Gulf Keystone have started to drill on the Shaikan block in Kurdistan.
Remainder of post removed at request of moderator. The previous version of this post already contained just the executive summary of a 9-page note.
In reply to ohisay (post #154)
This is the link:
http://edition.cnn.com/video/#/video/international/2009/11/27/mme.b.todd.kozel.cnn
"We are the most popular person at the dance.."
lsn
Note:
Agile Energy has also notified the Company that it has agreed to pledge its entire beneficial interest in the Company as part of the security package for a revolving credit facility to be provided to the Asher Family Trust. There is no change in Agile Energy's overall shareholding in the Company, and it continues to have an interest in 14,000,000 Common Shares representing approximately 2.9% of the issued share capital of the Company.
Wonder who is the lender?
I've been having a look at who else has acreage in Kurdistan.
From P6 of Vast Exploration presentation, I got a map with names of companies on the relevant blocks.
http://www.vastexploration.com/files/file/VAST%20Exporation_November%2024%202009%281%29.pdf
As a first pass, I just looked up the companies listed and checked where they were from (I will have missed lots of partners).
Aspect Energy : US
DNO : Norway
Dogan : Turkey
Dana Gas : United Arab Emirate
Genel Enerji : Turkey
Groundstar : Canada
Gulf Keystone : UK
Heritage : UK
Hillwood : US
Hunt : US
KEPCO : Korea
KNOC : Korea
Komet : ?
Legend : US
Longford Energy : Canada
MOL : Hungary
Niko : Canada
Norbest : Russia
Oil Search : Australia
OMV : Austria
Perenco : Everywhere?
Petoil : Turkey
Reliance : India
Sterling : UK
Talisman Energy : Canada
TTOPCO : Turkey & China (Sinopec via their ownership of Addax)
Vast Exploration Inc. : Canada
Thoughts:
a) Lots of countries are represented
b) Some companies are very well connected politically
c) The most powerful countries are represented US, China, Russia
d) Turkey, a neighbour with oil pipelines appears multiple times
e) Four out of five of the permanent members of the UN Security Council are featured (perhaps France is there too)
f) It would be crazy for Baghdad to piss off this lot.
I am fairly confident the politics will be resolved.
lsn
In reply to lowersharpnose (post #158)
Perenco are French, so we have a full set of the five permanent members of the UN Security Council.
Amazing how otherwise intelligent people turn a hint into a worthy prospect :-
http://boards.fool.co.uk/Message.asp?mid=11791948
TK has hinted that Shaikan could contain between 11-15 Billion OIP. .....TK has put his reputation on the line by using 11-15 billion barrels. These figures may also be conservative......If we take the 15billion barrel figure OIP....A few numbers for Shaikan (All unrisked).......15 Billion= £5.72
What bulls need to focus on is how much discovered reserves can be exploited within the licence period. Discovering more than say a couple of billion recoverable will add zip!
In response to this recent announcement by KRG on possible resumption of exporting oil http://www.krg.org/articles/detail.asp?rnr=223&lngnr=12&smap=02010100&anr=33405 I posted this http://boards.fool.co.uk/Message.asp?mid=11810218 over on Fool and no response to date so I'll report here
I understand the KRG announcement to mean that until there is resolution of Oil Contracts dispute between KRG and Baghdad that the KRG are asking for Costs (cost recovery) + 5% to cover expenses (to date) incurred by FOCs in Kurdistan. For clarity/transparency, KRG haev submitted a copy of DNO/Genel PSAs for IOM to look at how thay can calculate, based on volumes exported, the costs that KRG are applying for, and also for additional payments how KRG are allocating cost oil/Profit oil and R factors to calculate revenue due to Addaz, DNO/Genel for all their costs (CAPEX, OPEX, Interest) to date (with a little extra to compensate for delay) and after tax payments from profit oil shares.
KRG are not saying that this request for Cost Oil repayments represents the final agreement or only payment to FOCs that IOM must make or indeed the end of the dispute. KRG state that they (KRG) have additional profit oil obligations to fulfill under these PSA's and are proposing a methodology that this that can be done by negotiation between themsleves and IOM representatives (with either direct reimbursement to FOCs in Kurdistan by IOM or via KRG who would use additional revenues returned to KRG by IOM.
