Niko Resources - An Elephant that can gallop?

Wednesday, Apr 20 2011 by
23

Given there as been quite a bit of discussion about NKO following the First Energy Global Energy Conference last year, I thought it would make sense to give it its own thread.

http://www.nikoresources.com/

The overview http://www.nikoresources.com/operations/overview.html  on the company website gives access to a wealth of information on their operations. Click on each area around the globe for a v brief overview and then click in the blocks for more detail on ownership etc.

Essentially, Niko has been something of a wonder stock over the past few years based upon the success of its Indian Venture. At the core is the D6 block in the Krishna Godavria Basin where they have 10% interest. "10% is that all?" I hear you say, well in this case 10% of D6 is a lot. Current production of c170Mscf/d net to NKO and planned increases to 280M scf/d eventually.

The company has repaid its debt and is now very cash generative so the company can fund its exploration out of current cash flows even before further expansion of production (or price increase for the gas from D6).

Alongside India the company has built up an incredible acreage position in many areas as shown in the overview mentioned above.

The biggest acreage wise is Indonesia, where, IIRC, Niko is the largest acreage holder offshore.

Trinidad has also been significantly increased with further acreage acquired just this week (19/4/11).

Kurdistan is interesting, especially in the short term, where it is involved with Vast in the Qara Dagh license as operator (and 10% equity holder in Vast). News on QD is fairly short term.

And lets not forget the current "Jewel in the Crown" of India.

Oh, before we get to the tour of the NKO goodies, I should say a couple of other things. NKO also pays a dividend!! Okay, a miniscule one but its there. NKO is ISA’ able and shouldn’t pose any real trouble trading with decent liquidity, as you would expect for a $4.5bn market cap.

One of my niggles with the company though is that they are not the most transparent with regard to information. There does, however, seem to have been a realisation of this with the level of communications improving significantly of late. 

India 

Without doubt, the discovery of the giant gas fields in Block D6 in the Krishna Godavari Basin (KG) by Reliance (90%) was the making of Niko and is the foundation for the company’s current wealth of opportunities.

D6 has 40Tcf in place and is currently producing around 1.7 Bcf/d and 20k bpd of liquids. There are 23 undeveloped discoveries (with many more explo targets) in the block which will allow for further increases of gas production to the peak which is estimated to be 2.8bcf/d. However, the shares took a knock with the Q3 results due to the lower production from D6 than had been expected. This was due to a dispute (ongoing) between Reliance and the Indian Govt. over price and development.

D6 gas is sold under long term sales agreement at $4.2 per mcf as mandated by the Govt. Other producers are receiving $8 or better and end users are paying up to $11 per mcf or LNG. Obviously there is an argument for the price being higher and increased production as a result. This would be very positive for NKO’s cash flow, which, as mentioned above, already allows them to cover their planned activity across the portfolio.

A key development was the announcement of the BP deal to take a 30% in 23 of Reliance’s Indian oil and gas blocks (including the 3 in which Niko is a partner) for $7.2bn initially. This triggered an option whereby NKO can increase its own interest by 30% i.e. from 10% to 13% in D6. This is very likely to happen and would be funded by debt. Again, this is positive from cash flow and valuation metrics.

NEC25 in the Bay of Bengal is another block where NKO has 10% (with a potential to go to 13% due to BP). 15 discoveries to date with many additional explo targets.

D4 is a giant of a block at 4.2m acres. NKO have 15% (can go to 19.5% due to BP). 4,400km2 of 2D and 3,500 of 3D has been completed and a three well program is slated for this year (2011). The block is seen by many as being a potential D6 or even bigger.

India looks to be a very solid core and financial driver for NKO’s exploration program. This is what interest me most of all given the sheer scale of what is being pursued. What really interests me is the fact that the company has giant partners and has secured good farm ins from the likes of Repsol that mitigate financial exposure whilst still retaining very material stakes.

