Vast Exploration - the Qara Dargh well

Monday, Jan 03 2011 by
15
Qara Dargh
Qara Dargh

I haven't looked at Vast Exploration Inc before, so I am hoping that those who have (Repobear? IronPyrites?) will correct my errors and omissions. Vast is a independent oil and gas company listed in Canada with the ticker VST.V. It has a market cap of CAN$ 87.5m. In terms of the Directors and Management, nothing looked that interesting to me. A quick search failed to find details of how many shares the directors own. Niko own 10% of the company. Anyone know the history of this? 

Here's a 2 year price graph from Yahoo:

Here's a presentation from the company website. Their principal (only?) asset is the Qara Dargh block in Kurdistan:

The Company believes that proximity of the Qara Dagh Block to recent discoveries at TaqTaq and Miran and the presence of oil seepages on the block make the Qara Dagh structure a low risk prospect with the potential for the discovery of large oil reserves.

Huge potential numbers: http://www.vastexploration.com/index.asp?pid=7&spid=view&linkid=66. Vast have 37% of this block. 27% under the original PSC and 10% under something more complicated.

 Special Offer: Invest like Buffett, Slater and Greenblatt. Click here for details »

So this suggests that everything is riding on this Qara Dargh well. It is operated by Niko, who also has 37%. Groundstar has 10%. The well started drilling in May and was originally expected to take 4-5 months, but it has had problems. Firstly they found an unexpectedly thick layer of sandstone (as detailed in the above presentation). The good news is that this could contain hydrocarbons (they won't test until final depth is reached). They had gas shows early in drilling. The bad news is they won't be able to intersect the lower targets (because they will now be much lower) and indeed their whole seismic must surely be viewed with a great deal of suspicion. 

Secondly, they have had prolonged drilling problems, with instability in the Tertiary. In mid December, they finally installed casing down to 2100m and are drilling ahead. In mid November, they said they anticiapted drilling would be completed in JAnuary and said they were funded through to completion (there was a placing at 60c in October). As the mid Dec news release didn't comment on either time or money, I assume the Nov projections are still correct.

So this looks like a one trick pony. But 50 cents looks like an ok entry price for those that want to have a bet.

db

Disclosure: No positions


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42 Comments on this Article show/hide all

Davros006 15th Jan '11 23 of 42
3

Hiya LSN: Good to see you.... Yes, i have in the main, left ADVFN behind... Seems very little comment regards the companies I have an interest in these days. Biscuits, music i like, but it aint my reason for logging onto financial BB's. I doubt i will be a particularily active poster there again, whilst only 1/100 posts are related to the company in question..
I earned myself a cyber stalker on ADVFN too! lol.

A refreshing change to pop back in here, and see some on topic comment... lol.

As for VST being cagey... I don't know why. I have considered many reasons.. including NKO being operator, major shareholder and potential buyer of VST should we get a rub of the green and have a large oil find.
But who knows... I certainly don't.. :o)

I guess the crux of the matter, is finding oil in significant volumes... Everything else is just noise. (but i do like understanding my investments, as best as i can.)

Your strategy sounds good to me.. I followed a similar strategy on GKP from 6.45p, and did extremely well out of it.

VST, WZR i intend to trade in and out of though, and can take the hit should it go pear shaped with the drills, with GKP being my trusty Kurdi backup, with their assets already showing huge promise..(and seemingly slightly easier geology to drill than the companies operating in the south of K)

GL fella.

Best

Dav.

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lowersharpnose 15th Jan '11 24 of 42
2

In reply to marben100, post #22

Mark,


Have you see the proactive interview with GKP's John Gerstenlauer?

A couple of months ago bobobob5 collated some questions to put to him.

The youtube video is here

I suggested the first question "[in Kurdistan] it takes longer than in many regions to get anything out of the ground.  Can you talk us through the technological, geological and logistical problems that you face there"...

lsn

 

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marben100 15th Jan '11 25 of 42
1

In reply to lowersharpnose, post #24

Thanks lsn, very informative. :0)

So perhaps no criticism of the drilling crew is deserved: geological conditions make drilling through the Cretaceous there very tricky and unstable ground is typical. I would have expected Niko to have put the necessary infrastructure in place before the well was spudded (undoubtedly a major task in itself, especially considering the well location), so shouldn't think that's a factor at this stage.

I am amused by Gerstenlauer's understatement concerning heavy oil:

...when you have 13° API oil it just means it's a little bit harder to produce...

