FirstEnergy Global Energy Conference Report: Pt I
Introduction & Overview
Firstly, I owe Djpreston a big "thank you" for recommending me to the organisers, allowing me to attend this conference, held on 20th and 21st September. I found the event extremely useful, kinda like Oilbarrel on steroids, as there were a total of 29 companies presenting over two days. I caught most but not quite all of them, due to exhaustion & information overload! Given FirstEnergy's origins & focus, it will be no surprise that many of the companies presenting are listed on the TSX (some exclusively there). So, as Mattybuoy has been banging on about for a long time, :0) if you want to get serious about natural resources investment, you need an investment/trading platform that allows you to deal in international markets. He and others have suggested TD Waterhouse and Interactive Brokers for that purpose.
The sheer volume of info prevents me from doing comprehensive writeups, so most of this article will be a bullet list of key headlines & links to data. Each of the eight sessions was themed, so I have broken the list up by those sessions. For manageability, I have split this article into two parts; the first dealing with Monday's sessions and the second with Tuesday's. Where I have NOT provided a link to a company presentation, please contact me via Stockopedia's messaging system for further information. I must stress that due to the "information density" most of my comments are "first impressions" and I apologise in advance where I may have misunderstood or not done a company/presenter justice. Corrections/elucidation warmly welcome! The notes are intended as a springboard for readers to DTOR. Besides the headlines, two presentations stood out for me: Niko Resources and Trican Well Service, so I will go into these in a little more depth in separate articles. Whilst Niko is (possibly) a particularly interesting investment in itself, the facts I learnt from Trican are of general applicability to anyone investing in, or considering investment in, companies with a shale gas or oil focus.
Perhaps readers may care to pick one or two companies, research them more fully and write articles on them? If you fancy that idea, might be a good idea to post your intentions here, to avoid duplication of effort.
Companies covered in this part:
- Enquest Plc
- Cirrus Energy Corporation
- Sterling Resources Ltd
- Petroceltic International Plc
- Circle Oil Plc
- Transglobe Energy Corporation
- Sea Dragon Energy Inc
- Bahamas Petroleum Company Plc
- Zhaikmunai Limited Partnership
- Coastal Energy Company
- Niko Resources Ltd
- Providence Resources Plc
- Aurelian Oil and Gas Plc
- Toreador Resources Corporation
Headlines
Monday Early Morning Session
The theme for this session was the North Sea.
Company: EnQuest (LON:ENQ)
Website: http://www.enquest.co.uk/
Market Cap: £920M
Net 2P reserves: 80.5mmbbls
Current Net Production: 20,000 bbls/d
Presentation:
Presenter: Nigel Hares, COO
Notes:
- Floated on the LSE this April, "reincarnation" of Lundin's North Sea asstes + ex-Petrofac assets
- Enquest struck me as a new "Venture Production", with a similar strategy of exploiting fields that were too small to interest majors but could still offer a good return on investment. Focus is strictly North Sea. Hence may appeal to former investors in Venture. Production is 100% oil currently and the company prefers oil assets to gas
- IMO this strategy means that Enquest's perfomance is geared strongly to the POO, as well as to geological & engineering success in appraising & developing its assets (which has been good so far).
- Enquest will not hedge, except where required to back forward CAPEX commitments
Company: Cirrus Energy Corporation (TSX-V:CYR)
Website: http://www.cirrusenergy.ca/main/
Presentation: http://www.cirrusenergy.ca/main/files/presentations/100920_FirstEnergy_Cirrus_Corporate_Presentation.pdf
Market Cap: C$72m
Net 2P reserves: 9.7mmboe
Current Net Production: 2,300 boepd
Presenter: David Taylor, CEO
Notes:
- Focussed on Dutch gas assets. Dutch gas prices may be better than market perceptions. ;0) See the presentation for further info.
- Cirrus is seeking farm-in partners for some offshore assets.
