportunistic bid before full potential can be realised.
Main sequence of the interview - (anything in backets is my comment).
" Shaikan-2 site chosen -
It's a little bit of a step out. We say there are big structures in Kurdistan.
We're stepping out 9km for an appraisal well. In most parts of the world this would be an exploration well - This is one giant structure - it is 30km east and west by 6km north and south.
We've proved multiple horizons.
We found oil and gas in the lower triassic. We stopped drilling because of over pressure. We still have that as an exploration target and the Permian as an exploration target.
Well was completed on 23/11 at 2950mts.
Various well tests accumulated at 20,000 boepd.
We had equipment failure on 1 zone.
Engineering reports will boost that to 31,000 boepd
and that is out of one third of the net pay.
It's an amazing well.
As I said when we started drilling this our expectations were 1-2 billion barrels in place - 2 billion in our wildest imagination.
We started encountering oil in the Sergelu and we drilled roughly 1460 mts of reservoir section.
The net pay is 215 mts - If you don't add an addition to that - the fracture system which we beleive is full of oil raises that number to 250.
At the bottom - the Chia Zaira is where we saw the oil and the over pressured reservoir and we're gonna come back on the next well and drill. It's quite interesting.
These numbers are from the DGA report published a couple of months ago.
Oil in place - now this is just from the Jurassic - the 1st half of the well we drilled.
Anywhere in a range of P90 of a billion to P1 of 10.5 billion.
We'll get to the significance of that and why we're even talking of that number.
Generally in the industry we would not look that far down a reserves chart - In this case it is quite significant.
That's why (presumably pointing to the slide).
We drilled this well to 2950 mts.
We have yet on any log or well test to see one drop of water.
The next well we can correlate to is 26 kms away and from that we can tell the water is probably a few hundred mts below where we plugged this well.
So without further exploration drilling, without further appraisal drilling on this structure, we've gotta look at it and say alright fine, let's be conservative and that number is 2 - 5 billion.
If you start factoring in these and future appraisal, that is where under management expectations - I said it on CNN it was 10 - 15 billion barrels.
Management expectations based on this info could very well be just for Shaikan, let alone the package of the 4 licences.
We could be looking at potential reserves in the range of 10 - 15 billion barrels for these licences in Kurdistan.
Sheik-Adi - We fortunately ran a failed farm-out process for Shaikan before we drilled this well and i say fortunately because we hung on to the half we were trying to farm out at the time.
One of the difficult parts about Shaikan and the biggest risks pre drill was there could be not be closure to the west on the 2D seismic.
Once we got information on Sheik-Adi we realised why.
The closure is actually on Sheik-Adi and actually spills over to the Barbehar licence as well.
This has the potential to be one massive structure.
Just for framing our expectation numbers (he gives details on the usual oip figures for the blocks).
Sheik-Adi - The well in May will tell us alot about the extent of the structure from Shaikan.
Berbehar - It is the intention of both companies to drill this in 2010.
Akri-Bijeel - Our view of this block has changed immensely since the drilling of Shaikan.
It has a prospect in the foothills and 2 very large anticlines.
We chose the lower risk foothills prospect first - It's smaller - it's 700 - 750 million barrels.
Once again in my life I can't beleive i was saying small at 750 million barrels - but we've derisked with the jurassic discovery in Shaikan.
We've derisked the 2 very large anticlines.
Merril Lynch the other day on MOLs behalf brought out a buy rating and suggested those 2 may be as large as the Shaikan discovery.
I don't know - we don't have an opinion on that yet.
We'lll spud this thing as soon as the rig gets moved over in December.
We can assume 4 or 5 months to get this well drilled and tested.
We have a contract with Weatherford jointly with Mol.
It's one well Shaikan, one Akri-Bijeel, one Shaikan, one Akri-Bijeel - a total of 4 wells.
Shaikan 2 is a 9km step out and the next is a 6 - 8 km step out - hopefully drilled and spudded 2010.
Shaikan production - There is a local market for production. There is capacity available at refineries. We've had discussions with the KRG.
The production in May will roughly throw off net $2.5m a month to Gulf Keystone.
Sheik Adi well in bidding process and 3d seismic.
Berbehar is not on here, but we would hope to slot that in next summer as well.
So we'll have in Kurdistan on 3 untested structures in 2010 at any time have 2 - 3 rigs running for exploration and or appraisal.
Will be an exciting year for us and a lot of news flow.
Finance - The budget itself is approximately $73m net for 2010 so it's not a very large budget.
(Inaudible question) -
(TK reply) -
Management opinions on Shaikan is 10 - 15 billion barrels.
The DGA upper limit is just shy of 11 billion barrels just from the jurassic.
Now we have tested roughly 20,000 boepd from the triassic and we are unable to test the oil zone underneath that, so it is not out of the realms of possibility from both a combination of the DGA report on the jurassic, but further appraisal is going to be required of the structure - and it's a very large structure - and time is going to tell it is not out of the realms of potential 10 - 15 billion barrels is possible. "
Well, I've listened to the webcast very carefully (shame that given modern technology the audio was so poor and we were unable to hear the questions), and I've read through some of the resulting posts. I wish I had taken the day off!
Having read through the presentation before going to work, I was mainly listening for the 'extra, unscripted' comments. There were a couple I thought were really interesting.
TK says that GKP tried to farm out half of our stake in Shaikan. Luckily we failed. What does that tell me? Well, the BoD really did not believe that they had a find as big as this pre-drill. They must have been swimming in relief as the drill went down. How lucky are we PIs that this happened?
Why did the farm-out fail? Well, it seems that that potential suitors for this didn't like the fact that there is no closure to the reservoir within the license block boundary to the west. All sorts of legal and contractual issues could flow from that. Bit of a problem perhaps. Unless you have Adnan Samaraii on your BoD who can make a few calls to allow us to acquire the necessary block which is connected to the Shaikan reservoir.
So, does the Etamic deal now sit comfortably with everyone? It should. That deal now appears to have been absolutely critical in our future.
It seems that Sheikh Adi IS part of the same structure. TK also commented that Ber Bahr may well extend this (paraphrase).
The other notable point is that TK implies that they were not really that interested in Akri-Bijeel. He now seems rather bullish about it. We took the "safe" option of targetting the foothill prospect (no doubt due to MOL as the operator - as a much bigger O&G company they can take their time to firm up prospects). TK now seems to believe that the two big anticlines in the massive A-B block could be as big as Shaikan. What if that turned out to be the case? Astonishing!
Based on that speculation, GKP's blocks could contain a total of c. 40bn barrels. I emphasis "speculation" and "could". I also point out that that speculation could be total OIP, not GKP's share of OIP.
In summary, Today's presentation by TK was, IMO, an understated sales pitch (except in the case of our Algerian assets for which he quite happily asked for suitors).
He seemed to say: "We are for sale at the right price, but are prepared to go it alone for some time yet if you don't stump up enough cash. Over to you..."
What I like about TK is that he is not a polished, professional and cold public speaker. From the CNN interview on Friday and today's webcast he appears, to me, to be just a normal guy who works hard and has done well. He clearly values Adnan Samaraii's input and I am pleased he publicly acknowledged that (I have always thought that AS's involvement is crucial).
I cannot fault the way he has managed every aspect of the PR this year. Some things have been out of his control (MOL's reported comment), but he seems very focussed on managing expectations and news flow for us PIs.
I am happier with my holding now than I have been at any time. I will try to add more if I can.
In the meantime I am content to sit back, wait, and reap the rewards.
Jackozy
mr reliable, I agree. I have been considering "de-risking" for months, but the only other good E&P options I can see are also Kurdistani options.
Vast is the obvious choice (along with what used to be BBP). They have a HUGE anticline, but, IMO, there is less certainty as it is an un-proved structure. GKP's Shaikan has significantly de-risked all of A-B, S-A and B-B.
We also have to consider timeframes here. It is distinctly possible that GKP go to T/O before VST or BBP (sorry, ShaMarran). It may well be possible to benefit from both journeys. I hope so.
I would not sell any GKP shares in order to buy VST or ShaMarran (sorry, I know that's not the correct spelling) at this time. I hope I get the chance to max GKP and then go into those as they seem very good prospects to me.
We are in a period in the oil and gas E&P investment industry where lives can be changed. Borders are opening up, seismic interpretation is getting better and the world is desperate for oil, whose price in going to inexorably rise (unless there are a lot of SH-1 discoveries lol!).
I have said this before and I say it again. I feel lucky to be in this.
GKP Zengas Nov 2009 ' Events and comparisons '
I know there's many GKP investors/followers on this board, a few who are probably anxious with the sharp drop in the SP since the news was released. I think we all expected a slight retrace with profit taking, but not something this significant. So I thought I'd share this comforting post from the legendary Zengas(on ADVFN) of which I've taken from the Kurdistan Oil E & P board (thanks to mrjugz). In the post he refers to EVO's negative broker note, let me know if you haven't read it and I'll try dig it up.
ZENGAS - 25 Nov'09 - 20:08 - 50288 of 50292
Re EVO
All i can say is Evos coverage is lacking, but reasons for that are obvious. They cover SEY and are SEYs house broker and unlikely to want to see potential investors running elsewhere. Their job is to win investors for their primary customers. They are also market makers and just as likely to want to be long or short a stock and know that their comments travel on the newwires and press. For starters they have issued a price target of 6p on Sterling which now sits at 4p.
SEY reserves now 1.2 million barrels (much less than what GKP have for sale in Algeria - possibly 50 X that figure).
After the USA asset Sey gained just $6m more after all debt cleared.
Current shares in issue 7.13 billion @ 4p = m/cap of 285m pounds.
Cash $67m + $6m surplus from sale of USA = $73m/44m pounds.
So SEY valuation, minus cash = 241m pounds - EVO are giving SEY a price target PRE DRILL of Sangaw at 6p - ie 427m pounds. 44m pounds of that is cash so they are attributing a value of 383m pounds. On top of that is the upcoming 2 for 9 rights at 1.3p to raise 20m pounds which might give a total of around 8 billion shares which at 6p = 480m pounds including a possible 64m pounds cash element = net value of 420m (taking out the cash element) for Sangaw pre drill and before ANY oil is discovered.
Yet EVO are trying to tell us that GKP are worth around 90p/share or 439m pounds despite drilling one of the most promising discoveries todate - multiple reservoirs and an upgrade beyond the original DGA report and tests on only 30% of our net pay giving a potential 30,000 boepd.
At the same time for GKP - they are some 8 months ahead of SEYs operations.
Again look at it - Evo attribute 6p pre drill to Sangaw and when you strip out their cash would equal 420m pounds.
GKP with such a mammoth discovery - EVO are trying to tell us GKP is worth just 439m pounds - some 19m pounds more than SEY yet SEY haven't even spudded and have it all to do. Presumably then tell us that SEY will be worth 10-12p+ (their implying it in their coverage) on any discovery.
Likewise, SEY will only have one well drilled at Sangaw and will be in no greater position than GKP to give any greater info than GKP have done, other than to follow up with further drilling. I don't doubt SEYs enormous potential but they have it do and likewise will also have to go beyond the 1 well stage.
EVO say there will be no action at GKP until mid next year. WRONG !
GKPs Akri-Bijeel will be possibly spudding at the same time as Sangaw - (Akri due to spud next month). On top of that, despite the lower stake, the recent reports on the MOL analyst coverage, suggest that potentially there could be far greater oil in Akri-Bijeel than Shaikan (multiple prospects/oil seeps and roughly 3 times the area of Shaikan).
The Shaikan well test will commence in about mid January (where might the test oil go ?). Only 30% of the net pay so far is tested with estimates of 30,000 boepd so far - are EVO so naive to suggest we're worth only 19m pounds more than SEYs pre spud target price for Sangaw.
I've left out GKPs sale of Algeria - but this is expected some time after January/in the new year. Rumoured that there are 3 interested parties/dd.
What figure is anyones guess, - $50m?, $100m?, $125m+ ?
The production facilities are to be in place at Shaikan 1 for April and still at least likely to see production sold locally including from testing ops.
Also likely that some results from Akri-bijeel could emerge in late February/March.
The political situation is no different now than it was 6 months ago and will be worked on. It's something that all 30+ international companies face including SEY so not unique to GKP. GKPs former bidder 2 years ago has been upping its stake in the Kurdish explorer DNO last week.
If the shorters and others that shout repetive posts think this is worth a lot less, then i think their targetting the wrong company. Those that sold on EVO reccs and the constant barrage of scare mongering posts at least provided me (and i'm sure others) with a fantastic opportunity to acquire more and as such i added 100k more today after such astounding news delivered two days ago. Others should read Dalesmans posts.
What we have here is potentially a 250k+ boepd field in the making when you consider flow rates and the implied size of the discovery. It's not unreasonable to think that over the 4 blocks, potentially GKP may be a partner in 500k+ bopd production. What GKP have already announced makes them predatory bid material. Presentations and TKs TV appearance in the coming days will send that message out.
ZENGAS - 25 Nov'09 - 20:08 - 50288 of 50292
Re EVO
All i can say is Evos coverage is lacking, but reasons for that are obvious. They cover SEY and are SEYs house broker and unlikely to want to see potential investors running elsewhere. Their job is to win investors for their primary customers. They are also market makers and just as likely to want to be long or short a stock and know that their comments travel on the newwires and press. For starters they have issued a price target of 6p on Sterling which now sits at 4p.
SEY reserves now 1.2 million barrels (much less than what GKP have for sale in Algeria - possibly 50 X that figure).
After the USA asset Sey gained just $6m more after all debt cleared.
Current shares in issue 7.13 billion @ 4p = m/cap of 285m pounds.
Cash $67m + $6m surplus from sale of USA = $73m/44m pounds.
So SEY valuation, minus cash = 241m pounds - EVO are giving SEY a price target PRE DRILL of Sangaw at 6p - ie 427m pounds. 44m pounds of that is cash so they are attributing a value of 383m pounds. On top of that is the upcoming 2 for 9 rights at 1.3p to raise 20m pounds which might give a total of around 8 billion shares which at 6p = 480m pounds including a possible 64m pounds cash element = net value of 420m (taking out the cash element) for Sangaw pre drill and before ANY oil is discovered.
Yet EVO are trying to tell us that GKP are worth around 90p/share or 439m pounds despite drilling one of the most promising discoveries todate - multiple reservoirs and an upgrade beyond the original DGA report and tests on only 30% of our net pay giving a potential 30,000 boepd.
