Search Results for "Chad"

Chad to Double Oil Production by End of 2015

Reuters reported that Chad sees itself doubling its oil production by the end of 2015. The country is also looking to inventory potential mineral deposits.

As quoted in the market news:

Speaking to Reuters, Kordje Bedoumra, said the country expected a rebound in the growth rate this year to 11-13% and double digits again in 2015 as oil production ramps up.

‘We are more or less at around 100 000 barrels per day (bpd),’ he said in an interview at an OECD forum on Africa.

‘Our expectation is that by the end of this year we can move to 130 000 bpd and by the end of next year probably double that production because we will have new fields.’

Bedoumra said output would increase from the Mangara and Badila fields, which are operated by mining company Glencore Xstrata, and a new field managed by a China National Petroleum Corporation (CNPC) subsidiary.

Click here to read the full Reuters report.

Simba Acquires Three Oil and Gas Concessions in Chad

Simba Energy Inc. (TSXV:SMB,OTCQX:SMBZF) announced that it signed a Protocole d’Accord with the Republic of Chad and as a result now holds 100 percent interests in the production sharing contracts of three oil and gas concessions.

Hassan Hassan, Simba’s managing director of operations, commented:

Simba is very enthusiastic about the potential of having secured 100% interests in these three concessions.  Each block is potentially a company maker in its own right and nicely complements our existing asset portfolio in terms of long-term growth potential.  We consider this a unique and significant early-in opportunity for the Company and its shareholders.

Click here to read the full Simba Energy Inc. (TSXV:SMB,OTCQX:SMBZF) press release.

ERHC Energy Inc. Announces Initial Plans for Chadian Exploration

ERHC Energy Inc. (OTC:ERHE) updates on its Chadian exploration program.

The press release is quoted as saying:

ERHC Energy Inc. is a Houston-based independent oil and gas company focused on growth through high impact exploration in Africa and the development of undeveloped and marginal oil and gas fields.

Click here to access the entire press release

Glencore Reports Lower Copper, Nickel and Coal Output for 2015

Glencore plc (LSE:GLEN) released its production report for 2015, commenting on its output of copper, zinc and nickel, among other metals.

Highlights are as follows:

  • Own sourced copper production was down 3% to 1,502,200 tonnes in 2015, reflecting the suspension of processing operations at Katanga and a significant curtailment at Mopani. These volume reductions were partly offset by increases at Antapaccay (restart of the Tintaya mill in May 2015) and Antamina (strong milling performance).
  • Own sourced zinc production was 1,444,800 tonnes, up 4%. The increase reflects, that prior to our October announcement regarding a number of measures to preserve the value of resources in the ground, the Australian assets, in particular, had ramped up significantly compared to 2014 levels. The announced production changes reduced full year mined zinc production by some 100,000 tonnes compared to pre-announcement guidance. Q4 2015 zinc production was 20% below Q3 2015.
  • Own sourced nickel production was 96,200 tonnes, down 5%, due to the planned six-week shutdown of the Sudbury smelter and the impact of the metal leak at Koniambo in December 2014. Refinery production including third party was in line with 2014.
  • Attributable ferrochrome production was 1,462,000 tonnes, 13% up on 2014, due to a full year’s contribution from the Lion 2 smelter.
  • Coal production was down 10% to 131.5 million tonnes primarily due to curtailed production in response to market conditions and deconsolidation of Optimum Coal since its August 2015 placement into business rescue proceedings.
  • Oil entitlement production increased by 44% to 10.6 million barrels, reflecting increased attributable production from the Badila and Mangara fields in Chad.

Click here to read the full Glencore plc (LSE:GLEN) press release.

IEA: Oil Prices Expected to Stay Below $80 Until 2020

After a particularly volatile year, many experts believe oil prices will remain lower for the remainder of 2015 and into 2016. However, in a report released Tuesday, the International Energy Agency (IEA) states that it sees low prices sticking around much longer.

According to the IEA, while the plunge in oil prices will eventually force the market to rebalance through lower supply growth and higher demand, the adjustment is unlikely to be smooth. Indeed, in the central scenario it lays out, the IEA describes the tightening balance leading to prices around $80 per barrel only by 2020.

What’s more, there is a possibility that low prices could last much longer. That’s because today’s price levels are pushing higher-cost producers out of the market, forcing a heavy reliance on the world’s low-cost producers and creating a supply concentration that’s likely to elevate global energy security concerns.

“We estimate this year investments in oil will decline more than 20 percent. But, perhaps even more importantly, this decline will continue next year as well,” Fatih Birol, executive director of the IEA, told Reuters. “In the last 25 years, we have never seen two consecutive years where the investments are declining and this may well have implications for the oil market in the years to come.”

Higher-cost producers in Canada, the US and Brazil are likely to fold under low oil prices faster than other exporters, with Iraq and Iran expected to pick up the slack. At present, the Middle East provides about one-third of the world’s oil, but Birol told The Globe and Mail that a sustained $50 price environment would see exports equate to more than two-thirds of total supply.

“We have to think carefully about the oil security implications of a very few number of countries exporting a big chunk to the global markets alone,” he said.

