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Circle Oil, Tullow Oil, Encore Oil, Empyrean and others feature in Fox-Davies Capital Newsflash

Last updated: 04:18 13 Sep 2010 EDT, First published: 03:18 13 Sep 2010 EDT

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Circle Oil (BUY, £0.90) (LON:COP, 37.75p, ▲ (4.14%)) announced that the exploration/appraisal well Al Ola-1X is presently drilling ahead after setting casing at 10,600ft MD in the Upper Rudeis, following drilling through the Kareem Formation. Log analysis has shown both sand units of the Kareem Formation to be oil bearing with no indication of the OWC. Formation pressure testing shows some limited communication with the updip Al Amir SE producers, and the well proves up the southern field extension in the Al Ola area. The Top Kareem Shagar was encountered at 9,731ft MD with 6ft of net pay and the Top Kareem Rahmi at 9,782ft MD with 19ft of net pay (operator figures). The oil column is presently down to the base Rahmi Sand at 9,802ft MD (9,719ft SS). The secondary target in the Lower Rudeis Formation is expected at 13,700ft MD. A further announcement on the w ell results, including testing, will be made in due course. Separately, the partnership has also agreed the required plans to bring the gas associated with the NW Gemsa Concession producing wells into production, which is presently planned to be completed within the next 6 months. Current gross production from the Al Amir, Al Amir SE and Geyad fields in the NW Gemsa Concession is 9,000-9,500bopd.

Comment: No indication of the OWC means that all current estimates by the operator and indeed by the independent consultants will have to be revised upwards. The latest operator-calculated most likely oil reserves were 43MMbbl and did not take into account the results of either of the two latest wells, i.e. Al-Amir SE-6 and Al Ola-1. We believe that when the results of those two recent wells are included, the updated reserves estimates are likely to be closer to the 60MMbbl we are using in our risked valuation of the Company. In addition the partners are now making plans to bring the associated gas into production. Gas reserves are estimated at some 25-40Bcf and represent an addition of 4-7MMboe to reserves; however the economic value of the gas is unlikely to match that of crude oil. Nevertheless it represents a pure upside to our risked NAV as we have made no provision for the commercialisation of the Egyptian gas reserves in our current valuation of the Company. Hence we believe that our risked NAV of Circle Oil is well underpinned by today’s announcement.
 
Tullow Oil (LON:TLW, 1234p, ▼ (2.3%)) announced that the Owo-1 exploration sidetrack in the Deepwater Tano licence offshore Ghana has significantly extended the column of high quality light oil discovered by the Owo-1 well. The Owo-1 well encountered 53m of net oil pay and the sidetrack, drilled 0.6 km east of the Owo discovery well, encountered an additional 16m of net oil pay in the lower part of the same channel system. Pressure data indicates that this oil pay is in communication with the reservoirs penetrated in the Owo-1 well and confirms at least 69m of total net oil pay in a substantial gross oil column of 200m. Beneath the Owo oil field, 13m of net condensate pay was also discovered, with an additional 6m of net gas pay logged in the deepest sand encountered. No water was encountered in any of the hydrocarbon bearing reservoirs in either well. Following c ompletion of logging operations the well will be suspended for future use in appraisal and development. Tullow owns 49.95% of the licence, with Andarko Petroleum (18%), Kosmos Energy (18%), Sabre Energy (4.05%) and Ghana National Petroleum Corporation (10%).
 
Encore Oil (LON:EO/, 92.5p, ▲ (1.09%)) announced the result of testing operations on the Cladhan appraisal well, located in UK Northern North Sea Block 210/29a. The well flowed at a stable rate of ca. 5,903bopd for over 13 hours through a 28/64 inch choke with a final wellhead pressure of 1,874 psi. The flow rate was restricted by the capacity of surface facilities and due to the small diameter of the testing tools and the 3.5” tubing used while testing. The Operator, Sterling Resources, has indicated that with larger 4.5” completion tubing, they estimate that the well is capable of producing over 15,000bopd. The testing confirmed light oil with a gravity of approximately 34oAPI and a gas oil ratio (GOR) of 245scf/bbl. After completing the well test operations, the well will be plugged back and a further side-track downdip and to the southeast of the original disc overy well will be drilled to better understand the location of the oil water contact in the field. The side-track operation will commence later this week and is expected to take approximately two weeks subject to weather and operational delays.
 
Empyrean Energy (LON:EME, 1234p, ▼ (18.37%)) has been advised by the operator that the Quinn-3H well at the Riverbend Project in Texas was stimulated with 51,900 pounds of sand and subsequently a coiled tubing unit was used to inject nitrogen to 10,000' in a jetting operation to help unload drilling and fracc fluids from the wellbore. These operations were carried out on sections of the well to test the Saratoga Formation - which was a secondary objective to the primary Austin Chalk target. Despite the very encouraging shows while drilling, the eventual gas flow rates measured during the final testing were deemed to be sub-economic. The operator has recommended that the well be temporarily shut in and abandoned for possible future use as a water disposal well. In regards to the potential of the Saratoga Formation across the Riverbend Project acreage the operator a dvised that, although this initial attempt at a production test was unsuccessful in the Quinn-3H well, the Saratoga Formation still remains a secondary objective at this stage for future wells on the project acreage and information will be gathered as future wells are drilled in the hope of better understanding the production capability for this zone. Empyrean has also been advised by the operator that drilling at the Cartwright-1H well has reached a measured depth of 14,844ft.During the last week, a number of large gas bearing fractures have been encountered whilst drilling. These zones have had high pressure and temperature and the operator is proceeding with caution. No conclusions specific to the potential economics of the Cartwright-1H well can be drawn from the drilling activities to date - however it is encouraging to see the fracturing and gas bearing zones where the operator expected them.

Centamin Egypt (LON:CEY, 184.1p, ▲ (1.83%)) announced a downward revision to its 2010 production guidance. The Company now expects gold production for 2010 to be in the range of 160-170,000 ounces of gold, due to a combination of factors, including SAD Mill liner and lifter failures, lower than expected grades and marginally lower recoveries from the flotation and leach circuits.

Maghreb Minerals (LON:MMS, 1.48p, ► (0.0%)) announced that it has raised £1,162,500 through subscriptions for 93,000,000 new ordinary shares at a price of 1.25p per share. Firebird is the sole subscriber to the Placing. The proceeds of the Placing will be used to enable Maghreb to pursue its strategy of acquiring assets in the fluorspar sector internationally and to fund the ongoing exploration work at the Company's Zriba fluorspar project in Tunisia.

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