LON:AUL^J17 | Aurelian - Write Up

18th Feb '10 by thekingsgambit

4 comments 5764 reads

Hi,

I'm not sure if there are any active Aurelian followers on Stockopedia, but I have done a write up of the company below (also here: http://boards.fool.co.uk/Message.asp?mid=11840893).

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Executive Summary

Share Price - 33.75p
Shares in Issue - 339.5 million
Market Capitalisation - £ 115 million
Cash - € 51 million
Debt - None

Introduction

I have not really been following the progress of Aurelian and there has not been much written here, so I choose Aurelian as my entry for the Nicky Fraser 2010 share comp. After a couple of recent RNS's (a successful placing and an increase in contingent resources following a competent persons report) I thought they might be worth a closer look. This is my write up.

What do they do?

Aurelian is an oil and gas exploration and production company focusing on eastern European countries, including Romania, Slovakia, Bulgaria and Poland. Their acreage is focused in the Rotliegendes and Carpathian basins. Although currently a producer, the focus of this investment case is centred on the assets currently in the development and exploration phase. There are some high impact wells that are to be drilled on the next two years that could potentially transform the company.

I have split this write up into 3 sections :- Producing assets, development assets and the exploration assets.

Production asset

Aurelian currently produces gas from the Bilca field in Romania. It currently produces 3.5 mmscfd per day which generates circa € 2 million cash flow per annum. It looks like Aurelian will try to off-load this asset this year to focus more on its high impact development and exploration plays.

Core Development asset

Siekierki Field - Gas - Poland - Rotliegendes (AUL - 90 % working interest - operator)

The flagship project for Aurelian. This is a tight gas field that, following the CPR, is believed to contain, mid case, 346 BCF contingent gas resources (net to Aurelian). An appraisal well drilled here in 2007 produced gas but not enough to make the field commercially viable. Aurelian believe that by using horizontal wells with multiple fraccs that commercial levels of gas can be produced. Similar techniques have been used successfully in the neighbouring acreage of the Rotliegendes Basin in Germany.

Aurelian plan to drill a well in Q2…

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doverbeach

9th Aug '10

As the share price seems to be going up it seems like time to review what has happened since this excellent header in February.

Appointment of new chairman in March

John Martin Conlin, aged 57, is a petroleum engineer and has over 34 years' experience in the oil and gas industry; spending 28 years at Shell in various senior management and operational positions. During that time he also gained significant experience outside Shell through secondments to Maersk, Woodside, Sakhalin Energy and Exxon Mobil. Earlier in his career, as Head of Petroleum Engineering for the Central North Sea with Shell, he had extensive exposure to the Rotliegendes plays which form a core part of Aurelian's business.

Mr Conlin has previously served as a non-executive Director of Hardman Resources and Delphian Technologies, and Chairman of Fuelture Limited. He is currently Chairman of Nautical Petroleum.

March - farm-out and new license in Bulgaria

Sorgenia exercises its farm-in option to drill in B1- Goliza in Bulgaria

Aurelian awarded new prospective exploration licence, Provadia, with JV company controlled by Gazprom that will carry Aurelian and JKX for no less than €4,003,860 of the minimum work programme

In May and June they announced good fraccing results from 2 sands at Voitinel-1 in Romania:

The specific objective of the 1650 fracture stimulation was to penetrate past 'near wellbore' barriers identified in October 2009 that were constraining connected gas volumes and that had caused flow rates to decline from 3.0 million scf/d to1.5 million scf/d after three days. The fracture has now successfully achieved this objective with the well recently having flow tested at a stabilised rate of 2.5 million scf/d after three days, a 67% improvement on the October 2009 rate. The fracture treatment has also significantly increased the connected volumes/effective drainage area of the well and it is now believed that wells on the Voitinel structure have the potential to produce up to 6 bcf of gas at an average rate of 2.5 million scf/d for the first year. The 1650 sand has now been shut in for a pressure build up and further updates will be made as appropriate.

and

The 1400 sand in the Voitinel-1 well, which accounts for approximately 12% of total gas-in-place across the wider Voitinel/Solca trend, has been perforated and flowed gas at 10,000 scf/d with no water production. Further appraisal is likely in future appraisal wells where core can be obtained and fracture stimulation undertaken to increase production rates. Aurelian believes that the wider Voitinel/Solca structural trend could have gas-in-place volumes up to 400bcf and that it may be possible to recover up to 6bcf per well from the 1650 sand tested in May and, on the 1400 sand, up to 3bcf per well on the assumption that fracture stimulation is successful.

June they announced Climauti-1 well successfully tests at 2.7million scf/d in Romania, with first production this year

tested at a rate of 2.7million scf/d at a flowing tubing head pressure of 30bar. This rate was achieved over a 36 hour test period with a drawdown of only 3.2 bar from Sarmatian sands at a depth of 456.5 - 463.6m, 7.1m gross, 6.3m net. It is estimated that the gross recoverable gas reserves will be 2bcf over the life of the well and work will start shortly on the installation of a 4km pipeline to the Bilca Gas Plant with first gas expected in Q4 2010. As a result of this discovery, Aurelian's total production is expected to increase by 18% over the next seven years.

In July, the company's biggest project advanced when the Siekierki frac program in Poland started, results expected end of the year.

The rig will drill vertically to a target depth of 4,150m to evaluate the Rotliegendes reservoir as previously tested by the Trzek-1 well in 2007. Target duration for this pilot hole is approximately three months. Thereafter the well will be sidetracked and drilled some 1,500m horizontally towards the Trzek-1 well. The well will then be completed for fracture stimulation. This phase of operation is planned to take six to eight weeks therefore resulting in a total timeframe of four to five months from spud. The Halliburton fracture stimulation crew will then be mobilised to Trzek-2 and up to 10 fracture stimulations, a proven technology in shale and tight gas developments globally, will be carried out in sequence. The details of this operation will depend on the reservoir properties encountered. A flow test to determine the productivity of the stimulated well is expected to commence in late November with flow rates to be reported in December.

There is a detailed corporate presentation here and here is a map of their acreage (Siekierki is labelled 'Poznan'):

Overall, there is a lot happeneing with the new more pro-active management. However, unless I have missed anything, no key drilling results are imminent. The only ongoing activity expected shortly is

The reprocessing of the available seismic to incorporate the results of the Voitinel-1 well has been completed and the structure is currently being remapped. The results of this should be available in July/August and will enable the Company to provide a more accurate assessment of total gas-in-place across the trend. In addition, seismic contractor Prospectiuni has been appointed to acquire 60km of 2D seismic principally to detail the Solca trend to allow a site to be selected for a possible well in Q4 2010.

The ADVFN board is little frequented and, not being prone to the Whoosh type posts has instead opted for Buddhist chanting http://www.advfn.com/cmn/fbb/thread.php3?id=12493061, which isn't a great deal more helpful!

So no ideas about the share price rise. But no complaints...

bugsmunny

Hi Db,

Thanks for the review it's much appreciated.

I bought them some while ago and then it seemed as if they would go the way of several other promising small caps and paid little attention.

Great to be reminded about this interesting company.

Bugs

Mattybuoy

Is Aurelian the premier fraccing play on the London market? It is the only one even?

Whatever, me likes it. Stupidly cheap.

djpreston

10th Aug '10

Matty

Not the only one. An interesting one to look at is San Leon Energy (LON:SLE) with their large Polish acreage where they've done a good deal with Talisman.

Lots of other interesting assets as well. Will try and do a more thorough write up when I get into the office and out of this traffic jam.

D

Aurelian - write up

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Thekingsgambit

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