Company news: Q3 results

Penn West Petroleum (TSX:PWT,NYSE:PWE) released its Q3 financial and operating results late last week, highlighting the recent sale of its Mitsue properties for about $193 million. During the quarter, the company produced 82,198 barrels of oil equivalent per day (boed), slightly below estimates from Dundee Capital Markets. The company’s cash flow per share of $0.03 also missed the mark.

Raging River Exploration (TSX:RRX) also put out its Q3 results, reporting average production of 13,418 boed, a 26-percent increase from Q3 2014 and a new record. The company also reduced its operating and transportation costs for a ninth consecutive quarter, to $10.51 per boe. Dundee Capital sees the results as promising because they surpassed its expectations.

“RRX has repeatedly been able to chip away at competitors, increasing its position in the Viking, and that has continued with a letter of intent signed to acquire 13 (10 net) sections of undeveloped land in the core of Dodsland,” the firm states in a report.

NuVista Energy (TSX:NVA) also reduced its costs in the third quarter, achieving funds from operations of $31.8 million, or $0.21 per share, and production of 21,622 boed.

Surge Energy’s (TSX:SGY) put out its first quarterly operational and financial results since the $430-million sale of its Saskatchewan and Manitoba assets. Surge sold 5,300 boed in two transactions for combined gross proceeds of $465 million, completely repositioning its balance sheet. The company also announced a 50-percent reduction in its dividend, from $0.30 to $0.15.

“In one move, the company goes from being on the bubble to now having amongst the lowest payout ratios, cleanest balance sheets and torque to recovery,” Dundee analyst Chad Ellison said. “We believe that as oil prices recover, this sets the company up for dividend increases and share buybacks in the future, while protecting one of the cleanest balance sheets in the space.”

Chinook Energy (TSX:CKE), TORC Oil & Gas Ltd (TSX:TOG) and Granite Oil (TSX:GXO) also recently released Q3 financial and operating results.


Securities Disclosure: I, Kristen Moran, hold no direct investment interest in any company mentioned in this article.

Related reading:

Oil and Gas Price Outlook for Q4 2015

Simba Energy Signs Agreement with Essel Group to Invest in its African Oil and Gas Projects

Simba Energy Inc. (TSXV:SMB) announced that it has entered an agreement with Essel Group Middle East, a subsidiary of Essel Group India that will see Essel Group earn 60 percent participating interest in Simba’s production share contracts in Kenya, Chad and Guinea. As part of the agreement Simba will be carried on all future exploration costs.

As quoted in the press release:

Essel Group Middle East is a wholly owned subsidiary of Essel Group India, a prominent business conglomerate located in Mumbai India that has been operating for over three decades and has a diverse business presence across media, entertainment, packaging, infrastructure, precious metals and technology sectors. The current market capitalization of Essel Group India is US$12 Billion. The Essel Group is diversifying further by their entry into the hydrocarbon sector and their investment into Simba’s existing Production Sharing Contracts (PSC’s) in Kenya, Chad and Guinea with farm in agreements to earn a 60% participating interest.

Robert Dinning, president and CEO of Simba Energy, commented:

Simba has successfully obtained Production Sharing Contracts in three countries in Africa and is now ready to proceed to the next level in the development of its portfolio of exploration assets. This includes completion of a seismic program in Kenya leading up to the drilling of our first exploration well on Block 2A, and advancing our exploration programs in Chad and Guinea. We are delighted to enter into this Agreement with the Essel Group which will provide Simba with strong financial, technical, and marketing support to advance development of our properties.

Click here to read the full Simba Energy Inc. (TSXV:SMB) press release.

Glencore Xstrata buys Caracal for $1.35 billion

Bloomberg reported that Glencore Xstrata (LSE:GLEN) has purchased Caracal Energy Inc. (LSE:CRCL) for roughly $1.35 billion. Glencore hopes to gain oil and gas assets in central Africa, as Caracal is focused in Chad.

As quoted in the publication:

The offer of 550 pence ($9.20) a share is a 61 percent premium to the closing price of Caracal shares on April 11, Baar, Switzerland-based Glencore said today in a statement. Caracal sharessurged as much as 60 percent in London trading to 547 pence, the highest on record.

Click here to read the full Bloomberg article.

Which Oil Companies Could Benefit from Price Differentials?

Source: Tom Armistead of The Energy Report (5/28/13)

Price differentials emerged last year as a major hurdle in oil and gas markets, but not every company is equally vulnerable to the swings and dips of different crude grades. In this interview with The Energy Report, Chad Ellison, oil and gas analyst at Dundee Capital Markets, explains how producers are protecting themselves against price downside—or increasing upside exposure. Find out which names are dancing with differentials.

The Energy Report: Chad, your Q1/13 Earnings Preview forecasts higher natural gas prices, but says that the AECO Hub/NYMEX gas price differential, which is about $0.50 through all fluctuations, will remain unchanged for both the short and long terms. Why do you expect so?

Chad Ellison: The U.S. remains the key export market for Canadian natural gas, and the U.S. has seen tremendous growth in its own domestic production; to keep imports from Canada competitive, we expect to see AECO continue to trade at a discount that is in line with historical norms. Longer term, once Canada is able to export its liquefied natural gas, that potential diversification of customer base could increase demand for Canadian natural gas. But there’s still a lot of work to be done on that front. For now, we expect to see some seasonal volatility within the differentials between the $0.25–0.75 range, hence our ~$0.50 estimate.

