Oil & Gas Corporate News
Gulf Keystone Petroleum (LON:GKP) (BUY, £2.00) (GKP, 168.5p, ? (3.6%)) announced the completion of drilling and testing operations on its Shaikan-3 shallow appraisal well designed to drill and test the Cretaceous intervals in the immediate vicinity of the Shaikan-1 discovery well. Shaikan-3 drilled the entire Cretaceous interval and on into the Jurassic Sargelu formation. A total of two open hole and two cased hole flow tests were conducted in the Cretaceous. As a result of these tests, log evaluations and recovered fluid samples, the Company's current P50 to P10 estimate of Garagu oil in place volumes is 220-2,200mmbbl. These Garagu resources are in the lower portion of the Cretaceous at depth of 1060-1157m. The Shaikan partner group will formulate a development plan for these resources. The large spread between P50 and P10 volumes is due to the uncertainty with respect to the exact nature of the Cretaceous down dip, on the flanks of the Shaikan structure. If the Cretaceous is oil bearing near the flanks, then the P10 volumes become more likely and it is possible that the oil will also be less viscous and of higher API gravity. In the mean time, due to the different characteristics of the Cretaceous oil, the Shaikan-3 well has been completed as a second Jurassic producer from the Sargelu formation and will flow into the same test facilities as the Shaikan-1 well.
Comment: A positive result that adds up to the existing resources estimates for Shaikan-1. The P50 estimate is on the low side versus expectations but there is a material upside contingent on further appraisal on the flank of the structure. We retain our Buy recommendation and price target price of 200p.
Hardy Oil & Gas (HOLD, £2.00) (HDY, 190p, ? (12.24%)) provided an update on the drilling of the KG-D9-B3 well, the second exploratory well on the Company's D9 (KG-DWN-2001/1) exploration licence. The well was drilled to a total depth of 3,829 m MDRT by the Transocean drillship 'Discoverer India' in a water depth of 2,948 m at a location some 47 km away from the nearest well. The well encountered two Tertiary aged reservoir quality sand packages of 70 and 40 m gross thickness respectively, in which gas shows ranging from 6 to 9% were recorded. Testing was carried out with the MDT tool which…