At the same time for GKP - they are some 8 months ahead of SEYs operations.
Again look at it - Evo attribute 6p pre drill to Sangaw and when you strip out their cash would equal 420m pounds.
GKP with such a mammoth discovery - EVO are trying to tell us GKP is worth just 439m pounds - some 19m pounds more than SEY yet SEY haven't even spudded and have it all to do. Presumably then tell us that SEY will be worth 10-12p+ (their implying it in their coverage) on any discovery.
Likewise, SEY will only have one well drilled at Sangaw and will be in no greater position than GKP to give any greater info than GKP have done, other than to follow up with further drilling. I don't doubt SEYs enormous potential but they have it do and likewise will also have to go beyond the 1 well stage.
EVO say there will be no action at GKP until mid next year. WRONG !
GKPs Akri-Bijeel will be possibly spudding at the same time as Sangaw - (Akri due to spud next month). On top of that, despite the lower stake, the recent reports on the MOL analyst coverage, suggest that potentially there could be far greater oil in Akri-Bijeel than Shaikan (multiple prospects/oil seeps and roughly 3 times the area of Shaikan).
The Shaikan well test will commence in about mid January (where might the test oil go ?). Only 30% of the net pay so far is tested with estimates of 30,000 boepd so far - are EVO so naive to suggest we're worth only 19m pounds more than SEYs pre spud target price for Sangaw.
I've left out GKPs sale of Algeria - but this is expected some time after January/in the new year. Rumoured that there are 3 interested parties/dd.
What figure is anyones guess, - $50m?, $100m?, $125m+ ?
The production facilities are to be in place at Shaikan 1 for April and still at least likely to see production sold locally including from testing ops.
Also likely that some results from Akri-bijeel could emerge in late February/March.
The political situation is no different now than it was 6 months ago and will be worked on. It's something that all 30+ international companies face including SEY so not unique to GKP. GKPs former bidder 2 years ago has been upping its stake in the Kurdish explorer DNO last week.
If the shorters and others that shout repetive posts think this is worth a lot less, then i think their targetting the wrong company. Those that sold on EVO reccs and the constant barrage of scare mongering posts at least provided me (and i'm sure others) with a fantastic opportunity to acquire more and as such i added 100k more today after such astounding news delivered two days ago. Others should read Dalesmans posts.
What we have here is potentially a 250k+ boepd field in the making when you consider flow rates and the implied size of the discovery. It's not unreasonable to think that over the 4 blocks, potentially GKP may be a partner in 500k+ bopd production. What GKP have already announced makes them predatory bid material. Presentations and TKs TV appearance in the coming days will send that message out.
GKP Gramacho Jan 2010 ' reflections '
This note discusses DGAs Resource Evaluation of Shaikan a.k.a. “The Discovery Report”. It presents mostly good news and recognises upside but could have gone further in revealing the full upside potential of the structure which is arguably now in the range 15 BBO – 20 BBO plus significant condensate and gas. I will also comment on the market reaction to the report from the standpoint of the resource additions and provide some thoughts about issues to be investigated going forward.
1 MARKET REACTION
It was an open secret that the Shaikan structure has a significant probability of containing more than the mean estimate of 2.8 BBO in the prelim DGA report. On reflection I think it is not surprising that there was a muted reaction in share price to an increase in the mean resources to 4.2 BBO presented in the Discovery Report. The upward revision was due to about a 10% increase in the zones previously evaluated and ¾ BBO of untested and unknown, but likely heavy oil in the Sarmord which, until it is tested, will carry a risk that it can’t produce at good rates. On the face of it the news was not transformational. We might have hoped for 30-50% increase in share price but the OIP increase was not enough to overcome market concern about the political situation.
But dig a little deeper and there is cause for considerable optimism that Mean OIP will head so far upwards during 2010 that there will be intense interest in being a part of this investment opportunity. There comes a point that the potential rewards are so high that it is difficult to remain an outsider (as the DES share price illustrates).
2 UPSIDE HIGHLIGHTED BY DISCOVERY REPORT
DGA rightly pointed out (p37) that “Significant upside potential exists for the structure. This upside includes additional pay that was not identified due to” (a) “poor log responses over rugose zones and an interval not logged (1000 to 1313 m MD) and” (b) “from deeper formations still in structural closure that were not penetrated by the well.”
a) Upside in the Drilled Section
Consider point (a) above carefully. DGA is saying that there are intervals other than the interval not logged in which there may be additional pay. This is discussed more fully in the introduction and caveats to the petrophysical section on p 17-18. The degree of conservatism cannot be quantified at present but this will become clearer if GKP collects substantially more core in Sh-2. The amount of core collected in Sh-1 was rather limited but understandable given the uncertainties in reservoir depths prior to drilling the well.
The interval not logged is mainly the Garagu formation. Is there oil in the Cretaceous Garagu formation and will it flow?
In the Sh-1 pre-drill prognosis shown in the April 09 Oil Barrel presentation, GKP attributed oil reserves to the Garugu. Of course the well has turned out different to that prognosis as the Butmah was shown there as a seal whereas we now know it is a formation with low N:G but which nevertheless contains a reservoir interval with >1 BBO. However consider this:
1.Oil shows were encountered whilst drilling the Garagu.
2.The Tawke Field flows from the Cretaceous (and Pliocene) so this may be a good sign but note that its oil is a higher API gravity (27o) than is likely to be encountered in Sh-1 and may flow more readily.
3.The Garagu is described as a limestone. EVERY other limestone formation in the well above and below contains oil or gas.
4.The Garagu has a similar gross thickness (197m) to the Sarmord. If the net:gross ratio is similar then there could be another ¾ BBO to add using DGA’s current analysis methodology and considerably more if full to spill (discussed later).
Note that the Sarmord and Garagu are behind two strings of casing and cement in Sh-1. GKP will not want to destroy the pressure integrity of these strings to test them given that a long term test of the other more important oil zones is to be conducted and that the well will ultimately be a development well for the Jurassic reservoirs. The Sarmond and Garagu are more likely to be tested in Sh-2 or Sh-3.
b) Upside in the Deeper Undrilled Sections
Turning to point (b), the gas condensate upside in the undrilled Triassic and gas in the Permian, I was surprised that they quantified the upside at the levels they did. It was a giant leap to go from a mean resource estimate based on well results of 690BCF and 200 MMBO in the Upper Kurra Chine A and B and Lower Kurra Chine to 5-14TCF and 1-5BBO including the Permian. They have estimated an additional 200m of net pay in the undrilled section. This is almost as much pay as has been identified so far in the drilled section!
Perhaps they have used local and regional information e.g. the Jabal Kand-1 well to estimate the net reservoir quality rock likely in the undrilled section. Look again at the GKP version of the pressure plot (Macquarie slide 15) showing the presence of permeable zones throughout a 700m interval commencing at 3050 m SS in JK-1. Are these points from the Butmah are or they from the Triassic? Slide 15 is entitled Jurassic Pressure Data. Strictly speaking those points below 3050m SS should not be on the plot if they are not from the Jurassic in JK-1. However they may have been Triassic and included to support why the JK-1 water gradient line was drawn where it was. We know the Triassic Kurra Chine is 1150m thick in JK-1 so these points could be from this formation.
We also know drilling was terminated due to the higher reservoir pressure encountered. Note how the Kurre Chine B gas pressure is well to the right of the water gradient in JK-1 in Fig 16 on p24. The higher pressure could be the result of a very tall column of gas condensate. Pressure increases above the normal aquifer pressure by roughly 0.7 psi for every m of gas column below.
The gas condensate is extremely rich in liquids. The condensate will be valuable. Pricing condensate is a bit of a specialist subject but to give you an indication Australian NW shelf condensate has traded at only a $2 discount to Brent. There may be complications with this one. It may have a high sulphur content; I am not sure if sulphur attaches itself to condensate or only to longer chain HCs in crude oil.
3 UPSIDE ONLY PARTIALLY REVEALED BY DISCOVERY REPORT
If you remember in my first post I mentioned to check whether there would be a change in the underlying assumptions regarding reservoir area used in the preliminary report versus the final discovery report. This was all about the distribution of reservoir area in the Monte Carlo simulations of the Jurassic oil reservoirs. In the preliminary report the reservoir area was set equal to the spill point area in only 1 in 100 iterations of the models. However, the Jurassic test pressures in Sh-1 indicated, by comparison with JK-1 aquifer pressures, that the downdip oil water contact could be coincident (give or take inherent depth uncertainties) with the spill point.
It was encouraging to see the pressure plot in the Discovery Report (p24) and acknowledgement of its potential significance “If the oil gradient line is extrapolated down to where it intersects the area water gradient line, a possible oil-water contact can be inferred at -2375 m subsea.” However the frequency with which reservoir area is set to spill point area remains 1 in 100 iterations in the Discovery Report.
I won’t reiterate the entire discussion from my 4th January post (check out here if you wish <
a) Assuming the pressure data is telling us the Jurassic reservoirs are full to spill leads to a Jurassic OIP estimate of 13.5BBO (Barsarin thro Mus 8.4BBO and Butmah 5.1 BBO).
b) Should the Sarmord also be full to spill it would contain 3.2 BBO. This is more speculative as no pressure data is available.
So there is a potential 16.7 BBO in the Jurassic and Cretaceous Sarmord. As discussed earlier the Garagu is likely to be oil bearing and hence it could contain another 2-3 BBO. So there is a potential OIP in the 15 – 20 BBO range EXCLUDING the 1-5 BB condensate and 6 to 16 TCF estimate supplied by DGA.
Wait it doesn’t stop there. This may have been mentioned in a post last year but the Discovery Report maps and slide 16 of the Macquarie presentation reaffirmed that there is closure to the north west of Sh-1 on the downthrown side of the Northern fault in multiple horizons. The figure showing the appraisal/early dev well targets has a well in this closure. This area is outside those used to develop the OIP estimates.
OK, this all sounds great but remember that most of the OIP is still potential, albeit with reasonable justification, and future well results could be disappointing.
4 DOWNSIDES/AREAS OF CONCERN
a) Look at slides 11 and 16 of the Macquarie presentation. The terrain is very rugged. Hopefully there will be sufficient suitable places to locate development rigs. Otherwise there will be numerous difficult trajectory wells to drill. Whilst costs are recoverable well durations could be long and this will extend the period to achieve plateau production which will affect NPV estimates. Note also that Sh-1 was deviated. I don’t know the well history but it is called Sh-1B possibly indicating a sidetrack. Are there drilling concerns?
b) There is lots of H2S and CO2 in the associated gas and the Triassic gas discovery is very sour. 20% of the gas is not saleable so reduce GIP estimates by 20% to obtain useable gas. Have that H2S come out of your cooker and you would be dead in seconds! GKP will have had to take strict precautions when testing the well (breathing apparatus etc). The H2S/CO2 will have cost implications but more importantly the crude is probably high in sulphur so expect a sizeable discount to Brent crude price, possibly about 8-10%.
c) The rich condensate has a downside. Producing a rich gas condensate normally leads to drop out of the condensate in the reservoir and in the area around the wellbore. This causes a severe reduction in gas production rates and in the ratio of condensate to gas (CGR) and hence condensate rates. It would be necessary to re-inject the gas to maximise condensate recovery and sell the gas later when most of the condensate has been extracted.
d) As Sh-1 left us with so many questions, Sh-2 has numerous unknowns and uncertainties to resolve. Expect the well to take a long time if GKP do it right. There should be numerous cores to take which involves tripping in and out of the hole (pulling the drill string out and rerunning it) far more frequently than conventional drilling. The well will be 1500 – 2000 m deeper than Sh-1 and drilling will be slower as depths increase. Patience will be required! Hopefully TK will authorise a steady stream of news as hole intervals are drilled and logged.
The release of news revealing the growth in the OIP potential is being managed by GKP. They don’t want to run the risk of disappointing the market by declaring they have 10+ BBO mean OIP discovery and then having to retrace when the independent reports are released.
BACK TO POLITICS
The disappointment that the SP did not rise significantly is understandable. My reaction is to be patient and wait until the political situation is sorted and the discovery is sufficiently appraised to reveal its full potential. Shaikan on its own would make a significant contribution to helping Kurdistan reach its desired aim of reaching 1 MM bbl/d production (durby’s post “Latest Development .... “ of 17/1/10) and would provide insurance for Iraq regarding its desired aim of increasing oil revenues by raising production levels to 12 MM bbl/d. In assessing success case field value I will be modelling the field with a number of production scenarios to include peak production rates between 300 – 800 kbbl/d. Shaikan should increase the probability of everyone achieving their targets and its early development should therefore be supported by all parties.
CONCLUSION
In conclusion loads of good news to be encouraged by, some concerns but nothing to get too worried about. Roll on testing, an AB update and most of all Sh-2. That will be the most eagerly anticipated well in the industry!
As ever if you require any clarifications let me know.
All the best,
Gramacho
Saturday, February 6, 2010
GKP Gramacho Jan 2010 ' deeper understanding of OIP '
The purpose of this post is to provide a deeper insight into the potential OIP in the Jurassic and to explain why the Jurassic alone, never mind the Triassic, has a significant probability of containing well in excess of 10bn bbl, i.e. well above the DGA P10 and P1 estimates. The post is quite long but is worth your time.
There has been much discussion (and misunderstanding) about the differences in OIP estimates for Shaikan shown in DGA’s Report 1 (Preliminary Jurassic Evaluation) and those quoted by TK at the Nov 30th presentation to analysts. The DGA report presents a mean OIP of 2.79bn bbl for the Jurassic (based on well results to 2055m MD) whilst TK said, somewhat confusingly, that there was a possible 10-15bn bbl in place. Some posters on this board, and possibly the city analysts also, have assumed TK’s figures must be wildly optimistic since they exceed the P10 and even P1 estimates for the Jurassic. Others have concluded that his comments appear to have taken into account the Triassic and an analysis on this section is awaited in DGA Report 2.
I have built a Monte Carlo model of the two Jurassic Sections (Barsarin thro’ Mus and Butmah reservoirs) using the input data provided in Table 4 of DGA Report 1. The model was used to understand why the report produced a modest OIP (only in Iraq is 2.8bn modest!), given the huge net pay figures and very substantial size of the structure.
Reproduced below are the key OIP resource estimates in MM bbl. The first number is that from DGA report, the second number is from the model.
