Recent News Releases

Since the last post on 15 May, Roxi Petroleum (AIM:RXP) have released their final results, the Annual Report and Accounts for 2009 and an operational update.

The Annual Report can be found here and the Ops update for 1 June can be found here.

The new items released in the Annual Report and the Ops Update include a number of expected events for the rest of 2010:

June 2010:

The McDaniel determined SPE 2P reserves for the Galaz field should be released in June.  Prior releases have determined reserves to Soviet GOST standards - some 14mmbo of 2C reserves.  Hopefully, the determination of reserves to Western standards will encourage more investment in the company form London.

Well 806 on the South Yelemes field in the BNG contract area will be spudded.  We have already heard on 1 June that Well 805 has encountered hydrocarbons in the Cretaceous as well as in the target Callovian Sands in the Upper Jurassic.  The well was coring and preparing to drill on to target depth at 2,500m before running wireline logs.  It has also been announced that they will not flow test this well with this rig, but will mobilise a separate workover rig to conduct testing operations, should they be warranted on wells 805 and 806.

In the 1 June release, Roxi also stated that the reserves and prospective resource figures for the 2010 drilling programme on BNG were undergoing internal and external audit prior to release.  It is to be hoped that the release of these figures comes shortly.

 Test has started on Well #20 on the Ravninnoe block, with acidisation due to be carried out around now.

July 2010:

Pilot production should start on the Galaz field, after the much delayed approval from the Kazakh authorities.  We have also heard that the company has applied for an extension to the Galaz Contract Area, based on the results so far from Well NK22.  The well test awaits the final approval of LGI as the new operator of the block.

Roxi have also announced that well 135 (MJ-A) will spud on the BNG block during July.  We await further details of the target of this well.

August 2010:

The new 3-D seismic acquisition programme should complete on BNG together with the spudding of the first development wells on NW Konys.

September 2010:

Pilot production should start on South Yelemes and they should also receive an export license for the oil produced on BNG.  This should be a key development for Roxi Petroleum as the economics of oil production for export should be much more favourable than production for the domestic market.

Well 807 should be spudded on BNG and more development wells on NW Konys should commence.

October 2010:

Apparently Roxi are starting a "Project Financing Roadshow".  It is unclear what this means - whether to try and find additional partners for the so far disappointing Ravninnoe block, or to secure further funding for the BNG block - maybe the pre-salt formations.

Munaily should start production from one well, a further exploration well on BNG should spud and appraisal wells on NW Konys, hopefully to prove up more reserves towards the ends of the channel feature.

November 2010:

Roxi are anticipating receiving SPE reserves for BNG and spudding well 808 on South Yelemes as well as exploration wells on NW Konys.

December 2010:

Two more exploration wells on BNG should spud.  One is described as "post salt".  We must wait to see if any of the exploration wells are going to probe the pre-salt deeper horizons.



The structure of Roxi Petroleum and its subsidiaries and partners is very complex.  They have attempted to describe the effects of the "post balance-sheet events" in the Annual Report.  These events relate to the Galaz farm-out deal, the BNG farm-out deal and the settling of the loans made from Altius and Kuat Oraziman.  I have found it too difficult to summarise these into a new pro-forma balance sheet, and I do hope that matters are clarified in the interim results to be announced in August.

Despite the breathtaking pace of current and anticipated future developments, the share price performance in recent weeks has been very disappointing, with the share price languishing at levels not seen since April 2009.  This is painful for those holding RXP, but is somewhat mitigated by the CEO, David Wilkes buying a further 91,500 shares announced on 26 May.

Roxi Petroleum Announces Operational Update

On 10 May Roxi Petroleum (LSE:RXP, AIM:RXP, RXP.L) announced an operational update covering the BNG, Ravninnoe and Galaz blocks.

BNG

Well 805 is drilling ahead towards the target depth of 2,500m after setting 9 5/8 inch casing at 803m .  The 16 April RNS said that well 805 spudded on 14 April, with an expected drill time of some 30 days.  It therefore appears that there have been some delays in drilling, and we can expect to wait for some time longer for the announcement of the well result.

On a brighter note, the extra 3-D seismic over the northern part of the block has been completed and priority is being given to processing and interpreting the data over the Northern Yelemes area.  Seismic acquisition over the southern area of the block, presumably covering the Saztobe area, has commenced.

Ravninnoe

A period of 90-day production testing has begun on Well #20, and it seems that acid stimulation will also be part of the test programme.

Galaz

It seems that the initial attempts to perforate the NK22 well have failed due to water ingress caused by a poor cement bond.  Plans are being prepared to conduct a cement squeeze and re-perforation of the well.  However, Galaz Energy BV (Galaz), will have to wait for approval to carry out these operations fromthe new operator, LG International (LGI).  It seems LGI will be awarded the operatorship of the block as part of the deal announced on 29 April.  There was no word on the tortuous Kazakh approval process, nor on the start of pilot production.


Overall this is a slightly disappointing RNS with delays apparent in all three assets.  Let us hope the CPR that was promised over the BNG block at the Oil Barrel conference will be released soon.

Dae Han Issues Update about Galaz and NW Konys

Dae Han New Pharm has made its own announcement about the closing of the deal with LG International (LGI) to acquire a stake in Roxi Petroleum's (AIM:RXP) Galaz block.

A link to the original announcement in Korean can be found here.

Using Google Translate to get an English version of the release yields this result:


"Daehannyupam equity investment genetic Block 40%, LG Completes Acquisition of business

Daehannyupam invested in Kazakhstan oil optical operation of the project sign jeu Roxy Gala Careers live apart under development for 40% stake in Block jeu LG had completed an agreement to sell the firm announced on May 29.

With the completion of this agreement, apart jeu development of the project management will be given access to the LG International Corp. 5 is scheduled to begin production sometime in the pilot. Production of 1,600 barrels a day as the initial starting size of 3,800 barrels per day, said it plans to increase the production.

Current Kazakh government for the Northwest Connie seu Block C1 730 million barrels of production based on the pilot kept asking for is approved. To get approval from the government to smooth the current reserves will be calculated on the conservative, NK22 successful drilling of the reserves are projected to grow more.


This is the LG daehannyupam equity investment firm's large-scale genetic photosphere obtained for the commercial and reliability has been rated as a good opportunity."


Whilst understanding the nuances of the release is difficult, it does seem to suggest that current reserves C1 on NW Konys are "conservative" and that NK22 is projected to increase reserves.

Let's hope the results of NK22 are released soon.

LGI Announces Purchase of Galaz from Roxi

In a seemingly back to back announcement to Roxi Petroleum's (AIM:RXP) earlier disclosure about the sale of an interest in Galaz, LG International (LGI) has issued a press release about its purchase of a stake in Galaz.

The seemingly new disclosure is that LGI is going to become operator of the NW Konys field.  It seems the start of pilot production has slipped again to H2 2010, but the anticipated gross production rate has increased to 1,600bopd, with the expectation being set that gross production will rise to some 3,800bopd.