Although this statement looks like a pre-election "olive branch" from KRG to IOM, to me it is almost like a conditional surrender/white flag being offered to IOM.......paraphrasing here...saying at least agree to pay these FOCs off as this show of money will lessen the impact of what's coming i.e. we will agree to tear up contracts and impose Iraqi style RSCs on the Kurdistan FOCs. Maybe I have the wrong end of stick here but thats what it sounds like to me reading between the lines.
What do other GKP holders think?
JPGH
If like you are are into this sort of thing, click on attached link (thanks to Durby over on ADVFN)http://www.mees.com/postedarticles/oped/v52n47-5OD01.htm
for an interesting read that compares a KRG PSA contract with an IOM RSC or Tech Services Agreement for one of the high profile recent Iraqi license awards. Basically it confirms that the KRG contracts are better for foreign oil company, particularly as POO increases above $60/bbl opon which the IOM contract revenues/R Factors ..etc are based. Also looking at the KRG model T&C's he used a more recent example with more "stringent" T&C's. The FOC returns would be even better with the T&C's offered under the Genel/DNO contracts and under the alleged T&Cs that GKP signed up to.
If these more lenient contracts, such as those awarded to DNO/Genel/HOIL/GKP are "exposed" then I can see a cost reimbursement for all costs incurred to date and a renegotiation of terms as the only amicable solution.
A renegotiation to lesser terms (current GKP contract has an effective $4/bbl in the ground value) will have an impact on the take-out price of GKP and even valuations
Comments?
JPGH
JPGH
Hi JPGH: Nice link, cheers.
I agree there may be a sting in the tail for the K drillers, and that possibility has become more prevelant in my mind... Iraq can't be seen to be handing out sweeter contracts in Kurdistan than Iraq proper.
One thing i have been thinking in tandem to that is, I have not seen what Iraqs offers will be for exploration blocks. Are oil companies going to take on exploration risk and cost for the chance of $1 p/barrel? I can't see it.
There are other mechanisms that could be used to save face for Baghdad, and still allow the KRG to stand by the contracts, but like you i still have the niggle that disputes are often solved by both sides giving ground... That may well include us as shareholders having to re-evaluate potential outcomes for GKP.
Davros
IOCs will not explore for rewards fo $1/bbl. They will want PSCs or else Iraq NOC will have to do all drilling, awarding afterwars RSCs to IOC's.
A GKP $/bbl re-evaluation will probably follow but cant see it reverting to a fee based contract either.
JPGH
http://www.ekurd.net/mismas/articles/misc2010/2/independentstate3471.htm
Incremental steps in Iraq to let Kurdistan oil flow 1.2.2010
By Sam Dagher
February 1, 2010
ERBIL-Hewlêr, Kurdistan region 'Iraq', — The semiautonomous region of Kurdistan is the one place in battered Iraq that promised economic boom times, but some of the foreign oil companies that rushed in over the past few years are becoming increasingly restless.
Their multibillion-dollar deals are still mired in a bitter political dispute between the Kurdish region and the central government in Baghdad.
Courtesy of ImaBastard on the ADVFN thread:
Kurds propose to Baghdad solution to oil contracts
http://en.aswataliraq.info/?p=126235
The Kurdistan regional cabinet has submitted an official proposal to the Iraqi government in Baghdad to solve the issue of oil contracts.
“The suggestion included different approaches for a solution,” Barham Saleh, the Kurdistan regional prime minister, told the press on Monday.
Hesaid that Iraqi Prime Minister Nouri al-Maliki is currently examining the proposed solutions.
IMV, a resolution of this is more likely to give the share price a boost than oil at Akri Bijeel.
lsn
Apols for copyright slip all.
"IMV, a resolution of this is more likely to give the share price a boost than oil at Akri Bijeel."
Agreed LSN. Its clear finding HC's in Kurdistan isn't GKP's problem anymore.
The market seems to of forgotten its a forward looking instrument, and is completely ignoring the potential of the Shaikan structure, never mind the AB drill.
TBH i can live with the lack of enthusiasm from the market as long as GKP keep performing operationally.