Mean: 2790, 2723
P90, 956, 744 (think proven)
P50: 2217, 2043 (think probable)
P10: 5266, 5183 (think possible)
Note the excellent agreement with the P50 estimate and the Mean, the latter being the most important of all the figures. The small divergence at the P90 level is to be expected since the two models probably handle the end point distributions slightly differently and in any event the P10 and P90 distributions are not sampled so frequently giving rise to more statistical variation between model runs.
Having established the model’s ability to replicate the DGA model, it was used to answer the key question that a GKP employee should have asked when presented with this report. “What does the OIP distribution look like if the structure is filled to the closing contour of 2200m SS, ref Fig4 DGA report?”
This was simulated by setting the reservoir area equal to that within the 2000m SS contour (approx 140 sq km) and keeping the other parameters unchanged. This discounts the roughly 20 sq km at the periphery where the base of the Butmah dips below the closing contour. In this area there is a reduction of the net pay above the oil water contact (wedge effect). Pay reduces from the DGA input figures of 167m at 2000m SS down to 0m at the spill point. The model is conservative in this respect.
Key results were as follows:
Mean: 13.8 bn
P90, 8.8 bn
P50: 13.3 bn
P10: 19.4 bn
How, you might ask, is it possible for this Mean to exceed the P1 from the DGA report and be credible?
It is all down to the key assumptions regarding area of the reservoir which has by far the widest range of any parameter in the model. For example DGA use a P90 of 6.5 sq km for the top four Jurassic reservoirs which they say is 25% of the mapped area of lowest known oil (LKO). In other words the well has found oil down to a certain depth but their model doesn’t give the area associated with this a 90% probability of being sampled when the model calculates OIP. In fact their P50 area of 20.6 sq km is less than the area associated with the LKO in the 4th reservoir unit (Mus).
Consider how their upside areas have been handled. The full structure area within closure is sampled only 1 in 100 times and only 10 times in 100 samples is the oil filled reservoir area considered to be larger than 1/3 of the total area under closure. Also the lognormal distribution of the area parameter results in the modes (most frequently sampled areas in the models) being less than 20 sq km in the Barsarin thro’ Mus and Butmah models.
Note durby was making a similar point about the area assumptions in his post of 2/12/09 to Hub when discussing distance from Shaikan 1 to site of Shaikan 2. My models quantify the impact of the area assumptions.
DGA’s approach is understandable. They don’t want to stick their neck out and say there is 10-15 bn bbl in place after just one well and then find for some reason we don’t yet understand that it doesn’t work out. The 2.8bn is a fair estimate of the Mean OIP based on a one well result. But what the report doesn’t do is show the full potential of the Shaikan structure. This is because the DGA report does not make reference to important pressure information obtained from the well tests and the offset well that was shown in the November presentation to the analysts. It is possible that this information was not provided to DGA prior to release of their preliminary evaluation. The DGA Report is dated Oct 21st, 2009.
The information is contained in Slide 15 of the presentation to the analysts. It shows the oil column pressure gradient obtained from DSTs 1-3 and the local aquifer pressure gradient in the Jebel Kand 1 well which lies about 20km away in the Hunt oil block. In the situation where the oil water contact has not been encountered in a well, the industry has commonly used pressure information from the aquifer in adjacent wells to infer the depth at which the OWC is downdip. The intersection of the well’s oil gradient with the local/regional aquifer pressure gradient can predict the depth of the Free Water Level which in most reservoirs of reasonable permeability is close to the oil water contact. (Let’s not get into the differences here.) GKP are well aware of this and used the intersection to predict that the Free Water Level/OWC is 2230m SS.
Slide 15 is indicating that the structure contains oil down to, or close to 2230mSS. Does the data look reasonable or anomalous? Well, based on the following it does look perfectly plausible.
1. The aquifer gradient of 0.44 psi/ft corresponds to that of a fresh water/low salinity aquifer.
2. The oil gradient of 0.359 psi/ft is about that which would be expected of a medium to low gravity crude. From experience it is not obviously too high, say 0.4 psi/ft, neither is it obviously too low, say 0.3 psi/ft.
3. Correlation of fit (R value) of the straight line for both gradients is exceedingly good, i.e. R ~ 1.0.
4. Although there are only 3 points on the oil gradient line they span about 350m which is very large in comparison with most of the rest of the world’s fields. Often extrapolations are done on lines created from more pressure points but with a smaller vertical separation range.
5.The intercept of 2230 mSS may also be suggesting the data is valid. It is very close to the closing contour of 2200 mSS, implying that the structure is filled to closure. The difference of 30 m may be the result of having to extrapolate the oil gradient line 1200 m downdip from the lowermost test pressure and the depth errors inherent in seismic interpretation. Alternatively the oil column may extend below the closing contour indicating the Shaikan structure is one culmination of a larger oil accumulation as has been discussed. Note the Kirkuk Field has 3 separate culminations within one super giant accumulation.
What could cause the OWC to be shallower?
1. If the JK well and Shaikan well are not in pressure communication it is possible that the Shaikan aquifer pressure line is displaced slightly to the right, i.e. has higher pressure at the same depth locally in the Shaikan area. The structure would not be full. Unfortunately GKP do not present any background material to support the use of the JK-1 pressures.
2. If the three Shaikan test intervals are not in pressure communication, or the pressures have not been interpreted correctly, and each interval is one point on three separate oil gradient lines each of steeper slope (e.g. say about 0.33 psi/ft) then the OWC would be shallower. However I believe this is unlikely. Given the low GOR reported if any change is warranted I would expect the gradient to be marginally less steep and hence the contact to be deeper.
My view is that Slide 15 is telling us that the structure is filled to at least the 2200m contour and that there therefore a significant probability that the Jurassic contains 10 – 15 bn OIP. This is of course not guaranteed. For example even if the OWC is at 2200 mSS or deeper the net to gross could deteriorate significantly down dip from the existing well leading to lower net pay thicknesses down dip.
In conclusion two things to consider:
1. When the next DGA report is released look out for whether they have revised their Jurassic interpretation in the light of the pressure information. If not then their revised estimate is still likely to contain considerable upside.
2. Make no mistake the Shaikan 2 well has the potential to prove up very substantial volumes of oil. It will have a bigger effect on OIP than the extended test in the short term. If GKP were to sell out before Shaikan 2 I would be disgusted. It has so much upside if located correctly to investigate the oil column sufficiently down dip.
Let me know if you have any questions.
All the best for 2010 GKP investors.
Hub thanks for your 2010 hot list.
Cheers,
Gramacho
There has been much discussion (and misunderstanding) about the differences in OIP estimates for Shaikan shown in DGA’s Report 1 (Preliminary Jurassic Evaluation) and those quoted by TK at the Nov 30th presentation to analysts. The DGA report presents a mean OIP of 2.79bn bbl for the Jurassic (based on well results to 2055m MD) whilst TK said, somewhat confusingly, that there was a possible 10-15bn bbl in place. Some posters on this board, and possibly the city analysts also, have assumed TK’s figures must be wildly optimistic since they exceed the P10 and even P1 estimates for the Jurassic. Others have concluded that his comments appear to have taken into account the Triassic and an analysis on this section is awaited in DGA Report 2.
I have built a Monte Carlo model of the two Jurassic Sections (Barsarin thro’ Mus and Butmah reservoirs) using the input data provided in Table 4 of DGA Report 1. The model was used to understand why the report produced a modest OIP (only in Iraq is 2.8bn modest!), given the huge net pay figures and very substantial size of the structure.
Reproduced below are the key OIP resource estimates in MM bbl. The first number is that from DGA report, the second number is from the model.
Mean: 2790, 2723
P90, 956, 744 (think proven)
P50: 2217, 2043 (think probable)
P10: 5266, 5183 (think possible)
Note the excellent agreement with the P50 estimate and the Mean, the latter being the most important of all the figures. The small divergence at the P90 level is to be expected since the two models probably handle the end point distributions slightly differently and in any event the P10 and P90 distributions are not sampled so frequently giving rise to more statistical variation between model runs.
Having established the model’s ability to replicate the DGA model, it was used to answer the key question that a GKP employee should have asked when presented with this report. “What does the OIP distribution look like if the structure is filled to the closing contour of 2200m SS, ref Fig4 DGA report?”
This was simulated by setting the reservoir area equal to that within the 2000m SS contour (approx 140 sq km) and keeping the other parameters unchanged. This discounts the roughly 20 sq km at the periphery where the base of the Butmah dips below the closing contour. In this area there is a reduction of the net pay above the oil water contact (wedge effect). Pay reduces from the DGA input figures of 167m at 2000m SS down to 0m at the spill point. The model is conservative in this respect.
Key results were as follows:
Mean: 13.8 bn
P90, 8.8 bn
P50: 13.3 bn
P10: 19.4 bn
How, you might ask, is it possible for this Mean to exceed the P1 from the DGA report and be credible?
It is all down to the key assumptions regarding area of the reservoir which has by far the widest range of any parameter in the model. For example DGA use a P90 of 6.5 sq km for the top four Jurassic reservoirs which they say is 25% of the mapped area of lowest known oil (LKO). In other words the well has found oil down to a certain depth but their model doesn’t give the area associated with this a 90% probability of being sampled when the model calculates OIP. In fact their P50 area of 20.6 sq km is less than the area associated with the LKO in the 4th reservoir unit (Mus).
Consider how their upside areas have been handled. The full structure area within closure is sampled only 1 in 100 times and only 10 times in 100 samples is the oil filled reservoir area considered to be larger than 1/3 of the total area under closure. Also the lognormal distribution of the area parameter results in the modes (most frequently sampled areas in the models) being less than 20 sq km in the Barsarin thro’ Mus and Butmah models.
Note durby was making a similar point about the area assumptions in his post of 2/12/09 to Hub when discussing distance from Shaikan 1 to site of Shaikan 2. My models quantify the impact of the area assumptions.
DGA’s approach is understandable. They don’t want to stick their neck out and say there is 10-15 bn bbl in place after just one well and then find for some reason we don’t yet understand that it doesn’t work out. The 2.8bn is a fair estimate of the Mean OIP based on a one well result. But what the report doesn’t do is show the full potential of the Shaikan structure. This is because the DGA report does not make reference to important pressure information obtained from the well tests and the offset well that was shown in the November presentation to the analysts. It is possible that this information was not provided to DGA prior to release of their preliminary evaluation. The DGA Report is dated Oct 21st, 2009.
The information is contained in Slide 15 of the presentation to the analysts. It shows the oil column pressure gradient obtained from DSTs 1-3 and the local aquifer pressure gradient in the Jebel Kand 1 well which lies about 20km away in the Hunt oil block. In the situation where the oil water contact has not been encountered in a well, the industry has commonly used pressure information from the aquifer in adjacent wells to infer the depth at which the OWC is downdip. The intersection of the well’s oil gradient with the local/regional aquifer pressure gradient can predict the depth of the Free Water Level which in most reservoirs of reasonable permeability is close to the oil water contact. (Let’s not get into the differences here.) GKP are well aware of this and used the intersection to predict that the Free Water Level/OWC is 2230m SS.
Slide 15 is indicating that the structure contains oil down to, or close to 2230mSS. Does the data look reasonable or anomalous? Well, based on the following it does look perfectly plausible.
1. The aquifer gradient of 0.44 psi/ft corresponds to that of a fresh water/low salinity aquifer.
2. The oil gradient of 0.359 psi/ft is about that which would be expected of a medium to low gravity crude. From experience it is not obviously too high, say 0.4 psi/ft, neither is it obviously too low, say 0.3 psi/ft.
3. Correlation of fit (R value) of the straight line for both gradients is exceedingly good, i.e. R ~ 1.0.
4. Although there are only 3 points on the oil gradient line they span about 350m which is very large in comparison with most of the rest of the world’s fields. Often extrapolations are done on lines created from more pressure points but with a smaller vertical separation range.
5.The intercept of 2230 mSS may also be suggesting the data is valid. It is very close to the closing contour of 2200 mSS, implying that the structure is filled to closure. The difference of 30 m may be the result of having to extrapolate the oil gradient line 1200 m downdip from the lowermost test pressure and the depth errors inherent in seismic interpretation. Alternatively the oil column may extend below the closing contour indicating the Shaikan structure is one culmination of a larger oil accumulation as has been discussed. Note the Kirkuk Field has 3 separate culminations within one super giant accumulation.
What could cause the OWC to be shallower?
1. If the JK well and Shaikan well are not in pressure communication it is possible that the Shaikan aquifer pressure line is displaced slightly to the right, i.e. has higher pressure at the same depth locally in the Shaikan area. The structure would not be full. Unfortunately GKP do not present any background material to support the use of the JK-1 pressures.
2. If the three Shaikan test intervals are not in pressure communication, or the pressures have not been interpreted correctly, and each interval is one point on three separate oil gradient lines each of steeper slope (e.g. say about 0.33 psi/ft) then the OWC would be shallower. However I believe this is unlikely. Given the low GOR reported if any change is warranted I would expect the gradient to be marginally less steep and hence the contact to be deeper.
My view is that Slide 15 is telling us that the structure is filled to at least the 2200m contour and that there therefore a significant probability that the Jurassic contains 10 – 15 bn OIP. This is of course not guaranteed. For example even if the OWC is at 2200 mSS or deeper the net to gross could deteriorate significantly down dip from the existing well leading to lower net pay thicknesses down dip.
In conclusion two things to consider:
1. When the next DGA report is released look out for whether they have revised their Jurassic interpretation in the light of the pressure information. If not then their revised estimate is still likely to contain considerable upside.
2. Make no mistake the Shaikan 2 well has the potential to prove up very substantial volumes of oil. It will have a bigger effect on OIP than the extended test in the short term. If GKP were to sell out before Shaikan 2 I would be disgusted. It has so much upside if located correctly to investigate the oil column sufficiently down dip.
Let me know if you have any questions.
All the best for 2010 GKP investors.
Hub thanks for your 2010 hot list.
Cheers,
Gramacho
GKP Zengas 21 Jan ' events unfolding '
ZENGAS - 21 Jan'10 - 14:06 - 67012 of 67024
Just going back to Reliance and the analyst talking about eyebrows being raised about the speed at which they are raising money (on top of their $4b+ cash pile).
Let's say your in Kurdistan/Iraq and your 2 blocks - ie Rovi and Sarta don't throw up as much oil as hoped.
You either exit the country basically empty handed or consider buying your neighbour at a few dollars per barrel, or you seek to buy those assets while still cheap and consolidate your position and integrate economies of scale with your existing blocks. This could apply to any potential bidder though.
