LON:HBR | Catcher - Significant Light Oil Discovery

3rd Jun '10 by djpreston

90 comments 31759 reads

Good discovery by the looks of it though no flows as moving to a DST, results of which should be in 10 days or so.

The 28/9-1 vertical well was drilled to 5,219 ft Measured Depth (M.D.) having successfully encountered excellent quality oil bearing reservoir sandstones at 4,600ft at the target Cromarty Sandstone level. A potential oil water contact has also been intersected at 4,840ft.

Initial analysis indicates the discovery of a minimum 240ft oil column with calculated net pay of 90ft. Extensive sampling and pressure testing of the hydrocarbon bearing zones have been made and a preliminary analysis suggests the hydrocarbons are a light oil with an API of approximately 31 degrees. Analysis of the logs suggest excellent quality sands with porosities of approximately 34%, although analysis has not yet been completed and it is expected that these sands will have multi Darcy permeabilities.

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ohisay

5th Jul '10

Couple of broker comments on the participants this morning.

http://www.iii.co.uk/articles/articledisplay.jsp?section=Markets&article_id=10104195

Richard Griffith, analyst at Evo Securities, said the latest events reaffirmed its positive take on Premier.

"The 10 million barrels of oil equivalent increase at the lower end of the reserves estimates range adds around 10p to our risked upside for Premier, taking our core plus risked upside valuation to 1,789p. We maintain our 1,500p price target."

David Hart, analyst at Westhouse Securities, said today's news had forced it to upgrade its stance on AIM-listed EnCore, which owns a 15% stake.

"The sidetrack well further confirms the importance of the Catcher discovery, opening up a new light oil fairway to the south of the central fairway in the North Sea.

"Based on the revised estimate of gross oil in place within the Catcher structure and surrounding prospects, we have revised our valuation to 98.7p and our target price to 74p."

In a statement, the UK-focused minnow said the cost of the current drilling campaign would not make a "material impact" on the company's cash resources.

kenobi

Strange how muted share prices have been on this news,
perhaps EO. is fully valued, but for NPE to fall on this news seems strange to me,

cheers K

Fangorn

12th Jul '10

With the continued bout of profit taking(it seems), NPE has fallen back to high 130's this morning (a fall of 52p odd since the 2nd July - it's down 10% this morning alone), is anyone buying on the dip?

Am contemplating a dip in at current levels.

Is there any reason for the significant sell off other than profit taking?

oilretire

Possible fund raising (or fear of) for their heavy oil assets.......

RedTedsRoadshow

Encore off also but not by as much...

Selloff on NPE may be increased by IEG continuing to sell and risk of NPE fund-raising a drag - this has got to be on the cards...

...but I am also considering topping up but holding fire for now.

Ah,thank you both for the colour.

howdidthathappen

I did some research recently into International Energy Group AG (IEG) who own 27.5% of NPE (down from 29% over the past month). I'd feel more comfortable with my (now pretty large) NPE position if I felt IEG:
- are not going to keep banging out 1% of the company every time the market can take it
- more importantly, are interested in taking their chunk of any upcoming placing

I've seen references to IEG being 20% owned by Masefield Group, but I wouldn't be surprised if Masefield own much more of IEG.

The interesting thing is that Masefield was sold in Jan 2010 to Arcadia (an oil-trading house). Arcadia is owned via Farahead Holding Ltd by Seatanker Management Co Ltd.

Seatanker Management Co Ltd is controlled by John Friedriksen, who was Norway's richest man until he took a Cyprus passport instead. He owns the world's largest tanker fleet and has an estimated wealth of USD 11Bn.

http://en.wikipedia.org/wiki/John_Fredriksen

So, basically IEG has a substantial (maybe even controlling) new shareholder.
Friedriksen has very deep pockets, which is what NPE need. But the signs are mixed, at best, that he and his people are interested in funding NPE or even maintaining their current shareholding.

African4Life

Masefield was not bought by Arcadia. It was rumour and very bad journalism. IEG not selling currently - expect them to do a bit of selling amidst Kraken news. Like RTR mentioned, fund raising might be an issue, (IMO think the current dip is due to profit taking).

IEG not selling currently - expect them to do a bit of selling amidst Kraken news.

They have already sold over 2% of NPE in the past month. Is that not "currently" enough?

I've no idea if they are going to buy or sell any more, but I was previously very hopeful that they would stump up for their share of any placing. I am concerned that this may at risk now.

Do you have any links showing that the Arcadia story is untrue?

davjo

15th Jul '10

I see from PMO's update today that Catcher North step-out is pencilled in for Q4 and attributed gross P50 of 15mmbbls. Two other prospects also earmarked for Q4 of gross 35 and 50 mmbbls. Plus one other of 65 mmbbls in Q2 2011. That's quite a bit to shoot at!

Yes, and I see they clear up the questions regarding the firgures released so far - and if I read correctly it's only for the '3' catcher areas discovered so far. Loads of upside potential as davjo points out.

http://www.investegate.co.uk/Article.aspx?id=201007150700143904P

Premier currently estimates recoverable reserves of 60-100 mmbo for the area drilled to date, with significant untested potential

And on appraisal/explo plans.......

