Roxi Petroleum Newsflow Update

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

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

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

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

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

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

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

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

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

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

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

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

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

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


Don't forget to do your own research.

Roxi Petroleum Operations Update

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

BNG

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

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

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

Ravninnoe

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

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

Galaz

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

Munaily

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


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

Roxi Petroleum 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

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) Munaily Asset

Content updated and post moved here.

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

Overview

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

Prospects

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

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

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

Reserves

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

Roxi Petroleum (RXP) Releases Operational Update

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

Galaz

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

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

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

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

Ravninnoe

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

BNG

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

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

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

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

Other Operational

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

Management

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

Finance

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

Roxi Petroleum (RXP) Broker Note Released

Roxi Petroleum's (AIM:RXP) broker and NOMAD, Matrix Corporate Capital has finally released its long awaited broker note covering the company.

Based on a long term oil price of $80/barrel, Matrix sets a core value of 8p/share and a core plus risked value of 17p/share. With a long term oil price assumption of $100/barrel, the core value rises to 12p/share.

The broker note can be found here.

Key points that have emerged include:

1) BNG.

Matrix recounts the prior guidance of the company setting out the 2C reserves of 42 million barrels of oil (mmbo), with 2mmbo being attributed to G-54 in the Jurassic and 40mmbo attributed to Yelemes G-1 in the pre-salt.

However, elesewhere they talk of a shallow target spudding in 2Q10 to target 25mmbo and a deeper well spudding in 1H11 targeting 35mmbo. There is some discrepancy between the 2C reserves and the target sizes that is not very well explained; and no mention is made of the 3C resources of ~360mmbo that are mentioned in the annual reports. Moreover, it is not clear if the targeted 25mmbo in shallow target is just for G-54 or whether it includes the Triassic target identified beneath in the BNG Seismic post.

Elsewhere they talk of the shallow Jurassic well spudding in 1Q10 and targeting 5-40mmbo between 2-3,000m and a deeper well targeting 20-60mmbo at a depth of 3,500-4,500m. However, on the company's own seismic charts, the Jurassic is at around 1,400-1,600m, the Triassic target at 2,100-2,500m and the lower Permian target at approx 2,400-2,700m. So, overall, something of a confused picture, probably derived from the inordinate length of time it has taken to produce the note.

Interestingly, Matrix paint a little more detail on the old Ayrshagyl and Saztobe wells, both of which encountered hydrocarbons. It seems Ayrshagyl suffered a blowout and the Saztobe well was in the SW of the block and discovered condensate. This area is unlikely to be an exploration target for some time - the 3-D seismic over that part of the block is likely to be carried out during 2010.

2) Ravninnoe.

The Matrix broker note paints a little more detail on the targets in Ravninnoe. First, the mid-Carboniferous target currently being drilled by Well #20 is described as having P50 resources of 27mmbo and P10 resources of 58mmbo. The P10 resources number is a new disclosure.

Moreover, they indicate that if Well #20 is successful, then 3 or 4 additional wells are planned to be drilled on Ravninnoe in 2010. I guess we now have an indication of the use of funds if the full or partial sale of Galaz goes through.

Matrix also disclose some extra details about the deeper targets at Ravninnoe. First, the lower-Carboniferous target does seem to have been drilled by old Soviet wells, and Matrix assign a chance of success of 50% to this prospect, with P50 and P10 resources of 28 and 49mmbo respectively. Interestingly, in prior disclosures like the Envoi note, the lower-Carboniferous and Devonian targets have been merged together. This note clearly separates them out as different targets although we do not yet know the prospective size of the Devonian target.

There is also an interesting passsing reference to Well #20 having been designed to test a number of seismically mapped Jurassic and Cretaceous targets - this looks like a new disclosure.

3) Galaz

First, Matrix have made a simple mistake in saying the NK22 exploration well spudded on 24 December. That date is in the future, and Roxi have clearly said it spudded on 24 November.

Matrix also give an indication of the differences between the old Soviet GOST standards and western SPE standards for measuring reserves. Roxi's latest news releases indicate 14.6mmbo of 2C reserves on the NW Konys (aka NW Konus), but in their valuation, Matrix only attribute a core 8mmbo with an unrisked upside of 5mmbo. It appears as though some of the discrepancy arises from how far along the river channel one allows for probable reserves.

Central Asian Republic Oil/Gas Fields and Pipelines

Interestingly, Yelemes and Ravninnoe (as Ravnin) and Munaily (as Munayli) appear on this EIA map of Oil and Gas fields and pipelines in Central Asia, including Khazakhstan:

http://www.eia.doe.gov/emeu/cabs/Kazakhstan/images/Central%20Asian%20gas%20and%20oil%20pipelines%202004.pdf

Roxi Petroleum (AIM:RXP) 2009 AGM Presentation

Roxi Petroleum is an AIM listed oil and gas exploration company (AIM:RPX) with the BNG (aka Ayrshagyl), Galaz, Ravninnoe, Beibars and Munaily blocks in Kazakhstan. The Kazakh headquarters are in Almaty, Kazakhstan, although there is a corporate headquarters in London:

http://www.roxipetroleum.com/

At the recent AGM for the year ended 31 December 2008, the company made a presentation covering its major assets. This report can be found here:

http://www.roxipetroleum.com/PDFs/RoxiAGMDMCDJuly2009.pdf