Indonesia 

Niko have been working on Indonesia for many years now, carrying out a 400,000 km2 Multi Beam survey between Dec 2006 and April 2008. They applied their own Sea Seep technology to find seeps and then use this to focus their attention on areas where there was an active petroleum system. On top of this Niko has a database of 70,000 km of 2D, 11,000 km2 of 3D, 110,000 line km of grav and mag data, 5,000 km2 of aeromag data and over 3,000 Sea Seep geochem analysis of cores taken in relation to the multibeam survey. In short, they have a lot of data.

That isn’t enough for Niko though, they are about to start a second multibeam survey over 300,000 km2 using the latest generation equipment generated by the US Navy who developed it with one of the Niko Indonesian tech team seconded (a very good vote of confidence there). This new survey should, as a result be conducted quicker and offer better resolution. Given the attention being given to the area by the majors, agreements have been put in place to swap drilling data to the benefit of all. These companies include – Exxon, Marathon, Conoco, Statoil, Talisman, Murphy and Hess.

Another possible advantage for Niko is that they have built up their acreage via strategic acquisitions. For example Voyager Energy’s team had worked on Indonesia for much of their working careers, often with each other. Black Gold added another technical team. Of the 60 odd employees in country, 35 are techs. The majority of the team had worked together at Unocal before it was bought out by Chevron. Whilst at Unocal the team were very active, drilling roughly 150 deep water wells in SE Asia (mostly Indonesia) between 1,000m and 2,400m water depths.

We have just had the first of the announcements from the company of Independent Resource Estimates on 3 of the 16 licenses carried out by Netherland Sewell. http://www.nikoresources.com/upload/news_release/123/01/news-release.pdf   Further announcements on the remaining 13 licenses will be released regularly from here on in.

 

Block

Prospective Resources (P50mmbbls)

Prospects

Low CoS

High CoS

Mid CoS

SE Ganal

2,890

11

12%

15%

14%

N Makassar

Strait

407

1

21%

21%

21%

West Sageri

550

5

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16%

29%

23%

Total

3,847

Niko has 100% WI in SE Ganal and North Makassar Strait with 50% in West Sageri.

Volume calcs were based on a 50% prob that each prospect is oil and 50% gas.

NS calculated the CoS for each prospect. Mid is Niko’s mean of low and high estimates.

     

 

 

       

P90

781

       

P10

12,064

       

 

That is just the first 3 blocks. The 16 blocks cover 19.7 million acres and it is the largest leaseholder other than the government. In addition, Niko is in various stages of discussions for 5 farm-ins and two bids (open tenders) that could push up the number of blocks to 23 by the end of the year (2011). Remember that Niko have always said that they would not acquire a block unless it had at least 1 bn boe potential.

The company has said that it is planning a 3 year continuous drilling program in the country from late Q4 2011, probably Q1 2012. This is just in respect of the blocks where they are the operator. Other non operated blocks will see activity, adding to the number of wells to be drilled. The Partners are, it has to be said, big – Repsol, Marathon and Exxon. Marathon’s Bone Bay well should be the first to spud.

The company should benefit from being able to offer a long term contract and so should be able to get advantageous day rates. Given the range of prospects (water depth etc) Niko will most likely draft in a second rig from time to time to tackle the shallow water wells.

Trinidad 

Yesterday, Niko announced that it has signed three new PSCs, http://www.nikoresources.com/upload/news_release/125/01/niko-signs-three-new-pscs-in-trinidad-pdf.pdf

bringing the total up to 8. Again, like Indonesia, Niko is the largest leaseholder outside the government. The announcement relating to the new PSCs gives a breakdown of the licences, interests and acreage.

The offshore fields are mainly gas orientated and the partners on two of the blocks include RWE and BG, both sensible with a view to any commercialisation of any discovery since both have major experience with LNG around the world. BG is also part of the consortium that owns the Atlantic LNG facility in Trinidad as is Repsol, which is, of course, a major partner of Niko in Indonesia.

Looking at the various licenses, the Central Range Block (CRB), 2AB and Guayaguayare blocks are on trend with the prolific E Venezuela Basin which extends to the East of Trinidad and includes the Angostura gas/condensate discovery (80M bbls and 1tcf).