 

Yeah. Right. "just a little bit" - lol - esp when he then goes on to mention steam extraction.

That's why I will not invest in GKP: I prefer a management that "tells it straight", a rare breed. [Heavy, difficult to extract oil, is intrinsically much less valuable than readily flowing light oil, due to signficant extra OPEX per bbl and trickier export, as well as lower selling prices. I'm sure most readers here know that but statements like the above would mislead the unwary.] Though, to be fair, even a management I don't like can get lucky. ;0)

Cheers,

Mark

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JPGH 15th Jan '11 26 of 42
5

Mark,
Haven't listened to the interview but this heavy 13 API oil being discussed represents only a small fraction of GKPs discovered estimated resources. Shaikan consists of numerous layers from Cretaceous, Jurassic, triassic and Permian, all of which are hydrocarbon bearing containing heavier oil at shallow sections, progressively lighter the deeper the drill went. The 13 API stuff recently discussed related to Akri Bijeel drill results (and now also shallow Shaikan recently announced as part of Shaikan-2 RNS). In fairness to GKP they have not try to bury this "bad" low API oil news and i agree with his statement that this ultra heavy stuff is a bit harder to produce but SAGD is not rocket science anymore, reserves can be recovered and produced. In any case GKP have more than enough free flowing "easy" oil that can be developed at
Also regardless of oil quality under terms of PSCs with CAPEX and OPEX recovered and R factors to limit oil company share of profits to low numbers then it does not make a huge difference whether it's heavy or medium crude to overall economics except that developer will have large upfront investment costs to recover. In a concession arrangement type fiscal arrangement such as UKNS agree 100% that the API makes an enormous difference to overall economics of a project.

JPGH

JPGH

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jonnyt 17th Jan '11 27 of 42

What do you mean my luck?

I started last year with a 15 bagger (GKP), and still hold a 5 bagger (TRP) and a 7 bagger (AFR)
Yes some didn't do as expected namely Ascent and Roxi, but Ascent has now doubled for me, with the so called luck factor in the next few weeks it may become a multibagger....
Roxi is now well in profit following last weeks surge.

Two I bought around XMAS are also well in the money, Europa and Range.

Yes I admittedly sold Encore before the success but you cannot win them all.

However perhaps the biggest disappointment was my buy back in Soco for TGD.

Back on topic. if one of Western Zagros or Vast due find anything near the P50 numbers I'll be very happy.
Nothing is guaranteed but in my view these drills have COS as high as it gets.

JonnyT


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loglorry 17th Jan '11 28 of 42
2


Update from WZR appologies if this is OT but I don't think there is a WZR thread

http://cnrp.marketwire.com/client/westernzagros/release.jsp?actionFor=1380790

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Davros006 17th Jan '11 29 of 42
1

From Barham Salih Twitter page... How trustworthy this is, i'll let you decide.. I can find nothing on the news wires to confirm. (yet)

http://twitter.com/barhamsalih

"Productive meeting w PM Maliki in Baghdad.Agreed to resume oil exports from Kurdistan by Feb 1st,resolve outstanding issues on oil, budget. "

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loglorry 18th Jan '11 30 of 42

Seems a bit unlikely he would tweet this stuff on such a large issue for the country. Saying that his wikipedia page points to the twitter page here http://en.wikipedia.org/wiki/Barham_Salih.

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lowersharpnose 18th Jan '11 31 of 42
1

In reply to loglorry, post #30

I'm pretty darn certain it is genuine, as in it is from/on behalf of Barmin Salih.

However, I reckon you need to insert 'after we first' where the comma is. i.e. it is not a signed deal and negotiations continue.

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mallwood 18th Jan '11 32 of 42

If it is a hoax then it appears they've suckered Reuters:

Iraqi Kurds say agree to resume oil exports in Feb

http://af.reuters.com/article/energyOilNews/idAFLDE70H0Y120110118

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loglorry 18th Jan '11 33 of 42
1

New presentation out on the website - some mouthwatering numbers as you might expect

http://www.vastexploration.com/files/file/TD%20Conference%20-%20January%202011-2_pptx.pdf

Also some data in there for WZR which is very interesting too.

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marben100 19th Jan '11 34 of 42

In reply to loglorry, post #33

Thanks for that, log.