Company: Sterling Resources Ltd (TSX-V:SLG)
Website: http://www.sterling-resources.com/
Presentation: http://jetslides.tv/lobby/249
Market Cap: C$473m
Net 2P reserves: 32.5mmboe [Excludes Blakeney & Cladhan discoveries]
Current Net Production: -
Presenter: Mike Azancot, CEO
Notes:
- Has been extensively discussed elsewhere
- Is developing Breagh (30% W.I.); pipeline with 400mmscf/d capacity being installed to allow for Crosgan & other prospects [note completion of recent fundraising to finance this project]
- Initial Breagh gross production of 130mmscf/d expected in 2012, rising to a peak of over 250mmscf/d in 2015
- The second Cladhan sidetrack currently being drilled is roughly 3,000' due east of the previous S/T. See slide 10.
- S/T will probe sand channel off main terrace. Failure to find OWC will be positive for a thicker sand channel and possibly a deeper fan system running off the terrace.
- Overpressure from recent test result could be due to thick sand channels
Monday Late Morning Session
The theme for this session was North Africa
Company: Petroceltic International (LON:PCI)
Website: http://www.petroceltic.com/ (numerous broker notes available on website)
Market Cap: £220M
Net 2P reserves: -
Current Net Production: -
Presenter: Brian O'Cathain, CEO
Notes:
- Key asset is the Ain Tsila on-shore gas-condensate discovery in Algeria, within the Isarene permit.
- P50 GIIP of 6.1tcf (75% W.I.)
- Recovery factor uncertain
- Fraccing and/or horizontal drilling required to optimise recovery
- Seeking farm-in partner, 5 government-approved parties have expressed interest
Company: Circle Oil (LON:COP)
Website: http://www.circleoil.net/
Presentation: -
Market Cap: £205M
Net 2P reserves: 33mmboe?
Current Net Production: 3,500boepd
Presenter: Stuart Harker, VP Geology
Notes:
- Company has refocussed on assets that are close to infastructure, facilitating development at reasonable cost
- Circle's operational executive team are North Africa specialists, combining 150 years of experience in the region
- Morocco's Rharb Basin is flood prone (ancient floods may have been a factor in resource deposition)
- Most Rharb wells are ~1,000m deep, costing ~$1.3m per well
- Production in the Rharb basin at Sebou & Oulad N'zala is constrained by an old pipeline. 62km of new pipeline is being installed, increasing capacity from 2.5mmscf/d to 23mmscf/d. Gas to be supplied to local industry.
- Gross production from these fields expected to increase to 8mmscf/d by early 2011
Company: TransGlobe Energy Corporation (TSX:TGL)
Website: http://www.trans-globe.com/
Presentation: http://www.trans-globe.com/investors/presentations-and-events/documents/Sept2010CorporatePresentation_000.pdf
Market Cap: C$608M
Net 2P reserves: 24.2mmboe (2009)
Current Net Production: 10,000boepd (2010 average)
Presenter: Ross G Clarkson, CEO
Notes:
- On-shore Egypt is main focus + Yemen
- Strong 5 year reserves & production growth track record - without significant dilution
- Forward drilling programme fully funded from cashflow
- Aiming to raise production to 20,000boepd
- Active drilling programme 2011, after (up to) 33 wells in 2010
Company: Sea Dragon Enery Inc (TSX-V:SDX)
Website: http://www.seadragonenergy.com/
Presentation: http://www.seadragonenergy.com/default.asp?mode=newsstory&id=64
Market Cap: C$98M
Net 2P reserves: -
Current Net Production: 2,000boepd
Presenter: Said Arrata, Chairman & CEO
Notes:
- On-shore Egypt focussed
- New management injected in late 2009, followed by asset acquisition (no production previously).
- Has 10% interest in N.W. Gemsa concession. includes Al Amir field, which has been found to extend into Dana Petroleum Plc (LON:DNX) 's acreage. Unitisation agreement with Dana being sought before beginning waterflood programme.
