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Rodinia Oil Corp - ROZ.TSXV - 100bn bbls+???

Tuesday, May 17 2011 by
15

In a break from babbling about more solid companies with boring things such as reserves and production, I thought Id mention something a little bit different.  

Now here's what Id say looks a very very interesting but HIGH risk play that could/should see an outcome in the near term with the first well spudding later this month and the drill is scheduled to take 6/8 weeks.

The shares have fallen sharply this year with the swing in sentiment to the oil sector and are currently c C$1.40 down from a peak of C$3.45 seen in early Jan. Market cap is now $145m. Liquidity in the shares is good at c300k shares per day. It’s a Canadian Venture quote.

Rodinia has to be seen as a Speculative play for its high risk, high reward and essentially a binary play.

The company is focused on the unexplored Officer Basin in South and Western Australia with interests in 9 blocks covering 19.5m net acres.

As Ive said in the title, the estimated unrisked prospective resources is 126bn bbls (101 bn net). That’s on 7 of the 9 licenses.  

The first 10 drill ready prospects are targeting only 26bn bbls or 21 bn bbls net.

The first well, Mulyawara-1 is estimated at 2.7bn bbls gross prospective resources.

 

Okay, so some of the basic details:

Website: http://rodiniaoil.com/

Overview of operations: http://rodiniaoil.com/operations/overview.php

Company Presentation: http://rodiniaoil.com/documents/Presentations/Rodinia-PPT-2011-01.pdf

Resource Report from Ryder Scott (excerpt) http://rodiniaoil.com/operations/ryder_scott_report.php   

Full Ryder Scott Report (all 161 pages of it) http://rodiniaoil.com/documents/Misc/RodiniaDec10Resource(NC).pdf

The website lists four analysts covering the stock (and they aren’t Mickey Mouse outfits) – MacQuarie, RBC and First Energy are the biggest then there is Jennings and Haywood (which isn’t listed on the Website)  

You can download the October Note from MacQuarie and Jennings’ short note from the ROZ website (link above). Unfortunately they don’t have links to the RBC and First Energy notes but both of these have done more recent notes (initiations in Late Jan 2011 for FE and Dec 2010 for RBC).

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Plans

ROZ intends to drill four wells this year starting later this month. It is funded for the program. There is also an option on the rig for a further four wells.

This is real frontier exploration since the Officer Basin is essentially unexplored. What work has been done to date is basic surface mapping, minimal explo and strat drilling, minimal grav and mag and seismic. That is till ROZ came along. On top of their Areomag/grav survey, they have done two 2D seismic programs and the latest and largest has just been completed (IIRC). Historic 2D data was also purchased and reprocessed.

The reason for this is that there are access problems, it is remote and the offshore successes with no problems on access and easier commercialization, has attracted most attention.  I should explain a bit more about the Access problems.

Most of the land in the Officer Basin is held as freehold Aboriginal Land. As such, the Aboriginal people have rights to control access and to seek compensation for disturbance etc (a lot like the Native American lands and rights in the US). As a result, a Petroleum Exploration License will only be granted when agreement has been reached between a company and the relevant Aboriginal Group. To date, ROZ has reached agreement and therefore been granted permission to operate on PEL 81 and PEL 253.

PEL 81 and PEL 253 are 80% WI to ROZ with the remaining 20% WI held by Ensearch which has been in administration but has now emerged: No wells have been drilled into the structures identified by ROZ so, once again, this has to be seen as high risk. The company’s 2D seismic has identified five potential reservoirs in 32 structures. It also feels that the 2D has confirmed thick salt layers (ideal for trapping). Mine bores have also provided oil and gas shows historically.

Obviously the Officer Basin is in the back end of nowhere and so an obvious question is raised over commercialization. Given the RS estimates of Resources, any discovery of even a fraction of the size would be more than sufficient to support a commercialization program.

If oil is discovered then there is the possibility for oil sales to commence prior to year end via a trucking operation. Okay, costs will be high (c$20/bbl?) but would obviously provide cash flow whilst pipeline negotiations are entered into. However, given the potential size of the reserves, I would not imagine that ROZ will remain independent for very long.

Another risk is the chance of Gas rather than Oil. Ryder Scott looked at this aspect as well and said that if hydrocarbons are found it will either be 100% Gas or 100% Oil and that the two cannot be combined. Again, the size of the reserves make Gas commercial but it would be a much longer and more expensive process.

One very attractive point is that the targets are not deep. The first few wells should be c6-8 week wells costing between $7m and $9m each. Remember that they have a contract for four firm wells with four options. Before they spud the fourth well, the company must elect to drill the fifth and sixth well and then the seventh and eighth before they spud the sixth.