Slide 13 is particularly illuminating. I see that they've had to sidetrack twice more - which I didn't see explained in the announcements that I enumerated :-/. Firstly, according to the slide, there was a cave-in @ 2189m, requiring plugging back and a second sidetrack. Then it appears that the bit (or a tool?) got stuck and a third sidetrack was drilled and cased to 2,522m. Drilling currently underway in that third sidetrack in the first primary objective: the Shiranish formation.

Cheers,

Mark

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loglorry 19th Jan '11 35 of 42

yes indeed but if you think that is bad look at the nightmare that WZR had with there recent well in the same region. It looks like there are a lot of technical challenges drilling in that region either that of they are all no good at it :-)

The size of the prize though does look worth it though. It is one of those punt stocks really at this point. You can't really model the outcome because the inputs are really not well defined at that point not least the open question as to if they will every get any money for the oil they find from the Iraqi government :-)

Worth a punt though and undervalued relative to its peers not counting WZR that I also hold.

Log

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marben100 19th Jan '11 36 of 42
2

In reply to loglorry, post #35

Hi log,

Just to be clear, I'm not saying it's bad - just that it clarifies why the progress has been slow. But Iam surprised that I didn't see these sidetracks mentioned in official announcements (unless I missed it in my scan).

For transparency, I am not invested in Vast but am invested in Niko, so very interested in QD. Happy to take a larger stake in a lower risk play - more my style. And, of course, it is Niko that bears responsibility for the drilling, as they are operator.

Cheers,

Mark

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SW10Chap 22nd Jan '11 37 of 42
3

Firstly, according to the slide, there was a cave-in @ 2189m, requiring plugging back and a second sidetrack. Then it appears that the bit (or a tool?) got stuck and a third sidetrack was drilled and cased to 2,522m.

At those kind of depths that's exceptionally, er, unlucky drilling. And as a colleague of mine once used to say: "I don't employ unlucky engineers..."

SW10

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doverbeach 26th Jan '11 38 of 42
1

It will be interesting to see if Heritage Oil (LON:HOIL) 's huge gas discovery today has an impact on Vast's price - HOIL down 17%....

db

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jonnyt 26th Jan '11 39 of 42

This wasn't the discovery well though was it?

The market wanted and expected Oil from Miran West and didn't get it so lots of 'hope' value there.

Here if we get TCFs of gas instead of oil it would still be value enhancing and certainly better than a breached seal in the Cretaceous with oil having migrated up dip from our acreage.

JonnyT

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Jim Figgerty 3rd Apr '11 40 of 42
4

Hi Folks,

Has anybody looked at buying the Vast Warrants VST-WT.V - currently showing at CAD 0.15 .

Details Below:

Vast Exploration Inc. Closes $15 Million Private Placement Financing
Monday, 18 Oct 2010 07:00am EDT
Vast Exploration Inc. announces that it has completed its previously announced private placement financing, on a non-brokered basis, for gross proceeds of $15,000,000 (Offering). Pursuant to the Offering, the Company has issued 25,000,000 units at a price of $0.60 per unit (Unit). Each Unit is comprised of one common share and one-half of one share purchase warrant, with each whole share purchase warrant entitling the holder thereof to acquire one Vast common share at a price of $0.80 until April 15, 2012. The common shares, the warrants and the common shares issuable upon the exercise of the warrants, are subject to resale restrictions that expire on February 16, 2011. The Company intends to use the net proceeds from the financing for the continued development of the Qara Dagh Block, related work program and for general corporate purposes.

Since investing here is pretty much a binary bet anyhow, I'm wondering if buying the warrants might provide a better bang for less buck.

All comments appreciated,

Jim


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Leekgo 4th Apr '11 41 of 42

There was some discussion about how much the SP might suffer if the well `fails` to some degree over on the TMF O&G board. There was some suggestion of the ordinary shares retaining some significant value but like you i would really see the possible outcomes here as much more binary than that. So i would agree, maybe the warrants are a better bet.... but are they easy to buy? I imagine they are very illiquid.

Leek

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Jim Figgerty 4th Apr '11 42 of 42

In reply to Leekgo, post #41


Thanks Leekgo,

I guess today gives a pretty good indication as to liquidity, with just 20,000 warrants dealt.

There's also the consideration that a moderately promising drill result ( whatever that may be ) that moved the share price ahead by, say 50%, to CAD 0.70 might not yield a proporionate lift on the price of the warrants, as these would still not be "in the money".

All should become clear in the fullness of time!

Jim

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