Sunday 14 February 2010

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.