If we get to the point of oil then the company has very good fiscal terms. Royalty rates are 10% in South Oz and 10-12.5% in Western Oz. There is also an over riding royalty between 1.5% and 3% for the Aboriginal Group that granted access rights. Standard Oz Tax is 30%.

To finish with, I’ll reiterate that ROZ is a high risk, high reward, binary play in many respects. If they don’t find anything with the current campaign then the shares will fall and any further operations would need cash to be raised at the lower price. However, the upside looks incredible and Id wager that, in a more “normal” market, the shares would be expected to rise with spudding….

So there you go.

Some may also like to have a look at PFC – PetroFrontier Corp – essentially a sister company but with a different focus in Oz….


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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19 Posts on this Thread show/hide all

djpreston 17th May '11 1 of 19
1

That was well timed.

The company has put out a general update .

A slight delay in spudding due to weather and certification delays.

Rig sub deck is in place and derrick will be raised over the coming week. Spud now expected early June and the company will update on the actual date in another release.

Over 2 times average volumes already traded and up 7%.

Fund Management: European Wealth
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repobear 17th May '11 2 of 19
2

Hi djp,

That is one I've been looking at for a couple of months.

Given the huge upside and crap markets and high risk with the first drills I am minded to wait for some news to get involved with this one.

This will get caned on a less than good result which might be good value and is highly unlikely to move so far that there still isn't great value on a good result.

repo

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sirlurkalot 18th May '11 3 of 19
2

Thanks for pointing out this one, djp. Very high risk but a small holding looks interesting. Rodinia's blocks are huge, but maybe 5% CoS is optimistic?

The Aboriginal rights will be an issue to keep an eye on of course as this has been a problem in the past in these remote Aussie locations.

I have the Haywood 2 May 2011 note if anyone's interested, but it's much the same as the others on the company's website.

If I'm understanding the numbers right this is trading at about twice or 4x cash [NB I don't understand the Option Proceeds of ~$50m], whilst often these sort of wildcatters can be found trading close to cash, sometimes at a discount, particularly at a bearish time like now.  Cash appears to be ~c38/sh, should we be looking for the shares to be in that area before buying?  How does the valuation compare to some of the smaller E African companies that haven't yet discovered much?

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Mattybuoy 18th May '11 4 of 19
2

Too pricey IMO. Diluted market cap is around $225m. Seems a tad rich for what in the short-term is basically a binary drilling punt..

One might also ask the question of why an Australian play like this is listed in Canada and not on the ASX.

Just off the top my head ... Good luck with it regardless :-)

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djpreston 18th May '11 5 of 19
1

Rodinia has been presenting at the latest First Energy Global Energy Conference.

http://www.firstenergy.com/conference_details.php?conf_id=90&webcast

There are links there for the webcast as well as a note from First Energy.

Id encourage people to have a glance at the list of companies presenting as there are a lot of names familiar to this site. Also some others that arent perhaps so well known but interesting nevertheless (IMO)

I should say that once again, First Energy have done a sterling job with the conference and the companies attending.

Bonus points for them for deciding that, in response to the Wildfires hitting Slave Lake in Alberta, they have decided to donate all commissions from today to the Canadian Red Cross as the agent for disaster relief in connection with the wildfire.

Fund Management: European Wealth
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djpreston 9th Jun '11 6 of 19
4

Let the fun begin.

Rodinia announces that Mulyawara 1 has spud.

Six to eight weeks to TD.

 

Fund Management: European Wealth
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Mattybuoy 9th Jun '11 7 of 19

The penchant for drilling out in the depths of the Australian outback seems to be catching.

Also from today, here's Linc Energy (of UCG fame) announcing the spudding of the first of 10 wells in the Arckaringa Basin, in South Australia. These wells will apparently be the "most aggressive" drilled in that area for 30 years.

http://www.stocknessmonster.com/news-item?E=ASX&S=LNC&N=232570

I find the well's title telling. It's Haystack-1, as in needle ....

Since I have Linc anyway and there is no chance of dilution to fund this I am quite happy to be in on the ride. I still wouldn't touch Rodinia with a bargepole though, sorry :-)

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thegreatgeraldo 5th Jul '11 8 of 19
1

Drilling update released this morning wwhich has given legs to the SP, up a touch over 10% on the day so far.

Mulyawara-1 has reached a depth of 795 metres with surface casing set at 465 metres in the Dey Dey Mudstone. The well will commence intersecting prospective target formations below the Dey Dey Mudstone, which acts as the upper regional seal in the Officer Basin.