TER: You’re also forecasting a reduction for West Texas Intermediate (WTI) and improvement in light and heavy Canadian oil differentials. What is behind these forecast revisions?

CE: When we put out our revised commodity deck in the middle of April, WTI had come under pressure. There was disappointing economic news from China, uncertainty on economic recoveries in both the U.S. and Europe and growing domestic crude oil inventories, specifically at Cushing, where WTI is priced. As a result, we trimmed our WTI forecast, but we still remain constructive on the longer-term WTI price recovery due to a number of proposed pipeline projects that will help alleviate that storage glut. The WTI recovery has come much quicker than we anticipated, and it’s currently trading about $7.50 higher per barrel (bbl) than our Q2/13 forecast.

As far as Canadian differentials go, we expect them to narrow in the longer term back to the historical norm due to the vast number of proposed pipeline projects and expansions that I mentioned. But in the interim, the expanded use of rail to transport crude has allowed producers to bypass Cushing, go directly to refiners on the coast and get better realized prices, thus mitigating the effects of pipeline bottlenecks.

TER: What will differentials changes mean for the companies you cover?

CE: My coverage universe is largely light oil based. Although tightening differentials have been more noticeable on the heavy side, we did see a benefit across the board. I would say the biggest beneficiary would be Long Run Exploration Ltd. (LRE:TSX, BUY rated, $6.75 target price). It does have a small amount of heavy oil production, but is also a fairly balanced producer, which benefits from our increased natural-gas price forecast as well.

TER: According to your analysis, the cash flow for some companies in your coverage universe could suffer badly from a $10 drawback in WTI. On the other hand, it would not benefit equally from a $10 increase, while others would benefit greatly from an increase but would remain stable in a drop. [See chart below.] Why is that?

CE: Largely it has to do with hedging. Different producers who enter into hedges will use a combination of swaps, collars and put options to help insulate them from shifts in commodity prices. Companies that only locked in a floor price will have more to gain on the upside, but be protected on the downside. On the other hand, companies that lock in a fixed price will see a relatively balanced impact on cash flow either way when we stress test our commodity assumptions.

Cash flow per share sensitivities for Dundee 2013 estimates based on a +/- $10/bbl change in WTI prices. Source: Dundee Capital Markets

TER: You commented that in the absence of strong capital markets, companies you cover are increasingly dependent on their own cash-generating capabilities. What are their basic options for generating cash?

CE: The typical means include reinvested cash flow from a revenue-generating project, such as a producing well. Other options on the debt side include traditional reserve-based lending, and larger companies can layer in structured term debt or issue senior notes. Selling non-core assets has been another way to generate cash, but with so many companies pursuing asset sales on the market, we’ve seen the prices that these companies have been able to get come down. There is a short list of companies that have a market premium to exercise on these asset packages, and we are seeing them being selective in their acquisitions.

Establishing joint ventures or having private equity backing are additional innovative ways companies are exploring to increase access to capital. We haven’t seen much of that to date, but given the lack of availability of traditional equity funding, it is something a number of companies are looking into at this time.

TER: DeeThree Exploration Ltd. (DTX:TSX; DTHRF:OTCQX, BUY rated, $11.75 target price) has trended mostly up since June 2012. What’s behind that growth?

CE: DeeThree was one of the best-performing stocks in the sector in 2012. That was largely based on the success of its Alberta Bakken play. The company has now drilled 20 consecutive successful wells since its initial discovery well. The Alberta Bakken where DeeThree operates is a much shallower area than where some of its competitors have been drilling up to the northwest, and the company can drill two-mile horizontal wells for a total cost of $4 million ($4M). That’s less than half of what companies are paying to drill wells in other areas. These wells have also exhibited a very shallow decline profile with excellent economics. Type curve well analysis shows net present value over $7M and rates of returns in excess of 150%. That was what was responsible for the growth last year.

This year, the company’s Belly River play has taken the stock to the next level. A change in completion techniques has opened up a lot more potential. The Belly River play is very thick, between 250–500 meters, with at least six potential productive intervals within the play. DeeThree is only beginning to scratch the surface of the Belly River and has engaged a reserve evaluator to conduct a resource study to help evaluate the play’s full potential. I believe the study will show much larger resource upside than is currently being priced in. My $11.75 target price assumes only about 100 locations. The company has identified over 330 and believes it could ultimately have over 500, which could add another potential unrisked $4–5 per share.

TER: DeeThree’s price currently is around $8/share and you bumped its target up from $9.75 to $11.75 even though it’s never reached $9.75. Was this change prompted by something in the operations or in its prospects?

CE: I would say both. Our target price is based on a 12-month expectation. When I initiated coverage on the company, I was cautious on the Belly River play given the relative lack of drilling history, but during the company’s first quarter drilling program it drilled five successful wells, including two of the best to date. Given the success, I was comfortable giving the play some credit. I’m still only assuming 100 unbooked locations in my valuation and a type curve that at least these latest results seem poised to beat.