- 50% interest & co-operator on Kom Ombo concession in southern Egypt. Substantial upside foreseen.
Monday Early Afternoon Session
No particular theme to this session!
Company: Bpc (LON:BPC)
Website: http://www.bpcplc.com/
Presentation: http://jetslides.tv/lobby/232
Market Cap: £35M
Net 2P reserves: -
Current Net Production: -
Presenter: Alan Burns, Chairman & CEO
Notes:
- Offshore Bahamas focus
- Very large structures/prospects identfied
- Shallow/moderate water depths, but target depths substantial
- Partnered with Statoil on some prospects but either substantial cash raising or farm-in required to drill (my assessment)
- BPC reversed into RAB Capital owned cash shell to obtain AIM listing in Sep 2008 (RAB still own 15%)
Company: Zhaikmunai LP (LSE:ZKM)
Website: http://www.zhaikmunai.com/
Presentation: -
Market Cap: US$1,368M
Net 2P reserves: 529mmboe
Current Net Production: 48,000boepd (exit rate 2010, subject to gas processing plant startup)
Presenter:
Notes:
- Kazakhstan focussed
- Company expected to start up new gas processing plant by end 2010
Company: Coastal Energy Co (LON:CEO)
Website: http://www.coastalenergy.com/
Presentation: http://www.coastalenergy.com/fileadmin/user_upload/pdf/Corporate_Presentation_September_2010.pdf
Market Cap: £275M
Net 2P reserves: 55.0 mmboe [as at end 2009]
Current Net Production: 13,500boepd
Presenter:
Notes:
- Thailand focussed
- Onshore gas 2,000boepd & offshore oil 11,500bopd
- Offshore wells are in shallow water, drilled to 8,000'
- Benjarong has 1,000' of sands but has proved "tight"
- Dip in production indicated on slide 16 in 3Q09 was due to mechanical issues with a pump
Company: Niko Resources Ltd (TSX:NKO)
Website: http://www.nikoresources.com/
Presentation: http://jetslides.tv/lobby/210
Market Cap: C$5,072M
Net 2P reserves: 264mmboe [as at 31st March 2010]
Current Net Production: 50,317boepd [exit rate, 31st March 2011]
Presenter: Ed Sampson, Chairman, President & CEO
Notes:
- Niko appears to be in a different league from other companies presenting
- Has global interests, including India, Indonesia, Kurdistan, Bangladesh, Pakistan, Madagascar & Trinidad
- Has 10% W.I. in 2.1bcf/d(!) of current gas production in Block D6 offshore India
- Strong explo focus & track record, with deepwater Indonesia - where Niko has substantial acreage - regarded as most exciting prospect
- Pays a (modest) dividend
[I intend to write a follow up article on Niko, when I've studied the company more fully. Judging by Djp's grin, he did not disagree with my opinion that Niko made Soco look like a tiddler. ;0)]
Late Afternoon Session
Session theme: back to Europe!
Company: Providence Resources (LON:PVR)
Website: http://www.providenceresources.com/
Presentation: -
Market Cap: £53M
Net 2P reserves: 17.2mmboe [at 1st Jan 2010]
Current Net Production: 1,950boepd [at 1st Jan 2010]
Presenter: Tony O'Reilly, CEO
Notes:
- Main focus is offshore Ireland
- Current production from UK (onshore, operated) and US GoM (offshore, non-operated)
- Largest Irish prospects are Atlantic deepwater, requiring farm-out
Company: Aurelian Oil & Gas Plc (LON:AUL)
Website: http://www.aurelianoil.com/
Presentation: -
Market Cap: £148M
Net 2P reserves: -
Current Net Production: 436boepd (2009 average)
Presenter: Rowen Bainbridge, CEO
Notes:
- Area of operations is CEE
- Current focus is on Siekierki tight gas prospect in Poland
- First MFHW currently being drilled at Siekierki, 346bcf Aurelian net contingent resources
- Bieszczady, Poland oil prospect drilling shortly, targetting 30mmbbls P50 resources (25% W.I.)