"To date, I am pleased with the rates of penetration into this very hard surface section," stated Paul Bennett, President and Chief Executive Officer of Rodinia. "Our plan is to continue drilling ahead using the air hammer drilling technique as far as possible and if necessary, switch to rotary drilling should penetration become too difficult."

This is probably worth adding (from today's release)

As Mulyawara-1 is entering the target formations, management of Rodinia has imposed an operational trading blackout on all officers, employees, directors and consultants until the results of the exploration well are made public at the conclusion of drilling and preliminary evaluation...

 

... expected August, "unless a material event occurs in the interim"

So no leaks then!!!  ;-#)))


 

 

 

 

 


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djpreston 5th Jul '11 9 of 19

A very decent update and shows the intention to keep a tight ship. Guess its easier to keep a blackout in the ar$e end of nowhere and if anyone's caught then they can drop them off in Womera.

Fund Management: European Wealth
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djpreston 14th Jul '11 10 of 19
1

Nothing new re ROZ but as it concerns their "sister" company (and I can't be bothered to set up a thread for it)....

Heritage Oil (LON:HOIL) has just gone over 10% in PetroFrontier Corp (PFC:TSXV). Wondered why they'd been so strong recently.

Fund Management: European Wealth
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wistman 4th Aug '11 11 of 19
1

In reply to djpreston, post #10


Petrofrontier news:

Calgary, Alberta – August 3, 2011 (TSX-V: PFC) - PetroFrontier Corp.
(“PetroFrontier”) is pleased to announce that it has spudded its first well, “Baldwin-2”, in
the Southern Georgina Basin in the Northern Territory, Australia.

http://www.petrofrontier.com/en/news/pfc-august_3_2011_baldwin_spud_date_final.pdf?PHPSESSID=8doaqj42lfqu3ltd9kqfaei852

"The primary target in Baldwin-2 is the unconventional Basal Arthur Creek “hot” shale, with
conventional secondary targets being the Hagen Member and Dolomitic Shoal above the
Basal Arthur Creek “hot” shale and the Thorntonia located just below. Management
believes that the Arthur Creek “hot” shale is potentially analogous to the Bakken play
found in Saskatchewan, Canada and North Dakota, USA. PetroFrontier has re-evaluated
existing wellbores on its lands and believes the unconventional Basal Arthur Creek “hot”
shale is prospective for hydrocarbons over most of its land holdings. PetroFrontier’s
capital program for 2011 continues to focus on exploratory drilling opportunities around
these existing wellbores."

"According to a report (the “Ryder Scott Resource Report”) prepared by Ryder Scott
Company Canada (independent oil and natural gas reservoir engineers), dated
November 1, 2010, the unrisked, undiscovered, prospective (recoverable) resource,
based on a best (P50) scenario, for the unconventional Basal Arthur Creek shale zone in
EP 103 and EP 127 may contain approximately 13.2 billion barrels and 2.7 billion barrels
(gross) of oil respectively."

I find it most interesting that Heritage chose to buy 10% of Petrofrontier in preference to sister company Rodinia, also currently drilling, also in pursuit of monster targets.. Heritage may be a bit "racy" but I don't think they are stupid.

Link may not work -seems to be some funny formatting going on- but it is the first news item on Petrofrontier's site.

If they have an interesting result, we'll have to give them their own page!

I have some. (And Rodinia)

w

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djpreston 4th Aug '11 12 of 19
1

W

HOIL's focus on one and not the other is very interesting/odd. Can't fathom it to be honest.

Hoil have also just announced they've gone to 12.22% of Petrofrontier.

Fund Management: European Wealth
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wistman 31st Aug '11 13 of 19
2

In reply to djpreston, post #12

Continuing with the strange matter of why Heritage bought into Petrofrontier & not Rodinia....

Petrofrontier are currently drilling the first explo well,Baldwin 2, and  currently proceeding with the horizontal section of the well bore. The target is "the unconventional Arthur Creek "hot" shale.

I wonder if Heritage fancy the hot shale for some reason-that type of play. Do they perhaps think that the COS is greater than in the more conventional plays of Rodinia? It would be interesting to ask Heritage, I suppose. I'm not a shareholder of Heritage at present,  so feel a bit inhibited.