Roxi Petroleum Announces Sale of Galaz

On 29 April Roxi Petroleum (AIM:RXP) announced the sale of a stake in its Galaz project to LG International Corp (LGI).  This deal has been in gestation for some time, but the Sale and Purchase Agreement has finally been executed.

The deal is quite complex, and requires a great deal of concentration to understand completely.  Here are a few highlights insofar as I can tell.  It is recommended that any reader also consults the actual RNS issued by the company to check that I've not made any significant errors in this report of it.

• Overall, Roxi's interest in Galaz will fall from 50.15% to 34.22%
• In return, Galaz re-pays a loan from Roxi to Galaz of some $8.4m
• Galaz also loans Roxi of some $8.7m to be re-paid out of future production
• Roxi uses these proceeds to re-pay its convertible loan from Altius Energy (previously known as Arawak Energy), thus avoiding the dilutive effect of conversion.  Some of the proceeds are also used to purchase a 13% stake in Galaz from the local partners.
• LGI provide a loan of up to $26m to Galaz some of which will be used to repay the the bridging loan from Kuat Oraziman of $3m announced on 31 March and some to re-pay $5.5m to KazRosMunai.  The rest of the money will be used to finance the working capital needs of Galaz and fund further development of the project.

Overall it seems that Galaz is now well-funded, with a credible international partner and Roxi has funds to finance work on other assets as well as participate in the upside on Galaz.  Maybe some of these funds will be used on Ravninnoe or to purchase a further stake there.

Unfortunately, we did not learn any more about the results of the NK22 well, which seems like a new discovery on the block.  Hopefully, we will hear news on that soon, together with the start of production on NW Konys.

Roxi Petroleum Newsflow Update

In the post on 11 March, I set out a number of items of expected newsflow.  Here is an update:

1) Ravninnoe Well #20 test result (expected March 2010 per Oil Barrel Conference).  Update: Result announced in 7 April RNS.  240bopd from an 18 metre interval.  Awaiting results of extended flow test and acid stimulation.

2) Galaz NK22 test result (ought to be imminent as discovery was announced on 18Feb 2010).  Update: Result still awaited.

3) South Yelemes re-perforation of Well G-54 result (they were preparing to perforate on 3 Feb 2010). Update: Result announced in 7 April RNS.  200bopd from shallower interval.

4) Spudding of first new well on South Yelemes (a rig had been mobilised on 3 February 2010). Update: Well 805 spudded on 14 April, to be followed by Well 806.

5) Canamens exercising their option (or not) over a further %-age of BNG (due by 31 March 2010). Update: Done, announced in 31 March RNS.

6) Repayment (or not) of Arawak Energy (now known as Altius Energy) loan(s) - decision due by 31 March 2010.  Update: Re-paid from a new interest-free loan from Kuat Oraziman. This new loan likely to be re-paid using funds received from LG in the Galaz deal.

7) Further exercise (or not) of Arawak (now known as Altius Energy) warrants (the exercise price rises to 15p after 31 March 2010). Update: Altius Energy exercised a total of 3.6m warrants, leaving a substantial number outstanding at an exercise price of 15p or above.

8) Commencement of Galaz production (approval should be granted before end April 2010). Update: LG deal going well, but now expected to close during May 2010.

9) Commencement of Galaz development programme (deal with LG announced on 10 Feb 2010; awaiting regulatory approval). Update: presumably after the partial sale to LG deal completes

10) Lifting of Beibars military polygon (or not), and maybe a farm-in? (timing of lifting of the military polygon is unknown at present). Update: No further updat as yet.

11) Forward drilling plan for Ravninnoe (probably dependent upon Well #20 test result). Update: No further update yet.

12) Volumetrics and forward drilling plan for BNG (At Oil Barrel, the expectation was set of some news on this by mid-2010 in the form of a Competent Persons Report or CPR). Update: still awaited.

Additionally, we have been informed that some 80bopd of production on Munaily will commence around mid-year 2010, with the potential to ramp up to 300-400bopd.


Don't forget to do your own research.

Roxi Petroleum Start Drilling on BNG Block

In a low key announcement, on 16 April Roxi Petroleum announced the spudding of the first new well on the BNG Contract Area since they assumed operatorship of the block.

Well 805 commenced drilling on 14 April targeting the already discovered South Yelemes field.  The well will be drilled to 2,500m, so it seems it will explore both formations previously discovered in Well 54.  Roxi re-entered well 54, previously drilled in the 1980's and produced 200bopd from the Upper Jurassic sands at 2,212m.  There is  also another potential productive formation at around 2,223m but that suffered from  waterinflux from behind the casing.  Hopefully, Well 805 will have more success in this zone.

It is to be expected that Well 806 will be drilled once 805 has been completed.

Roxi Petroleum Operations Update

Today Roxi Petroleum (AIM:RXP) announced a comprehensive operations update covering four of their oil exploration and production assets in Kazakhstan.

BNG

Roxi have successfully re-perforated the old well 54 on the South Yelemes field.  The deeper interval produced oil and water at a rate of 90 barrels of oil per day (bopd).  This interval had to be isolated with a cement plug after water ingress from a deeper water leg.  The shallower interval is now on test production at ~200bopd.  As this well was originally drilled in 1988, it seems a remarkable achievement to get this well to flow at all.

Two further wells 805 and 806 on the South Yelemes field will now be drilled to test the formations producing in Well 54, and two secondary targets (presumably deeper) in the Middle Jurassic.  It seems appropriate to expect bpth these wells to be producers as the primary target is the formation already producing in Well 54.  Roxi estimates the gross P50 reserves for South Yelemes to be 12.5 million barrels of oil (mmbo) - 23.41% of this net ro Roxi.  The slight disappointment is that the Matrix broker note from December 2009 seemd to indicate gross recoverable resources of c. 25mmbo.

We can expect a further 3-6 wells to be drilled on BNG this year, and a further 895km2 of 3-D seismic to be shot over the southern portion of the block.

Ravninnoe

The initial production rate from Well #20 looks a bit low at 240bopd and calls into question the commerciality of the discovery, but this may improve as the well cleans up after the acid stimulation. 

Interestingly, there is a hint that Roxi and/or Canamens may end up purchasing a further stake in the Ravninnoe block from the Kazakh partners if they cannot fund the future work programme.

Galaz

There are five wells ready for production at a gross rate of some 1,200bopd, and state approval to begin pilot production is to be expected next month, with a reserves audit from McDaniel & Associates to come.  Well results from NK22 should be released in the next few weeks as the test programme looks poised to start.

Munaily

We can expect initial production of some 80bopd soon, ramping up to 300-400bopd hopefully before year end assuming the necessary approvals from the state authorities are forthcoming in a timely manner.


All in all, it is clear steady progress is being made across 4 of the assets, with the company being funded for the significant 2010 drilling campaign and cash flow now commencing from four separate fields.  But a nagging doubt about the commerciality of Ravninnoe.