Slowly slowly catchy monkey.
http://www.fox-davies.com/media/119320/seyinitiatingcoveragefeb12010.pdf
Supposedly SEY coverage... But GKP comes out of it alot better than SEY. Ouch.
Chaps,
short write up on GKP: http://www.stockopedia.com/forum/view/37359/general-discussion-on-gulf-keystone-petroleum
also see link to my NAV model (based on Dalesman's excellent effort) and an update of a previous Kurdistan PSA spreadsheet I did a while back on http://www.keepandshare.com/doc/view.php?id=1736286&da=y
Am using very conservative assumptions but you can put your own in to suit your optimism.
Still a steal at 84p. As ever I am adding on weakness.
JPGH
Two announcements from GKP (and thanks to Hal's morning summary in another place)
First, late yesterday, an RNS on the latest Kurdistan drilling - a good discovery in the Bijeel-1 well:
http://www.investegate.co.uk/Article.aspx?id=201003091613443204I
Oil Discovery on Bijeel-1 Exploration Well in Kurdistan
Gulf Keystone is pleased to announce that Kalegran Ltd., a 100% subsidiary of MOL Hungarian Oil and Gas Plc. and the operator of the Akri Bijeel block in Kurdistan, concluded a successful oil test in the Bijeel-1 exploration well in the Akri Bijeel block. Undiluted equity working interests in Akri Bijeel are currently 80% Kalegran and 20% GKPI.
The tested zone is in the upper Jurassic and flowed at rates of up to 3,200 bopd with associated gas rates of 933,000 scf/d. Oil gravity was 18 degrees API and flowing wellhead pressure was 420 psi on a 48/64" choke.
Drilling operations are still in line with previously announced plans, following completion of the full test cycle, drilling will resume from the current depth of 3831m to a final planned depth of approximately 4400m, pending actual well results.
All very good - presumably the RNS was rushed out a day early, and less than 20 minutes before the market closed. because of the sudden tick-up yesterday. So still suspicions of GKP being somewhat leaky then...
And then this morning we get this - the deal with the mysterious ETAMIC has fallen through
http://www.investegate.co.uk/Article.aspx?id=201003100700173390I
After extensive recent discussions with interested parties,GKP has negotiated with the Kurdistan Regional Government (KRG) to reorganise the Company's interest in Gulf Keystone Petroleum International (GKPI) following a material default by ETAMIC.
The reorganisation and transactions detailed are subject to KRG approval and signature and therefore the terms may change. Discussions regarding the proposed re-organisation remain ongoing. The main components of the proposed re-organisation and transaction as they currently stand are:
· The 50% shareholding of GKPI held by ETAMIC reverts to GKP. GKPI will then be a 100%
subsidiary of GKP.
· Following default by ETAMIC, GKPI will pay $40 million to the KRG which is an Infrastructure Support Payment due and owing by ETAMIC ($10 million of which is payable within 30 days of the signature of an Infrastructure Support Payment Agreement by the KRG and the remaining $30 million of which is payable within 90 days of signature), in return for GKPI maintaining its 80% interest in Sheikh Adi and 40% interest in Ber Bahr.
· GKP will make a termination payment of $12 million to ETAMIC in full and final settlement of all of their rights which is payable within 30 days of completion by GKP of a significant fundraising after Q1 2010.
· The KRG shall also be entitled to receive an Additional Infrastructure Support Payment to be
allocated to social programs, amounting to 40% of GKPI's entitlement to Profit Petroleum derived from GKPI's share of profits in all four production sharing contracts (PSC's).
etc....
So what WAS that ETAMIC deal all about? What was it that led Todd Kozel to conclude the deal in the first place? IIRC, it effectively meant giving away half of GKP's interests in the concessions they already had in Kurdistan, including Shaikan, already known to be a success, in exchange for smaller stakes in some undrilled areas. It didn't seem a particularly good deal at the time. Now, it would appear that, to get its interests back and to hold on to the stakes in the additional acreage, GKP will have to find US $ 52 million and commit to payments amounting to 40% of GKPI's entitlement to Profit Petroleum derived from GKPI's share of profits in all four production sharing contracts (PSC's).