- Romanian assets non-core
The fact that Auerlian consider Romania non-core gave me concerns regarding Europa Oil & Gas (LON:EOG) 's interest in the Voitinel prospect, which Aurelian operates. I decided to exit my modest postion in Europa, following disappointing production of their UK assets too.
Company: Toreador Resources Corporation (NASDAQ:TRGL)
Website: http://www.toreador.net/
Presentation: http://www.toreador.net/images/presentations/Toreador-FirstEnergy_20Sept2010.pdf
Market Cap: US$238M
Net 2P reserves: 9.1mmbbls
Current Net Production: 900bopd (2009 average)
Presenter: -
Notes: [I only attended the opening part of the presentation]
- In partnership with Hess
- Large acreage in Paris basin, targeting shale oil
Glossary of Abbreviations
| bbl | Barrel of oil |
| bcf | Billion scf (1bcf = 1,000mmscf) |
| boe | Barrel of oil energy equivalent (1boe = ~6mscf) |
| boepd | boe per day |
| bopd | bbl per day |
| CEE | Central & Eastern Europe |
| GIIP | Gas initially in place (reserves = GIIP x recovery factor) |
| m | Thousand |
| mm | Million |
| M | Million |
| MFHW | Multi-frac Horizontal Well |
| OWC | Oil/water Contact |
| Pxx | Probability that estimated figure will exceed stated value (e.g. P50 means 50% chance that actual value will meet or exceed this figure) |
| scf | Standard cubic feet (of gas) |
| STOIIP | Stock-tank oil initially in place (reserves = STOIIP x recovery factor) |
| S/T | Sidetrack |
| tcf | Trillion scf (1tcf= 1,000bcf) |
| W.I. | Working Interest |
Disclaimer
This is not financial advice. Our content is intended to be used and must be used for information and education purposes only. Please read our disclaimer and terms and conditions to understand our obligations.
18 comments
'Twas mid June.
http://www.marketwire.com/press-release/Groundstar-Announces-the-Resignation-of-Vice-President-TSX-VENTURE-GSA-1278591.htm
http://www.marketwire.com/press-release/Groundstar-Resources-Announces-Resignation-of-Director-TSX-VENTURE-GSA-1278803.htm
The main director that I deal with there is Stuart Macdowall, the former Canadian Ambassador to the UAE
Who is, of course, an excellent fellow (or was as ambassador)
Man Siarad
Matty
I don't recall any insider prosecutions. I'll have to have a dig - outside the period I held?
The main director that I deal with there is Stuart Macdowall, the former Canadian Ambassador to the UAE.
I think Groundstar might be a bit dodgy. There were some director resignations a while back due to successful insider dealing prosections.
The assets are nice though.
Just a quickie but I had forgotten a company we invested in a couple of years ago and sold out of in June 09 to lock in a gain.
For the more adventurous, this may be an interesting one to look at that brings in some of the elements highlighted by some of those attending the conference.
The company is Groundstar Resources, a $23m minnow but with three main interests:
1. KRG - involved with Niko.
2. Guyana - involved in Cancol
3. Egypt - West Kom Ombo (next door to Sea Dragon/Dana Gas.
Largely farmed down to minimal expense but you would need to DYOR on these as Im somewhat behind the times and forgotten the precise terms of the deals.
There's an awful lot of activity coming up or ongoign for a very minimal market cap. Undoubtedly there will need to be further funding rounds if anythign is successful but the management team will await positive newsflow before tapping up the markets.
Thought it might interest some of the brave souls out there.
D
This chap seems keen on niko
http://seekingalpha.com/article/226750-niko-resources-the-cash-flow-wave-continues-to-grow
points out that niko gets $4.25/mcf in india but costs are 25/30c/mcf
Niko, with its $500m "annuity", is a beaut.
