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.
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