Falklands : Hydrocarbons Daily Record (18/10/06)
Submitted by Falkland Islands News Network (Juanita Brock) 18.10.2006 (Article Archived on 01.11.2006)
Rockhopper Exploration shares gained 5.00 points today on good news.
HYDROCARBONS DAILY RECORD: WEDNESDAY, 18 OCTOBER 2006
By J. Brock (FINN)
At 1800 LMT Wednesday October 2006 Light Sweet Crude dropped $1.19 Cents to stand at $57.50 on the New York Mercantile Exchange and Brent Crude lost .16 Cents to stand at $60.78 on London’s ICE Futures Exchange.
TRENDS
Crude prices dropped today because the US has reported a larger than expected rise in crude inventories.
THE MARKETS
FTSE
Excellent results from a mining company – Rio Tinto – helped share prices to rise today.
At the close of play today, the FTSE 100 was upn41.78 points to settle 6,150.40 and the FTSE 250 gained 122.32 points to end at 10,342.00. FTSE Small Cap closed up 21.68 points to settle at 3,630.60.
DOW JONES AND NASDAQ
A whole lot of kissin goin on – the Dow Jones Index was above 12,000 twice today – once just 32 seconds after the open and another mid session reading was at 12,049.00. This was the highest in the Stock Exchange’s 110 years and boosted investor confidence. The Federal Reserve Bank also is expected to be neutral when it meets to consider interest rates.
At the end of play today the Dow Jones Index gained 42.66 points or 0.36% to settle at 11,992.68 and the NASDAQ fell 7.80 points or 0.33% to settle at 2,337.15. The SMP500 was up 1.91 or 0.14% to settle at 1,365.96 and the NYSE gained 17.10 points or 0.20% to settle at 8,663.55.
DEVELOPING FACTORS
(Europe)
(From a press release)
The Directors of Europa Oil & Gas (Holdings) plc, the AIM-listed production and exploration company, are pleased to announce that terms have been agreed with Edinburgh Oil & Gas Limited for the acquisition of 100% of DL001, the UK onshore licence containing the Crosby Warren Oilfield.
The Crosby Warren Oilfield is situated in the East Midlands Oil Province some 30km north of Europa’s existing West Firsby production facility. Crosby Warren currently produces approximately 35 barrels of oil per day[1] (bopd) and associated gas with less than 20% water cut from a single production well. Oil production is exported to the nearby Immingham refinery, whilst gas is sold to the adjacent Scunthorpe steelworks.
With only one part-time producer and multiple pay zones, the Directors believe Crosby Warren provides potential for production optimisation and field redevelopment.
Over the last three years, Europa has built a solid production base in the East Midlands. With this acquisition, the company will own three producing assets and associated exploration acreage. Europa’s investment at Whisby is a prime example of realising the value of under-funded fields: producing less than 5 bopd, the production was transformed by Europa’s Whisby-4 well, which has since produced over 200,000 bbls and continues to produce at c.150bopd.
Paul Barrett, Managing Director, said ‘I am especially pleased that it is still possible to acquire proven producing reserves with upside potential for a reasonable price even in the current climate of sustained high oil prices. The synergies with our existing East Midlands production operations will inevitably lead to more efficient operations and cost savings in the short term and we will be looking at the potential for drilling further production wells in the medium term.’
Europa Oil & Gas (Holdings) plc focuses on the production and exploration of hydrocarbons in Europe and North Africa. Europa currently produces over 500 barrels of oil equivalent per day from its operations in the UK, Romania and the Ukraine. Operating a balanced portfolio, Europa also has field appraisal and exploration activity on a number of projects in the UK and Romania and a strong new ventures programme across Europe and the North African region.
DEVELOPING REGIONAL FACTORS
(Bolivia)
Bolivia's vice president, Alvaro Garcia Linera, announced on Tuesday that the government was still committed to a target date of Oct. 28 to complete nationalising its petroleum reserves. Talks with foreign energy firms on transferring control have not yet produced a single new contract. The Vice President remains confident that negotiations are advancing quickly. None of the foreign energy companies working in Bolivia have signed new contracts.
(Falkland Islands)
Share prices at the close of play Wednesday, 18 October 2006
Desire Petroleum Plc ended up 1.25 points or -3.85% on the day to settle at 33.75.
Falkland Oil and Gas Limited (FOGL) ended down 1.50 points or -1.81% on the day to stand at 81.50.
Rockhopper Exploration ended up 5.00 points or 12.66% on the day to settle at 44.50.
