Roxi Petroleum (RXP) Broker Note Released

Roxi Petroleum's (AIM:RXP) broker and NOMAD, Matrix Corporate Capital has finally released its long awaited broker note covering the company.

Based on a long term oil price of $80/barrel, Matrix sets a core value of 8p/share and a core plus risked value of 17p/share. With a long term oil price assumption of $100/barrel, the core value rises to 12p/share.

The broker note can be found here.

Key points that have emerged include:

1) BNG.

Matrix recounts the prior guidance of the company setting out the 2C reserves of 42 million barrels of oil (mmbo), with 2mmbo being attributed to G-54 in the Jurassic and 40mmbo attributed to Yelemes G-1 in the pre-salt.

However, elesewhere they talk of a shallow target spudding in 2Q10 to target 25mmbo and a deeper well spudding in 1H11 targeting 35mmbo. There is some discrepancy between the 2C reserves and the target sizes that is not very well explained; and no mention is made of the 3C resources of ~360mmbo that are mentioned in the annual reports. Moreover, it is not clear if the targeted 25mmbo in shallow target is just for G-54 or whether it includes the Triassic target identified beneath in the BNG Seismic post.

Elsewhere they talk of the shallow Jurassic well spudding in 1Q10 and targeting 5-40mmbo between 2-3,000m and a deeper well targeting 20-60mmbo at a depth of 3,500-4,500m. However, on the company's own seismic charts, the Jurassic is at around 1,400-1,600m, the Triassic target at 2,100-2,500m and the lower Permian target at approx 2,400-2,700m. So, overall, something of a confused picture, probably derived from the inordinate length of time it has taken to produce the note.

Interestingly, Matrix paint a little more detail on the old Ayrshagyl and Saztobe wells, both of which encountered hydrocarbons. It seems Ayrshagyl suffered a blowout and the Saztobe well was in the SW of the block and discovered condensate. This area is unlikely to be an exploration target for some time - the 3-D seismic over that part of the block is likely to be carried out during 2010.

2) Ravninnoe.

The Matrix broker note paints a little more detail on the targets in Ravninnoe. First, the mid-Carboniferous target currently being drilled by Well #20 is described as having P50 resources of 27mmbo and P10 resources of 58mmbo. The P10 resources number is a new disclosure.

Moreover, they indicate that if Well #20 is successful, then 3 or 4 additional wells are planned to be drilled on Ravninnoe in 2010. I guess we now have an indication of the use of funds if the full or partial sale of Galaz goes through.

Matrix also disclose some extra details about the deeper targets at Ravninnoe. First, the lower-Carboniferous target does seem to have been drilled by old Soviet wells, and Matrix assign a chance of success of 50% to this prospect, with P50 and P10 resources of 28 and 49mmbo respectively. Interestingly, in prior disclosures like the Envoi note, the lower-Carboniferous and Devonian targets have been merged together. This note clearly separates them out as different targets although we do not yet know the prospective size of the Devonian target.

There is also an interesting passsing reference to Well #20 having been designed to test a number of seismically mapped Jurassic and Cretaceous targets - this looks like a new disclosure.

3) Galaz

First, Matrix have made a simple mistake in saying the NK22 exploration well spudded on 24 December. That date is in the future, and Roxi have clearly said it spudded on 24 November.

Matrix also give an indication of the differences between the old Soviet GOST standards and western SPE standards for measuring reserves. Roxi's latest news releases indicate 14.6mmbo of 2C reserves on the NW Konys (aka NW Konus), but in their valuation, Matrix only attribute a core 8mmbo with an unrisked upside of 5mmbo. It appears as though some of the discrepancy arises from how far along the river channel one allows for probable reserves.