Your neighbour has 4 blocks.
One block has potentially 18 billion barrels of oil and 5 billion bls gas (independently assessed of GKP).
At 30% oil and 70% gas recovery = potentially 5.4 biilion oil + 3.5 billion bls gas = 8.9 bbilion boe recovery.
Maybe with modern technology (and future technologies) you can increase that oil recovery at some future date which brings your purchase price away down ?
On those top figures - 25% net to GKP from Shaikan is potentially 1350 million bls oil and 875 million bls gas (2.2 billion boe).
Beleive me, you sit up and take notice if this is where you are operating or even aspire to operate when an independant accredited assessor issues that kind of report !!
At $3 or $4/b - the oil is potentially worth $4- $5.4 billion with gas even at 50c/boe = another $450m.
All told - Shaikan could be potentially worth between $4.5b and almost $6b to GKP.
Now realistically that quantity may not all be there, but DGA tells us the potential is there for it.
So if you are watching GKP, whether Chinese, Korean, Indian (and remember your country needs energy resource security - ie your government and not your company !!!). Huge, easily developed oil resources of this nature don't come around very often and at the cheapest capex/opex costs anywhere. I'm sure GKP is being watched closely. The independent DGA report is only 7 days old.
A number of things -
Do you then worry about a competitor nabbing those assets from your grasp while you are next door?.
Do you bid a few billion $$ soon (perhaps $2-$3b and prove up the rest of the potential yourself for another $120m+ or so, or pay perhaps 2 - 3 times that, 6-9 months later.
With an early bid of $2-$3 billion range - for any buyer, they'd be bidding on the assumption that there is up to 9 b/bo in place with the rest as free upside if it comes in - ie all that extra oil/gas for free but against the risk of maybe not as much being there until further drilling confirms it - all a careful balancing act.
DGA however already says the 'potential' alone already exists (ie 13 b/bo) to current drilled depth as no water exists. (A £3 bid for GKP if it were to happen would be eqivalent to just $2.4b - around what the rumoured Indian talks were in the summer and supposedly unaccepatable, though denied at the time by GKP - but not by the Indians).
As a potential buyer, you also know that GKP have a net 40% of the Sheik-Adi block which was acquired due to closure from the Shaikan anticline being determined in Sheik-Adi. Sheik-Adi has significant historical data (we don't know what it is, but Morfina turns up the fact that there is an existing oil well adjacent to the planned drill site).
If Sheik-Adi had 2.5 billion bls in place and with a 30% RF - that's potentially another 300 billion bls net to GKP if successful on those parameters - ie possibily representing another $1b - $1.2b of value to GKP using $3-$4/b range. This potential, though not guaranteed could come basically free on an early bid. Whose to say afterall that S-A might not hold 5-10 billion bls ?
Goverments on Energy security will factor in the cost of getting oil years down the road - whose to say they wouldn't see the value worth factoring in at $5-$8/b ?, when looking at something so strategic as energy security.
It's not just simply all about getting oil for the lowest $ per barrel price.
There's still Berbarh and Akri-Bijeel for GKP.
I've no doubt that TK saying the company was the most important person at the dance right now is perfectly true and shouldn't be underestimated. The DGA report has only come out. GKP won't imo have the muscle to develop fields of this size which will require perhaps a few billion $$ of investment and will be realistic about this, hence why he said something to the order that the company may not be around in 6 months or so ( a month or so ago).
The tenders are all out there - all systems go but only a measly £1.5m ($2.4m) drawn over a month ago.
Perhaps there's no reason to draw down more than needed and no need to commit to funding while he still has £16.9m ($27m) available and perhaps some potential suitors are now engaged in studying the DGA report.
As someone else posted, TKs' apparently not concerned about the s/p otherwise he could have been drawing like crazy when the s/p was up near 130p and stayed in the 110/115 range for a number of weeks - imo indicative, that he beleives the company is worth a hell of a lot more.
The independant DGA report was only released 7 days ago. Maybe dance partners were waiting for this ?
You definitely would want independant 3rd party accredited research other than what GKP have said, if you were to carry out any DD.
Could we see -
An equity placing in the company taken by a major ?
An early bid?
A percentage of the block sold ?
A standard institutional placing ?
More Seda drawdown ?
An increased Seda facility ? (unlikely imo).
Algerian asset sale nearing completion ?
We're surrounded by existing powerful industry players and definitely not lightweights by any stretch of the imagination. Reliance Industries, MOL (who are part of a seperate $8b Kurdish gas investment consortium) and HUNT - not to mention the extensive particapation of KNOC with $2.1b in capacity building bonues (are they going to forfeit that to politics and their countrymen signing a deal in Iraq itself ?). The Chinese are a few blocks up from us after spending $7.5b on Addax (580 mmbo worldwide).
I still maintain that any deep pocketed bidder can assume more risk weighed against any political outcome. In recent weeks, RAK have increased their stake in DNO (circa £700m+£200m debt) who have nothing as near indicative of the potential amount of oil that GKP may possess.
All food for thought. I hope the true potential gets the chance to be exploited but unfortunately the potential for bigger players is now too much to ignore in respect of a bid. Perhaps an equity stake by a major could help fend that off for now.
Just going back to Reliance and the analyst talking about eyebrows being raised about the speed at which they are raising money (on top of their $4b+ cash pile).
Let's say your in Kurdistan/Iraq and your 2 blocks - ie Rovi and Sarta don't throw up as much oil as hoped.
You either exit the country basically empty handed or consider buying your neighbour at a few dollars per barrel, or you seek to buy those assets while still cheap and consolidate your position and integrate economies of scale with your existing blocks. This could apply to any potential bidder though.
Your neighbour has 4 blocks.
One block has potentially 18 billion barrels of oil and 5 billion bls gas (independently assessed of GKP).
At 30% oil and 70% gas recovery = potentially 5.4 biilion oil + 3.5 billion bls gas = 8.9 bbilion boe recovery.
Maybe with modern technology (and future technologies) you can increase that oil recovery at some future date which brings your purchase price away down ?
On those top figures - 25% net to GKP from Shaikan is potentially 1350 million bls oil and 875 million bls gas (2.2 billion boe).
Beleive me, you sit up and take notice if this is where you are operating or even aspire to operate when an independant accredited assessor issues that kind of report !!
At $3 or $4/b - the oil is potentially worth $4- $5.4 billion with gas even at 50c/boe = another $450m.
All told - Shaikan could be potentially worth between $4.5b and almost $6b to GKP.
Now realistically that quantity may not all be there, but DGA tells us the potential is there for it.
So if you are watching GKP, whether Chinese, Korean, Indian (and remember your country needs energy resource security - ie your government and not your company !!!). Huge, easily developed oil resources of this nature don't come around very often and at the cheapest capex/opex costs anywhere. I'm sure GKP is being watched closely. The independent DGA report is only 7 days old.
A number of things -
Do you then worry about a competitor nabbing those assets from your grasp while you are next door?.
Do you bid a few billion $$ soon (perhaps $2-$3b and prove up the rest of the potential yourself for another $120m+ or so, or pay perhaps 2 - 3 times that, 6-9 months later.
With an early bid of $2-$3 billion range - for any buyer, they'd be bidding on the assumption that there is up to 9 b/bo in place with the rest as free upside if it comes in - ie all that extra oil/gas for free but against the risk of maybe not as much being there until further drilling confirms it - all a careful balancing act.
DGA however already says the 'potential' alone already exists (ie 13 b/bo) to current drilled depth as no water exists. (A £3 bid for GKP if it were to happen would be eqivalent to just $2.4b - around what the rumoured Indian talks were in the summer and supposedly unaccepatable, though denied at the time by GKP - but not by the Indians).
As a potential buyer, you also know that GKP have a net 40% of the Sheik-Adi block which was acquired due to closure from the Shaikan anticline being determined in Sheik-Adi. Sheik-Adi has significant historical data (we don't know what it is, but Morfina turns up the fact that there is an existing oil well adjacent to the planned drill site).
If Sheik-Adi had 2.5 billion bls in place and with a 30% RF - that's potentially another 300 billion bls net to GKP if successful on those parameters - ie possibily representing another $1b - $1.2b of value to GKP using $3-$4/b range. This potential, though not guaranteed could come basically free on an early bid. Whose to say afterall that S-A might not hold 5-10 billion bls ?
Goverments on Energy security will factor in the cost of getting oil years down the road - whose to say they wouldn't see the value worth factoring in at $5-$8/b ?, when looking at something so strategic as energy security.
It's not just simply all about getting oil for the lowest $ per barrel price.
There's still Berbarh and Akri-Bijeel for GKP.
I've no doubt that TK saying the company was the most important person at the dance right now is perfectly true and shouldn't be underestimated. The DGA report has only come out. GKP won't imo have the muscle to develop fields of this size which will require perhaps a few billion $$ of investment and will be realistic about this, hence why he said something to the order that the company may not be around in 6 months or so ( a month or so ago).
The tenders are all out there - all systems go but only a measly £1.5m ($2.4m) drawn over a month ago.
Perhaps there's no reason to draw down more than needed and no need to commit to funding while he still has £16.9m ($27m) available and perhaps some potential suitors are now engaged in studying the DGA report.
As someone else posted, TKs' apparently not concerned about the s/p otherwise he could have been drawing like crazy when the s/p was up near 130p and stayed in the 110/115 range for a number of weeks - imo indicative, that he beleives the company is worth a hell of a lot more.
The independant DGA report was only released 7 days ago. Maybe dance partners were waiting for this ?
You definitely would want independant 3rd party accredited research other than what GKP have said, if you were to carry out any DD.
Could we see -
An equity placing in the company taken by a major ?
An early bid?
A percentage of the block sold ?
A standard institutional placing ?
More Seda drawdown ?
An increased Seda facility ? (unlikely imo).
Algerian asset sale nearing completion ?
We're surrounded by existing powerful industry players and definitely not lightweights by any stretch of the imagination. Reliance Industries, MOL (who are part of a seperate $8b Kurdish gas investment consortium) and HUNT - not to mention the extensive particapation of KNOC with $2.1b in capacity building bonues (are they going to forfeit that to politics and their countrymen signing a deal in Iraq itself ?). The Chinese are a few blocks up from us after spending $7.5b on Addax (580 mmbo worldwide).
I still maintain that any deep pocketed bidder can assume more risk weighed against any political outcome. In recent weeks, RAK have increased their stake in DNO (circa £700m+£200m debt) who have nothing as near indicative of the potential amount of oil that GKP may possess.
All food for thought. I hope the true potential gets the chance to be exploited but unfortunately the potential for bigger players is now too much to ignore in respect of a bid. Perhaps an equity stake by a major could help fend that off for now.
GKP Unknown ' Summary of 2nd DGA report '
Shaikan Update link here from the long awaited independent (DGA) report covering Jurassic and Triassic sections of Shaikan
http://www.investegate.co.uk/Article.aspx?id=201001140700075
Previous RNS on DGA report on upper Jurassis section is also linked here
http://www.investegate.co.uk/Article.aspx?id=200910220700131
Key findings:
• The range of oil in-place for the Shaikan structure has been increased to a gross 1.9 (P90) to 7.4 (P10) billion barrels of oil, with a mean of 4.2 billion barrels of oil in place. Previous estimates were 1.0 (P90) and 5.0 (P10). In addition, there is upside potential (P1) up to a total of 13 billion barrels of oil in place.
• There are also prospective resources below 2,950 meters (lower Triassic and Permian). The DGA Executive Summary states that: "Potential resources for these deeper formations are ~ 1 to 5 BBO and 6 to 14 TCF, which is in addition to the P1 upside estimate of 13 BBO".
• In addition the DGA Executive Summary confirms that: "This discovery greatly reduces the geologic risks in the Sheikh Adi, Akri Bijeel and the Ber Bahr blocks, Gulf Keystone's adjacent opportunities. The Shaikan discovery proves the presence of hydrocarbon source and migration in the area.
• The Shaikan-1 well has discovered a significant resource of oil and gas in the Cretaceous Sarmord, Jurassic Barsarin, Sargelu, Alan, Mus, Butmah, Baluti and Triassic Kurre Chine formations
As TGG says some pretty mind boggling numbers here
(i) Mean OIIP = 4.2 billion bbls
(ii) P90 OIIP = 1.9 billion bbls
(iii) P10 OIIP =7.4 billion bbls
(iv) Additional undrilled potential under Triassic zone (up to 5 billion barrels oil or 14 TCF gas)
(v) Derisks all adjacent plays soem of which GKP share is significantly higher than that of Shaikan (no KRG back in right ...etc)
It is considered by certain posters on ADVFN and iii that the DGA report is conservative and numbers are higher. I am of a similar opinion but DGA is all that can be used for valuations for now.
I also wish, given that he has a bit of “previous” that TK would stop talking up P1 numbers (13 billion OIIP). These are 1% probability numbers FFS, and is it not industry etiquette/practice to big up beyond P10.
So Valuations!!! Well, with approx 500 million shares in issue, using $4/bbl in the ground, GKP have (approx) 27% net working interest, mean OIIP of 4.2 billion bbls and a 30% recovery factor then its
Shaikan only
4 x 0.27 x (4.2 x 0.3)
= $1.36 billion
= $2.72/sh
= 161p/sh
Add in
(i) cash in bank ($20m)
(ii) other undrilled prospects (I havn’t bothered with exact amounts but there is a strong feeling by GKP (and others) that Shaikan extends into some of the adjacent blocks as a continuous oil filled structure) so add same volumes again as Shaikan and set the technical risk at 30% but assign a net (to GKP) ownership is closer to 40%.
(iii) a bit for Algeria (say $50m)
(iv) then factor in political risk (say 70% COS that licenses stay exactly as they are) then you can get comfortably just over 200p share
What next
(i) Akri Bijeel drill – ongoing-result due in March/April. GKP have a net 10% in this.
(ii) Shaikan-2 appraisal well – add more resources to Shaikan and move P50 to P90, P10 to P50, and fro Todd move some of his “P1” (13 billion OIIP) to P10.
(iii) Shaikan Extended Well Test – confirm reserves of Shaikan by producing for several months
(iv) Raise cash via placing – imminent, should happen within next month or 2 as GKP need to book drilling rigs for 2010 exploration drilling
(v) Possibly, cash permitting, drill Sheikh Adi (and maybe also Ber Bahr)
(vi) Iraqi elections (March 2010) and possible resolution of Oil Law to also include KRG awarded Kurdistan PSA/PSCs. Thorny tricky one. I cant see a quick final resolution but I can see export taps and money as per KRG contracts being paid in short term.