Borders & Southern ended down 0.50 points or 1.25% on the day to stand at 39.50
Tullow Oil ended up 6.50 points or 1.65% to stand at 399.50
18th October 2006
Exploration Activity Update
Integration of data provides greatly improved clarity on prospects
• CSEM and 2D seismic data give direct hydrocarbon indicators
• Ernest Prospect (formerly J1) significantly de-risked, potentially c. 100 million barrels of recoverable reserves
• Potential discovered NPV10 over $1,000 million at $50 oil for prospect Ernest
Rockhopper Exploration plc (“Rockhopper” or “the Company”) has today announced that data from the two Controlled Source Electromagnetic Surveys (CSEM) carried out on its behalf by Offshore Hydrocarbon Mapping plc earlier in 2006, when co-rendered (superimposed) with recently acquired 2D seismic data, provides greater clarity of the structures surveyed and significantly de-risks the acreage.
Executive Chairman, Dr. Pierre Jungels, said:
“This is great news, we took a bold step utilising CSEM and have substantially de-risked our prospects. We now have a drillable prospect, Ernest, which if successful could contain over 100 million barrels of recoverable oil.
In little more than a year since listing on AIM, we have significantly increased our understanding of and confidence in the prospectivity our North Falkland Basin acreage. We now have a highly de-risked drillable prospect and a number of encouraging leads in licences PL023 and PL024.
We intend making further progress in our understanding with a 3D seismic survey starting later this month in licences PL032 and PL033 and conducting further evaluation of the 2006 2D seismic data on licences PL023 and PL024 with the aim of identifying a number of additional drillable targets for any drilling programme.”
Further technical information
Ernest Prospect (formerly J1)
2D
Interpretation of the 2D seismic acquired in 2006 has confirmed the robust nature of the prospect and also provided potential hydrocarbon indicators.
Prospect Ernest is a relatively low risk independent 4-way dip closed structure in 160m of water only 100km from the Islands. The 4-way closure looks more robust having interpreted the new seismic, with an areal extent of some 2880 acres. It is also possible to map a much bigger, somewhat more risky closure around it. This area depends upon closure against a major fault to the East and has an area of over 6,000 acres. We have observed an AVO (Amplitude Versus Offset) response on the flank of the structure along with possible gas chimneys and flat spots within the area of closure, all of which are potential hydrocarbons indicators. The new seismic also contains strong indications of the presence of reservoir units in the area.
CSEM
The CSEM data clearly shows resistors within the structure. On both the lines acquired over Ernest, a discreet resistive body is observed within the bounds of the 4 way closure. That resistor, in the opinion of the Company, when combined with the new seismic data, is suggestive of the presence of a hydrocarbon accumulation trapped within the structure.
Combining all the data and using fairly conservative assumptions leads us to believe that Ernest, as mapped to the less risky four way closure, could contain approximately 312 million barrels of oil, of which approximately 100 million could be recoverable.
At the time of the admission to AIM, Scott Pickford independently risked the prospect at a chance of success of 19.4%. From that point and following the interpretation of the 2D and CSEM data, we now believe that the chance of success has increased to over 40%, with the main remaining risk being reservoir quality. This reduction in risk, combined with a higher oil price environment, has hugely increased the EMV (Expected Monetary Value) of the prospect.
At the time of the admission to AIM, Scott Pickford built an economic model for the prospect. Using that model, the NPV of a 107 million barrel recoverable field at an oil price of $50 per barrel is over $1,000 million, should the oil price fall to $30 per barrel, the NPV would fall to $323 million.
The prospect is now ready to drill. As a result, we have upgraded its status and named it Ernest. The prospect is named both after the son of Director Richard Visick who was born in the run up to the AIM admission, and after Explorer Ernest Shackleton, who had a strong connection to the Falkland Islands.
Lead K
2D
The 2D seismic confirms the presence of a number of relatively shallow rollover leads in the area of target K. More seismic is required to further define the extent of the structures in the area.
CSEM
The CSEM resistivity data show a resistive body which appears to be coincident with a structural closure. However, it is not the original structure targeted in the survey, but a flanking structure to the north east. This is an interesting and encouraging result and further investigation is required in the area.
2D seismic - other areas
2D seismic was also acquired over a broad area in the south of licences PL023 and PL024. Interpretation of these data is continuing and is allowing Rockhopper to focus its future exploration efforts in the most prospective parts of these licences.
New 3D seismic acquisition programme
Our 3D seismic programme with CGG Marine in licences PL032 and PL033 will now begin at the end of October, some 2 months earlier than anticipated. This will accelerate our work programme and could lead us to have a number of additional drillable targets by the middle of 2007. At that point, we will be ready to join any drilling programme in the Falkland Islands subject to funding.
Images of the co-rendered 2D and CSEM data over Ernest and K will be placed on the Rockhopper website: www.rockhopperexploration.co.uk.
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