Roxi Petroleum Changes PR Company

According to their website, Roxi Petroleum plc (AIM:RXP) currently use College Hill Associates Limited as their PR consultants.

However, it has been tweeted that Roxi may have changed their PR consultants to Buchanan Commuications.  See below:

http://twitter.com/Gorkana/statuses/11425680691

"Roxi Petroleum switches financial PR account to Buchanan Communications"

http://bit.ly/dxvXkH

If true, then it may mark a sea change in Roxi's communication with the market.

Roxi Petroleum Corporate Update

Today Roxi Petroleum (AIM:RXP) announced a corporate update.  This covered a number of items identifed as due for release in the blog post of 11 March:

1. Canamens have exercised their option to acquire a further 12% of the BNG contract area for a consideration of $23m.  This transaction means that the BNG work programme is fully funded for 2010.  The Oil Barrel presentation indicates that 9 wells will be drilled on BNG this year, including 5 exploration wells and 4 appraisal/production wells.  Roxi now holds 23.41% of the BNG asset.
2. The most recent $3m convertible loan from Arawak Energy (now owned by Vitol) has been re-paid.  This avoids the conversion of the loan into shares and thus also avoids shareholder dilution.  The $3m has been provided by director Kuat Oraziman, and is repayable by 1 July 2010 - presumably from the funds that Roxi will receive once the Galaz deal completes.  Shareholders must thank Mr Oraziman for his continued support of the company.
3. Separately, Arawak has exercised a further 2m warrants at 10p each, providing £200,000 of funding to Roxi.  According to my calculations, this leaves Arawak with 30,923,835 warrants, which must now be exercised at 15p, if before 30 September 2010, or 20p if between 1 October 2010 and 31 March 2011.  This could be a significant source of funding for Roxi to finance further drilling on the Ravninnoe block.
4. The proposed transaction with LG International to acquire a stake in the Galaz block is progressing well

Unfortunately, a number of other operational matters were not covered in the RNS so we are no further forwards on understanding:

• The test results from Well #20 at Ravninnoe - we are awaiting oil flow rates from this well
• The results of the perforation of the well at South Yelemes
• If any of the appraisal oil wells at South Yelemes have spudded
• The test results of well NK22 on Galaz

We must hope for an update on these operational matters shortly, hopefully including some news on the lifting of the Military Polygon on Beibars and progress on re-habilitating Munaily.

Update: It was announced on 1 April 2010 that Altius Energy (formerly known as Arawak Energy) has exercised a further 1.6m warrants at 10p.  According to my calcuations,this brings Altuis' warrant holding down to 29.3m

More Roxi Petroleum (RXP) Research Notes

It seems that Baltic Business Analysis have started following Roxi Petroleum (AIM:RXP).  They have produced several reports.  Unfortunately, it seems that you can only access their content by paying for it.  I haven't bought any of it, so can't vouch for its quality, but for those who may wish to find out more here are some links:

Roxi Petroleum (RXP) has High Growth Chances

RXP Analyst Update 12/22/09

RXP Company, Industry and Country Update 12/23/09

I do hope Matrix Corporate Capital update their note soon as so much progress has been made since December.

Roxi Petroleum Anticipated Newsflow

Trading volumes in Roxi Petroleum (AIM:RXP) have risen sharply in recent days along with the share price.  From prior company announcements, here is a list of news items that maybe in the pipeline:

1) Ravninnoe Well #20 test result (expected March 2010 per Oil Barrel Conference)

2) Galaz NK22 test result (ought to be imminent as discovery was announced on 18Feb 2010)

3) South Yelemes re-perforation of Well G-54 result (they were preparing to perforate on 3 Feb 2010)

4) Spudding of first new well on South Yelemes (a rig had been mobilised on 3 February 2010)

5) Canamens exercising their option (or not) over a further %-age of BNG (due by 31 March 2010)

6) Repayment (or not) of Arawak Energy (now known as Altius Energy) loan(s) - decision due by 31 March 2010. 

7) Further exercise (or not) of Arawak (now known as Altius Energy) warrants (the exercise price rises to 15p after 31 March 2010)

8) Commencement of Galaz production (approval should be granted before end April 2010)

9) Commencement of Galaz development programme (deal with LG announced on 10 Feb 2010; awaiting regulatory approval)

10) Lifting of Beibars military polygon (or not), and maybe a farm-in? (timing of lifting of the military polygon is unknown at present)

11) Forward drilling plan for Ravninnoe (probably dependent upon Well #20 test result)

12) Volumetrics and forward drilling plan for BNG (At Oil Barrel, the expectation was set of some news on this by mid-2010 in the form of a Competent Persons Report or CPR)

Don't forget to do your own research.

Dea Han Operations Update on Galaz Block

Dae Han New Pharm, one of the shareholders in Baverstock, which in turn is one of the major shareholders in Roxi Petroleum plc (AIM:RXP) has released what appears to be an operational update about the NK22 well near the NW Konys field on the Galaz block. ( https://www.dhnp.co.kr/news/notice_read.asp?page=1&id=85&pos=85 ).

In a separate release, it appears that Dae Han have also acquired a 6.79% interest in Galaz, although it is unclear whether this is part of the deal that Roxi Petroleum announced on 11 February.


The operations update release is written in Korean, but a Google Translate version is shown below - apologies in advance.  It is well worth visiting the link above, as it shows some interesting pictures of operations on Galaz.

The main thrust of the release seems to confirm the Roxi Petroleum release on 18 February, but also seems to add that they expect the reserves in Galaz to increase as a result of the success at NK22, and that the oil discovered is of high quality.

"West Oslo Koh Block (galrajeu) Genetic Development Status

Our Disclosure of four Roxy sign oil development operations (February 18, 2010) According to the NK22 by drilling wells up to 2,840 m depth, 12.8 meters of crude oil stratum was found hayeotdago. In addition, the oil will be a quality player. After the current drilling operation, the casing (push an iron bar) is working.

The Kazakh government based on the current 7.3 million barrels C1 Pilot Production Project (pilot commercial production) requesting approval to place the results in light of the end of the state, and 4 will be released.

The Kazakh government for East oil reserves is about 1,600 million barrels (C1 + C2) and, NK22 wells has been found in the oil reserves will further increase is expected.

East Block of the pilot wells and preparation is already completed state. In each of the wells to separate oil and water separator, oil storage tanks, used for winter heating, an underground gas flare emissions, and the pipe is installed.

As shown in the picture below NK3, 4, 5 wells have enough pressure in the ground naturally without any special equipment to the oil wells that are leaking. The high pressure gas NK5 Yoo Eun lot is equipped with two flares. NK26 oil production wells and for the smooth bimpeompeu (Beam Pump) and currently are installing, NK27 wells are already installed on the pump.

Overall, the Kazakh government approved the commercial production from the pilot and they have prepared for the students to the mountain is the state. The NK22 is confirmed reserves of oil wells demonstrate the commercial production of existing wells Request (NK3, 4, 5, 6, 26, 27) is added to re-apply to the government plans to pilot commercial production. Nice nose northwest of the former Soviet Union during the photosphere such materials and modern exploration technology based on analyzing data to reduce risk, increase reserves and production is moving continuously ryangeun.

