Blog No Longer Maintained

Some time ago, after a run of bad news, or at least the absence of good news, I sold out of RXP.

However, I did keep the blog up and running.

However, readers shold note that although the blog will remain on-line, much of the content is now out of date and readers should do their own research into the stock.

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.

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.

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.

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.