Rose Petroleum CEO Matt Idiens (MI) talks to Upcoming Drills (UD)

UD:  Our last interview was in April this year and there have been a number of positive developments at Rose Petroleum since then.  Would you like to summarise them?

MI:  We have interpreted the 3D data and completed an updated Competent Persons Report which was very positive even though it only covered part of our acreage.  We have assembled a high quality operations team who have been working on well design and costing and we have started the permitting process for the first wells. We acquired additional acreage within the 3D shoot and are on track to commence drilling in 2018.

UD:  Can we clarify the financial situation first? Obviously, funding will be required for the drilling programme and you are currently concluding that, but can you confirm that the US$1,965,000 cash as of 30 June will provide you with sufficient working capital through 2018?

MI:  Cash conservation remains a priority and we are very comfortable with the working capital position, but our focus now is on the drilling programme and how we fund that, with an industry partner, service provider or through the market itself.

UD:  The interim results announcement mentioned a new well, the 22-1.  Which do you expect to drill first, this or the already announced GVU 29-1?  There also is a third obligation well mentioned, the State 16-2L.  Can you tell us something about this one too and how the wells differ?

MI:  Based on the results of the 3D seismic survey and the CPR report, we are very encouraged about the prospects for all three of these wells.  The drilling team have pulled together a well design and costing plan and one of the benefits of having high quality 3D seismic data is that we know that we do not need to do a vertical pilot well and can got straight into horizontal drilling which will result in a big saving.

UD:  The Competent Person’s Report by Gaffney Cline & Associates on the acreage covered by the completed 3D seismic acquisition (approximately 17,250 acres of the total circa. 80,000 acres held) and focused solely on the single Cane Creek reservoir (Clastic 21) of the multiple prospective reservoirs within the Paradox Formation has now determined gross contingent resources (2C) of 15.61 million barrels of oil and 31.23 billion cubic feet of gas with a NPV net to Rose of $122.4 million.  What sort of further resource numbers might there be in both the additional reservoirs and across the additional acreage?

MI:  Of course we would have to carry out further seismic work to give a conclusive answer, but based on the 3D seismic done so far we are very optimistic about the prospects for the total acreage.  The 3D work we did was the highest quality by anyone in the basin and we are the first to have mapped the shallower clastics, which has given us a much better insight into the basin’s potential.  The survey of just a small part of our acreage identified numerous drilling targets and based on that we can say that we have every confidence of the future potential of the additional acreage.

UD:  You stated that given the potential of the new acreage, you have been working with the BLM to include this new acreage within the Gunnison Valley Unit.  Could you explain the significance of that?

MI:  When we carried out the 3D seismic shoot we covered unleased acreage which included three wells so that we could have the well data to compare with the seismic data.  This was part of acreage that came up for auction in March and we successfully acquired and added to the portfolio.  By including it in the Gunnison Valley Unit it would allow us to drill horizontally across lease boundaries without any issues. That will give us greater flexibility as we plan our drilling programme.

UD:  You also mentioned the more proactive approach of the BLM towards land usage under the new political administration.  Whatever one’s views regarding current US politics, do you believe the new administration is good for business, particularly the oil and gas industry?

MI:  We have seen a noticeable change in the speed at which the BLM processes applications under the new administration which reduces the costs involved and also takes away a big element of uncertainty for exploration companies.  The other side of the equation is that when the BLM grants permission to drill, companies are under an obligation to work within the deadlines set.  We believe that this benefits the oil and gas exploration sector and ultimately the US economy, so from our industry perspective we think the administration has had a positive impact.

UD:  There appears to be a huge disconnect between the company’s current market capitalisation of around £3.8 million and the NPV assessed by Gaffney Cline & Associates of $122.4 million.  How do you see that gap closing?

MI:  We believe that our current market value does not reflect the prospects for the company and the shares are cheap, but we think the company is heading in the right direction and that the bigger oil industry picture is favourable.  We recognise that investors want to see results and that the share price has been dampened down by the possibility of dilution through fund raising.  But we are on the right track, with the high quality seismic results, a very positive CPR report and an experienced team with a proven track record in the Paradox Basin.  We are confident about financing our first well, with an industry partner, a service provider or the market, and this will be the next big step in our transition from being an exploration company to a production company.  The oil price is strong and is likely to go even higher, given global demand and geo-political conditions, which is a good environment for us to be operating in.

UD:  Cantor Fitzgerald already have set a target price of 9p per share.  How soon might it be possible to get there?

MI:  That really is for the market to decide, but we agree that our shares are too cheap and we are working extremely hard to show the true value of the company, its assets and its future.