(vii) GKP sold off. Not as bullish about this event as I used to be as the prize here is huge and gets bigger, the sales tag/price will be huge, political risk is large so plenty of due diligence for companies to mull over.
http://www.investegate.co.uk/Article.aspx?id=201001140700075
Previous RNS on DGA report on upper Jurassis section is also linked here
http://www.investegate.co.uk/Article.aspx?id=200910220700131
Key findings:
• The range of oil in-place for the Shaikan structure has been increased to a gross 1.9 (P90) to 7.4 (P10) billion barrels of oil, with a mean of 4.2 billion barrels of oil in place. Previous estimates were 1.0 (P90) and 5.0 (P10). In addition, there is upside potential (P1) up to a total of 13 billion barrels of oil in place.
• There are also prospective resources below 2,950 meters (lower Triassic and Permian). The DGA Executive Summary states that: "Potential resources for these deeper formations are ~ 1 to 5 BBO and 6 to 14 TCF, which is in addition to the P1 upside estimate of 13 BBO".
• In addition the DGA Executive Summary confirms that: "This discovery greatly reduces the geologic risks in the Sheikh Adi, Akri Bijeel and the Ber Bahr blocks, Gulf Keystone's adjacent opportunities. The Shaikan discovery proves the presence of hydrocarbon source and migration in the area.
• The Shaikan-1 well has discovered a significant resource of oil and gas in the Cretaceous Sarmord, Jurassic Barsarin, Sargelu, Alan, Mus, Butmah, Baluti and Triassic Kurre Chine formations
As TGG says some pretty mind boggling numbers here
(i) Mean OIIP = 4.2 billion bbls
(ii) P90 OIIP = 1.9 billion bbls
(iii) P10 OIIP =7.4 billion bbls
(iv) Additional undrilled potential under Triassic zone (up to 5 billion barrels oil or 14 TCF gas)
(v) Derisks all adjacent plays soem of which GKP share is significantly higher than that of Shaikan (no KRG back in right ...etc)
It is considered by certain posters on ADVFN and iii that the DGA report is conservative and numbers are higher. I am of a similar opinion but DGA is all that can be used for valuations for now.
I also wish, given that he has a bit of “previous” that TK would stop talking up P1 numbers (13 billion OIIP). These are 1% probability numbers FFS, and is it not industry etiquette/practice to big up beyond P10.
So Valuations!!! Well, with approx 500 million shares in issue, using $4/bbl in the ground, GKP have (approx) 27% net working interest, mean OIIP of 4.2 billion bbls and a 30% recovery factor then its
Shaikan only
4 x 0.27 x (4.2 x 0.3)
= $1.36 billion
= $2.72/sh
= 161p/sh
Add in
(i) cash in bank ($20m)
(ii) other undrilled prospects (I havn’t bothered with exact amounts but there is a strong feeling by GKP (and others) that Shaikan extends into some of the adjacent blocks as a continuous oil filled structure) so add same volumes again as Shaikan and set the technical risk at 30% but assign a net (to GKP) ownership is closer to 40%.
(iii) a bit for Algeria (say $50m)
(iv) then factor in political risk (say 70% COS that licenses stay exactly as they are) then you can get comfortably just over 200p share
What next
(i) Akri Bijeel drill – ongoing-result due in March/April. GKP have a net 10% in this.
(ii) Shaikan-2 appraisal well – add more resources to Shaikan and move P50 to P90, P10 to P50, and fro Todd move some of his “P1” (13 billion OIIP) to P10.
(iii) Shaikan Extended Well Test – confirm reserves of Shaikan by producing for several months
(iv) Raise cash via placing – imminent, should happen within next month or 2 as GKP need to book drilling rigs for 2010 exploration drilling
(v) Possibly, cash permitting, drill Sheikh Adi (and maybe also Ber Bahr)
(vi) Iraqi elections (March 2010) and possible resolution of Oil Law to also include KRG awarded Kurdistan PSA/PSCs. Thorny tricky one. I cant see a quick final resolution but I can see export taps and money as per KRG contracts being paid in short term.
(vii) GKP sold off. Not as bullish about this event as I used to be as the prize here is huge and gets bigger, the sales tag/price will be huge, political risk is large so plenty of due diligence for companies to mull over.
GKP Various posters ' notes from Feb presentation '
ladies and gents, TOPSCOTTY
my summary from tonight:
Algeria
some of the Algerian officials and some of the sontrach officials have been arrested therefore the Algerian asset sale will not happen anytime soon until that is cleared up
shaikan will need 6-7 development wells to firm up the structure so end of next year to fully appraise my guess on current timescales
shaikan 2 will be drilled with the same rig though design will incorporate the increased oil and gas pressures previously not anticipated
work over rig being implemented to target the zone that produced 5-8,000 barrels (note this was choked) will produce 10,000 bbls a day from one zone this will be sold into the local market at 50% discount to Brent...i.e. approx $35 dollars a barrel..(Not bad when the extraction costs $2-4 dollars!!)
sheik adi possible one structure no surface erosion and no oil seeps...as mentioned before GKP now take the view that with no seeps the oil is sealed in and the quality of the oil will be better than shaikan same as MOls structure I assume that the api will not vary as much as the shaikan structure so therefore we can produce from more than one zone and therefore greatly increase daily production
1 billion barrel potential....
ETAMIC were directed to GKP by the KRG as GKP and ETAMIC were worried about monetisation/protection issues also the fund had no operator at that stage so it was the perfect tie up...GKP were also worried that the oil from shaikan had migrated into ETAMICS blocks so they partnered for this reason i.e. if no oil in shaikan then definitely migration to their blocks
ETAMIC is listed offshore in the Caribbean by one individual....
He will be creating an oil and gas investment fund and the prospectus will be issued shortly to investors...this individual will then manage the fund proceeds of the above fund their 50% this news is imminent I think
ber bahr operator genel not confirmed on spud date yet though targeting same multiple reservoirs as shaikan pencilled in for 2010 currently
refining the oil was mentioned as the oil currently pumped goes thru the refinery in Kirkuk..a brand new refinery has opened in Erbil which has capacity for 50,0000 bopd so we would truck to their also existing refineries that have capacity
Bijeel 1 tight hole though no issues or hold ups to date GKP in daily contact with them over drilling tests etc etc the size of this block is massive with many shaikan structures situated on it..any successful drill will have significant material impact though we only have 20%
I took it that there will be a placing with institutions though there were many issues to consider around this that affect this decision...I took it that this was not an issue just deciding what was best for the company has over 40% of shares held by directors and they don’t want to give anything away...
my final take is GKP will not be bought out anytime soon as there’s too much risk still as further
appraisal work is necessary however the majors will be happy to pay the premium for a substantially de-risked acreage....I’ve set my timeline for end of next year with a share price of £5 + minimum definitely a share to hold so I for one will not be selling a single share till then and continue to add as funds become available..time for bed
MAKEMAGIC
Thank you to all who have provided a summary of tonights presentation, for what its worth this I furiously scribbled the following:-
1. Start of much bigger story.
2. Algeria - ongoing - some progress - 2 weeks ago - arrests made!
3. Leading E&P in Kurdistan.
4. Momentum to achieve 3 (above).
5. Start of life cycle.
6. Principle purpose to build resources via Sh. and other licenses.
7. Why Kurdistan? On trend with other Iraq/Iran oilfields.
8. Frontier area and high prospectivity 1:2 and 1:3 chance of success.
9. Trend down to Miran and visibility on surface.
10. Legal issues: Maliki - rights s/be observed - Shahrastani to look at. Iraq MP applied same objection to Baghdad as Shahrastani did to KRG!
11. Largest discovery in world last year - possibly last 10/20 years.
12. 5 tests - 20,000 bopd - restricted (testing) - output could be a lot higher.
13. Very large structure - difficult to measure. (yippee)
14. Seismic programme.
15. Cost - $1-$3 to develop.
16. Different types of oil and gas encountered. Showed slide with two jars of different oil - one light/one dark (both full!)
17. How big? Looked at Sh. with JK1 - water level 2230m - could be full to spill so could be very large OIP.
18. If all areas in communication - could be all oil!
19. 6-7 wells envisaged on Sh.
20 EWT - high permabilities - up to 13 Darcies i.e. better production (with analogy of bottles of water with stones in one and a sponge in the other).
21.Expect $35 for locally sold oil.
22. SA next to Sh. - poss. they join up - i.e. one structure. Oil from day one from Sh - but not SA - but could be better quality oil. Expect to drill 2010. Prospectivity Crut. to Permian.
23. Acquired SA in case Sh dry.
24. BerBahr - similar to SA/Sh. on trend. Genel to decide drilling. Prospectivity as Sh.
25. AB - MOL - Sh lookalikes on this block - may have drilled in wrong place - will move to where there is more prospectivity.
26. Work programme - to prove maximum OIP.
27. Sh 2 depends on Sh 3.
28. Lots of news this year.
29. Funding - discussing with advisors - news in near future.
30. Question time - ETAMIC - registered offshore Caribbean. Prospectus being prepared - one individual managing fund. TK has met ETAMIC - EA hasn't. ETAMIC Fund should be launched this year - "I hope so anyway" (or words to that effect)!
31. Used China for logging - Rig from US.
32. ETAMIC - no problems with ICG (!)
33. New refinery o/side Erbil - capacity up to 50,000.
34. JG introduced DGA - who have gained further work in Kurdistan as a result.
35. 13bn on DGA report - plus unreported areas.
36. Infinite pool of oil. (at least I think thats what he said!)
Apologies if I misheard anything and the points I missed - the sound system wasn't perfect and I'm no secretary.
Post presentation vibes - TK got lucky and has found one almighty oil well. What will he do with it - your guess is as good as mine. GKP is my largest holding by some distance - I'm not selling but then again I'm not buying either. One reason and one reason only - ETAMIC - it just won't go away. GL everyone.
Nice 2 c u
Ok,
This was an interesting evening and couldn't believe some of the big names from iii were at the presentation tonight :-)
Maud, the fish & chips were lovely.
THE GOOD
Good presentation
Biggest oil find in last 20 years and has the potential to be bigger
Felt GKP are holding back big time.
Big prospects for other wells.
Looking to produce and have already calculated $38 barrel to Kurd region until exports can start.
Ewan (CFO) is very bullish that funding is NOT an issue.
Looking to get new PR firm as GKP are unhappy with the share price also
THE BAD
ETAMIC - still very woolly. ETAMIC is only one person and the CFO has never met them!!!! TK has....Why?
ETAMIC introduced to GKP by the KRG...is this anything to be worried about??
Political risk - we all know this. Still relevant but getting better all the time. The Chinese are in Addax so really.......who's gonna mess with them at the moment?
The UGLY
I didn't quite catch the full explanation but, 2 guys from the sale of Algeria assets have been arrested for some reason so count this out of the equation for the next 6 months at least.
In the after speech drinks (and fish & chips) we encountered some interesting people.
Check out (Google) Robert Waterhouse - oil.
He was very upbeat about GKP however, most of his recommendations were on SEY.
He said that he thought GKP had the potential for being around £100 a share however, it would never get there because it will get sold before that.
Very interesting evening and worth the free drinks and food.
6-9 Months at least of hanging on for the biggy.
Good luck and thanks for the good company tonight...you know who you are.
Oh and COME ON YOU LEEDS for tomorrow :-)
JACK DIAMONDS
Dhatrader,
As you say....
"This is just the start of our story"..............
Tonights presentation confirmed to me :
1. No problems in funding, it's just the way it is structured
2. ETAMIC registered in Carribean. To set up fund this year. I heard Ewen say that "Directors & Management have no internal involvement with ETAMIC" & I believe him so bang go the conspiracies.
3. All 4 acerage " ON TREND" . Difficult to evaluate true potential. I would go as far as saying PI should throw away their calculations for Shaikan.
4. Confident that political issues will be sorted.
5. Production as early as May 2010
6. "2010 will be news driven" with the work programme that is in place
Overall more than happy with investment
Got the same impression Psyclops! The company is definitely on a path to drilling all blocks unless a blockbuster offer comes in! Ewen was quite clear that appraising and proving up reserves is the key! But long-term even he said they will sell-out. I asked him that direct question:
'GKP is going to get bought out right? you are here to prove reserves, you are not built to become an operator as the field is too big for you'
He agreed. So all in all:
- AB getting drilled now and mountain structures around drill-site makes their view that AB might hold a Shaiken not in this well but the block overall. Shaiken he said had 160km2 of oilin 283m2 block. AB is an 889km2 block.
- Early production facility up and running by April-end. 10000bbl/day into local market at 50% of spot price.
- As soon as AB finished SH2 will start. So hopefully May and then Shaiken 3 if needed.
- New rig in July for AB.
End of 2010:
- AB1 drilled
- SH 1 and 2 drilled. 3 maybe started
- SA1 drilled
- Early production system up and running.
- Oil contracts shld be in place
Story starting to come together right? We all should wait for the year to playout. Value of GKP will be in excess of a current offer if these blocks get proved up! If i was Todd i would do the same!
P.S We talked about CNN. He said Todd is a cheeky fellow and enjoyed the moment. Dont take that interview seriously.
I hope he doesnt take a low-ball offer seriously either! Lets prove up the block and get that 2nd rig in!
PSYCLOPS
My two cents worth from what I managed to get out of Ewan after the masses had moved on...
- Opened with the line "our goal is to be the leading E&P company in Kurdistan
- Funding should be announced sooner rather than later
- They are reviewing their PR firm given the lack of II buying on the open market, but tempered it by saying they are considered one of the best in the business for FTSE E&P Co's
- They are considering a main market listing as part of their longer term strategy
- Been covered already but: ETAMIC is one individual and will not have any negative impact on the contract ratifications, he is looking at establishing it as a private investment fund for Kurdistan, this will fund the forthcoming work from their side
- In the event that ETAMIC cannot fund their share of costs going forward, GKP have the right to take greater ownership of the GKPI vehicle.
One of the major points I took from this is that the BoD are looking more and more longer term at establishing a bona fide production capacity to take this forward without the need of a JV or partner to do this, Ewan stated, a lot can change in a few months and since Todd did the CNN interview the view is certainly changing. He also said it would be very difficult for a hostile bid to succeed as ~40% of the shares are owned by 4 /5 people who would side with the BoD reccommendation.
