Friday 26 February 2010

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.

Friday 19 February 2010

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.

Thursday 18 February 2010

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.

Tuesday 16 February 2010

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.

Sunday 14 February 2010

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.


Roxi Petroleum Galaz Development

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.

Friday 12 February 2010

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.

Thursday 11 February 2010

Roxi Petroleum (RXP) Beibars Block

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Roxi Petroleum Beibars 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."

Friday 5 February 2010

Roxi Petroleum (RXP) Ravninnoe Asset

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Roxi Petroleum Ravninnoe
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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Roxi Petroleum Galaz

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.


Roxi Petroleum Galaz Well Results

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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Roxi Petroleum BNG Block 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
Roxi Petroleum BNG 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.

Wednesday 3 February 2010

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