FoxDavies Daily Monitor - Gold Oil, Serica Energy and Providence Resources

Thursday, March 15, 2012

Gold Oil (GOO LN, 3.78p, ▲ 6.3%) - Competent Persons Report and Farm Out Update: An independent Competent Person's Report from D&M estimates combined mean prospective resources of 2.02 billion bbls of oil from twelve prospects identified by Gold Oil on the block Erika North and South in Latin America. D&M's evaluation is based solely on the interpretation of the 3D seismic surveys on the twelve key prospects. Gold Oil is also looking at farming out its interest in the Peru Block Z34, Offshore Talara (100% WI). It has opened a data room for the block to the prospective partners. Today's news bodes very well for the shares, and as a consequence we expect a measure of support in the market. Successful farm-out of the Peru Block Z34 offers near term catalyst for further upside.

Serica Energy (SQZ LN, 29.25p, ▲ 4.0%) BP joins the 3D party. The Company announced that, subject to the consent of Ministry of Mines and Energy in Namibia, BP will be joining in the exploration of Licence 0047 offshore Namibia by farming-in to Serica's interest. The Licence, comprising Blocks 2512A, 2513A, 2513B and 2612A (part), was recently awarded to Serica Energy Namibia (a wholly owned subsidiary of Serica) and covers an area of approximately 17400sqkm in the deep water central Luderitz Basin. Serica currently has an 85% interest in the blocks, and its partners are the National Petroleum Corp of Namibia (NAMCOR) (10%) and Indigenous Energy (IEPL) (5%). Both NAMCOR's and IEPL's interests are carried by Serica for prescribed work programmes. Under the transaction, BP will pay to Serica a sum covering Serica's past costs and earn a 30% interest in the Licence by meeting the full cost of an extensive 3D seismic survey. As a result of the farm-out, Serica's interest in the Licence following completion of the seismic survey will be 55%. In conjunction with that, the Company has signed a contract with Polarcus Seismic to acquire up to 4150sqkm of 3D seismic across the Licence. The survey is aiming to achieve three primary objectives; to delineate one of the three large four-way dip closed structures already identified on the blocks, to identify the potential for stratigraphic pinch out prospects which are likely to have formed in conjunction with large channel sand features present in the blocks, and to seek to demonstrate the presence of hydrocarbon indicators. Water depths in Serica's Luderitz Basin blocks range from 300 to 3000m. Drilling in these depths of water, whilst becoming more commonplace in the industry, requires sophisticated drilling techniques and equipment and is very costly. Serica has therefore granted an option for BP to increase its interest in the Licence by meeting the full cost of drilling and testing an exploration well to the Barremian level before the end of the first four year exploration period. In the event that this option is exercised, Serica's interest in the Licence will be 17.5% carried through the first well, which will have very considerable value if the exploration drilling is successful. Serica will continue to be the operator of the Licence during the initial seismic period with BP taking over as operator if it exercises its option to drill and test a well. Today's RNS is very positive news for the Company and its partners. The deep water geological basins offshore Namibia, including the Luderitz Basin, are at the early frontier stage of exploration. Although the presence of very large structures has been shown to exist from seismic surveys, very few wells have been drilled in the deeper water Namibian basins to date and the full hydrocarbon potential of the area has not yet been fully tested. Hence having a powerhouse such as BP on board should help in the derisking of the project. Also, the fact that management is pressing ahead with a 3D seismic survey so soon after being awarded the blocks in December helps to focus the Company's attention on the development of the Licence.

Providence Resources (PVR LN, 425p, ▲ 10.5%) Barryroe successfully flows oil and gas. The Company provided an operational update on its on-going well operations in Ireland. The 48/24-10z Barryroe appraisal well (Providence 80% and Lansdowne Oil & Gas 20% flowed oil and gas. A 24' thick net pay interval in the oil bearing basal Wealden sandstone section was perforated as the first phase of the well testing programme, and stabilized flow rates of 3514bopd & 2.93mmscfd were achieved without the use of artificial lift. As expected, analysis confirms that the oil is light, sweet, and highly mobile (gravity of 42 API, wax content of 20%, an in-situ reservoir viscosity of 0.68 centipoises and a gas-oil ratio of c. 800 SCF/STB). The upper gas bearing basal reservoir zone is currently being prepared for testing and flow rates from this section are planned to be comingled with the basal oil zone to assess any additional flow rate potential. After these operations are completed, it is planned to suspend the well for potential sidetrack drilling. All data obtained from these operations will be integrated with the 3D seismic acquired in 2011. The Company and its partners believe that the results have so far exceeded their expectations - site survey, 3D acquisition/processing, rig procurement, drilling & testing, etc. The characteristics of the oil alone coupled with the potential sidetrack drilling should excite and thus move the needle for investors.

Oilfield Services News

Wood Group (BUY) (WG/, 728p, ▼ 0.1%)
Wood Group has announced the award ff an Enterprise Frame Agreement by Shell Global Solutions International to provide subsea, umbilical, riser and flowline (SURF) engineering and construction management services to Shell worldwide, with primary focus on the Asia Pacific region, along with other project-specific awards in Europe. The EFA was awarded for a term of five years with an option to extend for a further five years.

Written by Steven Asfour, Sales Trader at Fox-Davies

Contribution from FoxDavies Capital

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This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. More

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