Country

Well Name

Estimated Timing

Licence Interest

Reserves range (mmboe, gross,
low-mid-high)

UK	Block 28/9 exploration	Q4 2010	35.00	35-50-75
UK	Block 28/9 exploration	Q4 2010	35.00	20-35-60
UK	Catcher North step-out	Q4 2010	35.00	5-15-30

Block 28/9 exploration

Q2 2011

35.00

30-65-100

repobear

Hi davjo,

If one accepts that PMO are being conservative in an officially released figures, because they are very interested in becoming the operator of the block, then the 165m bbl mid range estimate recoverable on the block over the next year is double their published estimates ( 60-100m bbl) for Catcher drilled to date.

Encore say that Catcher is 300m bbl gross drilled to date, about half of which is expected to be recoverable.

This block could quite easily have around 500m bbl recoverable light oil if one applies these ratios to the more optimistic Encore estimates, which have been supported by PMO in interviews. The high estimate from PMO released today totals 265m bbl recoverable on wells drilled over the period to Q2 2011.

Quote a bit to shoot at indeed;-)

repobear

11th Aug '10

Placing as expected...disappointing discount especially to recent highs but should now stop the price being held back - also nice to see IEG dropping their shareholding in one go rather than being a constant drag on the share price....

http://www.investegate.co.uk/Article.aspx?id=201008110700138748Q

Net proceeds of the Placing, together with existing cash, will be used to fund Nautical's planned exploration, appraisal and pre-development activity until the end of 2011, including:

- Catcher - three exploration wells to be drilled in 2010 and Field Development Plan ("FDP") preparation;

- Kraken - 9/02b-D appraisal/exploration well to be drilled in 2010 and FDP preparation;

- Mariner - progression to project sanction and FDP submission in 2011; and

- the execution of the remaining exploration and appraisal programme.

The decision to raise funds at this time follows the recent Catcher discoveries on Block 28/9, in which Nautical has a 15 per cent. equity interest.

· Assets in which the funds will be invested have a management estimated EMV of approximately £356 million.

· Placing Price represents a discount of 12.6 per cent. to the closing middle market price on 10 August 2010.

· In addition, International Energy Group AG, the Company's largest Shareholder, has conditionally placed 13,000,000 Ordinary Shares at the Placing Price with institutional investors representing 20.5 per cent. of the current issued share capital of the Company reducing their resultant shareholding to 4,409,425 Ordinary Shares representing 5.0 per cent. of the enlarged issued share capital of the Company.

djpreston

RTT

Yes, frustrating price compared to the recent highs but needed to be done and overall discount not too bad really.

Crucial reduction in the IEG holding, removing the overhang.

The rns shows the activity for the group coming up very shortly. So what more could investors want? - an exciting drilling programme (funded) with very material upside.

The relative value on Catcher is still much more evident in npw than EO given the SP movements.

Impvesta

I think the discount is minor compared to the benefits of having adequate funding and the removal of the IEG overhang. In very round terms I think the effect on the price is:

143p x 3/4 new mkt cap + 125p x 1/4 new mkt cap = 138.5 new price

ie expected drop in SP of 4.5p from current price of 143p. I would expect that to be more than made up by the removal of funding doubts and overhang pressures. I think a great buy just became even greater.

Regards

Impvesta

Placing Presentation

http://www.nauticalpetroleum.com/Proposed%20Placing%2011%20August%202010.pdf

...the market likes the placing...

bugsmunny

The placing presentation is well worth a read - some nice maps and diagrams plus a rather juicy NPV(10)

I note the breakeven price for oil is around $35 to $40 / barrel for Kraken and first oil 2012 - so it's looking hopeful :-)

Of course the placing price is annoying for those unable to participate - but I suspect in the fullness of time this will seem irrelevant.

I note that for news flow - thhe upcoming Kraken well is targeting a thicker section of sands and a side-track to the west of the fault line.

B.

Jim Figgerty

djpreston,

"The relative value on Catcher is still much more evident in npw than EO given the SP movements."

I'd be very interested in your take as to the implicit proportions of the current SPs for both EO and NPE that relate to Catcher. This would help to inform any potential decision to part switch from EO to NPE as news from Cladhan and Kraken comes available.

Also - best guess as to the timeframe for Cladhan news? I'm working on end August assumption, but have seen Sept 10th mentioned.

Thanks in advance,

Jim

father_paul

12th Aug '10

How come nobody attributes any value to being Operator of the block, and in the driving seat as regards Catcher appraisal and subsequent development?

So much talk taking place of the relative value between NPE and EO of Catcher.

Both with the same 15% share of the block, but don't forget it is Encore that is the Operator. I would like to think that this gives them a benefit in terms of the Catcher valuation and, if appropriate, the sale price of their 15% share.

trevorT

15th Sep '10

Being operator with just 15% equity does not equate to being in the driving seat - far from it, in fact. I would characterise their role as Operator as being more akin to that of a contractor who is being told what to do by the Joint Venture's management committee. The decisions of the JV will depend on a combination of common sense, the relevant pass marks and the equities held by each JV participant. The information arising from the work programme will be available to all JV participants.

Catcher - Significant Light oil discovery

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Djpreston

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