The Importance of Kazakhstan Oil to South Korea

An interesting paper on the geo-politics of Kazakhstan and South Korea.

http://uskoreainstitute.org/bin/k/o/USKI_WP0902.pdf

And a link to the 2008 Annual Report of the Turkish Petroleum Corporation

http://www.tpao.gov.tr/v1.4/condocs/yillik_rapor_2008en.pdf

Some interesting quotes from the paper:

"The most dynamic driving force of the Kazakh economy is the exploitation of crude oil around the Caspian Sea. These areas are estimated to have the largest oil and gas reserves outside the Middle East. Major oil companies have already moved to gain exploitation rights in these resource rich areas."

"South Korea is actively investing in the exploitation of Kazakhstan’s energy resources. The Korea Oil Corporation, Samsung, LG, SK, and Daesung formed a consortium which has energetically sought to exploit oil fields in the Caspian Sea and on land. In 2004, then South Korean President Roh Moo-hyun visited Kazakhstan and negotiated a basic contract for the exploitation of oil fields in the Zambil Region. The Korea Oil Corporation, LG, SK, and Serim have taken the lead on this project and on projects in other regions of Kazakhstan. LG has secured 50 percent of the Egizkara Oil Field’s total shares (estimated reserves: 200 million barrels). In cooperation with Serim, KS Energy has also secured the exploitation of two oil fields in Kazakhstan and started drilling operations there. In 2006, the Korea Oil Corporation discovered a new oil field in the Bashenkol structure inside the ADA Block of Actobe. Although it is estimated to hold about 20 million barrels of oil by itself, the estimated reserves in three other promising oil fields puts the total volume of the block at about 170 million barrels."

"In order to attract foreign investment in the exploitation of crude oil, the Kazakh government set up Production Sharing Agreements (PSAs) which granted foreign companies intending to invest in any Kazakh oil field to receive certain tax breaks and investment incentives when seeking joint venture with any private Kazakh company. Over the last several years, these PSAs have fueled fierce competition among foreign energy companies to invest in several of Kazakh’s oil fields, including North Buzachi, Sazankurak, Saztobe, Chinarevskoye and Airankol, which are all currently in production. In addition, other oil fields in Alibekmola, Urikhtau, and Kozhasai are almost ready to produce crude oil. As a result of this heightened activity, the oil production of Kazakhstan is expected to increase steadily for the next 10 years."

These quotes  and the TPC Annual Report seem to support a number of interesting ideas:

a) That Roxi Petroleum's (AIM:RXP) BNG, Beibars and Ravninnoe blocks are in a very prospective area.

b) South Korea sees the strategic importance of investing in the oil industry in Kazakhstan.  Interestingly, one of the shareholders in ADA is Vertom (a company in which Kuat Oraziman, Executive director  of RXP has an interest) where LG and KNOC also have investments.  Of course, LG has just agreed to purchase a stake in the Galaz block.

c) KazTurkMunai is the operator of the existing NE Saztobe, SE Saztobe and West Yelemes fields on the BNG block.  These fields are excluded from Roxi Petroleum's contract, but indicate the prospectivity of the contract area.

Perhaps one of the Korean corporate giants will be the eventual purchaser of Roxi Petroleum assuming they are successful in proving up the BNG contract area.

Further background on KazMunaiGaz, the Kazakhstan state oil company, which has a controlling stake in KazTurkMunai:

http://www.rice.edu/energy/publications/docs/NOCs/Papers/NOC_Kaz_Olcott.pdf

David Wilkes Increases His Stake Again

Roxi Petroleum plc (AIM:RXP) announced today that CEO David Wilkes has again bought shares in the company.  The latest purchase is of 160,000 shares at a price of 10.25p.

This makes his total holding after his total of 3 recent purchases 524,000 shares on top of his previously disclosed holdings.

It is encouraging to see CEO's buying shares in the company they run.

David Wilkes Buys More Roxi Petroleum (RXP)

Roxi Petroleum plc (AIM:RXP) today announced that CEO David Wilkes has bought another 102,000 shares at 9.625p. This comes on top of the 262,000 shares purchased only last week.

Another expression of confidence in the company.

Roxi Petroleum (RXP) Oil Barrel Report

Today Roxi Petroleum (AIM:RXP) presented at the Oil Barrel conference in London.  Hopefully, the investor presentation will be placed upon the web-site in due course.  First, my earlier post that suggested there would be 17 wells in 2010 was in fact under-estimating Roxi.  Today they talked of 19 wells in 2010 - with the extra two probably being more wells on Ravninnoe than I had assumed.

A copy of the presentation can be found here.

Key highlights:

Overview:

The overview slide near the beginning of the presentation had some volumetrics on it, talking of 29 million barrels (mmbo) of C1 and 45mmbo of C2.  It was a bit unclear precisely what this related to, whether it was current or target or gross or net.

They also showed a graph givng a production forecast out into 2012 or 2013.  I look forward to analysing this further once the presentation in published.

Beibars:

They talked of seeking a farm-in partner during 2010, so they must be becoming increasingly confident of getting the military polygon lifted soon.

Ravninnoe:

We might expect test production in 2010 and pilot production in 2011.  This suggests they are anticipating positive test results from Well #20.  The tests are just getting underway and we can expect the results in March.  I got the impression later that a significant proportion of the funds raised from the partial sale of Galaz will be used to fund further wells on Ravninnoe, once the remaining Canamens funds are exhausted.  Remember, at that point Roxi will only need to fund 30% of expenditure, so its $10m will equate to an overall drilling budget of some $33m, although the funds that Roxi can apply to Ravninnoe may be somewhat less than $10m if they chose to repay the most recent Arawak loan.

Munaily:

Now stopped trying to sell this block, and will develop it.  Expect production in 2010 (I seem to recall ~500bopd gross), which isn't massive but they'd rather have it than not.

Galaz:

Before the oil barrel conference started Roxi made an announcement about the Galaz NK22 well. They have confirmed an oil discovery in the Lower Cretaceous and Upper Jurassic. Although we don't yet know the prospective size of the new discovery, we do know they have found 12.8m of net pay, which is in-line with the declared net pay on Well NK3 on NW Konys.

It was confirmed at the oil barrel conference that the Middle Jurassic formation does not appear to be productive in this location, although it was implied that the Middle Jurassic is productive nearby. The position of  well NK22 well is in the south-east corner of the block.
 
They seemed rightfully pleased with the recent partial sale of Galaz to LG
 
BNG:

Expecting big things from this block. They are in the process of agreeing the prospect inventory with Canamens to agree the drilling priority.  They expect to publish the volumetrics for the near term drill prospects mid-year.  This will probably be in the form of a CPR (maybe this is in connection with the rumoured IPO of Canamens) and will include P50 resource estimates.

