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Fox-Davies Capital

Fox-Davies Capital specialises in assisting international resource companies to gain access to the UK, European and North American capital markets and has a substantial background in emerging markets particularly in Africa, Asia, Russia and the CIS.


Silvermere Energy, Enquest, Hardy Oil, Salamander Energy and others feature in Fox-Davies Newsflash

February 04 2013, 10:04am

Daily Oil & Gas Monitor

San Leon (LON:SLE) – Oil Shale Takes a Step Forwards: Today’s disclosure of the results of the scoping study on the Tarfaya Oil Shale in Morocco has suggested that the shale may yield up to 0.45bbl/tonne of rock; by comparison, TomCo’s Holliday block contains ~0.47bbl/tonne of rock. While this series accounts for relatively little in our valuation of the San Leon, today’s news continues to support out longer-term outlook for the Company. While retorting is not as expensive as continuous rotary facilities, it is not the only technology. Given the apparent similarity to TomCo’s Utah operations, Red Leaf’s “EcoShale” technology is a possibility. The EcoShale process is a variant of the Retort in that it is a batch process, but unlike the retort technology, the volume of shale used in the unit is larger, the run times generally longer, but generally speaking the upfront capital investment is lower. This news is positive for the Company, before we make any changes to the contribution that the Tarfaya Shales makes to our valuation, we will await the results of the feasibility study in to the suitability of the Enefit 280 process. We are reiterating our BUY Recommendation and 25p Target Price.

In this news:

Enefit Outotec Technology ("EOT") was commissioned to conduct an initial study of the Tarfaya Oil Shale, Morocco, with a view to pursuing a possible surface retorting project utilising the Enefit 280 process

EOT conducted the study on the basis of borehole data from Shell's operations in the 1980's. In addition, EOT picked 34 samples, at 0.5 m intervals, from the oil shale layers outcropping in the Trial Pit that was first excavated by Shell.

The resulting data was injected into an adapted model and a good correlation of the field samples taken by San Leon and the extensive borehole data collected by Shell was established

The yield results from the data samples from the R1 and R3 reservoir zones suggest that an oil yield of 72 litres of oil per ton of extracted material is achievable.  Preliminary modelling of the project confirmed that a commercial operation is possible

Further work is now focused on the optimal configuration of a plant based around the Enefit 280 process and the potential product mix in the context of Moroccan market conditions, with a view to the Company seeking partners into a 5,000 - 10,000 bopd production capacity plant.

Hardy Oil & Gas (LON:HDY) – Ganesha is Gas After All: Today’s news that Ganesha is a gas discovery (as the Company had claimed) and not an oil field (as the Government of India claimed) is just the shot in the arm that the Company needs. However, one questions to what extent the Company can move on today’s announcement, especially as the long awaited management review has not delivered much to date, and the PY-3 field remains shut in. While the share price in recent months has shown signs of recovering from its recent lows, we will wait to see more action from the management on what the next steps with regards to Ganesha are before we upgrade our estimates. Following this news, we are reiterating our BUY Recommendation and 185p Target Price.

In this news:

Arbitration of the Ganesha-1 discovery, located in the CY-OS/2 exploration block, has issued an award in the Company's favour

The Company has been successful in obtaining the extension of the CY-OS/2 licence

Hardy & Partners are to undertake appraisal activities on the CY-OS/2 block, in accordance with the governing production sharing contract, for a further three years from the date on which the block is restored

Hardy also awarded the joint venture recovery of costs incurred as a result of the arbitration.

MEO Australia (ASX:MEO) – Blackwood Appraisal is a Go: The Company has disclosed that its partner (Eni) in the NT/P68 permit which contains the Blackwood discovery, has elected to proceed with drilling a follow-up well and test the formation; the companies have 18 months in which to conduct the tests. Given that MEO’s project has to compete on a global scale for Eni’s investment (due to the number of projects that Eni studies at any one time), today’s announcement supports the wider Blackwood prospectivity, and our current outlook for the Company. Following this news, we are reiterating our BUY Recommendation and A$0.55 Target Price.

Salamander (LON:SMDR) – Potentially a Significant New Find: Today’s announcement that the South Kecapi-1 well has interested productive horizons is the shot in the arm that its exploration programme needed, and reverses the disappointment of Thai exploration wells. If you look at the wider portfolio, however, it is discernible that there is an upwards trajectory, as today’s news follows the positive update before Christmas on Bravo’s first oil. We believe that the shares will rightly respond positively to this news, as we are now seeing a Company moving forward with greater assurance than it has in the past.

In this news:

Primary Targets (BT45 and BT50 channels)

o The well encountered 11 metres of net oil pay in high quality early Pliocene channel sandstones (BT45) which represent the upper primary target of the well at 1,722 m TVDSS. A DST was conducted across a five metre interval of the oil-bearing reservoir which flowed at a rate of c. 6,000 bopd on a 52/64" choke, without any produced water. The oil is a light, sweet 33.4 API crude (GOR of 1.3mcf/bbl).

o Wire-line and pressure data have confirmed the presence of an oil-water contact within these well-developed channel sandstones. The lower primary Upper Miocene target (BT50) was found to have limited sand development at this location.

Secondary Targets (BT18 - BT25 channels)

o In the shallowest target, the BT18, the well found three channel sandstones each with gas to base totalling 24 m of net pay. In the BT25 target a 5 m thick sand channel with gas to base was encountered.

o A full evaluation suite of pressure and fluid sampling together with wire-line log analysis and collection of gas samples provides evidence for excellent quality reservoir characteristics, with porosities exceeding 30 % and excellent gas mobilities within these sandstone sequences.

o In addition, two long sections of thin-bedded pay were encountered in the shallow section of the well. A micro-resistivity log was run, indicating a significant potential net pay addition. Further work is on-going to determine the resource potential of these zones.

Resource Potential

o Work is currently underway to confirm the range of volume of discovered resource. Salamander does not believe the gas resource discovered in the main channels necessarily represents a commercial volume on a stand-alone basis and work continues to define the additional resource potential of the thinner sands. However, with light oil discovered at South Kecapi in well-developed, high quality reservoir on the down dip, western flank of the large Bedug structure, there is a material upside case for both oil and gas.

o The crest of the Bedug structure lies 4 km east and 500 m up-dip of the SK-1 well location and the initial view of the range of potential recoverable oil resource discovered in the BT45 primary target reservoir alone is between 13mm bbl and 133mm bbl. Further appraisal of this interval, together with the drilling of additional target channel sequences with the Bedug-1 exploration well will help further define resources.

Other News In Brief:

EnQuest (LON:ENQ) – Update Short and Sweet: Today's Operating Update was short but to the point, outlining the Company’s progress in 2012. The Company appears to be well funded (as suggested by its 5.5% 2022 bond), and well placed to make 2013 another successful year.

Gold Oil (LON:GOO) – On the Right Track: News today that the Nancy Burdine field is online at 500bpd is not going to set Gold’s world on fire, but it underlines the fact that the Company is moving in the right direction.

Silvermere Energy (LON:SLME) – Slowly, Slowly: Today’s trading update is solid, and news that sales volumes are once again flowing is good news. That its operations have been interrupted tempers the overall tone of the announcement is disappointing, but that things are progressing in line with the Company’s expectations plan provides a solid platform for the remainder of 2013


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