DHATRADER
All,
Went to the presentation this evening, and was quite informative to hear Ewen thoughts. Got to spend some quality time with him. I will address the key points. I finally met a PI in Gramcho, and i knew it was him as soon as the technical reservoir questions started coming from the man ;-)........was nice meeting you mate! Most of the reservoir points i will get Gramcho to post as he is the expert.
1) Funding:
Ewen said funding would not be a problem but they continue to assess their options. Algeria will not fund the program as politics are quite tough and few Sonatrach folk just got arrested, further delaying that process. GKP never thought that was an option. We have a payment of 15million i believe as per block extension rights etc. However, no costs will be spent on development, ie drilling etc.
What about offering shareholders to partake in fundraising. Ewen was quite clear that the process is way too long and offer for shareholders will not happen. However, funding is still a mystery and thats the way GKP like it.
2) Oil Law: Not much comments but most of the stuff is in the news. Good progress is being made. Ewen did make a parting shot at the government. How can you award contracts in the South when you havent got an overall oil-law. its the same thing as the KRG he said. Confident this will get honoured
3) ETAMIC:
Obviously this was going to get asked and it surely did by many people. Ewen did say it was 1 person and they are registered in some island. The specific firm plans to open a fund with special investors. The capital put by those investors will cover their share of the costs.
So why were they brought to the party?
According to the geology in the region, Shaiken had oil-seeps all the way to the surface. That doesnt necessarily mean thats a good thing. It can often mean that no seal exists and oil has seeped of somewhere else. So it could have been a possibility the oil had seeped to SA,the adjacent block.
In addition, there was clear indication that both reservoirs were connected and hence monetisation and fighting of reserves could get ugly. Therefore KRG put them in touch with ETAMIC who did the deal with GKP. This was supposedly done pre-spud but paperwork takes a long time.
This doesnt mean SA hasnt got oil. What they obviously didnt realise is the size of the beast and that SA is linked to Shaiken.
The oil-spill over question was asked by Gramcho and Ewen and the team are quite confident that it does exist.........so 13billion barrels here we come! Anyways, i will let the expert deal with this one.
4) Takeover
I asked him what would tempt you for takeover and what is the gameplan. The reality is that these directors all hold a couple of million shares. This share should make them millionaires. If they play it right, they should be even richer. They wont get a chance like this again in their life. Simply there is no other area this oil rich on our planet.
To realise full-value they need to drill appraisal wells for Shaiken, do SA, AB etc. It would give the buyer a clear value on the reserves. Ultimately when you prove the reserves, it removes uncertainty and you get real value for your company. So in my view GKP is up for sale but only after appraisal and firm numbers against each block. However, if a big offer came they would consider. This is Ewen's words and not mine!
Favourite quotes:
' Drilling this well was like drilling a pipe into an infinite pool of oil........we just never hit water'
While in AB we have a small share, they have been looking at physical structure and he said the following during the presentation:
'If you look at the hills behind the AB drill-site, we believe the structures there are like Shaikan and even bigger'
Finally:
'This is just the start of our story'
Dhatraders view: Buy or Hold.........dont sell unless circumstances require you too.
Regards,
AMARETTO
Amaretto - 2 Feb'10 - 21:39 - 69002 of 69005
Didn't stay for the free booze and canapes as there were just too many people present to successfully corner Ewan.
Ewan kicked off with the stated aim of GKP in the near term, that being to verify the amount of oil in place. He also said that despite the rapid rise in SP recently, it was 'only just the beginning'.
He then gave a brief synopsis on how he saw the state of play in Kurdistan and it's relationship with Baghdad. He made particular reference to Shakristani (can't remember the spelling) and his recent comments and also mentioned an MP from the Iraqi parliament taking the Iraqi government to court over their awarding of oil contracts, which given the lack of an oil law means the contracts awarded to the majors in Iraq are no more 'legal' than the contacts awarded by the KRG. Essentially he expects everything to be resolved soon and the current contracts to be honoured.
He talked a lot about Shaiken and didn't add anything new but clarified just how much oil he expects to eventually be in place (a la Todd's CNN interview). He expects there to eventually be 6-7 wells for Shaiken alone but Shaiken-2 will be amongst the most important as this will give a much clearer idea as to the actual size.
He also mentioned the extended well test. He expects to produce about 10,000 bpd and this will be trucked out. Given it'll only be sold locally they only expect to receive approx 50% of global oil price. Refining facilities in country will be able to handle everything sent their way.
Finally, onto funding. He was a bit elusive on this subject but cutting a long story short I got the impression there was plenty of cash available but they wanted to decide in 'the near future what kind of company GKP was going to be' (direct quote).
That's about all I can remember and i'm sure others will post more detail. Overall though, nothing significantly new but the overall vibe was of extreme confidence. They're just doing things in their own time and it's all about sinking as many holes as possible and proving reserves. It's just how to maximise this task so as to give best shareholder return. All in all great stuff but it'll take a while (12 months min according to the charts on his presentation) assuming we don't get gobbled up by then.
________________________________________
my summary from tonight:
Algeria
some of the Algerian officials and some of the sontrach officials have been arrested therefore the Algerian asset sale will not happen anytime soon until that is cleared up
shaikan will need 6-7 development wells to firm up the structure so end of next year to fully appraise my guess on current timescales
shaikan 2 will be drilled with the same rig though design will incorporate the increased oil and gas pressures previously not anticipated
work over rig being implemented to target the zone that produced 5-8,000 barrels (note this was choked) will produce 10,000 bbls a day from one zone this will be sold into the local market at 50% discount to Brent...i.e. approx $35 dollars a barrel..(Not bad when the extraction costs $2-4 dollars!!)
sheik adi possible one structure no surface erosion and no oil seeps...as mentioned before GKP now take the view that with no seeps the oil is sealed in and the quality of the oil will be better than shaikan same as MOls structure I assume that the api will not vary as much as the shaikan structure so therefore we can produce from more than one zone and therefore greatly increase daily production
1 billion barrel potential....
ETAMIC were directed to GKP by the KRG as GKP and ETAMIC were worried about monetisation/protection issues also the fund had no operator at that stage so it was the perfect tie up...GKP were also worried that the oil from shaikan had migrated into ETAMICS blocks so they partnered for this reason i.e. if no oil in shaikan then definitely migration to their blocks
ETAMIC is listed offshore in the Caribbean by one individual....
He will be creating an oil and gas investment fund and the prospectus will be issued shortly to investors...this individual will then manage the fund proceeds of the above fund their 50% this news is imminent I think
ber bahr operator genel not confirmed on spud date yet though targeting same multiple reservoirs as shaikan pencilled in for 2010 currently
refining the oil was mentioned as the oil currently pumped goes thru the refinery in Kirkuk..a brand new refinery has opened in Erbil which has capacity for 50,0000 bopd so we would truck to their also existing refineries that have capacity
Bijeel 1 tight hole though no issues or hold ups to date GKP in daily contact with them over drilling tests etc etc the size of this block is massive with many shaikan structures situated on it..any successful drill will have significant material impact though we only have 20%
I took it that there will be a placing with institutions though there were many issues to consider around this that affect this decision...I took it that this was not an issue just deciding what was best for the company has over 40% of shares held by directors and they don’t want to give anything away...
my final take is GKP will not be bought out anytime soon as there’s too much risk still as further
appraisal work is necessary however the majors will be happy to pay the premium for a substantially de-risked acreage....I’ve set my timeline for end of next year with a share price of £5 + minimum definitely a share to hold so I for one will not be selling a single share till then and continue to add as funds become available..time for bed
MAKEMAGIC
Thank you to all who have provided a summary of tonights presentation, for what its worth this I furiously scribbled the following:-
1. Start of much bigger story.
2. Algeria - ongoing - some progress - 2 weeks ago - arrests made!
3. Leading E&P in Kurdistan.
4. Momentum to achieve 3 (above).
5. Start of life cycle.
6. Principle purpose to build resources via Sh. and other licenses.
7. Why Kurdistan? On trend with other Iraq/Iran oilfields.
8. Frontier area and high prospectivity 1:2 and 1:3 chance of success.
9. Trend down to Miran and visibility on surface.
10. Legal issues: Maliki - rights s/be observed - Shahrastani to look at. Iraq MP applied same objection to Baghdad as Shahrastani did to KRG!
11. Largest discovery in world last year - possibly last 10/20 years.
12. 5 tests - 20,000 bopd - restricted (testing) - output could be a lot higher.
13. Very large structure - difficult to measure. (yippee)
14. Seismic programme.
15. Cost - $1-$3 to develop.
16. Different types of oil and gas encountered. Showed slide with two jars of different oil - one light/one dark (both full!)
17. How big? Looked at Sh. with JK1 - water level 2230m - could be full to spill so could be very large OIP.
18. If all areas in communication - could be all oil!
19. 6-7 wells envisaged on Sh.
20 EWT - high permabilities - up to 13 Darcies i.e. better production (with analogy of bottles of water with stones in one and a sponge in the other).
21.Expect $35 for locally sold oil.
22. SA next to Sh. - poss. they join up - i.e. one structure. Oil from day one from Sh - but not SA - but could be better quality oil. Expect to drill 2010. Prospectivity Crut. to Permian.
23. Acquired SA in case Sh dry.
24. BerBahr - similar to SA/Sh. on trend. Genel to decide drilling. Prospectivity as Sh.
25. AB - MOL - Sh lookalikes on this block - may have drilled in wrong place - will move to where there is more prospectivity.
26. Work programme - to prove maximum OIP.
27. Sh 2 depends on Sh 3.
28. Lots of news this year.
29. Funding - discussing with advisors - news in near future.
30. Question time - ETAMIC - registered offshore Caribbean. Prospectus being prepared - one individual managing fund. TK has met ETAMIC - EA hasn't. ETAMIC Fund should be launched this year - "I hope so anyway" (or words to that effect)!
31. Used China for logging - Rig from US.
32. ETAMIC - no problems with ICG (!)
33. New refinery o/side Erbil - capacity up to 50,000.
34. JG introduced DGA - who have gained further work in Kurdistan as a result.
35. 13bn on DGA report - plus unreported areas.
36. Infinite pool of oil. (at least I think thats what he said!)
Apologies if I misheard anything and the points I missed - the sound system wasn't perfect and I'm no secretary.
Post presentation vibes - TK got lucky and has found one almighty oil well. What will he do with it - your guess is as good as mine. GKP is my largest holding by some distance - I'm not selling but then again I'm not buying either. One reason and one reason only - ETAMIC - it just won't go away. GL everyone.
Nice 2 c u
Ok,
This was an interesting evening and couldn't believe some of the big names from iii were at the presentation tonight :-)
Maud, the fish & chips were lovely.
THE GOOD
Good presentation
Biggest oil find in last 20 years and has the potential to be bigger
Felt GKP are holding back big time.
Big prospects for other wells.
Looking to produce and have already calculated $38 barrel to Kurd region until exports can start.
Ewan (CFO) is very bullish that funding is NOT an issue.
Looking to get new PR firm as GKP are unhappy with the share price also
THE BAD
ETAMIC - still very woolly. ETAMIC is only one person and the CFO has never met them!!!! TK has....Why?
ETAMIC introduced to GKP by the KRG...is this anything to be worried about??
Political risk - we all know this. Still relevant but getting better all the time. The Chinese are in Addax so really.......who's gonna mess with them at the moment?
The UGLY
I didn't quite catch the full explanation but, 2 guys from the sale of Algeria assets have been arrested for some reason so count this out of the equation for the next 6 months at least.
In the after speech drinks (and fish & chips) we encountered some interesting people.
Check out (Google) Robert Waterhouse - oil.
He was very upbeat about GKP however, most of his recommendations were on SEY.
He said that he thought GKP had the potential for being around £100 a share however, it would never get there because it will get sold before that.
Very interesting evening and worth the free drinks and food.
6-9 Months at least of hanging on for the biggy.
Good luck and thanks for the good company tonight...you know who you are.
Oh and COME ON YOU LEEDS for tomorrow :-)
JACK DIAMONDS
Dhatrader,
As you say....
"This is just the start of our story"..............
Tonights presentation confirmed to me :
1. No problems in funding, it's just the way it is structured
2. ETAMIC registered in Carribean. To set up fund this year. I heard Ewen say that "Directors & Management have no internal involvement with ETAMIC" & I believe him so bang go the conspiracies.
3. All 4 acerage " ON TREND" . Difficult to evaluate true potential. I would go as far as saying PI should throw away their calculations for Shaikan.
4. Confident that political issues will be sorted.
5. Production as early as May 2010
6. "2010 will be news driven" with the work programme that is in place
Overall more than happy with investment
Got the same impression Psyclops! The company is definitely on a path to drilling all blocks unless a blockbuster offer comes in! Ewen was quite clear that appraising and proving up reserves is the key! But long-term even he said they will sell-out. I asked him that direct question:
'GKP is going to get bought out right? you are here to prove reserves, you are not built to become an operator as the field is too big for you'
He agreed. So all in all:
- AB getting drilled now and mountain structures around drill-site makes their view that AB might hold a Shaiken not in this well but the block overall. Shaiken he said had 160km2 of oilin 283m2 block. AB is an 889km2 block.
- Early production facility up and running by April-end. 10000bbl/day into local market at 50% of spot price.
- As soon as AB finished SH2 will start. So hopefully May and then Shaiken 3 if needed.
- New rig in July for AB.
End of 2010:
- AB1 drilled
- SH 1 and 2 drilled. 3 maybe started
- SA1 drilled
- Early production system up and running.
- Oil contracts shld be in place
Story starting to come together right? We all should wait for the year to playout. Value of GKP will be in excess of a current offer if these blocks get proved up! If i was Todd i would do the same!
P.S We talked about CNN. He said Todd is a cheeky fellow and enjoyed the moment. Dont take that interview seriously.
I hope he doesnt take a low-ball offer seriously either! Lets prove up the block and get that 2nd rig in!
PSYCLOPS
My two cents worth from what I managed to get out of Ewan after the masses had moved on...