They have previously announced the perforation of G-54 on the South Yelemes field and the drilling of multiple appraisal/development wells on this Soviet-era discovery.  They expect a number of exploration wells to be drilled on the acreage during 2010 as well as ~600km2 of new 3-D seismic on  the SE portion of the block.

I think Roxi Petroleum management are anticpating that Canamens will take up their option over the further 12% share of BNG in return for the additional cash for exploration and appraisal.

Post Meeting Chat:

Together with others, I had a brief chat with David Wilkes, the CEO after the presentation.  He was asked where is thought the share price ought to be.  He diplomatically side-stepped this by suggesting his recent share purchase indicated that he thought there was significant upside in the stock.  I understand that the "close-period" prior to the results announcement may commence soon, so it will be interesting to see if Mr Wilkes takes advantage of this for a further purchase.  He is aware that communication with the market needs to improve and the content of the website has room for improvement.  I think he will do something about this, but I got the impression he wants to focus their cash resources on drilling, so it may be unreasonable to expect significant action in the short term.

We might expect Mr. Jang to be granted some options during April 2010.

Roxi Petroleum (RXP) Announces Galaz Discovery

Today Roxi Petroleum plc (AIM:RXP) made a further announcement about the Galaz NK22 well.  They have confirmed an oil discovery in the Lower Cretaceous and Upper Jurassic. Although we don't yet know the prospective size of the new discovery, we do know they have found 12.8m of net pay, which is in-line with the declared net pay on Well NK3 on NW Konys.

It was confirmed at the oil barrel conference later that the deeper, Middle Jurassic formation does not appear to be productive in this location, although it was implied that the Middle Jurassic is productive nearby.  Moroever, the NK22 well is in the south-east corner of the block.

Roxi Petroleum (RXP) Announce Options for Directors

It was announced today, that Roxi Petroleum plc (AIM:RXP) have awarded options to two directors: the CEO, David Wilkes, and the new non-executive, Edmund Pery.

The options have been issued at 12p per share, a premium to today's share price.

David Wilkes receives 2,000,000 shares and Edmund Pery receives 200,000 shares.

It was also announced that David Wilkes seems to have previously been granted options over 354,918 shares at 12p, a further 1,162,555 at 38p and 1,462,618 at 65p.  Maybe the 38p and 65p options were transferred from part of former CEO, Rob Schoonbrood's holding.

It is encouraging to see options being awarded at a premium to the prevailing share price, and comes on top of David Wilke's recent outright purchase of 262,000 shares.

Perhaps strangely, no options for Hyunsik Jang, the new COO.

Edmund Pery joins Roxi Petroleum

It was announced on 3 February 2010 that Edmund Pery (7th Earl of Limerick) has joined the board of Roxi Petroleum as a non-executive director.

He was described as follows in the Roxi Petroleum news release:

"Edmund Limerick has been involved in Central Asia and financing the oil and gas business for the last 18 years. He is a manager of the Altima Central Asia Fund which has invested in private equity in the oil sector in many countries in the region, and prior to that he spent many years in Deutsche Bank as a project financier and senior oil and gas investment banker in Moscow, London and Dubai.

Previously Edmund was a solicitor with Milbank Tweed in Moscow and Freshfields and Clifford Chance in London. His early career was spent in HM Diplomatic Service with postings in Paris, Dakar and Amman. He was educated in Oxford, London, Moscow and Paris and speaks Russian.

He is a non-executive director of Chagala Ltd, Saddleback Mining Ltd, GCRC 1 Ltd, a Governor of Ardingly College and a member of the Association of Conservative Peers."

Here are a number of links describing Edmund's pedigree:

http://en.wikipedia.org/wiki/Edmund_Pery,_7th_Earl_of_Limerick

http://www.altimapartners.com/

http://www.chagalagroup.com/index.php?lang=eng

http://www.saddlebackcorp.com/board_directors.htm

http://www.roxipetroleum.com/PDFs/Rns030210.pdf

Roxi Petroleum (RXP) Drilling Programme

Roxi Petroleum (AIM:RXP) has released a great deal of operational news over the past few weeks. By combining this with the recent Matrix broker note it is possible to compile a tentative schedule of drilling for the rest of 2010 and beyond.

Galaz

Well NK22 has decalred a discovery in the SE corner of the block in the Cretaceous and Upper Jurassic.  However, given the deal to sell part of Galaz to LG was announced last week, it is likely that LG believe the oil shows that were encountered in the Arksum and Upper Jurassic sands will be commercial. Moreover, we do not yet know if hydrocarbons will be encountered in the deeper exploration target.

We know that LG have committed $26m of funding to develop the Galaz field. We don't know exactly what that money will be spent on, but we know that Roxi Petroleum have submitted an application to produce the 7.3 million barrels (mmbo) of C1 reserves.




According to the schematic (re-produced above) in the Matrix broker note, one can see that there are 5 or 6 more wells required to fully develop the C1 reserves. An estimated cost of $1.5m per well (per well cost estimate given at the November GM) would leave ~$17m. Presumably these remaining funds could be used to either:
a) Fund further development of the C2 reserves - according to the schematic, a further 8 or so wells, or ~$12m plus costs of surface facilities and/or,
b) More appraisal/exploration of the apparent new discovery in the Arksum/Upper Jurassic and deeper targets on the acreage. Note that RXP are also planning to shoot 3-D seismic over the northern part of the acreage.

Once production comes on stream from NW Konys, then the cash generated ought to be able to fund further development of new discoveries on the block.

Assuming the regulatory consents for the LG deal are forthcoming in a short timeframe, it seems we can expect results from NK22 soon and at least half a dozen development wells on Galaz this year and maybe some exploration/appraisal wells if the deeper target on well NK22 is successful.

Ravninnoe

We know that Well #20 is undergoing testing, and results should be announced shortly. The Matrix note indicated that a further 3-4 development wells would be drilled in 2010 to exploit the mid-Carboniferous target if Well #20 is successful. However, the funding from Canamens will probably only be sufficient to drill one further well on the acreage. So, funding of the further development wells will probably come from the $10m recently received for the partial sale of Galaz..

So, let us assume for the moment that we will get results from Well #20 shortly and three further wells will be drilled on Ravninnoe in 2010. We don't know if this will target the Lower Carboniferous or not; and there also remains the potential to drill the even deeper Devonian formation below 5,500m.

BNG
Roxi Petroleum recently announced plans to perforate well G-54 on the South Yelemes field, drill two shallow wells there and a further 6 wells to be drilled in 2010. The Matrix note talked of drilling a total of 4-5 shallow wells, presumably on South Yelemes. We can hope that one of these shallow wells will be deepened to explore the Triassic target that lies beneath the G-54 discovery.

This leaves 3-4 other targets to be drilled on BNG in 2010. We can perhaps assume that 2 of these will be on the fields discovered by the G-1 and G-7 wells, so this leaves a further 1 or 2 wells to probe other targets or appraise whatever is found in the earlier wells.

