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: Investors await Guinea Prospect
If hydrocarbons are present, this prospect is estimated to host a resource between 65 and 120 million barrels of oil on an un-risked* basis. This will be Elixir?s first major target to be drilled since a dry well was drilled last year and, in this case, Elixir has no financial exposure to worry about if the well is dry.
However, the discovery on a neighbouring block is encouraging, and for Elixir 13.125% of a 20 million barrel discovery would be significant.
On the adjacent Yoeman North Sea Block, it looks like Nexen, Paladin, OMV and Oilexco have discovered a (P50*) 22 mbbls* oil field. I say ?looks like? because further appraisal is required before the find can be classified as ?commercial?
Elixir felt the crunch in the North Sea when several mid sized oil companies piled into the region, increasing the competition for blocks in each licensing round. Unfortunately for the smaller players, this means that in many cases they simply cannot bid for the most sought after blocks as they are ?out bid? by bigger players. This has forced companies like Elixir to be more nimble and concentrate on acquiring blocks where there is prospectivity that has been overlooked by other players. Naturally this has led Elixir more to the fringes of what was then deemed ?typical? North Sea targets and as the company focus on less obvious targets is increased, so too is the risk increased that the drill bit will fail to find commercial quantities of oil.
However, one ?edge? that Elixir does have is that it was one of the first AIM listed oil companies to move into the North Sea three years ago when the sector started to warm up. Many pundits wrote off the North Sea as the super majors exited the region, but their exit left a temporary vacuum which allowed many smaller players such as Elixir to snap up high impact acreage. Some of the licences that Elixir picked up at this time, in the 22nd and 23rd rounds, now attract the attention of some of the mid-tier players now looking for more drill targets.
Elixir is currently negotiating farm-in deals for Blocks 14/14b, 211/18b and 211/8b and it is very likely that Elixir will negotiate arrangements that leave the company with free carries through the exploration drill stage of the projects. If Elixir manages to do this the company will be hanging on to cash reserves which will be much needed for the forthcoming 24th licensing round, in which prospective applicants will have to show financial as well as technical capability to carry out exploration if they wish to acquire blocks.
Whilst we await more news flow on the farm-in arrangements, the near term high impact news will certainly come from Guinea, where operator Nexen anticipate drilling in the next few weeks.
So - fingers crossed!
Jargon Buster
*?Un-risked? means ?pretty sure?
* P50 represents a sort of ?middle path? estimate of the size of an oil field - about half-way between too optimistic and too pessimistic - and is taken to represent what can reasonably be expected to be the size of the oil reserve.
* mbbls = million barrels
