BNG Asset

Source: Canamens

Overview

Roxi Petroleum's (RXP) BNG Contract Area, sometimes known as Ayrshagyl, is probably the most mouthwatering block in the Roxi Petroleum portfolio, lying as it does some 40km away from the super-giant 8bn barrel Tengiz field in Kazakhstan.

Prospects

At the time of acquisition, 25 leads had been identified at various depths from the Jurassic to the Carboniferous. It was stated at the 2009 AGM that it was believed a common source rock under-pinned the acreage that may have been up to 40,000 feet thick.  The existing leads are being refined and delineated by the 3-D seismic programme that took place during 2008.  Some areas of the block are excluded as they contain shallow fields in the 5-100 millions of barrels of oil (mmbo) range from the Jurassic, Triassic and Permian horizons.

The shallow fields in this area tend to be above the salt (or post-salt). But the super-giants like Tengiz have been discovered under the salt (or pre-salt).  It is to be hoped that the new techniques associated with the modern 3-D seismic have provided imaging that is good enough to delineate prospects under the salt.

Interpretation of the 360km2 3-D seismic was due to be received in November 2009, but at Oil Barrel in February 2010, expectations were set for some announcements on this mid-year 2010.

It was understood at the 2009 AGM that the company was in the process of deciding well locations, with an intention to start drilling ~3 Jurassic depth wells in the G-54 area and possibly 1 deeper well to the Permian in the G-1 (Yelemes) area, with first spud in 4Q09, with the deeper well more likely to be in 1Q10. These wells appear to be primarily appraising the existing discoveries that were made in the 1980's. The combination of modern 3-D seismic and old and new well logs ought to provide enough data to support the generation of 2P reserves to SPE standards.  The original G-1 tested oil at ~2,000barrels of oil per day (bopd) - from 2009 AGM report.  It may just be, that Roxi will consider testing the Triassic Truncation play with one of the planned G-54 wells.  G-54 tested oil at a rate of 250bopd in 1998.

In the Operations Update of April 2010, it was announced that Well 54 had tested at 200bopd and two further wells, 805 and 806 were about to be drilled targeting the same Callovian sands that well 54 is producing from with secondary targets in the mid-Jurassic.

A further 3-6 wells will be drilled this year that may be expected to provide rapid organic growth to BNG’s reserves base and production.

Seismic Results

Looking at the image above (it can be enlarged by clicking on it), taken from Slide 8 of the Roxi Petroleum (RXP) AGM Presentation from July 2009, it looks like there are more targets in this part of the BNG block (also known as Ayrshagyl) than were discovered in Soviet times.  We know already about G-54 (aka Yelemes), the likely target of the first wells Roxi will drill on the block and G-1, presumably the pre-salt target discussed in the same presentation.

However, two other targets appear on this slide, the Triassic truncation play and the Upper Permian truncation play. Is it possible that Roxi will consider deepening one of the 3 new Yelemes G-54 wells to test the Triassic play type?

Clearly, the timing of the wells has been put back by the re-negotiation of the farm-out to Canamens, and the broker note of December 2009 with Matrix indicating shallow wells in 1-2Q10; although it is not clear if these wells are targeting just the Jurassic or whether they will also be targeting the Triassic play. 
The "coffin-shaped" area that is not currently under license is thought to be prospective, and indeed the image sourced from Canamens above suggests there may be an existing field there.  At the 2009 AGM it was suggested this area may become available during 2010.

The announcement of 3 February 2010 stated that Roxi was preparing to reperforate the old G-54 well and that a rig has mobilised ready to drill 2 wells - presumably shallow wells - on the South Yelemes field.  Moreover, they were planning to drill 6 further wells on the BNG block during 2010.  It is to be hoped at least some of these additional wells will also test the deeper, larger structures and that at least one of the shallow wells tests the Triassic lead underneath G-54.  At Oil Barrel in February 2010, it was confirmed that a total of 9 well results are expected during 2010, including 5 exploration wells and 4 production/appraisal wells.  Roxi has also tendered a contract to shoot more 3-D seismic over the southern part of the block, presumably covering the old Saztobe well.

Reserves

Reserves for the BNG Contract Area to SPE standards have yet to be published. However, the 2008 annual report shows gross reserves and resources to Soviet-era GOST standards of over 400mmbo (C1+C2+C3), with 42mmbo C1 + C2. After the recent farm-out deal with Canamens, the Roxi share of these resources would be around 93mmbo 3C or 10mmbo 2C.

The gross 2C reserves are attributed 40mmbo to Yelemes and 2mmbo to G-54 on the South Yelemes field.  In the April 2010 Operations Update, Roxi said they expected the P50 reserves associated with South Yelemes to be around 12.5mmbo.

The combination of modern 3-D seismic and old and new (from the anticipated drilling programme) well logs ought to provide enough data to support the generation of 2P reserves to SPE standards.

Of course, we don't yet know the prospective resources attributed to the leads and prospects identified on the recent 3-D seismic.

Financing

On 29 October, Roxi announced the details of the new financing transaction. This deal means that Roxi's additional work commitments are reduced to $8m, in return for reducing its eventual stake in BNG to 23.41%.  Whilst it is disappointing that the final stake is BNG is being reduced so dramatically, it is undoubtedly good news that funding issues have now been resolved and the path is clear to commence drilling; hopefully in the near future.

On 31 March 2010, it was confirmed that Canamens has exercised its option over 12% of the BNG block in return for a consideration of $23m in the form of a loan.  So, Roxi's share of the block is now confirmed at 23.41%, and the programme for 2010 is fully funded.  Hopefully, significant value can be added from this drilling campaign.