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    Archived articleThis is an archived article from 2010 - please note that any content within the article may be out of date.

    News expected on Oates prospect - Serica Energy & Premier Oil

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    Profile picture of doverbeach
    doverbeach
    8 comments·8,365 Reads

    Oates is a Palaeocene Forties prospect in Block 22/19c, approximately 20 kilometres west of Block 23/16f (the Columbus discovery, in which three successful wells have been drilled by Serica.). Premier Oil (LON:PMO) and Serica Energy (LON:SQZ) have 50% each. Oates is said to be "low risk and exhibit[ing] a well-defined amplitude response on the 3D seismic data, similar to that seen in the Columbus field" [ref]  http://www.serica-energy.com/operations-unitedkingdom-columbus.php [/ref]  

    An exploration well, funded by Premier, is planned to be drilled to a depth of approximately 10,000 feet.

    This was extracted from Premier's recent trading update: 

     The rig for the Oates prospect in the UK is expected on location by 20 July. The well is expected to take 30 days to reach target depth.

    They have the low-mid-high range for reserves (ie recoverable, gross) as 25-65-107 mmboe. These were my notes on Oates from my Serica AGM writeup last month:

    Premier are paying all dry hole costs. See this excited article on Premier's farm-in http://business.timesonline.co.uk/tol/business/markets/article6977108.ece    The Huntington discovery is 25mmb and Serica are assuming that PMO came in because a find at Oates would allow a joint development.

    Serica have Oates as 78mm boe and 60%/ likley to me oil rather than gas. Premier have a slightly lower target quoting 60-65. Mostly oil will be easy to develop, dry gas would too but is unlikley. Wet gas will be more of a challenge.

    Disclosure of interest: The author holds shares in Serica Energy (LON:SQZ)

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    8 comments

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    Avatar for doverbeach
    doverbeach

    It's good it was a free carry, nevertheless, this was an important well to Serica. RBC note today

    The removal of the Oates prospect has a significant impact on our Serica NAV, reducing it to C$0.98/share (58p) from C$1.44/share (85p). As a result, we have lowered our target price to C$1.00/59p from C$2.00/119p.

    So, on to Kutai to drill Dambus and Maridan, two independant prospects, starting in September:

    Located in shallow waters offshore East Kalimantan and close to several giant gas fields, Dambus is estimated to contain 200mmboe spread across multiple stacked reservoirs. Success at Dambus or Marindan would de-risk follow-up prospects identified across the 4,700km2 block. We tentatively estimate that the two wells could add ~35p/share (C$0.60) to our revised NAV, fully unrisked.

    db


    7
    Avatar for deucetoace
    deucetoace

    I think the downgrading of Kambuna makes SQZ a less defensive stock than had been thought. Recent drill results have all been the same which also reduces confidence. I have sold FWIW.

    2
    Avatar for djpreston
    djpreston

    Well the news is out and it isnt good,

    Shares now down to 46p.

     

    The Oates well 22/19c-6 was spudded on 30 July. The target of the well was the Palaeocene age Forties Sandstone, which is a significant oil and gas producing reservoir in the Central North Sea. The data acquired on the Oates well confirms that the Forties Sandstone was entered at 9,531 feet MD BRT but logging indicates that no hydrocarbons are present in the sands at this location and the well will be plugged and abandoned as a dry hole.  Detailed analysis of the well results will be used to evaluate the remaining potential of Block 22/19c, which also contains a second Forties Sandstone prospect known as Bowers.


    Under the terms of a farm-in agreement, Premier Oil plc is paying 100% of the Oates drilling costs in order to earn a 50% interest in the Block 22/19c licence and has assumed the operatorship of the block.  Serica retains a 50% interest in the licence.

    0
    Avatar for fuiseog
    fuiseog

    Dissappointing but an SP fall of 25%+ seems to be an over reaction for a free carried failure, with Premier footing the bill, and more drilling to come in Indonesia.

    fuiseog

    1
    Avatar for hannibal
    hannibal

    Thanks for your comments.

    As I understand it, Serica for the rest of the year is a 2 shot play. With Oates and Danbus the main targets, and the 2 Indonesian wells insignificant small fish, targeting 2 - 6 mmboe net - which for the live of me, I can not see the logic behind drilling, unless of course the broker's note I am referencing - excuse my laziness - has the wrong end of the stick.

    0
    Avatar for doverbeach
    doverbeach

    @hannibal

    No. Serica's estimate of the possible reserves is 25-65-107 mmboe. If you assume that it comes in at the top end of that AND that it is all oil, I suppose you get somewhere near to your figure. However, that is very unlikely. I think the company and its investors would define 'a success' as a lot less than than that. I have seen analysts notes mention 70p as the unrisked value and that would seem to me to be more reasonable as a maximum target :) 

    db

     

    2
    Avatar for thegreatgeraldo
    thegreatgeraldo

    A tripling of the SP would add £250 mill to the m/cap. Using the P50 estimate of 65mmbbls (gross) that sounds a bit steep to me. Of course, the Oates result will roughly coincide with the kick off of the Indonesian campaign, which could make the end of August/beginning of September quite interesting.

    5
    Avatar for hannibal
    hannibal

    Doverbeach,

    My analysis of Oates, is that a success could triple the share price. Does that concur with your thinking?

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