TER: In the wake of the management shakeup and noncore asset sale, your latest report on Surge Energy Inc. (SGY:TSX, BUY rated, $6.75 target price) notes its transition to a lower-growth company as it reaches a certain level of corporate maturity. How will these changes affect the company’s operating strategy and its stock?

CE: Paul Colborne, who is coming in as President/CEO, has an excellent track record of running successful companies: He is the former President/CEO of Starpoint Energy Trust (private), Crescent Point Energy Corp. (CPG:TSX, BUY rated, $49.25 target price) and StarTech Energy Inc. (private). The management team is out on the road now marketing to over 100 investors over the next two weeks to lay out the plan and the shift in strategy. The new plan will likely involve a slowdown in capex to ensure the company has a more stable, low-decline production base. Once management and the board have confidence in the low-risk, low-decline production base, we would expect to see a dividend put on with a strong emphasis on sustainability. This should open up the stock to a new yield-focused investor base.

TER: A stumble by Surge in H2/12 undermined its credibility and share value, but the stock began what looks like an upward trend in early May even before the shakeup. What’s driving that?

CE: The stock began trading at a steep discount to any valuation metric after its H2/12 miss, and was oversold, in my opinion. The company had an excellent Q1/13 drilling program, hitting or beating its type curve estimates and expanding its inventory in its three key oil plays at Valhalla, Nipisi and in southeast Alberta. It was in need of a catalyst and it managed to get three with the management shakeup, the sale of its North Dakota assets to clean up the balance sheet and a successful Q1/13. I think this was just investors looking to get ahead of the potential catalyst and it ended up being better than anyone had anticipated.

TER: Manitok Energy Inc.’s (MEI:TSX.V, BUY rated $5.25 target price) marketing boasts that it is a “once-in-a-generation,” “contrarian” opportunity. Does the performance justify the language?

CE: I believe it does. The operations team is composed of former Talisman Energy Inc. (TLM:TSX, not rated) technical players that have firsthand knowledge of the complex drilling involved in the foothills area, in the disturbed belt of Western Alberta. Manitok has been able to use this technical expertise to assemble a land base of over 280 thousand (280K) acres relatively cheaply, as few others have the knowledge or capability to drill in the area. Results to date at Stolberg in the foothills have been some of the best drilled in the basin in decades, coming on at over 800 barrels per day (800 bbl/d) and exhibiting a shallow decline profile as the wells are not fracked. The shallow decline allows the company to generate free cash flow, which it can reinvest into drilling and exploration.

TER: Manitok’s target price is at $5.25, but it’s only $2.60 now and it’s never broken $3.50. What will it take to bring it up to $5.25?

CE: I think the stock has stalled at this level due to market perception of a lack of inventory, but the company has a large land base that spans the foothills. Although it’s had tremendous success at Stolberg to date, there hasn’t been a lot of activity outside of that. However, there is an upcoming catalyst—Manitok has recently commenced drilling a new area at Cabin Creek. It’s an area that the technical team has worked on in prior careers. They like what they saw there and managed to farm in and increase the land base. Success at this well should get some of those skeptics back into the stock, in my opinion, once they’re able to evidence repeatability.

We fully expect to see exploration results that vary. Given the nature of the drilling, I don’t expect the company to drill at a 100% success rate, but if the company can find another Stolberg-type oil pool every one to two years, it will build the inventory enough to keep this thing as one of the fastest-growing stocks in our coverage universe.

TER: What prompted you to bring Long Run Exploration’s target from $6.50 to $6.75? Did its Q1/13 production meet your forecast of 23,800 bbl?

CE: Production was pretty much in line with our estimates, as was cash flow. The quarter was exactly in line with oil and liquids production, and that’s what generates most of the economics. This is the first full quarter the company had since its merger and disposition. I think hitting its guidance will help build credibility. The target bump had more to do with the revised commodity price deck, which I discussed earlier.

TER: Any closing thoughts that you’d like to share?

CE: There’s a deep discount in the Canadian junior oil and gas space right now. The crude oil differential problem that we saw last year hit stocks hard, and a lot of U.S. investors exited the space. Through rail, producers have managed to mitigate the differential financial impact and there is a plethora of planned pipeline projects, but we haven’t seen a big return in equity prices, so there’s still deep value in a lot of the Canadian E&Ps. Now is a good time to consider getting back into some of these names.

TER: I appreciate your time this morning. Thank you for your thoughts.

CE: Thank you, Tom.

Chad Ellison joined Dundee as an energy analyst in November 2012. Prior to Dundee, he was with Canaccord Genuity’s research team with a focus on Canadian domestic junior and intermediate companies. Ellison gained experience providing financing for E&P and oilfield service companies from 2005 to 2010 with GE’s financial services arm. He holds a Bachelor of Commerce degree in finance from the Haskayne School of Business at the University of Calgary.



1) Tom Armistead conducted this interview for The Energy Report and provides services to The Energy Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of The Energy Report: None. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.