UD:  You also noted that Rose has been approached by a number of third parties about potential partnering and investment opportunities in the region.  While it is appreciated that Paradox is the absolute priority, can you tell us something about the sort of deals that are being proposed?

MI:  Our main focus is on Paradox, particularly in the coming weeks and months as we go through the process of drilling applications and preparing to drill our first well.  US oil and gas is a very exciting and active industry and we are proud to be part of it.  If the right opportunities came along, particularly in producing or near-producing assets, that could add value to our portfolio then we would examine them carefully, but I don’t have anything to concrete to tell you at the moment.

UD:  Thank you.  To finish would you like to add any further comments which you believe might be of interest to investors?

MI:  This is a very exciting time for Rose Petroleum.  A lot of intense work has gone into getting us this far, including the seismic shoots, assembling a strong team and going through the regulatory processes.  We expect to drill our first well later in 2018 and I look forward to telling shareholders that we have made the transition from explorer to producer.

PVR Interview – Providence Resources CEO Tony O’Reilly talks to Upcoming Drills

UD  To start, can you tell us anything further about the status of the Barryroe farm out, where drilling is targeted for 2019?  Is it still on track to close in Q3 this year?

TOR  Due to confidentiality provisions, we are limited by what we have publicly stated already on the Farm-Out – but the stated objective is to close the transaction in Q3 2018 and commence drilling in 2019, subject to receipt of all permits etc. There has been no change to the indicated timeline.

UD  APEC will be granted warrants to subscribe for 59.2 million shares at 12p per share, exercisable only after completion of the Barryroe drilling programme.  Is it a performance incentive, or is the idea perhaps to give them a platform to mount a bid?

TOR  APEC wanted an equity interest in PVR from the outset – but we were obviously reticent about dilution for existing shareholders whilst Barryroe still had to undergo further impactful drilling, which in itself would be a significant value driver.  So through negotiation, we arrived at a position whereby APEC can only subscribe for the warrants after the drilling programme is completed in full.  So yes, in one sense, one could call it an incentive because it represents a good value opportunity to buy PVR shares at a fixed price and for PVR, if the warrants are exercised, it also delivers a deferred cash payment of c.$10 million. The key aspect of the Farm-out is that it is a multi-well drilling programme where Providence takes no upfront capital risk.

UD  A further prospect you’re hoping to drill in 2019 is Newgrange, which is another relatively low cost drilling opportunity.  How confident are you of a farm out on this one?

TOR  No deal is done until it is done – but the combination of the new technical data, the low drilling costs and good industry interest is encouraging – and PVR has a track record of getting farm-outs done; in the past 18 months PVR has announced 4 farm-outs.

UD  Dunquin South is then slated for drilling in 2020.  By how much have the results of the 3D seismic acquisition upgraded the prospect?

TOR  Obviously, the precise date for drilling has yet to be formally confirmed by the JV, but the new 3D has significantly upgraded Dunquin South.

UD  Next up is Avalon with potential drilling in 2021.  The licence already is farmed out to Total.  What progress is there so far in the evaluation of this prospect?

TOR  Again, we are restricted by what we can say here but obviously, we are delighted to have brought TOTAL in as a 50% equity holder and now Operator of this licence as they bring a wealth of technical and operating experience.

UD  Diablo already has farm outs to Cairn and Total in place.  What is a possible drilling date for this one and what are the potential resources?

TOR  No date has been set by the JV for the drilling of Diablo – but interestingly, industry speculation is ripe that Nexen CNOOC will be drilling their “Iolar” prospect next spring.  Why this is of interest is that the “Iolar” well will test the same geological play structure as Diablo and the “Iolar” licence is immediately adjacent to our Diablo licence – so obviously, the Diablo partners will be watching this well with real interest and any hint of success could certainly influence timing on Diablo.

UD  The prospective resource numbers are huge: Barryroe with 346 MMBOE recoverable, Newgrange with 13.6 TCF or 9.2 BBO, Dunequin South with 1.389 BBOE recoverable and Avalon with 12 BBOE, plus of course Diablo.  Barryroe is appraisal, but what sort of chance of success do you believe the others may have?

TOR  They all have differing levels of chance of success (CoS) – but due to partner confidentiality provisions, we can’t specifically disclose at this time…but certainly, with the work being done on Newgrange and Dunquin this past year, there is a great deal of new information which would help to increase the CoS levels of these assets.

UD  There’s also Hook Head, Kish Bank, Spanish Point, Dragon, Helvick and Dunmore.  How much additional potential do you believe they represent?

TOR  It is a mixed portfolio with some assets advancing, whilst others are subject to discussions with the Irish regulator as to future status due to consenting issues and/or revised resource estimates/economics. 

