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