Seeking Alpha

Proactive Investor's  Instablog

Proactive Investor
Send Message
Proactiveinvestors is a leading multimedia news organization, investor portal and events management business with offices in New York, Sydney, Toronto and London. Proactiveinvestors operates five financial websites in four languages providing breaking news, comment and analysis on hundreds of... More
My company:
Proactiveinvestors
My blog:
Proactiveinvestors
  • IPB Petroleum Commences Life On The ASX 0 comments
    Apr 29, 2013 10:11 PM

    IPB Petroleum (ASX: IPB) has brought its highly prospective offshore Browse Basin oil and gas exploration portfolio onto the ASX with shares starting to trade this morning.

    The company had raised $ 2,915,550 through the issue of 5,831,100 shares priced at $0.50 each, above the $2.5 million minimum that it had sought.

    Notably for the company, its first well on the Pryderi oil prospect will be fully funded by farm-in partner CalEnergy, a fully-owned subsidiary of Berkshire Hathaway's MidAmerican Energy Holdings Company.

    The well in WA-424-P is expected to spud by mid-July, targeting a high-amplitude seismic response similar to that seen at the non-commercial Gwydion-1 oil discovery that was made by BHP Billiton (ASX: BHP) in 1995.

    ISIS Petroleum Consultants estimates that there is a 75% chance of a hydrocarbon discovery at the Pryderi prospect.

    Quantitative seismic interpretation work on the 3D seismic concluded that in the event of a discovery, there is a 60% probability that the hydrocarbon phase would be oil, giving an overall 45% chance of an oil discovery with a mean recoverable prospective resource of 40 million barrels.

    IPB's other permit, WA-471-P, has the potential to host stratigraphic traps at deeper levels to the Pryderi Prospect that lie closer to the oil-prone source rocks identified further to the north.

    These traps will be evaluated further through the acquisition of 3D seismic once the Pryderi-1 well has been drilled.

    The Browse Basin is home to some of the biggest offshore energy developments in Australia. The last two years have seen in excess of A$40 billion of gas condensate development projects reaching final investment decision approval.

    This is highlighted by the proximity of both permits to the Prelude gas field (2 trillion to 3 trillion cubic feet), where Shell (LON:RDSA) is developing the world's first floating liquefied natural gas project, and Inpex Corporation's giant Ichthys gas field (12.8Tcf) that will feed its 8.4 million tonne per annum LNG facility in Darwin.

    The permits are also close to the undeveloped Cornea oil field.

    IPB has a 75% interest in WA-424-P and 100% in WA-471-P.

    Use of Funds

    With $4.1 million in cash at hand - $1.18 million as of 1 January 2013 and $2.92 million from its IPO, IPB is well funded for its exploration activity this year.

    With CalEnergy carrying the cost of drilling the Pryderi exploration well, The company expects to spend just $0.98 million on exploration and development in WA-424-P and WA-471-P.

    New permit evaluation and preliminary exploration activity is expected to cost $300,000 while advance opportunities to evaluate WA‐424‐P, WA‐471‐P and other initiatives to secure additional permits will cost a further $400,000.

    IPO expenses and general administrative costs are expected to total about $1.5 million, leaving the company with an estimated $880,000 as of 31 December 2013.

    CalEnergy farm-in

    Under the farm-in agreement, Cal Energy will fund 100% of the cost of drilling the Pryderi Prospect exploration well in the WA-424-P permit to earn a 25% interest in the whole permit.

    This will also give CalEnergy a 60% interest in the permit's current Gwydion discovery and the neighbouring Mathonwy/ Gilfaethwy structures Area, collectively known as the GMG Area.

    CalEnergy, which has also being appointed the operator, can increase its interest in the balance of the WA-424-P permit to 60% by spending further funds on exploration, appraisal and or development activities up to $32.4 million, less the costs expended on the Pryderi well.

    It also has options to participate at a 25% interest in IPB's WA-471-P permit and a nominated gazettal block that IPB is applying for.

    The option for WA-471-P can be exercised for a nominal cost within three months of the date of the Pryderi well being drilled while the gazettal block could be awarded this month if IPB is successful.

    IPB will remain the operator of WA-471-P and the gazettal block.

    CalEnergy is 100% owned by MidAmerican, which is in turn 89% owned by Berkshire Hathaway.

    WA-424-P

    The WA-424-P permit contains two wells, Gwydion-1 and Caspar-1A.

    Gwydion-1 was drilled by BHP in 1995 and discovered a 14.5m gas column in a poor-quality glauconitic sand above a 10m oil column in a good-quality Cretaceous-aged Hauterivian/Barremian clean sand.

    ISIS had attributed a mean contingent recoverable resource of 6MMbbl to the Gwydion oil discovery

    BHP followed it up with Caspar-1A in 1998,

    While this well intersected very good-quality reservoir sands 15m thick at the level that contained oil in the Gwydion-1 well, these sands were water-wet.

    Caspar-1A is considered to have been drilled out of closure at this level and therefore not a valid test.

    Pryderi was identified following completion of IPB's 200 square kilometre Gwydion MC3D seismic survey that was shot in WA-424-P in 2011.

    It had a similar high-amplitude seismic response to that noted around Gwydion-1 due to the presence of gas in the main Barremian/Hauterivian-aged reservoir sand.

    Further analysis of the seismic data supports the interpretation that the trap could contain an oil leg confined within a narrow channel.

    There are also several additional leads at different reservoir levels which are independent of the result at the Pryderi-1 well that have been identified within the permit. ISIS has assessed an unrisked mean recoverable prospective resource of 357MMbbls of oil for these additional leads.

    Further upside potential could exist as while the Gwydion 3D seismic survey covered less than 5% of the 6175 square kilometre permit, good coverage of older 2D seismic data over the remainder of the block has identified 10 leads similar to the Pryderi Prospect.

    ISIS has assessed an unrisked mean recoverable prospective resource of 282MMbbls of oil for these leads. In the event of a discovery at the Pryderi Prospect, these leads would become extremely attractive additional exploration targets.

    Analysis

    With a "full-carry" by a well known oil and gas player in MidAmerican in one of Australia's most prospective oil and gas basins to be drilled soon, IPB Petroleum provides strong risk/return characteristics in an exploration play for investors.

    This covers the cost of drilling in mid-July an exploration well targeting the 40 million barrel Pryderi oil prospect, which has a 45% chance of success.

    The stronger than expected initial public offering that raised $2.92 million, more than the minimum $2.5 million sought, also leaves the company well-funded for its other activities.

    Success at Pryderi-1 will also unlock the multiple leads and prospects in the permit, further enhancing the attractiveness of the company's assets.

    Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX "Small and Mid-cap" stocks with distribution in Australia, UK, North America and Hong Kong / China.

Back To Proactive Investor's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.