Showing posts with label LG. Show all posts
Showing posts with label LG. Show all posts

Tuesday, 15 June 2010

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.

Saturday, 15 May 2010

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.

Wednesday, 5 May 2010

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.

Sunday, 2 May 2010

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.

Tuesday, 20 April 2010

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.

Wednesday, 31 March 2010

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

Thursday, 4 March 2010

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

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.

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.

Thursday, 11 February 2010

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) Galaz Asset

Content updated and post moved here.

Content below up to 28/2/10, but this will not be maintained.

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.

Tuesday, 1 December 2009

Roxi Petroleum (RXP) Releases Galaz Reserves

Today Roxi Petroleum has announced that it has received approval from the State Geological Committee of Kazakhstan for the re-dermination of the reserves of the Galaz field.

The total 2C reserves to GOST standards are 14.6 million barrels of oil (mmbo), with C1 at 7.2mmbo and C2 at 7.4mmbo. Roxi's share of these barrels would be 43.4% or 6.34mmbo

This is somewhat lower than many had hoped for, and below the numbers announced on the Dae Han website last week.

However, this news is tempered by the fact that a new exploration well, NK22, has been spudded on the Galaz block by KazRosMunai LLP targeting the Arksum and Upper Jurassic sands at around 2,200m and some 6km away from the NW Konys field. The prior expectation set with the announcement on 4 November was for this exploration well to be drilled in 2Q10.

It also seems strange that KazRosMunai are drilling this well, as previously there was talk of selling all or part of Galaz to LG of Korea or another party. It remains to be seen whether this deal will now go ahead or whether the farm-in deal with KazRosMunai will now continue to its second stage.

Wednesday, 4 November 2009

Roxi Petroleum (RXP) Releases Galaz Update

Today Roxi Petroleum (AIM:RXP) announced an update on its Galaz asset in Kazakhstan.

Unfortunately, it has not been possible to conclude a deal to sell all or part of the asset to LG of Korea under the exclusive MoU announced on 17 July. However, Roxi and LG are still discussing a deal, and Roxi has recommenced discussions with other interested parties; which bodes well for getting achieving full value in any full or part sale.

More interesting is that a reserves upgrade report has been submitted to the state authorities that will be reviewed today, with the results of the review expected to be received by 11 November. Some think the expected 2C classification will be of the order of 30mmbo (gross, of which Roxi share 43.4%). Following the classification to GOST standards, Roxi will then determine the reserves classification to western SPE standards. If expectations of 30mmbo gross recoverable reserves are correct; applying a multiple of $5/bbl would equate to a Roxi share worth ~$60-65m, or close to the current market capitalisation which would mean the BNG, Ravninnoe, Munaily and Beibars assets are in the price for almost nothing.

Further, after the reserves approval, Roxi will submit a pilot production plan and would expect approval, and presumably production start, in 1Q10. So, if the asset is not sold, Roxi will gain valuable cashflow. [Edit: Expectations of 2Q10 production start were set at the GM held on 17 November 2009. See report here].

Finally, Roxi has identified a deeper exploration target in the south of the acreage and plans to drill an exploration well to test the Arksum and Jurassic reservoirs to a depth of 2,200m . Roxi has completed tenders for the well, and hopes to start drilling by 2Q2010. After this well is completed, it is expected that 20km2 of new 3D seismic will be collected over the recently acquired northern portion of the block.

Thursday, 27 August 2009

ADA Oil

ADA Group is not currently an asset of Roxi Petroelum. But in October 2007, it did announce an option to buy a 50% stake in ADA and ADA Oil (together the ADA Group), which has significant, prospective acreage in Kazakhstan, and now very significant production. See this link:

http://www.roxipetroleum.com/PDFs/Rns041007.pdf

Further details of the ADA acreage is given here:

http://www.roxipetroleum.com/PDFs/RoxiEragonAcquisition0208.pdf Slides 20-22, and here
http://www.roxipetroleum.com/PDFs/Rns310108_4.pdf Pages 209-247

Part of the consideration was going to be Roxi shares at a value of 80p, later reduced to 65p. The credit crunch played its part in decimating the Roxi share price, so the deal did not go ahead. However, the deposit was never re-paid, and at the 2009 AGM, it was said that Roxi was interested in a deal for a part of ADA, but perhaps a different shape to the original one.