3) Chad Ellison: I or my family own shares of the following companies mentioned in this interview: Surge Energy and Manitok Energy. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: DeeThree Exploration, Surge Energy, Manitok Energy, Long Run Exploration. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

Chad Ellison beneficially owns, has a financial interest in, or exercises investment discretion or control over, companies under his coverage: Surge Energy Inc., Manitok Energy Inc.

Dundee Capital Markets and its affiliates, in the aggregate, beneficially own 1% or more of a class of equity securities issued by, companies under coverage: Renegade Petroleum Ltd.

Dundee Capital Markets and/or its affiliates, in the aggregate, own and/or exercise control and direction over greater than 10% of a class of equity securities issued by, companies under coverage: Marquee Energy Ltd. and Tamarack Valley Energy Ltd.

Dundee Capital Markets has provided investment banking services to the following companies under coverage in the past 12 months: DeeThree Exploration Ltd., Kelt Exploration Ltd., Manitok Energy Inc., Pinecrest Energy Inc., Raging River Exploration Inc., Renegade Petroleum Ltd., Tamarack Valley Energy Ltd., TORC Oil & Gas Ltd., TriOil Resources Ltd. and Whitecap Resources Inc.

All disclosures and disclaimers are available on the Internet at Please refer to formal published research reports for all disclosures and disclaimers pertaining to companies under coverage and Dundee Capital Markets. The policy of Dundee Capital Markets with respect to Research reports is available on the Internet at

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Key Oil Projects and Players in West Africa

Key Oil Projects and Players in West Africa

The first commercial quantities of oil in West Africa were discovered in 1956 in Nigeria’s Niger Delta Basin, and it was not long before the region became well known for holding some of the world’s largest reserves of oil and gas.

Most major international energy firms are already heavily invested in West Africa, with several factors influencing production, namely: strong global demand, high pricing levels and newer and more efficient technologies. The region has also fast become a prime hunting ground for deepwater oil exploration and production. Since the first exploration in the Congo Basin in 1994, deepwater oil exploration offshore West Africa has boomed, and the region is now recognized as one of the most high-potential areas in the world for both oil and natural gas.

Nigeria and Angola are the largest producers of oil and gas in West Africa, accounting for approximately 77.7 percent of the region’s total offshore production from 2001 to 2011, according to a report by resource intelligence provider GlobalData. Offshore production in the West African region increased from 843.7 million barrels of oil equivalent (MMboe) in 2001 to 1,564.2 MMboe in 2011 at an annual average growth rate (AAGR) of 6.2 percent, an Atlas on Regional Integration report notes. That amount is expected to increase further, to 2,201.6 MMboe in 2020 at an AAGR of 3.8 percent, as a result of anticipated projects.

Major players and projects in the region

Chevron (NYSE:CVX), the third-largest oil producer by market value, has long stated that West Africa is a key strategic area. Chevron’s activities in West Africa include exploration for oil in Liberia and producing and exploring for oil in Angola, Chad, the Democratic Republic of the Congo, Nigeria and the Republic of the Congo. It is involved in several projects at different stages of development, including a major development program aimed at increasing Angolan production from the Block 0 concession, which is located offshore Cabinda, and a 10-well, second-phase development program for the Agbami field, located offshore Nigeria. It recently approved plans to develop the Mafumeira Sul project off the Angolan coast for $5.6 billion and also announced that it will be moving ahead with a $10-billion project aimed at producing oil in the waters west of the Republic of the Congo.

ExxonMobil’s (NYSE:XOM) West African upstream operations include both onshore and offshore exploration, development and production, according to The Lamp, the company’s shareholder publication. In the shallow waters of Nigeria, Mobil Producing Nigeria operates a joint venture covering more than 800,000 acres in four leases off the southeastern coast of the country. It was also responsible for restarting the Erha and Erha North deepwater developments, located 60 miles offshore Nigeria. Affiliates in Angola own interests in four deepwater blocks that cover more than 3 million gross acres, and the company has announced over 60 discoveries totaling 14 billion gross oil-equivalent barrels to date. Another affiliate, Mobil Equatorial Guinea, is the largest oil producer in Equatorial Guinea and operates the offshore Zafiro producing field. In Angola, the company has interests in five deepwater blocks that cover 4.5 million gross acres and, together with partners, it has announced 38 discoveries with recoverable resource potential of almost 12 billion oil-equivalent barrels, as per a company brochure. Earlier this month, the energy giant signed off on a deal with Liberia that will see it, along with its junior partner, Canadian Overseas Petroleum (TSXV:XOP), develop an offshore oil block.

West Africa also remains a key focus point for French energy giant Total (NYSE:TOT). Total has been present in Nigeria since 1962 and operates seven production licenses out of the 44 in which it has a stake, and two exploration licenses out of the eight in which it has a stake, according to its website. The group is also highly active in natural gas through Nigeria LNG and the Brass LNG project. Over the years, the firm has built up its acreage considerably, including increasing its stake in Block 1 of the Joint Development Zone, which is administered jointly by Nigeria, São Tomé and Principe, as well as strengthening its deep offshore position with the ongoing development of the Bonga Northwest project. In Côte d’Ivoire, Total is the operator of the Cl-100 exploration license; last year, it acquired interests in three ultra-deepwater exploration licenses: CI-514, CI-515 and CI-516.