A new 1,200 km2 3D survey is ongoing in Block 2AB to supplement the older 3D data it already has. The new data will verify what the company has already identified form the older generation with 2 prospects that stand out. The first is the Stalin with a risked est. recoverables of 200M bbls to 500M bbls and a second, Shadow, being a shale play.

In the CRB, Niko has already identified similar prospects to those seen on 2AB from the 2D data it shot 18 months ago. We should see the first of two wells (at least) spud in the Shallow Horizon CRB in the next month or so.

Guayaguayare is, like the CRB, split shallow and deep with several features already identified. 3D seismic is to be acquired and the first well will be likely on the Deep Beach prospect in Q1 2012.

NCMA2 & NCMA3 are immediately East of 3 producing gas fields, Poinsetta, Hibiscus and Chaconia, which are estimated to have 5Tcf recoverable which is being delivered to the Atlantic LNG terminal. Niko is teaming up with Centrica, who own NCMA4 (and is also NKO’s partner in 2AB)  to shoot 4,600 km2 of 3D over the two blocks, 2,900 of which will cover all of NCMA2 & NCMA3 starting in Q3 and likely to run to Q1 2012.

The “RNS” re the new blocks doesn’t actually cover it but NKO has a 25% interest in Block 5(c) which was acquired in December last year. http://www.nikoresources.com/upload/news_release/94/01/niko-to-expand-in-trinidad[1].pdf  This block already has 3 gas discoveries on it. The block offsets the producing Dolphin field (BG and Chevron) again producing to the Atlantic terminal. The Victory 1 well was tested in December 2007 with two tests on two different formations. The first tested 40-45mmcf/d and the second did 30 mmcf/d and both tests were constrained by equipment. In mid 2008, Bounty 1 tested at a stabilised 60mmcf/d (2.5km East of Victory). Endeavour 1, some 8.4km North of Bounty 1, tested 60mmcf/d. All three wells were suspended but could ultimately be put on production. NKO’s estimates are that the 3 discoveries total up to 2.5Tcf with several undrilled structures remaining on the block.

Block 4(c) is immediately to the North of Block 5(c) with 1,000 km2 of 3D available. Already several channel fairways and stacked sands have been identified.

Kurdistan 

Some people get excited by Kurdistan, others don’t. I tend to fall into the later category given the seemingly never-ending political wrangling between the KRG and the Iraqi Oil Ministry which makes commercialising any discovery a dream at the moment. Nevertheless, NKO has a 37% interest in the Qara Dagh well being drilled by Vast Exploration. It also holds a 10% interest in Vast itself.

Recent update on the QD1 well, (which spudded on 12 May 2010) was positive with the logs showing 143 m of possible pay in the Upper Cretaceous (Tanjero and Upper Shiranish formations). The top of the Shiranish is the first of the three initial primary Cretaceous targets estimated to be at 3420m. Increased florescence and gas readings were seen in cuttings which could suggest oil or liquids.

The well had been drilled to 3558m with a 7” liner set. The plan is to now drill on to the TD of 4200m which some analysts think means it may not drill through the deeper Qamchuqa formation. This would reduce the potential In Place numbers but the Unrisked IP nos were estimated by AJM to be 2.25 bn bbls so we are talking big numbers here. There is also the Aliiji formation which was drilled through in July 2010 that had a 64m net pay zone with strong indications of hydrocarbons. This will be tested as part of the overall testing program which is expected to be completed in June.

As I say, Kurdistan is not the main reason for holding NKO in my opinion, but a discovery here would be potential material but there are the risk re government and also a possible repeat of HOIL where the initial positives (for oil) turned into a multi tcf gas play).

A second well planned for the block will not be drilled until mid 2012.

Pakistan 

Niko has 4 blocks (100% WI) in the Indus Basin, the second largest fan system in the world. The blocks total 2.45M acres and NKO has 2,000 km2 of 3D data from 2 separate programs.

