Oil & Gas Corporate News
Circle Oil (LON:COP) (BUY, £0.90) (COP, 37.75p, ? (4.14%)) announced that the exploration/appraisal well Al Ola-1X is presently drilling ahead after setting casing at 10,600ft MD in the Upper Rudeis, following drilling through the Kareem Formation. Log analysis has shown both sand units of the Kareem Formation to be oil bearing with no indication of the OWC. Formation pressure testing shows some limited communication with the updip Al Amir SE producers, and the well proves up the southern field extension in the Al Ola area. The Top Kareem Shagar was encountered at 9,731ft MD with 6ft of net pay and the Top Kareem Rahmi at 9,782ft MD with 19ft of net pay (operator figures). The oil column is presently down to the base Rahmi Sand at 9,802ft MD (9,719ft SS). The secondary target in the Lower Rudeis Formation is expected at 13,700ft MD. A further announcement on the well results, including testing, will be made in due course. Separately, the partnership has also agreed the required plans to bring the gas associated with the NW Gemsa Concession producing wells into production, which is presently planned to be completed within the next 6 months. Current gross production from the Al Amir, Al Amir SE and Geyad fields in the NW Gemsa Concession is 9,000-9,500bopd.
Comment: No indication of the OWC means that all current estimates by the operator and indeed by the independent consultants will have to be revised upwards. The latest operator-calculated most likely oil reserves were 43MMbbl and did not take into account the results of either of the two latest wells, i.e. Al-Amir SE-6 and Al Ola-1. We believe that when the results of those two recent wells are included, the updated reserves estimates are likely to be closer to the 60MMbbl we are using in our risked valuation of the Company. In addition the partners are now making plans to bring the associated gas into production. Gas reserves are estimated at some 25-40Bcf and represent an addition of 4-7MMboe to reserves; however the economic value of the gas is unlikely to match that of crude oil. Nevertheless it represents a pure upside to our risked NAV as we have made no provision for the commercialisation of the Egyptian gas reserves in our current valuation of the Company. Hence we believe that our risked…