Here are other links about ADA. The first indicates that one discovery on Aktobe, where it suggests ADA has a stake, may have over 1bn barrels of reserves:

http://www.eia.doe.gov/emeu/cabs/kazaproj.html

The second indicates a discovery made on the block in 2006:

http://www.lgicorp.com/eng/ir/ir_news/news_view.jsp?txtGubun=Q&txtSeqNum=64

There has long been Korean interest in the assets of Roxi. For instance, Vision FMS from Korea was going to buy some of the Roxi shares issued as consideration for the Eragon acquisition and for the failed ADA deal.

Now, LG has expressed an interest in buying the Galaz asset.

Perhaps as significant is a recently announced deal whereby the Korean National Oil Company (KNOC) and LG have recently raised their stake in ADA Oil to 75% after a partial sale of assets from Vertom and other Kazakh holders:

http://209.85.229.132/search?q=cache:k5wrK1XZ4bIJ:www.securities.com/googlenews.html%3Fpc%3DKZ%26doc_id%3D230890976+ADA+and+LG+and+KNOC&cd=1&hl=en&ct=clnk&gl=uk

"Korean National Oil Corp. (KNOC) and LG International Corp. Purchased an additional 30% stake in the Ada oil block in Kazakhstan . The move increased their combine shareholding to 75%. Previously, KNOC and LG International held a 22.5% stake in the block each. In the recent transaction, the companies boosted their stakes by 17.5% and 12.5% respectively. The stakes were offered by Vertom and other shareholders due to problems in planned investment. Ada oil block is located in north western Kazakhstan . It is expected to producer 250,000 barrels of oil from the block by the end of this year. Next year, production is expected to rise to 750,000 bpd. Exploration of the block started in 2006. Its reserves are estimated at 170m barrels."

Interestingly, the seller was Vertom, which is one of the investment vehicles of Kuat Oraziman, one of the executive directors and major shareholders of Roxi Petroleum (RXP).

Is it possible that Roxi may sell the Galaz asset to LG perhaps as some part of the consideration for a stake in ADA?

Monday, 17 August 2009

Smarty Overview of Roxi Petroleum (AIM:RXP) Investment Case

Why invest in Roxi Petroleum (RXP):

  • Funded to drill acreage over next 2 years
  • Production success 1200-1400 barrels of oil per day (bopd) from Galaz - revenues monetised Q4 from possible sale of Galaz
  • Sept Interims with New broker note to follow
  • Possible move to SETS
  • Very likely Drill Ravninnoe wells end Sept
  • Drill Yelemes Q4
  • Vitol involvement
  • ADA acreage opportunity

    A positive broker note was meant to be published by WHI. Our new broker will obviously be keen to get his clients in pre proper news hits the streets and before broker note and probable rerating. Therein lies the problem of stock availability as a high % of RXP stock is held by KO and his Kazakh mates. I suggest that there maybe an attempted tree shake at some point as institutional demand will be met by a supply problem, net result a severe pop in the sp followed by news and a further spike north on rerating.

    I also like the Vitol involvement in RXP and their investment in BWLVN yesterday says a lot about their current appetite for more opportunity and it wouldn't surprise me to see their involvement in Kazakhstan-based ADA.

    This share is currently below the radar of many BUT not for much longer. I am in for the long term as I want to see BNG and possibly ADA deliver. There aren't many fully funded OE companies with the deep prospects and acreage prospectivity that RXP possess. RXP have done a great job to stay afloat and have managed to obtain interest & support from Canamems, LG of Korea, Vitol and I really see this as a hugely undervalued stock that has huge 'Bagger' potential.