Summary

In total it appears as though we can expect 6 or so wells on Galaz on top of the NK22 result; possibly 3-4 wells on Ravninnoe as well as the test results from Well #20 and the results of a total of 8 wells on BNG, many of which seem to be targeting discoveries that were made in Soviet times. A total of at around 19 well results in 2010 – a very busy drilling programme indeed for a company with a market capitalisation of only £40m.

David Wilkes buys Shares in Roxi Petroleum (RXP)

It was announced yesterday that David Wilkes, CEO of Roxi Petroleum (AIM:RXP) had bought 262,000 shares in Roxi at a price of 9.5p per share.

It seems the purchase has come in the small window of opportunity since the last operations update, yesterday's announcement of the partial sale of Galaz and the expected results of the Ravninnoe Well #20, the Galaz NK22 well and the re-perforation of one of the shallow wells on the South Yelemes field on the BNG block.

Given this is a purchase with his own money, it looks like a great expression of confidence.

Roxi Petroleum (RXP) Beibars Block

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Roxi Petroleum's (RXP) Beibars 50% owned contract area is about 40km from Aktau and 14km NW of the Oimasha field in quite a prolific hydrocarbon bearing area in the Mangishlak basin in Kazakhstan. In the 2008 Visor Capital Presentation (slide 6) it was described as one of the longer term, high impact blocks in the portfolio.

When Roxi Petroleum acquired the acreage they didn't think that there had been any Soviet-era exploration. But they have now "found" two old wells. The first encountered oil and the second flowed a small amount of gas.

However, the block is currently under a "military polygon" which has invoked "force majeure". So, as there can be no further activity until this is resolved, we shall have to wait to see just how prospective this block may be.

In the announcement of 3 February 2010 Roxi Petroleum stated they were "evaluating the potential of the block" in anticipation of lifting of the "Force Majeure". Perhaps a sign that things are starting to move forwards.

Roxi Petroleum (RXP) Sells Part of Galaz

Today Roxi Petroleum (AIM:RXP) has announced a complex deal to sell part of its interest in the Galaz block to Korean corporate giant, LG International (LGI).

Prior to the agreement, Roxi held a 43.3% interest in the Galaz block. After the deal, it will receive $10m in cash and retain an indirect 34.2% interest of the Galaz block. Perhaps as importantly, LGI has also agreed to provide up to $26m of funding for appraisal and development work on the block.

It shold also be noted that it seems Roxi Petroleum has re-negotiated the terms of the original farm-out to KazRosMunai such that KazRosMunai will now be paid for the services provided rather than transferring and equity interest in Galaz.

In valuation terms, Roxi are giving up 9.1% of the block and receiving $10m in cash in return, valuing the whole block at some ~$110m. Thus, Roxi's remaining 34.2% stake would be worth $37.5m. Of course, Roxi also receives the $10m cash, so the combined value to Roxi of Galaz and the cash it receives is ~$47.5m, or nearly £30m. With 417m shares in issue, that is 7.1p/share.

Or another way of loking at it, LG is purchasing 40% for $24m and providing a further $26m of funding (of which $8.4m is a repayable loan) to develop the asset. Essentially, they are commiting $50m of funding in return for 40% of the asset, valuing Galaz in total at $125m.

LG will hold 40% of Galaz after the deal completes and presumably is confident it is going to make a return on its significant investment, so no doubt we can look forward to future success on the block and the final results of Well NK22.

David Wilkes, CEO of Roxi Petroleum said:

"Completion of the Galaz agreement with LGI will mark a turning point for Roxi. Not only would we retain a meaningful interest in this producing asset, but we would secure substantial funding of its work programme commitments. This together with our recent completion of our farm out deals with Canamens puts Roxi in a strong position to develop its existing assets and achieve production by the end of the year."

Roxi Petroleum (RXP) Ravninnoe Asset

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Overview

Roxi Petroleum's exciting Ravninnoe (pronounced Rav-nina) contract area lies in the Pre-Caspian Basin of Kazakhstan, 100km NE of Tengiz and some 30km away from the Opornaya supply base. The Exploration License expired in May 2009, but an extension over the acreage to May 2011 has been granted. Roxi holds a 30% interest in this license block after a farmout of a portion of its interest to Canamens.

Prospects

Six wells have been drilled on this area before Roxi secured the block. A number of them are still seeping oil to surface and showed gross oil columns in the range of 57-127m, apparently in the mid-Carboniferous.

Roxi have re-entered an old well, but the casing was parted so the well was suspended. However, 130km2 of 3-D seismic have been shot over the acreage.

A new well started drilling on 30 October, Well#20, which is essentially an offset re-drill of the old well #8. At the 2009 AGM it was stated that the old Well#8 had flowed oil at up to 6-800 barrels of oil per day (bopd). From the AGM presentation, it appears as though this well is targeting prospects in the middle and lower Carboniferous to a total depth of 3,800m. At the 17 November GM it was stated that the primary target is at 3,200m, but if they continued to see oil shows at 3,500m they would "keep going". Moreover, this well is not in the optimal location to test the lower-Carboniferous target, so it is unlikely they will drill as far as 3,800m.

It was announced on 14 January 2010 (see this post) that Well #20 was drilled to a total depth of 3,455m and encountered a gross hydrocarbon column of some 30m. The well will now be tested across several intervals. It was further announced on 3 February that the hydrocarons encountered were oil at high pressure and no H2S issues had been identified.  It has been subsequently announced that testing operations on Well #20 should be complete during March 2010.

Investors can look forward to the results from this well with some anticipation, but should not overlook the fact that the company is planning to re-map the as yet un-drilled pre-salt (presumably Devonian) horizons that may yield further results. A second appraisal well might be expected to be drilled, presumably targeting the lower-Carboniferous depending upon the results of the first well.

In their December 2009 broker note, Matrix helpfully delineated the prospects on Ravninnoe by describing the P50 and P10 resources estimates for the mid-Carboniferous structure targeted by Well #20 as 27mmbo and 58mmbo respectively. They also suggest the P50 and P10 resources of the lower-Carboniferous target are 28mmbo and 49mmbo respectively and also indicate that this structure has also been drilled before in the Soviet days and therefore attribute a 50% chance of success. They say Roxi is also working on the exploration potential of the deeper Devonian target.

Moreover Matrix also make a passing reference to Well #20 having been designed to test a number of seismically mapped Jurassic and Cretaceous targets - this looks like a new disclosure.

Further disclosures have been made in an Envoi note about the Ravninnoe field.

Reserves

Currently, 15.5 millions of barrels of oil (mmbo) gross 2C reserves are granted to the field. However, some of the original owners of the Ravninnoe field have put their share of the asset up for sale and the Envoi note accompanying that sale suggests Pmean recoverable reserves of some 53mmbo from a combination of the mid and lower Carboniferous stratigraphic and structural traps. This does not include any potential upside from deeper Devonian targets.