Pakistan has long been a frustration for the international oil companies with recent offshore explo activities disappointing. The previous drilling has focussed on the shallow Miocene whereas Niko is looking to opportunities it has identified in the Cretaceous to pre Miocene levels. Positive AVO responses have been noted on several Eocene channel prospects as leads on Palaeocene carbonate build-ups with at least 20 opportunities being identified to date from the different play types. There is no drilling location planned yet since the company has to complete the 3D analysis. The first of a 2 well program is planned for early Q1 next year (2012) and they are sourcing a rig and tubulars. Water depth here isn’t a problem (mostly sub 200M). Whilst a 4km well would cost roughly $40M, Niko has 100$ so I would expect to see a farm down to say 50% to mitigate costs.

Madagascar 

Over the course of the next month, Niko should complete the processing of the 3,200km2 of 3D that it acquired last year (2010). It also has around 10,000km2 of multibeam data available. A variety of play types (stratigraphic and Cretaceous channels) have been identified and oil seeps processed during the multibeam acquisition provide evidence of an active petroleum system extending out from the big heavy oil fields on shore. The first explo well could spud in H2 2012. Given the recent experience of investors and companies in Madagascar (MOIL) and the political problems of the country, I don’t attach any real value (yet).

Bangladesh 

I didn’t really know where to put Bangladesh. It’s a cash flow situation really, not massively material to the upside story for the company with most analysts carrying around the $3/shr PV10. Onshore operations with the main Block 9 (60% WI) operated by Tullow. Current production (gross is 120M scf/d).

Summary

Well that’s about it for now. That puts a bit more “meat” on the bones (or into the thread header anyway). Apologies for any spelling, grammar and other errors but hopefully that gives everyone a better idea about the company.

Disclosure. We do hold a goodly chunk of NKO stock


Disclaimer:  

The opinions expressed by the author are those made by him personally as an individual and not in any professional capacity. 


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136 Posts on this Thread show/hide all

djpreston 14th Jan '11 1 of 136
2

News out this morning that Niko have announced a double farm out for two of its licences in Indonesia with Repsol:

 

CALGARY, ALBERTA, Jan 14, 2011 (Marketwire via COMTEX) --

Niko Resources Ltd. ("Niko") (TSX: NKO | PowerRating) is pleased to announce that it has reached a Farmout agreement with Repsol Exploration SA ("Repsol") in which Repsol, through its subsidiaries, will become a joint venture participant in both the East Bula and Seram Production Sharing Contracts (PSC) in Indonesia. As a result of the agreement, Niko as operator will hold 55% working interest and Repsol will hold 45% working interest on each PSC. The transfer of interest has been approved by the Government in Indonesia.

The Seram PSC was signed by Niko in November 2008 while the adjacent East Bula PSC was signed by Niko in November 2009. Niko as the operator of both blocks has completed a 4,760 km 2D seismic survey and a 200 square km 3D seismic survey.

Repsol and Niko are also joint venture partners in three recently awarded blocks; Cendrawasih Bay II, III, and IV. These three blocks were signed under a Production Sharing Contract on May 18th, 2010. Niko as the operator of Cendrawasih Bay III and IV has already completed a 5,240 km 2D seismic survey.

Fund Management: European Wealth
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Murakami 14th Jan '11 2 of 136
1

Just cross-linking here to the new search page for Niko Resources: http://www.stockopedia.com/search/?q=Niko%2520Resources&page=1&seq=ASC

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marben100 14th Jan '11 3 of 136
1

News just out: http://tmx.quotemedia.com/article.php?newsid=37466800&qm_symbol=NKO

CALGARY, ALBERTA, Jan. 14, 2011 (Marketwire) --

Niko Resources Ltd. ("Niko") (TSX:NKO) is pleased to announce that it has reached a Farmout agreement with Repsol Exploration SA ("Repsol") in which Repsol, through its subsidiaries, will become a joint venture participant in both the East Bula and Seram Production Sharing Contracts (PSC) in Indonesia. As a result of the agreement, Niko as operator will hold 55% working interest and Repsol will hold 45% working interest on each PSC. The transfer of interest has been approved by the Government in Indonesia.