Petrofrontier's 2nd Quarter results came out on 29th Aug http://www.petrofrontier.com/en/news/pfc-aug_2011_q2_2011_v3_clean.pdf?PHPSESSID=ahrodj40vfl8dtlktedf2jhqg7 and contained this snippet:

In July 2011, PetroFrontier announced that its Board of Directors had adopted a
Shareholder Rights Plan (the “Rights Plan”). This Rights Plan was adopted to
ensure the fair treatment of shareholders in connection with any take-over offer
for PetroFrontier, and to provide the Board of Directors and shareholders with
additional time to fully consider any unsolicited take-over bid. The Rights Plan
will also provide an opportunity, if appropriate, to pursue alternatives in order to
maximize shareholder value. The Rights Plan is subject to approval by the TSX
Venture Exchange, as well as by PetroFrontiers’ shareholders at its upcoming
annual general and special shareholders’ meeting scheduled for early November
2011. If ratified by the shareholders, the Rights Plan will have a term of three
years.

Does this indicate that they have an "above average" expectation of a bid at some point?

w

 

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wistman 12th Oct '11 14 of 19
3

Well, here,s a very encouraging result from Petrofrontier:
http://www.petrofrontier.com/en/news/pfc-oct_11_2011_baldwin_td_announcement_short_version_final_clean.pdf?PHPSESSID=8alc6sost8abim35aamjdhob51

Looks like they've found pretty much what they were looking for, but just got a bit caught out by the unexpected fault.
Actually , isn't this a stonking success?

w

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wistman 12th Oct '11 15 of 19
2

Here's an interesting little something, for those interested in (mainly) shales/ unconventional hydrocarbons in Australia, namely a Morgan Stanley report from June this year.
I found it on the Baraka Energy website. I haven't read it yet, but a quick skim suggests it will give a useful picture of Rodinia and Petrofrontier's holdings in comparison with some of the other less conventional basins etc currently attracting interest in Oz.
A bit more going on down there than I had realised. Maybe worth a bit more attention?
http://www.barakaenergy.com.au/pdfs/2011-06-17-020537Morgan_Stanley_Oz_Energy_Shale_Gas_Research_June_2011.pdf

By the way-remember Baraka, with its interests in Mali, which (almost )disappeared, but emerged re-capitalised a couple of years ago? Baraka has an interest in two of Petrofrontier's blocks in the Georgina Basin.
http://www.barakaenergy.com.au/projects.php

I have a small holding (tiny tiny punt size) left over from the Mali days, which simply wasn't worth selling after the SP collapsed. I'd be interested to know if anyone else still has a few. I think I'll hang on to mine for now.

w

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robs12 18th Oct '11 16 of 19
4

Hoil announced another bite at PetroFrontier yesterday - now a smidgen over 14%:

http://www.investegate.co.uk/Article.aspx?id=201110171350013105Q

Must like it as much as buying their own stock?!

Thanks for the MS report link Wistman - good reading. I already hold Beach & AWE. One company that seems (too?) obviously missing from it is CTP, who just announced they will be re-entering Surprise 1 in the first week of November.
There's some (not overly impressive) history with CTP (a bulletin board favourite downunder), but they are near neighbours of Rodinia & PetroFrontier, and hold massive acreage in central Oz. I still hold a few of them too...but DYOR. They are short on cash, some might say 'unlucky,' and in middle of fund raising (last one failed somewhat).

 

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wistman 27th Oct '11 17 of 19
1

In reply to robs12, post #16

Curioser and curioser...Strange goings on at PFC and ROZ :

14th Oct Rodinia

Rodinia announces that Peter Philipchuk has resigned as a director of Rodinia for personal
reasons and that Matthew Philipchuk, Executive Vice-President, has resigned in order to pursue
other business opportunities in Australia, both effective immediately.

(This came after the Rodinia drilling result)

(They both get a nice thankyou, though)

AND Matthew also resigned from Petrofrontier to pursue etc.

But it appears that Peter is still a director of Petrofrontier.

Note that Heritage's top up of PFC shares came after the drilling result and the resignation, so Heritage still think that PFC is "interesting".

w

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djpreston 31st Oct '11 18 of 19
2

CALGARY, Oct. 27, 2011 /PRNewswire/ - (TSX-V:ROZ) - The management of Rodinia Oil Corp. ("Rodinia") will be hosting a conference call from 2:30 to 3:00 p.m. Mountain Time on Tuesday November 1, 2011 for all investors, financial analysts, media and any interested stakeholders to discuss its current operations.

The conference call dial-in numbers for Canada and the U.S. are 647-427-7450 or 888-231-8191. For interested parties outside of North America please use +1-647-427-7450. A recording of the conference call will be available for replay until November 8, 2011 at 11:59 pm. ET. To access the replay, please dial either 416-849-0833 or 855-859-2056 and enter the password 22822155. For those outside of North America please use +1-416-849-0833 and the same password.

Fund Management: European Wealth
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alano20 31st Oct '11 19 of 19

In reply to djpreston, post #18

So management can spare a whole half hour to talk to "all investors, financial analysts, media and any interested stakeholders"?

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