There are N things that could add materially to its stock price and only about 2 which could reduce it, these being a) a repeat of the forced selling fiasco as in 2008 or b) an India-Pakistan war.
As to the N, take your pick:
Big discovery in Kurdistan (seems likely IMO).
Indian govt allows commercial nat gas pricing, or moves towards it (just a matter of time)
Increase in production from the 100+ TCF K-G gas fields (probably dependent on the second item)
World class discoveries in Indonesia (Mr Sampson is optimistic - "17 x 10 TCF targets")
The stock is already a 100 bagger (if you go back 10-12 years) but IMO there is every chance it will 10 bag again over the next 5-10 years, and the risk/reward is just lovely :-)
P.S. To marben100 - with only around 50m shares out Niko is a classic example of dilution avoidance as we discussed elsewhere. I don't know the history as to how that was achieved mind you.
Mark,
Said stated that Sea Dragon was his seventh successful entrepreneurial venture, Centurion having been the last one. He also indicated that the SDX team had high-level Middle East contacts. Your remarks suggest that my impression was wrong, and if so then I'd agree that this is definitely worth further research.
Here's some background for you:
Arts Backer
Among the province’s growing number of modern Medicis, Said Arrata could very well be the one with the deepest pockets. In 2007, The CEO of Centurion Energy International Inc. (acquired last year by Dana Gas) cut a cheque to the Calgary Opera, saving it from near bankruptcy. Though the amount has never been reported, it’s said to be large enough to cover the organization’s operating expenses for next eight years. In 2006, the Globe and Mail named Arrata the 56th best-paid CEO in Canada.
Man Siarad
Hi davjo,
Thanks v much for those comments, which are extremely useful. From a purely technical/analytical POV SDX looked pretty interesting to me too. However, with the limitations of time, one has to make judgements on what to pursue based on impressions, as well as purely the presentation content. Apologies in advance to Said for the following comments.
My impression of the presentation was that it seemed a little "spivvy", so I was sceptical, especially as SDX was so early-stage. Said stated that Sea Dragon was his seventh successful entrepreneurial venture, Centurion having been the last one. He also indicated that the SDX team had high-level Middle East contacts. Your remarks suggest that my impression was wrong, and if so then I'd agree that this is definitely worth further research.
As you suggest, Kom Ombo is the potential medium/longer-term star and the presentation spent some time on it. The theory is that the block may be another East African rift basin, like Lake Albert and the Sudanese Muglad Basin. SDX has a 50% WI in Block 2 which currently produces 700bopd gross. With a frac job and well twinning, this is expected to rise to 2,000bopd. The Al Baraka field within Block 2 is estimated to contain gross recoverable reserves of 10-15mmbbls. 4 wells are being drilled in 2010, with 26 development wells in total planned between 2010 and 2013. A further 300mmbbls of STOIIP is being targeted by explo within the block. Based purely on development drilling, Said is aiming to raise net production from Al Baraka to 3,000bopd by the end of 2012. At $75 oil (Brent -$3.50), contractor netback is US$30/bbl (with cost recovery taking that to $45.75).
SDX is debt free and has $18M net cash. See slide 19 for the forward CAPEX profile. Looks to me (on a scan, without detailed calculation) like that should be covered from current cash + cashflow from production.*
If Said can hit his goal of end 2012 net production of 6,000bopd, without further fund raising, the current market cap below C$100m will look pretty cheap... and there's explo upside on top. May well be worth a medium-sized punt, having DYOR.
*A quick aside: if only more companies would present that data so clearly: forward CAPEX, estimated production & fiscal regime details, as provided by SDX, are what investors really need to value producing oil cos. Boe in the ground and current production just aren't good enough.
Cheers,
Mark
PS further risk factors to consider (besides operational & geological risk), which apply to many such investments, and should form part of one's judgement of how much risk to take on, are:
Hi Mark - thanks for the excellent write up .