UD  If it all comes off, or even just part of it, what sort of value do you believe PVR might have?

TOR  The analysts all have substantial “risked” valuations for PVR well in excess of the current share price – and the “unrisked” valuations are many multiples of PVR’s current share price.

UD  Thank you.  To finish, would you like to add any further comments which you believe might be of interest to investors?

TOR  The key points about Providence that investors should note are: we had the first mover advantage in what is now being recognised as an exploration “hot spot” area; we have a portfolio of large and material exploration and development projects, where we retain material equity positions (even post farm-out deals); we have successfully agreed farm out deals/worked with some of the leading E&P companies including ENI, Total, ExxonMobil, Repsol, Petronas and Cairn; our focus is on “turning the drill bit” and through various commercial deals, there is now a schedule of planned drilling; our shareholder base represents some of the leading UK Tier 1 investors in the oil and gas space; and we have no current capital requirements and are debt free.

Interview – Baron Oil CEO Malcolm Butler (MB) talks to Upcoming Drills (UD)

UD  At the start of the year, having secured the release of the $3.6 million guarantee in respect of Block Z-34, you were undecided about remaining in the oil and gas exploration business.  By the end of February, you had decided that near-term drilling activities in areas where discoveries can easily and profitably be developed represent the best way forward.  What made you reach that decision?  

MB  The Board took note of the fact that Baron had been set up as an oil and gas exploration company but it had really bitten off more than a small company could chew in Z-34 and had failed to get it drilled. We felt we owed it to long-term shareholders to give them exposure to near-term drilling activity in environments that would allow for easier drilling and monetisation if successful, rather than spending our funds on entering a totally new business.

UD  You now have three upcoming drills: one offshore England, one offshore Scotland and one onshore Peru.  In which order do you expect them to spud?  

MB  If all goes well, it is quite possible they will all be drilling at the same time (Q3 or 4 2018).  However, El Barco is more likely to be delayed.

UD  Regarding the proposed El Barco well in Peru, with prospective recoverable resources of 25 BCF, will you consider drilling this regardless of whether a new partner will farm in? 

MB  El Barco has the potential for 6+ BCF in a low-risk shallow objective and some 18 BCF of higher-risk potential in fractured basement.  That combination is really too small to interest new entrants to Peru, so we have been concentrating on potential local partners, both oil companies and local industries that need gas. We have consistently indicated that we don’t want to drill it without financial support from a partner – and that hasn’t changed.

UD  At Wick, you will be drilling close to the boundary of the licence into a structure which appears to extend outside the licence area.  In the event of a commercial discovery, how do you secure the estimated 250 MMBO prospective resources of the Wick prospect? 

MB  Only a small proportion of the prospective resources lies outside the current licence area, so this does not concern us.

UD  Colter, with prospective recoverable resources of 23 MMBO (based on your latest RNS), is a prospect in which you have a previous involvement.  Would it be correct to say you have a high level of confidence in this drill? 

MB  I have a high level of confidence that we will find oil, well 98/11-3 encountered a 10.5 metre oil column in the Sherwood Sandstone reservoir on the flank of a structure and the reprocessed 3D seismic volumes indicate we can get significantly higher than this.  However, the area is structurally complex and this creates risk on the potential size of the structure and the volumes it could contain.

UD  There also is a licence application pending in SE Asia.  Can you tell us anything more about this? 

MB  The host government continues to delay consideration of this application, which is very disappointing. It now seems unlikely that an award, if any, will be made before the fourth quarter of 2018.

UD  You are a virtual company, with no fixed office costs and no staff, other than the directors and a consultant in Peru, which must be the right approach for small oil and gas companies participating in drills with third party operators.  How much a year do you believe you save with this approach? 

MB  It’s difficult to be precise about this, but office rent, utilities, secretarial staff, etc. in the UK and Peru could easily add up to more than £300,000 per year.

UD  You have previously stated that the company has sufficient funds for all drills and resources available for further ventures.  Is that still correct as of today?  

MB  We stated in the recent results announcement that the Company remains debt-free and is fully-funded for its currently planned activities in 2018. We project a reasonable surplus at year-end but we do believe in holding funds in reserve in case of unexpected cost overruns.

UD  The largest shareholder in the company is Mrs. J Parvisi.  Who is she? 

MB  Mrs Parvisi is the former wife of Mr I Parvisi, who invested heavily in the Company in its earlier years on AIM.

UD  Thank you.  To finish, would you like to add any further comments which you believe might be of interest to investors? 

MB  We look forward to an exciting drilling campaign later this year.  Success, particularly in the UK wells, is capable of adding significant value to shareholders.