The Seram PSC was signed by Niko in November 2008 while the adjacent East Bula PSC was signed by Niko in November 2009. Niko as the operator of both blocks has completed a 4,760 km 2D seismic survey and a 200 square km 3D seismic survey.

Repsol and Niko are also joint venture partners in three recently awarded blocks; Cendrawasih Bay II, III, and IV. These three blocks were signed under a Production Sharing Contract on May 18th, 2010. Niko as the operator of Cendrawasih Bay III and IV has already completed a 5,240 km 2D seismic survey.

Besides India & Kurdistan, it's these Indonesian prospects that make my mouth water.

Unlike the speculative microcaps, there is no one prospect that is likely to make Niko double bag overnight but, as per the thread title, I see Niko as having multi-bagging potential over the next 5 years yet underpinned by good producing assets, generating substantial cashflow and a sound cash pile.

I have tucked some away in my TD Waterhouse ISA, as a core holding.

Cheers,

Mark

PS: snap!

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djpreston 14th Jan '11 5 of 136
3

Update out from Groundstar Resources regarding QD in the KRG:

Groundstar Resources Limited (TSX VENTURE:GSA) ("Groundstar" or the "Company") is pleased to provide the following update on the drilling progress of the Qara Dagh - 1 exploration well in Kurdistan, Iraq.
Since the last update on December 13, 2010 the well has drilled to 2,522 meters. Over the past several days, an intermediate 9 5/8 inch casing string has been set prior to drilling ahead.
Based on regional geology and correlation with other wells in the area, and in addition to other well parameters, the operator, Niko Resources, has identified the top of the Cretaceous Shiranish formation. The Shiranish formation is the first of three primary drilling targets in the Cretaceous section and drilling continues.
The Qara Dagh Block is located in the prolific Zagros foldbelt that extends from southern Turkey across northern Iraq and into southwest Iran, which contain giant and supergiant accumulations of hydrocarbons. The large surface structure on the block known as Qara Dagh is a prominent anticline that rises as high as 600 meters above adjacent valley floors. This block, which is 65 kilometers by 5 kilometers, is located 60 kilometers southeast of the Taq Taq oilfield and 60 kilometers east of the giant Kirkuk oilfield, and is adjacent to a Heritage block with a recent oil discovery. Groundstar has a 6% beneficial interest in the Qara Dagh Block.

Incidentally, those looking at Vast as a way to play QD, may actually find that Groundstar is a better play with its 6% interest (carried IIRC). They also have carried interests in WEEM and West Kom Ombo in Egypt as well as what could be quite interesting acreage in Guyana where a well has spudded.

Fund Management: European Wealth
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Mattybuoy 17th Jan '11 6 of 136
1

Just a point of interest.

Niko is a member of that exclusive club "The 100 Baggers". Yes, you could have bought it for a dollar or so 10 or 12 years ago. Obviously, with a market cap of $5bn it's not going to do that again, but it should provide a few more bags over the coming years before "retiring" into a major's pocket.

What I like most is that there is essentially no downside due to the KG gas being sold at a fixed price set by the government, and this is complemented by a large number of possible upside events. One of which BTW is the possibility of the government set gas price going up at some point. There is a lot of politics surrounding this, which I don't really understand, but Reliance is now supplying around 50% of India's natural gas and has the resources in the KG basin to supply much more. That ought to be provide quite a good bargaining position. Note: ONGC (the state-owned oil company) had previously explored the KG basin and drawn a blank, presumably due to a lack of competence, so there ought to be little chance of the thing being "nationalised".

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djpreston 7th Feb '11 7 of 136
2

Interesting to see rumours from the media that BP is in talks to acquire a 30% - 45% stake in Reliance's D6 block in the KG Basin. Niko of course have 10%.