Juniors active in the region

Mira Resources (TSXV:MRP) is an independent oil and gas company focused on West African proven energy plays in countries ranging from Ghana to Angola. The company’s main focus is the OML 14-Tom Shot Bank (TSB) field in Nigeria — a well originally held by Royal Dutch Shell (NYSE:RDS.A,LSE:RDSA). Past work undertaken on the field has proven promising, the company’s website notes. Discovery well TSB #1 reported 425 gross feet of hydrocarbon pay, plus another possible 111 net feet of oil and 29 net feet of gas pay. TSB #2 encountered the upper five gas zones, but crossed a major fault and missed the underlying oil-bearing structure. Gross contingent resources of 8.7 million barrels of oil have been assigned to this discovery, with prospective resources showing potential for more than 110 million barrels.

Canadian Overseas Petroleum (COPL) is an exploration company focused on oil prospects offshore the West African continental margin. In 2013, several transactions closed that allowed COPL to claim a 20-percent equity interest in Block LB-13 offshore Liberia (ExxonMobil has the remaining 80-percent equity interest). Block LB-13 covers an area of approximately 2,500 square kilometers and the drilling targets identified are Cretaceous turbidite sand stratigraphic traps. The company also “has a license for 3D seismic shot on the block in 2010 that appear to have similarities to recent deep water oil discoveries made offshore Ghana and Sierra Leone,” according to its website. A gross prospective petroleum resource report shows that the top 13 prospects on the block derive a statistical aggregate number of 2.6 billion barrels of gross recoverable oil at the P50 (best estimate) probability level.

Simba Energy (TSXV:SMB) is an exploration junior focused on the onshore frontier basins of Africa. It holds a diversified portfolio of six prospective oil and gas exploration concessions in Kenya, Chad, Guinea, Liberia, Ghana and Mali. In addition to its 100-percent interest in Kenya’s Block 2A, it holds a 60-percent interest in Blocks 1 and 2, onshore the Republic of Guinea. After conducting both site investigation and a detailed review of available technical data, the company’s geological staff concluded that Blocks 1 and 2 represent significant potential for oil and gas in a basin that remains relatively underexplored. It has also acquired 90 percent of International Resource Strategies Liberia Energy, a private company domiciled in Liberia that holds the onshore reconnaissance license for the Roberts and Bassa basins. This license covers the 1,366 square kilometers of the onshore coastal strip of Liberia lying within the known extent of the Roberts-Bassa Basin. Although there are no published studies of this basin, existing field and geological outcrop data produced by the US Geological Survey indicate that it is connected laterally and downdip with the West African-Atlantic conjugate continental margin.


Securities Disclosure: I, Adam Currie, hold no direct investment interest in any company mentioned in this article.

Turkey’s Dadas Shale: A World-class Unconventional Oil Play

Turkey's Dadas Shale: A World-class Unconventional Oil Play

Turkey’s importance, both as a regional energy transit hub and energy consumer, is growing.

In line with its economic expansion, Turkey’s crude oil consumption has increased significantly over the last decade. With limited domestic reserves, Turkey imports nearly all of the oil it needs; however, with an increasing number of exploration firms targeting the region, that could very well change.

The latest US Energy Information Administration report on the country estimates Turkey’s proven oil reserves at 270 million barrels, located mostly in the country’s southeast region. Its oil production peaked in 1991 at 85,000 barrels per day (bbl/d), but then declined substantially before bottoming out at 43,000 bbl/d in 2004.

In 2010 and 2011, Turkey had one of the fastest-growing economies in the world — and with this economic expansion, its oil consumption grew. Despite this growth, the country’s domestic production has not yet experienced a meaningful increase. However, that has not hindered analysts’ optimism about the region; in fact, more and more exploration and production companies are being drawn to the country by one of the largest oil play discoveries in recent times.

The Dadas Shale

The Dadas Shale has the size and potential to ignite Turkey’s energy sector, according to analysts. Boasting a similar geological structure to that of the Woodford and Eagle Ford shales in the US, the play has a huge amount of oil and enormous potential. Sizeable oil booms were launched by the discovery of the Dadas Shale’s North American counterparts, and Turkey is looking to replicate that success.

The Dadas Shale is an “exciting shale oil play in Southeast Turkey that covers an area about the size of the Barnett Shale in Texas,” Malone Mitchell of TransAtlantic Petroleum (AMEX:TAT,TSX:TNP) said in an interview with Oil & Gas Financial Journal, adding that it is Silurian in age and sits on top of the Bedinan sandstone. While a press release from Anatolia Energy (TSXV:AEE) notes that Turkey’s national energy company, TPAO, estimates that 110 billion barrels of original oil in place exist in the Diyarbakir Basin, nobody has effectively managed to produce large amounts of oil from the Dadas Shale yet.

The potential of Dadas has already attracted attention from major oil companies, including ExxonMobil (NYSE:XOM) and Royal Dutch Shell (NYSE:RDS.A,LSE:RDSA), but the real story lies in junior firms. It is these juniors that are making serious progress in tapping Turkey’s lucrative shale basins, and many are poised to enter the big league in the event that Turkish shale takes off.