I picked up this article on one of the companies that you liked - Niko resources.
http://seekingalpha.com/article/226750-niko-resources-the-cash-flow-wave-continues-to-grow
Very interesting reading I must say.
I have an indirect interest here as I have a smallish interest in Vast Exploration*** one of Nikos partners in Iraq which the article mentions.
Niko has an interesting drilling project that is ongoing in Kurdistan where the company is drilling the Qara Dagh exploration well with its partner Vast Exploration. This well is currently drilling ahead with full results expected in the next month. This well has several hundred million or billion barrel potential and would be material to Niko if successful.
(Vast actually indicate end of October /first half of November.)
****
http://www.vastexploration.com/
Thanks for your splendid write-up Mark...and to djp for his summary too :-)
Having scanned the list, one company jumped out for me - Sea Dragon Energy (SDX.V)
This comprises the old Centurion Energy management who sold out to Dana Gas for $1.2bn, a 10 bagger for me[:-)].
Brief details :-
Shares out fully diluted 419m (options/warrants 43m)
SP $0.25
M/cap $117m
Debt Nil
Cash $18m
Assets (Egyptian)
N.Gemsa 2P 1.7mmbbls producing 940 bopd net sweet crude
Cost oil 30%. Profit Oil 23:77 con:gov
Al Baraka OIP 100mmbbls(gross) 2P 6.3mmbbls producing 1100 bopd net light crude
Cost oil 40%. Profit Oil : 35:65 con:gov
Combined assets expected to increase production to 4600 bopd in 2012
So SDX have an EV of $100m for 2P reserves of 8mmbbls. Not cheap on the face of it at $12.5/bbl. However, the fiscal terms are attractive for Egypt, especially Kom Ombo Block 2 where the Al Baraka field lies. Reserves there are pending review, unsurprisingly, given the OIP. The Kom Ombo licence was in fact part of Centurion's 100% owned assets when they sold out to Dana Gas. SDX bought 50% interest from Dana for $45m earlier this year. The management obviously knows the acreage as well as anyone.
There is decent explo upside in Kom Ombo particularly.
In summary, the management have a proven good track record and pretty decent Egyptian relationships. Downside looks fairly limited. I don't see this company as having much of a multi bag chance but it does seem a steady as she goes outfit with half decent prospects of growth.
DYOR before investing. I haven't taken a position but I might do if the sp dips over the coming months....I'm a bit fussy these days ;-)
I only wish I could have done as good a job as Mark.
As he says, the sheer volume of information in such a short period makes writing anything up and the style of such a report, almost impossible.
Id thoroughly endorse his suggestion that people pick a stock (or two?) and then feedback their own views.
Sadly Im snowed under at the moment so any more write up will have to wait.
PS Thanks also to DJP, whose earlier report somehow slipped past me!
Just read djp's excellent report. :0) Realised that I forgot to thank FirstEnergy for organising this event. As djp says, it was very well organised and, as I commented in my article, very useful. A huge amount of work must have gone into organising the event and in preparing the tome that accompanied it.
Thanks also for the kind words above. Motivates me to get the second part done but will have to juggle priorities, as ever. :0( Fortunately, Ed & Dave have saved me some effort with their excellent write up of the Colombian focussed session. I would highlight that Colombia may be an overlooked opportunity, with investors scared by the country's troubled past. This article provides some useful background: http://www.stockopedia.com/content/the-shifting-colombian-equity-story-from-near-failed-state-to-strong-fundamentals-46991/ I had the views expressed in it corroborated anecdotally last year, on meeting a Colombian couple whilst on holiday in the Middle East.
Cheers,
Mark
Thanks mark, excellent work
Mark, a simple 'thanks' seems woefully inadequate for this article (and the many others) that you spent enormous time and effort researching and writing-up - but I am truly grateful!
Now to settle in with another coffee and digest the info above!
SM