www.elixirpetroleum.com
Elixir Petroleum is an international exploration and production company listed on the Australian Stock Exchange (ASX:EXR). Elixir holds interests in producing gas and condensate fields located in the Gulf of Mexico and has extensive interests in exploration and appraisal licences in the UK North Sea. Elixir has recently acquired interests in two producing fields in the Gulf of Mexico which provide the group with cashflow from sales of gas and condensate. The company is focused on increasing its presence on the shallow water shelf of the Gulf of Mexico and continues to examine new projects in which to participate. Such projects typically display discovered reserves, nearby infrastructure and short cycle times to first production and cashflow.
Elixir Petroleum Finds a bride
At long last Elixir Petroleum has found its bride! Press releases from Elixir over the past 6 months have hinted, several times, that the company was considering options that would help balance its portfolio between high impact, high risk drilling and lower risk, lower impact assets. It would appear that Elixir has finally found the answer ? a merger with ASX listed Gawler Resources.
Originally formed to explore for uranium in Australia, Gawler Resources has one oil asset; a 30% working interest (22.5% Net Revenue Interest) in the High Island A268 oil and gas development project in the coastal waters off Texas. Oil and gas-bearing formations were first discovered at High Island between 1984 and 1989. At the time, 2D seismic and wireline logs suggested that the reservoirs had continuity risk and, combined with lower hydrocarbon prices so the decision was made not to develop the assets.
What a difference a few decades can make. There are now numerous producing fields in the immediate vicinity and modern 3D seismic data taken in 1995, and reinterpreted in 2004, has considerably lowered the development risk. There are now three wells planned for High Island A268, which will form a tripod that will tie into another nearby platform. Production is anticipated in September once the second well is completed and the necessary infrastructure is in place. A third well will be drilled and tied in shortly afterwards, but production is expected to start at around 20 million cubic feet per day (mcf/d) of gas in the 3rd quarter. Gawler have stated that gas and oil production from High Island should reach 1,500 barrels of oil equivalent per day once the field is fully developed. And even though High Island isn?t a particularly big field, with potential reserves estimated at 3.2 million barrels of oil and 38 billion cubic feet (bcf) of gas, from Elixir?s point of view, this is a quick and simple route to the sacred cow of all resource related companies ? cash flow. Gawler itself acquired the 30% working interest in High Island from fellow ASX listed oil and gas exploration and production company Aurora Oil and Gas (ASX: AUT) who will be a major shareholder in the combined group.
So while Gawler Resources has an option in a near term production play, what it lacks is access to funds for development. From this point of view, Elixir appears a good fit. Elixir?s own focus on high impact targets in the North Sea has always seen it farm out stakes in its North Sea blocks to larger players who essentially foot most of the entire exploration bill while Elixir is free carried. Elixir?s Achilles heel however has been the long gaps between drilling in the North Sea, and the excruciatingly long time it can take to negotiate farminee partners into a proposed well. And despite having a stake in some very sizeable targets, the chances of success on the first well are quite low. One thing Elixir has been quite good at though is retaining cash. The company currently has £3.8 million and with the merger with Gawler Resources, it will bring to the table all the funds required to complete the development of High Island, and some.
Gawler shareholders will gain access to Elixir?s high impact portfolio. Particular interest currently surrounds the completion of the farming out of Block 211/18b where German utility group RWE recently took a 30% interest. Russell Langusch, MD of Elixir, told Proactive that RWE?s entry on the block had sparked the interest of many other groups and that they were hopeful of making a further announcement soon on developments at Block 211/18b. Block 211/18b contains the Leopard prospect which has prospective reserves of 370 million barrels of oil. Elixir also has high hopes for Block 211/22b where, despite the failure to find a commercial discovery with the Jaguar well, it was proved that a working hydrocarbon system exits on the block. This added to the prospectively of the block as Antrim Energy?s Giants Causeway discoveries are on trend to the north-east of 211/22b.
Assuming the merger goes ahead ?- the combined entity will have interests in several blocks in the Northern and Central regions of the North Sea and near term production in the Gulf of Mexico. This will offer investors a much better balance of cash flow and high impact exploration.