Growing in appeal

From a political perspective, Turkey has recently adopted a more open and transparent stance regarding foreign investment. That was highlighted when TPAO signed an accord that allows Shell to explore for oil and gas in the Mediterranean Sea and onshore in Southeastern Turkey.

Oil & Gas Investments Bulletin (OGIB) notes in an article published earlier this year that the country has made itself appealing from an economical standpoint by implementing both a flat 12.5-percent royalty on oil produced and a 20-percent corporate tax rate, which together make its fiscal terms amongst the best in the world. Turkey also boasts extensive oil and gas transportation infrastructure, as well as seismic, drilling and other oilfield equipment that is available at competitive prices. Investors concerned about the stability of the country will also be pleased to note that it is a democratic, secular, constitutional republic, a G-20 major economy and a long-standing member of NATO.

Adding even more incentive is that Turkey’s oil is better priced than that of North America. Oil from Turkey and the surrounding regions is priced using Brent crude pricing, which for some time now has averaged $20 more per barrel than the West Texas Intermediate benchmark.


Despite these benefits, some factors, including a lack of access to Turkey’s historical geological and production data, are still holding the country’s oil sector back. While the national government has been generous with foreign oil and gas companies, it still maintains a tight lease on data that could potentially unleash its shale bounty.

In comments to OGIB, Anatolia Energy CFO Pat McGrath said that while all the other pieces are in place, the main question for the industry right now is: “how and when we will be able to access the old producing fields, now held by the national oil company. These fields hold great potential for re-activation using unconventional technology. In the meantime, the national oil company just maintains marginal production through conventional wellbores.”

Active junior players in the region

Anatolia Energy is an international company engaged in the exploration and development of oil and gas assets in Turkey. The company is based in the heart of the major oil-producing Anatolia Basin, and according to its website, holds a large land position of well over 700,000 gross acres with its Turkish partner, Calik Enerji.

It is focused on four play types in Turkey, namely the Silurian Dadas shale-oil trend, Paleozoic Bedinan sand trend, Cretaceous Mardin strike-slip trend and Garzan reef trend. The company drilled its first well in the Dadas Shale last year, uncovering results that reveal much about the shale’s potential.

Core analysis shows that porosity is between 2 and 10 percent, which proves the shale reservoir’s capability to store hydrocarbons, according to drill results. Permeability of up to 1 millidarcy at reservoir pressure was also measured, affirming that the shale reservoir has the ability to naturally flow hydrocarbons. The quartz content ranges between 20 and 30 percent in most of the core samples, indicating a fairly brittle reservoir, the type that is preferred for fracture stimulation effectiveness.

Anatolia boasts massive upside in that its Turkish portfolio has 11.6 billion barrels of original oil in place; 47 million barrels of net unrisked prospective resources; a large diversity in acreage — 11 licenses in four play types (both conventional and unconventional); and no debt.

Transatlantic Petroleum is an international energy company engaged in the acquisition, development, exploration and production of oil and gas. It currently holds interests in developed and undeveloped properties in Turkey, Bulgaria and Romania.

The company holds 4.3 million acres in Turkey that include 57 onshore exploration licenses and nine onshore production leases, according to OGIB. It already has four operated rigs running: two in the Thrace Basin and two in Southeastern Turkey.

In its latest update, the company confirmed that it expects production during 2013, excluding any impact from exploration drilling, to total 1.8 to 2.1 million barrels of oil equivalent (boe), or an average production rate of between 5,000 and 5,700 boe per day. Crude oil is expected to account for approximately 60 percent of production volumes.

The company has also noted success at different depths of the Dadas play. Chad Potter, TransAtlantic’s vice president of finance, told OGIB, “[w]e’re coming at it from multi-play idea on each license; where there is stacked pay, all likely sourced from Dadas shale.”

“Stacked pay” is an industry term for several underground oil formations located on top of each other. This type of formation allows producers to drill off several horizontal wells at different depths from one surface location, allowing them to lower costs and make production more profitable.

TransAtlantic boasts near-term potential in that production at its Molla license is expected to pick up in the first quarter of 2013. Another exploration well (Goksu-3H) was naturally flowing as of October last year, and additional horizontal drilling is planned. Production from Goksu-3H has continued at an encouraging rate, “averaging 425 bbls of oil per day over its first 30 days of production, 412 bbls of oil per day over its first 60 days of production, and 477 bbls of oil per day over a recent seven day period,” according to the company’s update.

The stock could rise in the short to medium term as the company implements an aggressive 2013 exploration plan that includes drilling 17 wells in the Tekirdag field area development program, eight wells testing the Hayrabolu structure area and 11 wells in other licenses. TransAtlantic has also allocated $15 million for seismic activities and infrastructure in the Molla area so that it can appraise both the Mardin and Bedinan discoveries.


Securities Disclosure: I, Adam Currie, hold no direct investment interest in any company mentioned in this article.

Royal Dutch Shell Plans to Put Orion Project on the Block

Reuters reported that Royal Dutch Shell Plc (NYSE:RDS.B) has planned to put Orion steam-driven project on the block.