    Smarty

Saturday, 1 August 2009

Roxi Petroleum (AIM:RXP) AGM Report

First the actual formal AGM:

Chaired by Clive Carver. All motions passed without incident, as you might expect when all of them had ~197m of proxies behind them. I did raise my eyebrows at Res 5 that allows the management to allot 190m shares – quite a big dilution, but it was justified by the possible need to use the GEM facility (more on that later) and exercise of warrants and options.

Now, the meaty bit: the presentation by Duncan McDougall. It is difficult to over-estimate the calm assurance in which he delivered the presentation, his openness to answering questions and being extremely informative. The meeting only had about 3 PI's, one corporate proxy and a few City hangers on (apologies to any reading). Bob and I asked most of the questions, in what was felt like a fairly cordial boardroom setting. Couldn't be better.

I think the best way of going through this is to step through the presentation as it was given ( http://www.roxipetroleum.com/PDFs/RoxiAGMDMCDJuly2009.pdf ), and chip in any further info that came up wither in the session, or afterwards in a brief chat with some of the directors.

Slide 4

They've essentially spent the last year raising finance. They've largely shunned placings and rights issues because the cost of capital would have diluted the company very, very significantly. So, they've gone the farm-out route and seem proud of their achievements. It seems that now they are funded up for a very significant exploration programme. Rob SSchoonbrood emphasised on more than one occasion after the meeting that the GEM facility was an "insurance policy" and he did not intend to use it as it was "very expensive money". I believed him, but I guess we should all note that no CEO is ever going to pre-announce using GEM, as it would make it even more expensive money. But as I see it, at the moment there is no need to use it.

Slide 5:

One of my concerns about Galaz was taken away, in that now we have had confirmation of the extension to the exploration phase to May 2011, which leaves plenty of time to drill up the deeper target(s).

Slides 6-10: BNG
Currently 2C reserves of 42 million barrels of oil (mmbo) – 40mmbo to Yelemes and 2mmbo to G54. There is not enough reliable data at present to declare 2P reserves to SPE standards. This will come from a combination of the 3-D seismic interpretation and new drilling. Spangle: the picture of G-1 was not mentioned on that slide, but elsewhere they stated that it previously tested at ~2,000barrels of oil per day (bopd) from a sandstone play – I've no idea what pipework they had in place for that test. G54 tested at 200bopd.

The significance of the blue dot-dash line is the "Transition Zone". Basically areas to the south and west of the line suffer flooding from the Caspian in the Spring. So, they need to plan operations in these areas carefully (for instance they are planning 3-D seismic over that area now. The red zone represents the carbonates distribution boundary – I didn't quite pick up on the significance of this, but Bob may have done.

Bob asked about the Max Petroleum interpretation of the geology, that all of the pre-salt and post-salt oil comes from the same, deep source rock. Duncan McDougal confirmed this as their understanding and said that the underlying Carboniferous source rock may be up to 40,000 feet thick (yes taller than Everest).

They are interested in acquiring the "coffin-shaped" bit in the middle, and believe it may become available in 2010. The other two excluded areas are producing fields (although there as a hint the southern one may be shut-in) and are not available for exploration. Maybe available to acquire as producing assets(?). However, significantly, they both have pipelines from them, making getting any new oil discovered to market (some 30-40km to the export facility) easier than it might otherwise be.

They expect the deeper wells to 4,000m carboniferous targets to cost $10-12m a throw, with wells in the southern part being perhaps 10% more than that with extra concrete pads and raised roads being needed to combat flooding. For these wells they are designing the wells, the casing and well head to prepare to encounter H2S, but they do not expect to encounter H2S, as historic wells in the immediate area have been H2S free.

They are looking to define the well locations later this year and trying to design wells that will hit the river channel features (shown on slide 9 – they very quite excited about these features) that they hope will produce 1.5mmbo each over their life rather than 0.5mmbo in other locations. Looking to target ~3 wells in the G-54 Jurassic closure area and possibly ~1 deep well in the G-7 area – a 4-way dip closure – I think this may be subject to change. I'm not sure but I think this well may target the area shown on the seismic map outlined in light blue that G-1 hit.