Fund Management: European Wealth
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marben100 7th Feb '11 8 of 136
4

In reply to djpreston, post #7

Here's the source: http://www.livemint.com/2011/02/06212622/BP-may-buy-into-RIL-gas-field.html?d=2

New Delhi: London-based BP Plc is in talks with Reliance Industries Ltd (RIL) to buy a significant stake in the D6 hydrocarbon block in the Krishna-Godavari (KG) basin.

“BP is in talks with RIL for acquiring between 30% to 45% stake in the D6 block,” a person aware of the development said on condition of anonymity. “The technical teams have been in discussions for some time now.”

The Mukesh Ambani-owned firm, India’s biggest company by market value, holds a 90% stake in the KG D6 field off the eastern coast of India, which was hailed as the world’s largest natural gas discovery in 2002. Canadian hydrocarbon explorer Niko Resources Ltd owns the remaining 10% stake...

 

Some interesting further details from the article:

“As far as RIL is considered, in fields like these, any access to technological advancement is welcome. A lot of technological advances are taking place in this space.”...

 

...The explorer is currently pumping gas from 18 wells in the block.

“The plan was to produce 40 mscmd in the phase one of production and 80 mscmd in the second phase. The plan was to drill 44 wells for producing 80 mscmd. During testing it was observed that per well could produce 8-9 mscmd of gas. There was no pressure decline for some time but lately we have seen the pressure dropping,” said the Reliance official cited earlier. “We are now drilling four new wells for sustaining production of 60 mscmd… the reservoir is not behaving in a manner that was expected.”

The Indian government, which has allocated gas from the field to priority sectors such as fertilizer, liquefied petroleum gas, steel, petrochemical plants and city gas distribution companies and refineries, is not worried about the decline.

“These are small ups and downs. Once the 22 wells are operational, things will become normal and a production of 60 mscmd will be reached by March,” said a senior official at Directorate General of Hydrocarbons, requesting anonymity.

According to the projections made by India’s oil ministry regarding gas availability from the D6 block, which were reviewed by Mint, the field is expected to produce 59.4 mscmd in 2010-11, with the production reaching a peak of 88.5 mscmd in 2012-13.

[1mscm = 35.3 mmscf = ~6,000boe]

Cheers,

Mark

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marben100 9th Feb '11 9 of 136
3

3rd quarter results (to 31st Dec 2010) just out: http://www.nikoresources.com/upload/news_release/108/01/q3-for-website.pdf

Market doesn't seem very keen, I guess because, though quarterly production/revenues/net income are up y-o-y, current production is down. This is, however, because fresh drilling on D6 is awaited (as mentioned in the livemint article). Niko is waiting for Reliance to sort itself out. Should just be a temporary glitch AFAICS...

Here's the bit on Qara Dagh:

Drilling of an exploratory well in the Kurdistan region of Iraq on the Qara Dagh anticline commenced in May 2010. The well had drilled to a depth of 2,522 metres at December 31st and is currently drilling at a depth of approximately 3,000 meters. Geologically, the well has penetrated an anomalously thick lower Tertiary interval containing potential light oil in sandstone reservoirs that displayed fluorescence and cut fluorescence. A significant increase in mudgas readings with free oil has also been observed in the drill mud while drilling through the lower Tertiary. Nine and five-eighths of an inch casing string has been set and drilling continues in a 8.5" hole. The plan is to continue drilling and evaluate the prospectively of the deeper Cretaceous Shiranish, Kometan and Qamchuqa formations and conduct further evaluation of the lower Tertiary sandstones. The Company expects to reach the planned total depth of between 3,500 and 4,000 meters at the end of February. Testing will commence after reaching the total depth. Drilling and related costs are expected to be incurred over the remainder of Fiscal 2011.

Cheers,

Mark

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Mattybuoy 9th Feb '11 10 of 136
1

The Calgary Herald comments:

"Future uncertain for D6 gas project in India"

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djpreston 9th Feb '11 11 of 136
3

Evening all.

Somewhat of a shocker. It was a bit like a slow motion car crash - limited early move then gathered pace. Couldn't help but pick some up sub 85 (still waiting the call from my chaps out there).

Main point for me was the cashflow remains.