As quoted in the market news:

Based on the current output and the potential for future production gains, Shell could garner as much as C$200 million for the operation, estimated Chad Friess, analyst with UBS Securities. That assumes an average unit value for such projects of C$35,000-C$40,000 per producing barrel a day.

Click here to read the full Reuters report.

The North American Shift from Natural Gas to Oil

By Adam Currie — Exclusive to Oil Investing News

The North American Shift from Natural Gas to Oil

Natural gas prices are trading at ten-year lows on the back of a surge in supplies and increasingly efficient methods of extraction. While some analysts feel that the commodity is likely to rebound, not all companies are quite so optimistic, and a number of them are shifting their initiatives to liquid oil.

Unable to produce product at a profit, the lucky few companies with enough capital on hand are already leveraging oil and natural gas liquids, resulting in significant alterations to overall company strategies.

“You can’t keep losing money”

Speaking at the CIBC 2012 Energy Conference in mid-April, George Fink, CEO of Bonterra Energy Corp. (TSX:BNE) said, “[o]ur gas drilling locations are totally mothballed right now. You can’t keep losing money when you’re drilling, [and] $2 for natural gas is not sustainable when costs are closer to $5 or $6.”

At the same event, Perpetual Energy Inc. (TSX:PMT) announced that it has also moved away from gas in order for its balance sheet to be “substantially restored to health.”

“Our gas marketer is being kind of morbid these days; he wants [natural gas] prices to go as low as they possibly can to get this capitulation over with, [but] we have been waiting for that for the last two years and the price keeps going lower. That is why you are seeing all this diversification now,” said Cameron Sebastian, Vice President of finance at Perpetual.

The company’s strategy shift is one that has become all too common across the sector over the past two years. Shallow natural gas makes up less than a third of Perpetual’s current production, down from 100 percent in 2007. That shift has meant that production has now been replaced with more cost-effective oil projects, which the company grew from only 100 barrels per day (bpd) in 2010 to currently over 3,500 bpd.

Yet another example of a shift in asset development is oil and gas junior Sun River Energy (OTCBB:SNRV), which recently announced its plans for oil development in East Texas.

In a press release, Donal R. Schmidt, Jr., the company’s CEO and President, said, “[a]s the price of natural gas began to decline last summer we began to evaluate shifting our focus to oil.” In a letter to shareholders he added that, “[w]ith the price of crude over $100 per barrel and natural gas declining to decade low prices, the shift was the logical one for Sun River.”

Majors selling assets

In a move that might send shivers down the spines of natural gas investors, Encana Corp. (TSX:ECA), Canada’s largest gas producer, has been selling gas assets worth billions of dollars in a bid to shift more of its focus towards liquids.

While this shift might be feasible from a major producer’s perspective, it has created a sentiment of fear amongst some junior explorers and producers.

“Those kinds of options aren’t always available to the junior sector,” said Gary Leach, Executive Director of the Small Explorers and Producers Association of Canada in a recent market overview.

“The fact is you can’t turn yourself from a gas producer overnight to a crude oil producer, [and] if you are trying to get rid of assets that are natural gas weighted, the prices being paid are low and in many cases there may not be any real buyer interest.”

In a surging crude market, a shift away from gas to liquid oil was always going to be a natural progression for those able to make the transition. Overall natural gas production has been dipping in Canadian companies, which produced 5.9 percent less product in January 2012 than in January 2011, according to a report compiled by Statistics Canada. Crude oil production in Canada grew 8.4 percent over the same period.

Shift not only affecting producers

The shift from gas to crude has not only been evident on the production side. TransCanada Corp. (TSX:TRP) announced that it is “actively” pursuing a move to ship oil rather than natural gas along a key pipeline network as prices for Alberta gas plunge.

According to Russ Girling, the company’s CEO, Eastern Canadian refineries have enquired about the possibility of moving oil through the company’s Mainline network instead of natural gas.

Chad Friess, an analyst at UBS Securities, expects current natural gas customers, as well as TransCanada, to welcome the transformation, adding that if the project was to go ahead that he expects light oil to fill the line.

“It would free up [TransCanada’s] stranded capital in the natural gas Mainline, and solve a lot of the problem they are fighting with producers on over tolls,” he said, adding, “[i]f a portion of that rate base was transferred towards an oil pipeline, it would be very attractive for both. It is like a win-win situation.”

Oversupply and declining prices

Meanwhile, Halliburton Co. (NYSE:HAL), one of the world’s largest oil businesses, confirmed that it reached record revenue in North America as the energy industry shied from natural gas production and boosted oil field exploration.

The company, which aids producers in constructing oil and gas wells, pointed to “a significant rig-shift that is taking place in the U.S. between natural gas and oil.” The shift has resulted in oil field rigs rising by 12 percent to a 25-year high while natural gas rigs dipped by 17 percent.

In a conference call with analysts, CEO David J. Lesar stated that natural gas production for Halliburton is sliding due to oversupply and declining prices, which have been “dramatic and disruptive to operations.”

All in all it seems that the bull run of natural gas is indeed a thing of the past, and despite forecasts of a recovery in the longer term, natural gas ventures will be very much on the back burner in the near term.


Securities Disclosure: I, Adam Currie, hold no direct investment interest in any company mentioned in this article.