Slides 11-13: Galaz
Recently extended the size of this acreage and extended the exploration time horizon. It is a bit hidden on the slide, but KazRosMunai have invested about $5.5m so far, with a potential for $17m. But as what they have found in the Upper Jurassic is ahead of expectations, they are not going to proceed with KazRosMunai funding for drilling the mid-Jurassic target. So, Roxi's share of the acreage is going to remain at 43.3% (higher than the previously announced post-farm-in expectation of 30.09%).

They are hoping for 2C reserves in the region of 30mmbo. This submission will be in the next couple of weeks. They will start reporting reserves in both Soviet GOST standards (to satisfy Kazak authorities) and SPE standards (to satisfy investors). Hoping for pilot production approval of 1,200-1,400 bopd by end of the year.

Again they are excited about the "river channels" and they map the field along that channel. They plan to drill 4 more wells, probably in the in the yellow sections of the channel to prove up more reserves and better define the OWC. NK-4 had water ingress that they have solved with a diesel-cement squeeze (they described that as a bit crude). They are considering "coil tube side-tracking" (I can guess what that is, but maybe Spangle can elaborate).

The NE green channel will need water injection to fully produce. It is a bit of a problem where the water is going to come from, now they've sealed off NK-4.

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. I 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.

I asked about how wise it was to sell off Galaz when it was on the verge of significant production A reference to the MoU with LG of Korea), and the business needs income. The reply was that they will only sell if they get "full value" representing the reserves they have found and an element of upside. It may make sense to monetise now the next 20 years of production. Sounds to me like they know what they are doing. Additionally, they expect some production from Yelemes later in the year, so they would still have an income stream if they ended up selling off Galaz.

Slides 14-16: Ravninnoe (pronounced Rav-nina)

They are planning a new well here (#20) which will be a slightly offset re-drill of the old well #8, which tested ~800bopd. 3,800m td, but they will log the secondary Jurassic target on the way down. Drilling contract awarded, they've purchased the long-lead items and are working on sorting the services contracts. Probably spud in October, looking to produce at commercial rates. Although I don't recall it being mentioned during the meeting, looking at the slide 15 now, it looks like they've got two targets in the mid and lower Carboniferous which looks exciting.

Slide 17: Beibars

When they 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 gas at I think he said 500,000scfgpd. But the block is currently under a "military polygon" which has invoked "force majeure". So, no further activity until this is resolved. They didn't give a timeline and I didn't ask.

In the post presentation questions I asked about two things:

1) ADA. They haven't invoked repayment of their deposit as they are still interested in the asset. A deal may be done, but a different shape to the prior agreement.

2) Arawak/Vitol. I asked if we should attach any significance to them buying in. Rob Schoonbrood said it was for "internal Kazak reasons" and done at the "Arawak level", not the "Vitol level". He also said that any bid for the company would have to be agreed by major shareholders. At that point the meeting looked towards Kuat Oraziman, and he just laughed. I don't think he is interested in selling any time soon.

Bob also asked about when a full estimate of "unrisked resources" would be made available. They understood the question and what he was getting at. The answer is that to do that they need data, both from interpretation of the seismic and some drilling. Once they have that, then it will be provided. CC also mentioned that now they have the funding in place and a programme taking shape they will consider stepping up the PR campaign. Bob suggested Oil Barrel and Pro-active Investors as suitable venues, and I did get the impression a broker note was in progress.

So, overall I came away impressed with the people, with what they are doing and the future plans. In my view this is an "investment stock" not a "trader's stock". If I had more cash available, I would be buying more, but I don't, so I'm just sitting tight and watching the story unfold over the coming months and years. Inevitably, the share price will go up and it will go down, but what matters is where you buy at and what you eventually sell for.