Published 7 June, 2018

Interview – Tower Resources CEO Jeremy Asher (JA) talks to Upcoming Drills (UD)

UD  To start, can we confirm the project status of the Thali Block in Camaroon.  Is it accurate to say that reprocessing of the 3D seismic is completed, preparation of the ESIA has been initiated and a reserves report is awaited from OIL?

 JA  Yes, that is correct.

UD  The main focus is on the Njonji discovery with 39 million barrels gross contingent oil in place, of which 7 – 15 million barrels of oil are estimated to be recoverable.  Do you envisage a possible increase of those numbers in the CPR?

 JA  We are working on the reprocessed 3D data right now and are preparing our interpretation. That will be reviewed by the OIL team who will draw their own conclusions for the CPR. Naturally, we hope that the better picture provided by the reprocessing will allow us to see more potential resources, but whether the total amount goes up or not, the important thing is that we will have much more confidence in what we see, and the volumes in place are already meaningful and attractive.

UD  There are undeveloped discoveries on Thali, including Njonji, with summed Pmean gross prospective potential of over 315 million barrels of oil in place.  Will these also be covered in the new reserves report?

 JA  Our main focus is on the fault blocks around Njonji, but we are also intending to look at the prospective resources in the North of the block near Dissoni. However, there are a number of other opportunities, including the Rumpi gas discovery, which we will leave for later.

UD  The Thali Block also has significant exploration potential.  Could you describe the plays, the possible resources and your future plans here?

 JA  We believe there is substantial potential in the deeper turbidites, especially for gas. This has been the source for projects like Alba and Etinde. We have also already talked about the possibility of a Zafira-type oil analogue in the deeper areas on the block. Exploring these deeper zones is something we look forward to doing, but we must get the shallow reservoirs that have already been identified into production first.

UD  Drilling on the Thali Block is targeted for Q4 2018.  Do you believe you will be able to finance this and, if so, how?

 JA  Yes, we have a range of financing options available, including vendor financing, bank financing, farm-in and our own equity. We will choose the best combination we can assemble, and we will also seek to minimise cost by taking advantage of the rigs we already know will be available in Cameroon in the coming months, whether in Q4 or later.

UD  Tower further has a 50% interest in the Algoe-Gamtoos Block, South Africa and the acquisition of additional geophysical data is planned in 2019.  Your neighbours are Total, Exxon, Shell, Anadarko and Statoil.  Presumably you see some major potential here?

 JA  Yes. Our partner NewAge is the operator of Algoa-Gamtoos, and they have been doing quite a lot of work on the block, some of which we hope to be able to share with the market soon. We do believe the block contains some good prospects, and there has been a growing interest in the area recently. We understand that Total will be drilling a deepwater well close by to our block later this year, which is something that both we and other companies will be following closely.

UD  You additionally have a 6,526 km2 (1.6 million acres) land position in Zambia with reported oil and gas seeps and where source rock, reservoir and seal appear to be present.  The next major step here is likely to be an aero gravity survey.  When is that planned and what are the possible resources here?

 JA  We are waiting for the conclusion of Zambia’s new petroleum law, before finalising the next phase of work with the government. The scale of resources is impossible to know at this early stage, but we do believe that either gas or oil could be commercially developed in this location. In particular, apart from local electricity demand, our location along Zambia’s Southern border places us close to the South African power grid.

 UD  There also are royalty agreements in SADR and an application for licence PEC 0010 in Namibia.  Is there anything more you can tell us about these?

 JA  We cannot talk about applications in process. With regard to the SADR, we can say that the process for a new nation such as the SADR to emerge and to be able to assert its soveriegnty is likely to be slow; nevertheless, there does seem to be progress and the international backing for the UN resolution supporting the SADR does not seem to have flagged.

UD  Directors, staff and consultants own 15.4% of the company.  In addition, the directors hold warrants exercising into 8.9% of the company’s issued share capital.  This is significantly more than is the norm at most oil exploration companies.  What makes you all so confident?

 JA  I am happy that the directors own a large amount of stock relative to many other oil and gas companies. The directors have supported most of the company’s share placings, and have also accepted warrants in lieu of cash fees whenever we have been asked to do so. This is because we believe in the value of the licenses we have acquired, and the quality of our assets, and we are deeply committed to building a cash-flow generative oil production business, in which we want to participate.

UD  Thank you.  To finish, would you like to add any further comments which you believe might be of interest to investors?

 JA  After several difficult years for our industry and our company, we have reached a very exciting point where prices have recovered, but the costs of drilling and production are still far below the peak levels they hit in 2014. So this is an excellent time to be working on bringing new fields into production, and that is why we are very excited about our company’s future.

Published 23 May, 2018