- Opened with the line "our goal is to be the leading E&P company in Kurdistan
- Funding should be announced sooner rather than later
- They are reviewing their PR firm given the lack of II buying on the open market, but tempered it by saying they are considered one of the best in the business for FTSE E&P Co's
- They are considering a main market listing as part of their longer term strategy
- Been covered already but: ETAMIC is one individual and will not have any negative impact on the contract ratifications, he is looking at establishing it as a private investment fund for Kurdistan, this will fund the forthcoming work from their side
- In the event that ETAMIC cannot fund their share of costs going forward, GKP have the right to take greater ownership of the GKPI vehicle.
One of the major points I took from this is that the BoD are looking more and more longer term at establishing a bona fide production capacity to take this forward without the need of a JV or partner to do this, Ewan stated, a lot can change in a few months and since Todd did the CNN interview the view is certainly changing. He also said it would be very difficult for a hostile bid to succeed as ~40% of the shares are owned by 4 /5 people who would side with the BoD reccommendation.
DHATRADER
All,
Went to the presentation this evening, and was quite informative to hear Ewen thoughts. Got to spend some quality time with him. I will address the key points. I finally met a PI in Gramcho, and i knew it was him as soon as the technical reservoir questions started coming from the man ;-)........was nice meeting you mate! Most of the reservoir points i will get Gramcho to post as he is the expert.
1) Funding:
Ewen said funding would not be a problem but they continue to assess their options. Algeria will not fund the program as politics are quite tough and few Sonatrach folk just got arrested, further delaying that process. GKP never thought that was an option. We have a payment of 15million i believe as per block extension rights etc. However, no costs will be spent on development, ie drilling etc.
What about offering shareholders to partake in fundraising. Ewen was quite clear that the process is way too long and offer for shareholders will not happen. However, funding is still a mystery and thats the way GKP like it.
2) Oil Law: Not much comments but most of the stuff is in the news. Good progress is being made. Ewen did make a parting shot at the government. How can you award contracts in the South when you havent got an overall oil-law. its the same thing as the KRG he said. Confident this will get honoured
3) ETAMIC:
Obviously this was going to get asked and it surely did by many people. Ewen did say it was 1 person and they are registered in some island. The specific firm plans to open a fund with special investors. The capital put by those investors will cover their share of the costs.
So why were they brought to the party?
According to the geology in the region, Shaiken had oil-seeps all the way to the surface. That doesnt necessarily mean thats a good thing. It can often mean that no seal exists and oil has seeped of somewhere else. So it could have been a possibility the oil had seeped to SA,the adjacent block.
In addition, there was clear indication that both reservoirs were connected and hence monetisation and fighting of reserves could get ugly. Therefore KRG put them in touch with ETAMIC who did the deal with GKP. This was supposedly done pre-spud but paperwork takes a long time.
This doesnt mean SA hasnt got oil. What they obviously didnt realise is the size of the beast and that SA is linked to Shaiken.
The oil-spill over question was asked by Gramcho and Ewen and the team are quite confident that it does exist.........so 13billion barrels here we come! Anyways, i will let the expert deal with this one.
4) Takeover
I asked him what would tempt you for takeover and what is the gameplan. The reality is that these directors all hold a couple of million shares. This share should make them millionaires. If they play it right, they should be even richer. They wont get a chance like this again in their life. Simply there is no other area this oil rich on our planet.
To realise full-value they need to drill appraisal wells for Shaiken, do SA, AB etc. It would give the buyer a clear value on the reserves. Ultimately when you prove the reserves, it removes uncertainty and you get real value for your company. So in my view GKP is up for sale but only after appraisal and firm numbers against each block. However, if a big offer came they would consider. This is Ewen's words and not mine!
Favourite quotes:
' Drilling this well was like drilling a pipe into an infinite pool of oil........we just never hit water'
While in AB we have a small share, they have been looking at physical structure and he said the following during the presentation:
'If you look at the hills behind the AB drill-site, we believe the structures there are like Shaikan and even bigger'
Finally:
'This is just the start of our story'
Dhatraders view: Buy or Hold.........dont sell unless circumstances require you too.
Regards,
AMARETTO
Amaretto - 2 Feb'10 - 21:39 - 69002 of 69005
Didn't stay for the free booze and canapes as there were just too many people present to successfully corner Ewan.
Ewan kicked off with the stated aim of GKP in the near term, that being to verify the amount of oil in place. He also said that despite the rapid rise in SP recently, it was 'only just the beginning'.
He then gave a brief synopsis on how he saw the state of play in Kurdistan and it's relationship with Baghdad. He made particular reference to Shakristani (can't remember the spelling) and his recent comments and also mentioned an MP from the Iraqi parliament taking the Iraqi government to court over their awarding of oil contracts, which given the lack of an oil law means the contracts awarded to the majors in Iraq are no more 'legal' than the contacts awarded by the KRG. Essentially he expects everything to be resolved soon and the current contracts to be honoured.
He talked a lot about Shaiken and didn't add anything new but clarified just how much oil he expects to eventually be in place (a la Todd's CNN interview). He expects there to eventually be 6-7 wells for Shaiken alone but Shaiken-2 will be amongst the most important as this will give a much clearer idea as to the actual size.
He also mentioned the extended well test. He expects to produce about 10,000 bpd and this will be trucked out. Given it'll only be sold locally they only expect to receive approx 50% of global oil price. Refining facilities in country will be able to handle everything sent their way.
Finally, onto funding. He was a bit elusive on this subject but cutting a long story short I got the impression there was plenty of cash available but they wanted to decide in 'the near future what kind of company GKP was going to be' (direct quote).
That's about all I can remember and i'm sure others will post more detail. Overall though, nothing significantly new but the overall vibe was of extreme confidence. They're just doing things in their own time and it's all about sinking as many holes as possible and proving reserves. It's just how to maximise this task so as to give best shareholder return. All in all great stuff but it'll take a while (12 months min according to the charts on his presentation) assuming we don't get gobbled up by then.
________________________________________
GKP Orsotoro Jan 2010 ' Political situation '
Orsotoro post kurds
Lots of really interesting and positive newsflow this last few days, which seems to have been lost or underplayed with the DGA report contents and discussions. This is a long post and brings together a lot of information and references.
Firstly, it looks like the Iraqi politicians are building coalitions and becoming more pragmatic in their approach to power sharing and oil contracts / revenues.
See the following articles:
http://uk.reuters.com/article/idUKLDE60F06V20100116
http://www.oilvoice.com/n/Iraq_Approves_Outstanding_Foreign_Oil_Contracts/e21839037.aspx
http://www.iraqoilreport.com/oil/production-exports/comment-analysis-iraqs-oil-and-gas-challenges-and-opportunities-3613/
http://www.iraqoilreport.com/politics/oil-policy/as-election-nears-oil-becomes-an-ally-3699/
http://www.aknews.com/en/aknews/2/103297/
http://en.aswataliraq.info/?p=125126
This is due to both the realisation of realpolitic with the impending election in March, US pressure and the lure of HUGE riches from the oil.
The recent announcement of 21,000 troops being deployed throughout N Iraq is a hugely significant strategic move by the US, as it is signalling their intention to withdraw from the dangerous Central and Southern areas ( Sunni and Shia ) but provide a further buffer for the Kurds.
http://www.aljazeera.com/news/articles/34/Despite-SOFA-US-will-deploy-21000-troops-in-N-Ir.html
I am no Hilary Clinton or Kissenger, but have a few thoughts about where this is leading. Would like to share these and open this up for discussion.
Firstly, the current Kurdish situation. The Kurdish people live in an area which stretches across Turkey, Iraq, Iran, Syria and minor parts of other nearby countries.
See maps :
http://en.wikipedia.org/wiki/File:Kurdish-inhabited_area_by_CIA_(1992).jpg
http://www.globalsecurity.org/military/world/war/images/kurdistan1.gif
They see themselves as a seperate nation, with their own culture, traditions and language. There have been many conflicts and much rebellion and repression throughout Kurdish history. Although Musilim, Kurds see themselves as a distinct and seperate cultural block from the Arabs or Turkomen and are very loyal to this idea. Their dream would be for a strong and united Kudish state.
This is now both a threat to, and an opportunity for, the larger geopolitical players and superpowers involved in the region.
Currently, the Kurds in Northern Iraq have establshed a functioning autonomous democracy from the wreckage of the old Iraqi state, following the 1st and 2nd Gulf Wars. Here is some information which illustrates what they are currently achieving:
http://www.youtube.com/watch?v=AuefI5ld0-4 ( Old, 2002, but informative )
http://www.youtube.com/watch?v=cxf0nzBlDrU Iraqi Kurdistan as a tourist destination
http://www.youtube.com/watch?v=mvb0JpdluJU Housing in Kurdistan
http://www.youtube.com/watch?v=M3GcFkdqBwM Foreign workers in Kurdistan
http://www.youtube.com/watch?v=p7nx7r2NJx8 Oil revenues and the new Kurdistan ( 2006 )
http://www.theoildrum.com/node/6124 Geopolitical compromises and Kurdish Autonomy
The Kurds in N Iraq see themselves as a progressive new country. Secure ( no terrorist attacks since 2007, visa entry requirements for Arabs ) developing quickly ( tourism, new housing, attracting and employing foreign workers ) And don't wish to be lumped in with the chaotic South.
The US recognises and supports this for the following reasons:
1. A useful physical and political buffer between the Sunnis/Shiites and Turkey, a NATO member.
2. A political buffer and counterbalance to the South of Iraq. which is largely hostile to the US and pro-Iran ( Sunnis )
3. A working demonstration that a democracy and non fundamentalist Islamist state can be successful in the region.
4. Will cause problems for Iran and Syria.
The uncovering of the HUGE oil finds are a bonus. ( Although I strongly suspect that the US have known they were there for a long time ) They can be both the means to finance and suport a strong Kurdish state and provide future reserves for the US, Europe and their allies from a friendly regional state.
There are massive potential and economic strategic gains to be had from this situation. The US and Bush / Obama recognise this, this is more important than left/right politics and approaches.
The US has learnt a lot about the potential dangers of this situation.
US businesses and personnel will be very wary of working in the Central and Southern regions, being aware of the future security dangers. This type of thing will continue in the Sunni areas.
Iran kidnapped Brits:
http://www.abc.net.au/news/stories/2010/01/01/2783742.htm
http://www.timesonline.co.uk/tol/news/world/iraq/article3822830.ece
The US has been involved in the Balkans situation during the 90s and has learnt a lot about multi-ethnic regions where artifically-created former colonial states have collapsed and managing subsequent ethnic conflict, aiding the development of new states and creating alliances. I can see many parallels with the Yugoslavian / Kosovan situation, so the US is positioning to deal with this ( the 21,000 troops on the ground as a peacekeeping force is a big step )
See historical context / parallels here:
Kosovo war http://en.wikipedia.org/wiki/Kosovo_War
US and allied investment in the Kurdish region is developing, but has not really even begun. The fact that so many US and western businesses have been granted drilling rights in N Iraq Kurdistan is no coincidence. It is also becoming clear that they seem to have gained the most prospective blocks.
One major danger to this process is the potential for conflict between the Kurds in Turkey, with their wish for autonomy, and the larger Turkish state.
as flagged in this recent article (Geopolitical compromises and Kurdish autonomy http://www.theoildrum.com/node/6124 ) Factors which could prevent this are:
1. The Turks are NATO members and looking to join the EU ( http://ec.europa.eu/enlargement/candidate-countries/turkey/relation/index_en.htm ) which would be levers for the western powers to pull to revent the Turks from restarting a war against the Kurds. The carrot would also extend to the economic opportunity to Turkey of all of the Kurdish oil ( pipelines, refining, etc... )
Likewise, the Turkish Kurds would have to see and be involved in the economic upside of the situation, thus dissuaded from pressing too hard for the traditional Kurdish areas of Turkey to break away to join a Kurdish state. A light political touch, coupled with the economic benefits of the status quo, would involve free movement of people and money between Turkey and N Kurdistan, economic opportunities for Turkish Kurds in the development of N Iraq Kurdistan, thus no wish to uset the applecart with a civil war. Existing seperatist movements such as the PKK would need to be marginalised.
The US would want to channel any desire for a greater Kurdish state Eastwards towards the Kurds living in Iran. The US would lke nothing more than to see the Kurds add their voices to those trying to destabilise the current Iranian regime, but this is a dangerous, murky and illegal game. Likewise, there are Kurds in Syria.
I am holding approximately 250,000 GKP shares, plus almost 50,000 VAST.
I am amazed at current price, but it just reflects the fact that this situation is incedibly complex, risky and murky. There is so much going on behind the scenes thet we cannot know, and maybe never will, that I cannot risk trying to trade these, as no-one can honestly know or guess what will develop, or when. I am HOLDING and considering adding.
A takeover will not be far away, my favoured predator being a US or other Western major. The situation in N Kurdistan demands it. These corporations can see that the future of oil in Iraq is in Kurdistan. Leave the dangerous South to the rest of the world and take advantage of what the US government will achieve with the N Iraqi Kurdish state.
I am sure I am only scratching the surface here and I would welcome those with more knowledge and experience than me to comment, correct and enlarge upon this post.
Happy Hunting
OT
Lots of really interesting and positive newsflow this last few days, which seems to have been lost or underplayed with the DGA report contents and discussions. This is a long post and brings together a lot of information and references.
Firstly, it looks like the Iraqi politicians are building coalitions and becoming more pragmatic in their approach to power sharing and oil contracts / revenues.
See the following articles:
http://uk.reuters.com/article/idUKLDE60F06V20100116
http://www.oilvoice.com/n/Iraq_Approves_Outstanding_Foreign_Oil_Contracts/e21839037.aspx
http://www.iraqoilreport.com/oil/production-exports/comment-analysis-iraqs-oil-and-gas-challenges-and-opportunities-3613/
http://www.iraqoilreport.com/politics/oil-policy/as-election-nears-oil-becomes-an-ally-3699/
http://www.aknews.com/en/aknews/2/103297/
http://en.aswataliraq.info/?p=125126
This is due to both the realisation of realpolitic with the impending election in March, US pressure and the lure of HUGE riches from the oil.
The recent announcement of 21,000 troops being deployed throughout N Iraq is a hugely significant strategic move by the US, as it is signalling their intention to withdraw from the dangerous Central and Southern areas ( Sunni and Shia ) but provide a further buffer for the Kurds.
http://www.aljazeera.com/news/articles/34/Despite-SOFA-US-will-deploy-21000-troops-in-N-Ir.html
I am no Hilary Clinton or Kissenger, but have a few thoughts about where this is leading. Would like to share these and open this up for discussion.