Off to bed now (was up at 4am) but I'll see what the analysts have to say overnight and report back in the morning.

Fund Management: European Wealth
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djpreston 10th Feb '11 12 of 136
3

Just a quick one.

Unsurprisingly not that much comment around on NKO as it isnt really followed that widely, especially by the biggest houses.

RBC have just issued a very good note Outperform but PT reduced to $100 from $111. They say "use current (and probably on going) weakness to accumulate a position ahead of a very active H2 when potentially transformational drilling offshore Indonesia should commence.

Canaccord yday (when SP was $95.85) Hold and $97 target

Cormark yday By with $115 target from $125. Summary (mine) Strong financial position, cashflow base in India explo portfolio of world class prospects. Given the potential for a repeat of D6 with D4 along with other explo blocks - should be a core hlding in an international portfolio.

Edit - Just received First Energy's take: Summary (mine) - market has reacted way too negatively. Looks pricey on curent finacil metrics but very inexcpensive looking at risksked explo. Believe this is a very material buying opp for value investors ivo the value creation potential. Outperform $125 target

And Raymond James - Underperform $75 target from $85

 

 

 

Fund Management: European Wealth
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marben100 10th Feb '11 13 of 136
1

In reply to djpreston, post #12

Hi djp,

I concur with you & RBC & have just picked some "extras" up for my ISA @ C$81.99

Safely tucked away in the bottom drawer. :0)

Besides the H2 drilling, we also have a possible "interesting" result from Qara Dagh (but I expect it may take the market some time to digest that if it happens). More important from the market perspective, I suspect, will be announcement of any deal between Reliance and BP and subsequent timetabling of D6 drilling. I expect that Reliance can't drag their feet too much on the drilling, or they'll come under pressure from the Indian govt.

From my perspective, I'm perfectly happy for the gas to stay in the ground, as I think that it'll become more valuable as time passes and tariffs start to look more favourable. As you point out, even the currrent declining production will generate plenty of cashflow to fund Niko's explo programme.

Cheers,

Mark

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djpreston 10th Feb '11 14 of 136
1

In reply to marben100, post #13

Oh yes, and dont forget the first Independent Resource assessment for Indonesia due in April.

Fund Management: European Wealth
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repobear 10th Feb '11 15 of 136
1

I like this one a lot and added a couple of times yesterday, but I am in no rush to add more. It's one to lock away as marben suggests.

I think that the Canadian market offers opportunities like this quite regularly.They love cashflow and like everyone else hate uncertainty. There are issues about RIL's technical competence, which at some stage will get resolved, and the gas isn't going anywhere in the meantime. The news doesn't warrant the big selloff, imv, but i am not kidding myself that the issue will get resolved too quickly or that the Canucks will get their heads around it too soon either.

NKO still have lots of good cashflow,an outstandingly rich portfolio of assets and to get that together with absolute minimal dilution I would suggest the management must be extremely smart.

People seem to be put off this one because:-

it's Canadian, they have weird markets,crap bulletin boards and UK punters have been tucked up there before;
it's difficult to comprehend the scale and quality of the assets;
there is a too good to be true feeling that they can drill all these assets up out of existing, and hopefully growing, cashflow; and
it just seems too difficult to get your head around it and analysts aren't too clever either in demystifying it.

If you look through the other end of the telescope some of the above can be seen as advantages, but don't expect me to be ramping this one up too much. I just don't understand it enough;-)

DYOR,

repo

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djpreston 10th Feb '11 16 of 136
1

Yes, repo, I think that very few appreciate the sheer scale of what NKO will be drilling from Q3 onwards and all funded by cashflow and with very big partners, not fly by nights, mega cap oilers - Marathon, COP, Repsol, Exxon etc etc. Lots of other licences abutting the NKO ones also being drilled so maybe interesting newsflow from there.

Hopefully the Resource statement will help to address this situation.
I'd suggest that new players may want to scale in. Some now and some post QD in the KRG (end Feb?) just in case QD is a flop.

Fund Management: European Wealth
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