Proactive Investors - Run By Investors For Investors

Producer Pulse Oil's Bigoray project in Alberta could be a game-changer

Bigoray's development could mark an absolute game- changer for the firm in terms of scale.
Producer Pulse Oil's Bigoray project in Alberta could be a game-changer
Pulse is focused on high potential assets in western Canada

Producer Pulse Oil Corp (CVE:PUL) has big plans to grow a small company exponentially through the strategic acquisition of low cost but high potential assets in western Canada.

The management team, headed up by money man Garth Johnson and geologist Drew Cadenhead, undoubtedly have form.

Looking to repeat success..

With this venture, they are looking to repeat the success they had with TAG Oil, which they took to a $660mln market cap firm from a financially stressed one worth about $2mln.

Chief among their plans at Pulse involves their newly acquired Bigoray assets, whose development should mark an absolute game- changer for the firm in terms of scale.

Chief executive Johnson said excitedly of Bigoray "Drew and I have been partners for 15 years. We looked all over and I've never come across an opportunity where we can make such a big value-add to reserves, cash flow and NPV10 without taking on a lot of risk - without drilling an exploration well."

This is one of two assets the firm has bought, the other being located in Queenstown in southern Alberta, which already generates around 70 boe/d (barrels of oil equivalent per day).

So lets drill down a bit more at Bigoray and see why it's sparked such excitement.

Johnson explained how the firm originally looked at the project as a conventional oil play, but after some further research, realised it could yield much more, by employing an enhanced oil recovery program - in this case via miscible flooding.

Current reserves of 1.67mln boe..

Pulse's current reserve base stands at around 1.67mln boe with a net present value of $11.6mln.

"We have an opportunity in front of us, without drilling a well, to increase our NPV10 of reserves to, on a low case, about $170mln and on a high case $215mln," he told Proactive.

Bigoray consists of the Cardium oil pools, the Mannville gas pools, the Pekisko oil pool and the Nisku oil pools. It is the latter, which is key to the growth story here.

There are around 50 of these Devonian age reefs - 1 to 2km across -  discovered in the late 1970s and Pulse has interests in two of them. Most have been subjected to enhanced oil recovery techniques, which saw average recovery of about 80% of the oil in place.

Pulse's Nisku D and E pools have about 27mln barrels in place, 9mln of which have been recovered from simple waterflood, and the firm reckons there are about 12mln barrels it can still recover.

Johnson explained how a nearby pool was originally producing around 2,000 boe a day, but after the miscible flood, that increased to 3,000 boe, which then flat-lined at that level for the next seven to eight years.

"We reckon we can grow production from about 100 gross boe per day to well over 4,000 barrels with the implementation of the miscible flood..," said the company boss, adding that at level Pulse could likely be seen as a takeover target.

In simple terms, the process involves pumping in a solvent and then a gas, which reduces the viscosity of the oil, making it easier to get out.

It's low cost too, says Johnson, costing about $3mln for initial infrastructure for each reef.

Bigoray also has opportunities to reactivate conventional wells at low cost and Johnson says with just some Nisku wells being reactivated that have been on waterflood and bringing the Mannville wells on stream Pulse could add around 700 boe/d of gross output for a cost of approximately $2mln.

Getting it's house in order...

But before all that, Pulse is keen to get it's house in order and wants to have full control of its assets. To that end, it's keen to buy out two partners it has on the Bigoray play so that’s where Johnson and Cadenhead are currently focussed.

It is an opportune moment to make such deals at reasonable cost as the oil market is under pressure and firms are looking for exits completely or to free up limited capital to focus on core areas of their operations.

It's worth mentioning here that Pulse also has the Queenstown assets in southern Alberta, which, it says,  represent a fantastic longer term (5-6) year play opportunity.

Here, Pulse owns a 100% interest in over 30,000 acres and 70 boe/d of current production and 20 development drilling locations already earmarked.

Last month, the firm said a new geophysical study means Pulse knows where to focus on the highest productivity areas within  the prolific Mannville lithic channels, and it reckons it can generate initial output of 200boe/d for the first 60 days of each new well and then producing on predictable, low decline rates for years to come.

So it's all looking quite exciting for the group, which only went public in March this year. It is already profitable at the operational level, and management has certainly put its money where its mouth is.

Cadenhead and Johnson combined have put in around $1.3mln of their own money in the venture, and are convinced it will grow.

The market cap is about $7mln yet the book value of the assets alone are worth $14mln, explains Johnson, which would support a share price of double where they are now at 10 Canadian cents.

"We don't want to put the company at risk. We want to make profits," said Johnson.

Pulse raised C$4.8mln in June and has no plans to raise any money, at least in the next three to six months, while it focuses on consolidating its exciting assets.

View full PUL profile View Profile

Pulse Oil Corp Timeline

Related Articles

oil and gas operations
December 17 2018
The AIM-quoted Tanzania focused oiler is set for a significant 2019 as the Ntorya project advances
February 26 2019
GGZ will be spun off 2020 as dividend in specie and the remainder of the Chinese assets will follow
Gas facility
March 01 2019
Scott Kaintz took over as Curzon's chief executive in November

© Proactive Investors 2019

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use