Firstly, the current Kurdish situation. The Kurdish people live in an area which stretches across Turkey, Iraq, Iran, Syria and minor parts of other nearby countries.
See maps :
http://en.wikipedia.org/wiki/File:Kurdish-inhabited_area_by_CIA_(1992).jpg
http://www.globalsecurity.org/military/world/war/images/kurdistan1.gif
They see themselves as a seperate nation, with their own culture, traditions and language. There have been many conflicts and much rebellion and repression throughout Kurdish history. Although Musilim, Kurds see themselves as a distinct and seperate cultural block from the Arabs or Turkomen and are very loyal to this idea. Their dream would be for a strong and united Kudish state.
This is now both a threat to, and an opportunity for, the larger geopolitical players and superpowers involved in the region.
Currently, the Kurds in Northern Iraq have establshed a functioning autonomous democracy from the wreckage of the old Iraqi state, following the 1st and 2nd Gulf Wars. Here is some information which illustrates what they are currently achieving:
http://www.youtube.com/watch?v=AuefI5ld0-4 ( Old, 2002, but informative )
http://www.youtube.com/watch?v=cxf0nzBlDrU Iraqi Kurdistan as a tourist destination
http://www.youtube.com/watch?v=mvb0JpdluJU Housing in Kurdistan
http://www.youtube.com/watch?v=M3GcFkdqBwM Foreign workers in Kurdistan
http://www.youtube.com/watch?v=p7nx7r2NJx8 Oil revenues and the new Kurdistan ( 2006 )
http://www.theoildrum.com/node/6124 Geopolitical compromises and Kurdish Autonomy
The Kurds in N Iraq see themselves as a progressive new country. Secure ( no terrorist attacks since 2007, visa entry requirements for Arabs ) developing quickly ( tourism, new housing, attracting and employing foreign workers ) And don't wish to be lumped in with the chaotic South.
The US recognises and supports this for the following reasons:
1. A useful physical and political buffer between the Sunnis/Shiites and Turkey, a NATO member.
2. A political buffer and counterbalance to the South of Iraq. which is largely hostile to the US and pro-Iran ( Sunnis )
3. A working demonstration that a democracy and non fundamentalist Islamist state can be successful in the region.
4. Will cause problems for Iran and Syria.
The uncovering of the HUGE oil finds are a bonus. ( Although I strongly suspect that the US have known they were there for a long time ) They can be both the means to finance and suport a strong Kurdish state and provide future reserves for the US, Europe and their allies from a friendly regional state.
There are massive potential and economic strategic gains to be had from this situation. The US and Bush / Obama recognise this, this is more important than left/right politics and approaches.
The US has learnt a lot about the potential dangers of this situation.
US businesses and personnel will be very wary of working in the Central and Southern regions, being aware of the future security dangers. This type of thing will continue in the Sunni areas.
Iran kidnapped Brits:
http://www.abc.net.au/news/stories/2010/01/01/2783742.htm
http://www.timesonline.co.uk/tol/news/world/iraq/article3822830.ece
The US has been involved in the Balkans situation during the 90s and has learnt a lot about multi-ethnic regions where artifically-created former colonial states have collapsed and managing subsequent ethnic conflict, aiding the development of new states and creating alliances. I can see many parallels with the Yugoslavian / Kosovan situation, so the US is positioning to deal with this ( the 21,000 troops on the ground as a peacekeeping force is a big step )
See historical context / parallels here:
Kosovo war http://en.wikipedia.org/wiki/Kosovo_War
US and allied investment in the Kurdish region is developing, but has not really even begun. The fact that so many US and western businesses have been granted drilling rights in N Iraq Kurdistan is no coincidence. It is also becoming clear that they seem to have gained the most prospective blocks.
One major danger to this process is the potential for conflict between the Kurds in Turkey, with their wish for autonomy, and the larger Turkish state.
as flagged in this recent article (Geopolitical compromises and Kurdish autonomy http://www.theoildrum.com/node/6124 ) Factors which could prevent this are:
1. The Turks are NATO members and looking to join the EU ( http://ec.europa.eu/enlargement/candidate-countries/turkey/relation/index_en.htm ) which would be levers for the western powers to pull to revent the Turks from restarting a war against the Kurds. The carrot would also extend to the economic opportunity to Turkey of all of the Kurdish oil ( pipelines, refining, etc... )
Likewise, the Turkish Kurds would have to see and be involved in the economic upside of the situation, thus dissuaded from pressing too hard for the traditional Kurdish areas of Turkey to break away to join a Kurdish state. A light political touch, coupled with the economic benefits of the status quo, would involve free movement of people and money between Turkey and N Kurdistan, economic opportunities for Turkish Kurds in the development of N Iraq Kurdistan, thus no wish to uset the applecart with a civil war. Existing seperatist movements such as the PKK would need to be marginalised.
The US would want to channel any desire for a greater Kurdish state Eastwards towards the Kurds living in Iran. The US would lke nothing more than to see the Kurds add their voices to those trying to destabilise the current Iranian regime, but this is a dangerous, murky and illegal game. Likewise, there are Kurds in Syria.
I am holding approximately 250,000 GKP shares, plus almost 50,000 VAST.
I am amazed at current price, but it just reflects the fact that this situation is incedibly complex, risky and murky. There is so much going on behind the scenes thet we cannot know, and maybe never will, that I cannot risk trying to trade these, as no-one can honestly know or guess what will develop, or when. I am HOLDING and considering adding.
A takeover will not be far away, my favoured predator being a US or other Western major. The situation in N Kurdistan demands it. These corporations can see that the future of oil in Iraq is in Kurdistan. Leave the dangerous South to the rest of the world and take advantage of what the US government will achieve with the N Iraqi Kurdish state.
I am sure I am only scratching the surface here and I would welcome those with more knowledge and experience than me to comment, correct and enlarge upon this post.
Happy Hunting
OT
GKP Dalesman New Year post ' valuations '
New Years Message
Lets have a look at what GKP could have in store fo us!
The following is all my own speculation and in no way is a recommendation to buy, hold or sell.
Firstly lets get the downside out of the way – the contract could be declared illegal and be worth nowt. This would p … off the UK. USA, China, Canada, Turkey, Korea, India, Russia and all the other countries who have KRG interests
The calculations below use $3.6/barrel, a 33% recovery rate, £1=$1.63 and are the unrisked figures.
Akri Bejeel
The Weatherford rig is currently drilling at Akri Bejeel. Todd Kozel has said that the data gained from Shaikan has de-risked AB and Mol through its broker has hinted that the reserves at Acki Bejeel could outstrip Shaikan.
TK has hinted that Shaikan could contain between 11-15 Billion OIP. If this figure is bettered by Akri Bejeel that would be worth up to £1.44 to GKP using 6.4% diluted interest.
If Mol was referring to the 2.8 billion DGA figure and by ‘exceeds’ they mean for example 3billionOIP, the upside to GKP would still equal an additional 29p unrisked.
Further upside from Akri Bejeel could include GKP being awarded part of the 20% Kurdistan Backin rights.
If the backing rights are awarded to a third party, GKP would receive a payment from the party to cover the drilling costs commensurate to the rights awarded.
Shaikan
We have the DGA reports to look forward to. There could be an interim report followed by a final report after the workover rig has done its stuff.
Only 30% of the pay has been evaluated so far, the data from the work over rig will increase the OIP figures.
TK has put his reputation on the line by using 11-15 billion barrels. These figures may also be conservative.
We know that the Triassic is high energy – high gas to oil ratio with an API near 50. This will aid the recovery of the higher Jurrasic oils and increase the likely recovery rates. If we take the 15billion barrel figure OIP each 1% increase in recovery represents 17p to the NAV. Re injecting the gas to provide a gas lift to the low energy Jurassic should improve the recovery figure. I look forward to hearing what recovery factor DGA may put on the discovery.
With Shaikan 2 being drilled at a distance of 9km from Shaikan 1 the data relating to the reservoirs will be fine tuned and I expect that the OIP numbers may continue to rise. Additional Seismic will increase the data and probably the OIP figures adding weight to any figures presented in a data room when the for sale sign really goes up.
Production will reduce the cash burn – starting in May and the improved data will attract buyers for GKPI.
Production will under right the share price
In addition we could be allotted part or all of the 15% Kurdistan backing rights. If these rights go to a third party they will be expected to pay their commensurate drilling costs – cash back to GKP.
The KRG may give up part of their 20% for an equity stake in GKP/GKPI – again increasing GKP’s involvement in the block. (Vast petroleum sets this president)
A few numbers for Shaikan (All unrisked)
2.8 billion OIP = £1.07
5 Billion= £1.91
11 Billion = £4.19
15 Billion= £5.72
As Shaikan is proved up Sheik Adi is de-risked along with Ber Bahr.
Sheik Adi.
TK has hinted that the Shaikan seal to the west may be in Sheik Adi and could be in Ber Bahr. At the moment the official OIP figs for SA are in the 0.5 -1 billion OIP range. If however the Shaikan reservoirs do extend into SAI would expect these figures to be revised upwards. Lets say to 5billion OIP at 40% to GKP this would give £2.99 increase in NAV. As with all these figures these are guesstimates but are not beyond the bounds of possibility. You can add your own pro rata!
As there are no backing rights we will receive the full 40%
Ber Bahr
As this is the furthest away from the Shaikan block lets use Gennel figs of 1.9billion OIP. An additional 57p on the NAV. Drilling on Sheik Adi will derisk BB.
Algeria
Additional upside will come on the sale of Algeria. Using $1.20 / barrel this would add 26p.
Additional News
GKPI could be awarded other blocks on trend with Shaikan.
The Contract problem is sorted out.
News of a TO is revealed to the market.
The above adds up to £10.98 and is a best case scenario.
Lets look at a worst case scenario regarding OIP
Akri Bejeel = 1 billion OIP
Shaikan = 2.8 billion
Sheik Adi = 1 Billion
Ber Bahr = 1.9 Billion.
Algeria = 173m
Risked at 50% for the above with the exception of 70% for Shaikan and 100% for Algeria.
The risked total is £1.64 risked and £2.59 unrisked.
!
Have a great 2010
Cheers Dalesman.
I just know I’ve missed something!
Lets have a look at what GKP could have in store fo us!
The following is all my own speculation and in no way is a recommendation to buy, hold or sell.
Firstly lets get the downside out of the way – the contract could be declared illegal and be worth nowt. This would p … off the UK. USA, China, Canada, Turkey, Korea, India, Russia and all the other countries who have KRG interests
The calculations below use $3.6/barrel, a 33% recovery rate, £1=$1.63 and are the unrisked figures.
Akri Bejeel
The Weatherford rig is currently drilling at Akri Bejeel. Todd Kozel has said that the data gained from Shaikan has de-risked AB and Mol through its broker has hinted that the reserves at Acki Bejeel could outstrip Shaikan.
TK has hinted that Shaikan could contain between 11-15 Billion OIP. If this figure is bettered by Akri Bejeel that would be worth up to £1.44 to GKP using 6.4% diluted interest.
If Mol was referring to the 2.8 billion DGA figure and by ‘exceeds’ they mean for example 3billionOIP, the upside to GKP would still equal an additional 29p unrisked.
Further upside from Akri Bejeel could include GKP being awarded part of the 20% Kurdistan Backin rights.
If the backing rights are awarded to a third party, GKP would receive a payment from the party to cover the drilling costs commensurate to the rights awarded.
Shaikan
We have the DGA reports to look forward to. There could be an interim report followed by a final report after the workover rig has done its stuff.
Only 30% of the pay has been evaluated so far, the data from the work over rig will increase the OIP figures.
TK has put his reputation on the line by using 11-15 billion barrels. These figures may also be conservative.
We know that the Triassic is high energy – high gas to oil ratio with an API near 50. This will aid the recovery of the higher Jurrasic oils and increase the likely recovery rates. If we take the 15billion barrel figure OIP each 1% increase in recovery represents 17p to the NAV. Re injecting the gas to provide a gas lift to the low energy Jurassic should improve the recovery figure. I look forward to hearing what recovery factor DGA may put on the discovery.
With Shaikan 2 being drilled at a distance of 9km from Shaikan 1 the data relating to the reservoirs will be fine tuned and I expect that the OIP numbers may continue to rise. Additional Seismic will increase the data and probably the OIP figures adding weight to any figures presented in a data room when the for sale sign really goes up.
Production will reduce the cash burn – starting in May and the improved data will attract buyers for GKPI.
Production will under right the share price
In addition we could be allotted part or all of the 15% Kurdistan backing rights. If these rights go to a third party they will be expected to pay their commensurate drilling costs – cash back to GKP.
The KRG may give up part of their 20% for an equity stake in GKP/GKPI – again increasing GKP’s involvement in the block. (Vast petroleum sets this president)
A few numbers for Shaikan (All unrisked)
2.8 billion OIP = £1.07
5 Billion= £1.91
11 Billion = £4.19
15 Billion= £5.72
As Shaikan is proved up Sheik Adi is de-risked along with Ber Bahr.
Sheik Adi.
TK has hinted that the Shaikan seal to the west may be in Sheik Adi and could be in Ber Bahr. At the moment the official OIP figs for SA are in the 0.5 -1 billion OIP range. If however the Shaikan reservoirs do extend into SAI would expect these figures to be revised upwards. Lets say to 5billion OIP at 40% to GKP this would give £2.99 increase in NAV. As with all these figures these are guesstimates but are not beyond the bounds of possibility. You can add your own pro rata!
As there are no backing rights we will receive the full 40%
Ber Bahr
As this is the furthest away from the Shaikan block lets use Gennel figs of 1.9billion OIP. An additional 57p on the NAV. Drilling on Sheik Adi will derisk BB.
Algeria
Additional upside will come on the sale of Algeria. Using $1.20 / barrel this would add 26p.
Additional News
GKPI could be awarded other blocks on trend with Shaikan.
The Contract problem is sorted out.
News of a TO is revealed to the market.
The above adds up to £10.98 and is a best case scenario.
Lets look at a worst case scenario regarding OIP
Akri Bejeel = 1 billion OIP
Shaikan = 2.8 billion
Sheik Adi = 1 Billion
Ber Bahr = 1.9 Billion.
Algeria = 173m
Risked at 50% for the above with the exception of 70% for Shaikan and 100% for Algeria.
The risked total is £1.64 risked and £2.59 unrisked.
!
Have a great 2010
Cheers Dalesman.
I just know I’ve missed something!
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