Finance

Canamens have farmed-in to acquire up to 32.5% of the field for a total consideration of up to $22m. The estimated cost of each well is ~$8.5m, so Roxi are funded for the entire work commitment of the block, some $18m up until 2011.

Roxi Petroleum (RXP) Galaz Asset

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Overview

Roxi Petroleum's (RXP) Galaz contract area is a relatively small block compared to the potential of BNG (Ayrshagyl) and Ravninnoe, but has been important in establishing reserves and initial production. The block was recently extended in size to form the most northerly triangular shape and now covers a total area of some 42km2 in the middle of Kazakhstan.

Prospects

Initially, the block had modest 2C gross reserves of 12.6 millions of barrels of oil (mmbo), from 2008 Annual Report. But recent drilling has demonstrated the prospectivity of channel features in the NW Konys field. Soviet era wells #26 and #27 have been re-entered and flowed at relatively modest rates of 50-60bopd. More recent drilling under Roxi operatorship has been successful, with NK1 finding oil in the Arksum sands. But wells NK3, 4, 5 and 6 showing oil in the Arksum and Jurassic sands.

The table above shows the total test production levels that have been announced for each well, giving a total of 1,730bopd. However, we might expect the productivity to be somewhat lower when under full production. It appears as though production rates from NK4 have not yet been released.

It might be expected that additional development wells for the NW Konys field will be required to produce all of the reserves.

Roxi has identified a deeper exploration target in the south east of the acreage which has been drilled to a depth of 2,840m.

We now know that well NK22 is in the SE corner of the block and has recorded 12.8m of net pay in the Lower Cretaceous and Upper Jurassic. It seems that the deeper horizon was not prospective in this location. We do not yet know the prospective resources fom this new discovery, but it is probably safe to assume that the 2C (and 2P reserves to SPE standards) will rise. Hopefully, test results form this well will be publshed soon.

At the AGM in July 2009, Roxi stated that they intend to extend the seismic grid to the whole Galaz area, and believe there are a large number of targets.

Another operator is going to drill a deeper well to the West of the northern-most apex of the triangle to ~2,500m. We don't know who that is, but the results will be no doubt interesting to RXP as they plan their own deeper well programme. Another operator also holds the "zig-zaggy" triangle near the top of the acreage.

Reserves

A reserves upgrade report has been submitted to the state authorities that was to be reviewed on 4 November with the results of the review expected to be received by 11 November. Some thought that the expected 2C classification was of the order of 30mmbo (gross, of which Roxi share 34.2%). However it was announced on 1 December that the C1 reserves to GOST standards are 7.4 million barrels of oil (mmbo) and C2 reserves are 7.2mmbo. This makes the 2C reserves to GOST standards 14.6mmbo gross. Following the classification to GOST standards, Roxi is going to determine the reserves classification to western SPE standards.

The December 2009 broker note from Matrix indicated their expectations of 2P reserves under SPE standards to be 8 million barrels of oil (mmbo), with a further 5mmbo unrisked upside.

Finance

Some time ago, Roxi entered into a 2 stage farm-out agreement with KazRosMunai.

In June, Arawak Energy Limited (a subsidiary of Vitol, now known as Altius Energy) advanced a loan, in exchange for some warrants, to finance the development of Galaz to full production (http://www.roxipetroleum.com/PDFs/Rns180609.pdf).

On 17 July Roxi announced they had received an approach from LG of Korea to purchase the whole block, with exclusivity granted until the end of September. Note that LG also holds a stake in ADA Oil.

It was announced on 4 November 2009 that it has not been possible to conclude a deal to sell all or part of the Galaz block to LG under the exclusive MoU. However, Roxi and LG are still discussing a deal, and Roxi has recommenced discussions with other interested parties; which bodes well for achieving full value in any full or part sale.

However, on 11 February 2010, it was announced that a deal had been struck where LG has purchased a 40% stake in the Galaz asset from Roxi Petroleum and the other part owners of the block. Roxi Petroleum ends up with a remaining 34.2% stake in Galaz, $10m to fund other projects and LG has agreed to provide a further $26m of funding to further appraise and develop the block.

Roxi Petroleum (RXP) BNG Asset

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Source: Canamens

Overview

Roxi Petroleum's (RXP) BNG Contract Area, sometimes known as Ayrshagyl, is probably the most mouthwatering block in the Roxi Petroleum portfolio, lying as it does some 40km away from the super-giant 8bn barrel Tengiz field in Kazakhstan.

Prospects

At the time of acquisition, 25 leads had been identified at various depths from the Jurassic to the Carboniferous. It was stated at the 2009 AGM that it was believed a common source rock under-pinned the acreage that may have been up to 40,000 feet thick. The existing leads are being refined and delineated by the 3-D seismic programme that took place during 2008. Some areas of the block are excluded as they contain shallow fields in the 5-100 millions of barrels of oil (mmbo) range from the Jurassic, Triassic and Permian horizons.

The shallow fields in this area tend to be above the salt (or post-salt). But the super-giants like Tengiz have been discovered under the salt (or pre-salt). It is to be hoped that the new techniques associated with the modern 3-D seismic have provided imaging that is good enough to delineate prospects under the salt.
Interpretation of the 360km2 3-D seismic us due to be received in November 2009.

It was understood at the 2009 AGM that the company was in the process of deciding well locations, with an intention to start drilling ~3 Jurassic depth wells in the G-54 area and possibly 1 deeper well to the Permian in the G-1 (Yelemes) area, with first spud in 4Q09, with the deeper well more likely to be in 1Q10. These wells appear to be primarily appraising the existing discoveries that were made in the 1980's. The combination of modern 3-D seismic and old and new well logs ought to provide enough data to support the generation of 2P reserves to SPE standards. The original G-1 tested oil at ~2,000barrels of oil per day (bopd) - from 2009 AGM report). See BNG seismic post for brief discussion of other targets; it may just be, that Roxi will consider testing the Triassic Truncation play with one of the planned G-54 wells.
G-54 tested oil at a rate of 250bopd in 1998. Once production has been established from G-54, the cashflow, together with the Canamens funding ought to provide the financial platform to explore the deeper horizons.

Clearly, the timing of the wells has been put back by the re-negotiation of the farm-out to Canamens, and the broker note of December 2009 with Matrix indicating shallow wells in 1-2Q10; although it is not clear if these wells are targeting just the Jurassic or whether they will also be targeting the Triassic play. Matrix indicate the well targeting the deeper Y-1 structure won't be spudded until 1H11, which would be something of a disappointment if true.

The "coffin-shaped" area that is not currently under license is thought to be prospective, and indeed the image sourced from Canamens above suggests there may be an existing field there. At the 2009 AGM it was suggested this area may become available during 2010.

The announcement of 3 February 2010 stated that Roxi was preparing to reperforate the old G-54 well and that a rig has mobilised ready to drill 2 wells - presumably shallow wells - on the South Yelemes field. Moreover, they were planning to drill 6 further wells on the BNG block during 2010. It is to be hoped at least some of these additional wells will also test the deeper, larger structures and that at least one of the shallow wells tests the Triassic lead underneath G-54. Roxi has also tendered a contract to shoot more 3-D seismic over the southern part of the block, presumably covering the old Saztobe well.

