Carnarvon Petroleum (ASX: CVN) believes a farm out of its Phoenix gas assets offshore Western Australia will deliver value that is far higher than it current market capitalisation.
The top-ranked Phoenix South and Roc prospects in the Roebuck Basin’s WA-435-P and WA-437-P are believed to each hold in place gas of 5.5 trillion cubic feet of gas.
This resource would be worth several billions of dollars upon commercial gas flows being proven and would still represent a company changing boost to Carnarvon and its equal partner Finder Exploration despite any dilution to their equity in the project from a farm out.
Carnarvon has also revised its Thailand reserves downwards to account for the poorer than expected drilling results in 2011.
Gaffney, Cline and Associates estimated the company held proved reserves of 3.8 million barrels (MMbbl) of oil, down from 4.7 MMbbl in 2010.
This takes into account production of 400,000 barrels in 2011 and is based on Carnarvon carrying out a 28 well development program this year.
The program targets sandstones in the onshore WBEXT field and targets oil production of 1500 barrels per day net to Carnarvon.
The review also led to a reduction in proved and probable to 12.1MMbbl of oil, down from 20.4MMbbl in 2010.
GCA believes this could lead to an increase in Carnavron’s net production up to 4000bpd of oil in the 2013-2016 time frame though this may require the implementation of inflow control devices that are currently being trialled.
The Phoenix asset in WA-435-P and WA-437-P was discovered in 1980 by the Phoenix-1 well and has a proved Triassic in-place resource of 870 billion cubic feet of gas.
Phoenix South and Roc were identified through 3D seismic covering 1100 square kilometres in late 2010 to early 2011 over the gas discovery and nearby prospects and comprehensive technical work.
With the two permits located just 150 kilometres north of Port Hedland, any discovery would benefit from existing pipeline access to Perth, be developed through existing or new liquefied natural gas projects, or provide gas to mines in the Pilbara.
Carnarvon is also looking at acquiring seismic data from Fugro Multi Client Services, which is shooting a 4289 square kilometre multi-client 3D seismic survey.
This survey covers part of WA-435-P, WA-436-P and WA-443-P and will allow the company to assess several leads in the area and enable further technical work to be undertaken before the next farm-out process is initiated.
Carnarvon holds 50% of WA-435-P and WA-437-P. The remaining 50% is held by Finder.