I've not had time to look into this properly, but at a first glance it seems to suggest that, in effect, GKP have to find a lot of money to recover ownership of what they effectively gavce away in the first place, US $ 12 million of that going to the ETAMIC crowd, whoever they might be.
All very odd (and expensive, perhaps - though good news for the KRG in terms of the Additional Infrastructure Support Payment.
Something doesn't smell quite right. - and the market doesn't seem too impressed so far
And what, I wonder, might this involve?
a significant fundraising after Q1 2010.
Mind you, if GKP keep on finding oil in Kurdistan, I guess it won't matter too much in the long term.
Man Siarad
OT for GKP, but keeping in the Kurdistan theme.............
The latest release from WZR
http://cnrp.marketwire.com/client/westernzagros/release.jsp?actionFor=1256258
Looks like a fairly decent update what with 31 API crude confirmed and hitting some high pressure zones (they seem to have been struggling to tame this one for a while).
But a more specific question if I may about this from the release:
Oil in the drilling mud reached four percent by volume while drilling these formations.
Not seen the likes quoted before in a RNS and just wondered if anyone had a feel for whether this was a particularly high returns reading or not? It's not far off a high water cut well in the NS after all ;-)
Given the returns, is it safe to assume that they have found something that is more than ready to flow once they get to the testing stage?
A view from CNF on the ADVFN WZR thread in relation to my question regarding 4% oil in mud returns. Kind of confirms my thoughts that it could be very good - or they were seriously under balance on mud weight.
Yeah, 4% return in oil volume in mud is very very high from random sampling of the drilling returns when drilling ahead through two of the main cretaceous reservoirs. You would expect to have trace oil returns from the drilling mud as its highly diluted by drilling fluids and formation water from the open hole section on return to surface. You would only expect to see traces as the heavy mud weight used to control the well holds back formation fluids. The traces of hc should be from the very bottom of the hole as you drill ahead through potentially oil bearing strata. To get 4% in your returns suggests either highly oil saturated strata as you drill ahead or alternatively the formations around the open hole are able to feed formation fluids against the pressure of your mud column and back up the well. Highly pressured, higly fractured oil containing carbonates seem to be feeding this well with oil even though it should be a little over balanced to counter the extreme pressure that can be encountered in Kurdistan wells (Hoil, GKP, Sarqala-1 and Kurdamir-1 all have encountered extremely high pressure zones).
News release from Western Zagros,Ttoronto WZR) in whom TAQA recently bought a 20% stake at a premium to the (then) market price.
http://tmx.quotemedia.com/article.php?newsid=45593564&qm_symbol=WZR
Main news is first oil:
WesternZagros Resources Ltd. (TSX VENTURE:WZR) ("WesternZagros" or "the Company") has received payment for its first sale of crude oil to the domestic market in the Kurdistan Region of Iraq. First oil production from the Sarqala-1 extended well test was achieved on October 18, 2011, and first lifting occurred by truck today.
"Production start-up marks a new chapter in the Company's history, as WesternZagros takes its first steps to become an exploration and production company, rather than a pure exploration company," said Simon Hatfield, Chief Executive Officer of WesternZagros. "We are appreciative of the process established by the Kurdistan Regional Government's Ministry of Natural Resources, which requires pre-payment directly to WesternZagros for the contracted volumes. We also appreciate the close coordination with the Ministry in starting the test. Thanks to the diligence of our in-country operations personnel, the start-up was conducted in a safe, responsible manner and ahead of schedule."
Production started at approximately 2,000 barrels of oil per day ("BOPD") and is anticipated to increase towards 5,000 BOPD in the near future. WesternZagros has signed an initial sales contract for delivery of approximately 33,500 barrels of oil priced in the range of US$50 to US$60 per barrel. WesternZagros plans to use the information gathered from the extended well test in determining future appraisal and development activities, including the potential for increasing production beyond 5,000 BOPD. Horizontal completions may be considered to take advantage of the demonstrated high deliverability of the Jeribe reservoir.
Rest of the release is about drilling progress etc on Mil-Qasim-1 and Kurdamir-2 and one year without a lost time incident.
The SP has been a bit lively since the TAQA buy and I imagine this update won't hurt.
W
