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.

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.

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.

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.

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.

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.




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.

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."

Roxi Petroleum (RXP) Galaz Asset

Content updated and post moved here.

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

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.

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) 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.

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.

Dea Han New Pharm Let's Slip the Galaz Reserves

On 4 November, Roxi Petroleum announced that the Kazakhstan authorities were about to consider the revised reserves for the NW Konys field on the Galaz block, with results expected on 11 November.

We are still awaiting official confirmation from Roxi; but on 25 November, one of the shareholders of Baverstock (a major shareholder of Roxi), Dae Han New Pharm appears to have announced that the revised gross 2C reserves to GOST standards are 16 million barrels of oil (mmbo) (43.4% net to Roxi), compared to prior reserves of 12.6mmbo in the 2008 Annual Report.

This is somewhat below expectations of ~30mmbo, but is nevertheless an improvement. However, the numbers are coming from a Google translation of a page published in Korean, so we must treat this with some scepticism for the time being.

Links to:

Dae Han New Pharm website: https://www.dhnp.co.kr/default.asp

Dae Han press release from 25 November: https://www.dhnp.co.kr/news/notice_read.asp?id=80&page=1&pos=80

Note that unless you can read Korean, you will have to use a translation tool to understand what is being said.

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.