Reserves

Reserves for the BNG Contract Area to SPE standards have yet to be published. However, the 2008 annual report shows reserves and resources to Soviet-era GOST standards of over 400mmbo (C1+C2+C3), with 42mmbo C1+ C2. After the recent farm-out deal with Canamens, the Roxi share of these resources would be around 93mmbo 3C or 10mmbo 2C.

The 2C reserves are attributed 40mmbo to Yelemes and 2mmbo to G-54.

The combination of modern 3-D seismic and old and new (from the anticipated drilling programme) well logs ought to provide enough data to support the generation of 2P reserves to SPE standards.

Of course, we don't yet know the prospective resources attributed to the leads and prospects identified on the recent 3-D seismic.

Financing

On 29 October, Roxi announced the details of the new financing transaction. This deal means that Roxi's additional work commitments are reduced to $8m, in return for reducing its eventual stake in BNG to 23.41%. Whilst it is disappointing that the final stake is BNG is being reduced so dramatically, it is undoubtedly good news that funding issues have now been resolved and the path is clear to commence drilling; hopefully in the near future.

Roxi Petroleum (RXP) Munaily Asset

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Overview

Roxi Petroleum's (RXP) Munaily Contract Area, sometimes known as Munayli, is a small block that has had a chequered history in Roxi's hands. It has been identified as for sale for some time, but the potential buyer has not come up with the cash and now Roxi are planning to rehabilitate the field and apply for a pilot production license. Roxi holds a 58.41% share of this license.

Prospects

According to the 2008 WH Ireland broker note, the field was dicovered in 1946 and has produced 10 million barrels from 59 wells up to 1998.

Since acquisition, Roxi has drilled the new H1 well on the block and that has produced at up to 100 barrels of oil per day (bopd) on test from 6m of pay in a Jurassic sandstone with ~20% porosity.

The primary targets for development/rehabilitation are the bypassed shallow Cretaceous, Jurassic, and Triassic sandstone reservoirs at depths between 500 and 1,650 metres.

Reserves

Only a small amount of reserves have so far been attributed to Munaily, and in the 2008 Annual report these were expressed as a dollar value, not the number of barrels.

Roxi Petroleum (RXP) Releases Operational Update

Today, Roxi Petroleum (AIM:RXP) announced a very interesting operational update.

Galaz

Roxi Petroleum's original announcement of the spudding of this well stated that the target depth was 2,200m with the target formations being the Arksum Sands and Upper Jurassic. These are the formations that have been targeted by the earlier production wells on NW Konys.

They have said today that they have seen "shows" in these formations and are drilling ahead at 2,550m in the middle-Jurassic. The new ultimate target depth is as yet unknown.

It may be reasonable to conclude that the shows in the Arksum and Upper Jurassic will end up being commercial, and may well add to the reserves already declared on the block. It remains to be seen if the deeper exploration target will find anything, let alone be commercial, but if it is, it could add substantial value to the Galaz block.

Interestingly, Roxi have been silent on the progress of negotiations with third parties on the full or partial sale of this asset.

Ravninnoe

Roxi Petroleum have released further details of the initial results from the drilling of Well #20 on the Ravninnoe contract area. They have confirmed the hydrocarbons encountered were oil at high pressure (likely to lead to higher flow rates in the future), and that they have not encountered any H2S issues. Porosity has been measured in the range of 4-20%. A workover rig has been mobilised to complete the logging and test the well. Hopefully further results will be released within the month.

BNG

The BNG (aka Ayrshagyl) contract area is probably the crown jewel in the Roxi Petroleum portfolio. Now, following the farmout agreement with Canamens they are moving to explore the block.

First seems to be a re-entry and perforation of an existing well on the South Yelemes field, also known as G-54. It appears this will be followed by 2 further wells on that field. Prior seismic charts released by Roxi have shown a Triassic target beneath the Jurassic G-54. It remains to be seen if this target will be drilled by either of these two wells.

Roxi have also announced they have awarded a contract to acquire more 3-D seismic in the south of the block, in the "transition zone". This area probably includes the previously drilled Saztobe well, which appears to have tested for condensate from the Carboniferous.

Moreover, Roxi appear to be nearing a conclusion on interpreting the earlier 3-D seismic acquired in 2009, and are planning to drill a further 6 wells on the block in 2010. Hopefully, some of these additional oil weels will be targeting the exciting pre-salt targets which have great potential - indeed well G-1 tested at ~2,000bopd in Soviet times.

Other Operational

Roxi Petroleum have stopped trying to sell the Munaily block and is now applying for a production licesne to re-habilitiate the field. The statement regarding the Beibars block is the most encouraging for some time as Roxi is now "evaluating the potential of the block" in anticipation of lifting of the "Force Majeure". Beibars was previously described at the 2008 Visor Capital presentation as one of the high impact blocks in the portfolio, alongside BNG.

Management

The board of Roxi Petroleum has been strengthened with the appointment of Edmund Pery, Earl of Limerick - and experienced financier in the oil and gas sector and Hyunsik Jang, formerly a senior player in LG (who have been interested in buying Galaz) as operations director. Mr Jang will be co-ordinating drilling activity and identifying new sources of finance from the Far East.

Finance

Roxi Petroleum has also secured a further $3m convertible loan from Arawak Energy (now known as Altius Energy) re-payable by end March 2010 or convertible into 19m new shares at ~10p/share; this takes Arawak's potential stake in Roxi Petroleum over 20% if all their warrants are exercised. Hopefully, a full or partial sale of Galaz by this deadline will give sufficient funds to repay the loan and preclude further dilution of shareholders

Roxi Petroleum (RXP) Announces Results from Ravninnoe Well #20

Today, Roxi Petroleum (AIM:RXP) has announced the first results from Well #20 drilled on the Ravninnoe field.

The well has been drilled to a total depth of some 3,455m. Wireline logs indicate the presence of a gross hydrocarbon column of some 30m and higher than expected pressure. Roxi have released the Parker drilling rig and are mobilising a workover rig to test multiple reservoir intervals.

From the well design included in the AGM presentation the original target depth was some 3,800m, however at the GM in November, it was stated the target depth was some 3,500m. It is not clear why they stopped drilling earlier than anticipated. Moreover, the gross hydrocarbon column is somewhat smaller than the gross oil column heights published from the historic wells (discussed here) where the range was 57-127m. So, whilst it is no doubt good news that hydrocarbons have been encountered, it is a little disappointing that this well, drilled closer to the mapped crest of the structure apparently has a smaller hydrocarbon column. However, this may be explained by the Envoi note (p7) that describes Ravninnoe as "an anticline sheared off at the top by an unconformable salt layer acting as the top seal for the reservoir".

We shall have to wait and see the results of the testing programme to see if the field is commercial.