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tullii
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Studied: Power Engineering, Exploration Technology, Worked Upstream, Midstream, Downstream in Oil and Gas, Pipelines, Drilling, Refineries. I'm Interested in very big picture, game changers that come from sizeable economic deposits of Oil, Gas, Gold, Silver, Uranium, Specialty Metals used in... More
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Tullii LLC
My blog:
Exploration Blog
My book:
CrOblet Creating real opportunity by leveraging energy technology
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  • What Is The Value Of An Exploration Company In This Oil Price Environment

    (click to enlarge)

    In a few days, a dozen or so blocks of land are up for auction in Europe, in particular in Albania.

    (click to enlarge)

    In oil and gas terms, this real estate is valueable due to its huge fractures, which long term will allow flow rates that won't decline like the shale oil decline rates. Evidence of this is already present in Italy where just 30 wells are producing 80,000 barrels per day. So neighborhoods with fractures are very expensive neighborhoods in terms of oil and gas acreage.

    However you want to visualise a Block of land is upto you.

    Its really 3 dimensional to an oil producer but sold in acres on surface in 2 dimensions and a section of land is 640 Acres.

    Petromanas already has about 638,000 acres of land.

    Back in 2013 it was valued at 30 million according to its market cap. Today the entire company is valued at 34 million, which seems a bit disconnected given what is being spent by Shell oil on this area.

    When these final blocks in Albania is auctioned off for 2015 the price will be watched by its many foreign O&G investors.

    Back in Canada the Land Sales for new Exploration were dismal to say the least. The land sales in British Columbia were terrible in 2015.

    However, opportunities exist in other jurisdictions. Finding a new discovery that will yield new cash flow for new companies in a dismal oil price environment where investors are averse to risk makes understanding VALUE a tough thing to both understand and to get consensus on.

    Exploration doesn't behave the same way as Oil producers, if you find something new nobody knew existed its value is quite different than existing production with known metrics. So we are in uncharted waters here.

    This is the crux of a possible large opportunity.

    The gap between what the market thinks the value is worth and what oil companies are willing to pay for future Production, Cash Flow, Reserves is the price discovery at issue.

    Risky as it appears for new entrants, the reward if value contrarians are right is quite significant, and merits consideration.

    Which leads us to the company in question.

    Here is the back story of Petromanas (PEYNF), watch video below;

    https://www.youtube.com/watch?v=7FXCTP-8RWQ

    Petromanas is a very high risk, high reward light oil play.

    They have raised and risked or committed to spend over 100 Million dollars in hunting for a light oil deposit that is an elephant sized prize that will last 20-30 or more years...these are very long term exploration decisions made by the largest companies in this space.

    ALBANIA OIL AND GAS AUCTIONS
    Oil leases and auctions will proceed in Albania upto July 15, 2015.

    The original bid deadline was June 15, this initial delay was requested by a major player who convinced the country energy minister to give them an additional month to prepare their bid.

    (This request was granted and deadline is now tomorrow July 15)

    It may take a week or two for numbers to release to the public, but when they do the price discovery at least for the land in Albania will be better understood. As those numbers get digested then the institutions willing to place a bet will pile in, or not. We cannot know how it plays out until we see it materialize.

    HOW THE BIDDING WORKS

    Once the bids are received, Albania's Natural Resources Agency will evaluate the offers and recommend the best ones to the ministry so that it may negotiate production-sharing agreement(s).

    Favors are granted to companies with Deep Pockets and Techinical Expertise mostly because other players have run out of money or lacked skills to advance the projects. The previous state run oil company Albpetrol kind of failed to meet both terms above and so the government has made changes to be more like the American way of running the oil and gas projects now.

    HOW LONG ARE THE PERMITS

    Companies will be able explore for up to five years which can be extended to seven if needed, and they can develop and produce in the block for 25 years or more in accordance with Albanian oil laws.

    DOES ALBANIA HAVE OIL

    Albania has some of the most prolific oil and gas reserves in Eastern Europe, and according to sources, is more anxious than ever to exploit those resources as a backstop against current financial and social upheavals in neighboring Greece.

    A LITTLE MORE NEWS HISTORY - Josef Schachter is one of Calgary's oil and gas experts commonly viewed on BNN for his insight into the markets and often particular companies.

    He featured this story in 2013

    http://ceo.ca/2013/11/04/pmi-and-shell-have-hit-in-albania/

    Wed, Feb 13, 2013 - 7:37 PM

    Josef Schachter, President, Schachter Asset Management shares his top picks: Niko Resources (NKO), Petromanas Energy (PMI) and cash.

    Around the 3:19 minute mark we hear about Petromanas.

    http://www.bnn.ca/Video/player.aspx?vid=339124

    A quick context is that PMI was worth 50 million on paper in 2013 and today its valued at 34 million... yet tens of millions of dollars have been spent since 2013 to advance the project and that gap between then and now is the market not knowing what the land is worth and so no premium is attached to it and the shares are 0.05 as of yesterday July 13.

    Shell Got Nowhere in Albania. Now It's Banking on Little Venture-Listed Petromanas

    2/26/2014 ...First Bankers Petroleum began producing in Albania. Now Venture-listed Petromanas Energy is finding exploration success, so much so that joint venture partner Shell decided to give Albania another go after pulling out years ago. Glenn McNamara, CEO, Petromanas Energy.

    http://www.bnn.ca/Video/player.aspx?vid=337315

    A year later Shell commits to put up $100 Million in cash and services to get in on Albania with Petromanas.

    Thu, Jun 19, 2014 - 11:50 AM

    Shares of TSX Venture-listed energy explorer Petromanas Energy are higher by almost 130% since the beginning of the year as the company continues to advance its properties in Albania.

    Petromanas is one of the few Western companies exploring in the country and its work has attracted the attention of Royal Dutch Shell, now a deep-pocketed partner. A look at Petromanas' operations in Albania with CEO Glen McNamara.

    ttp://www.bnn.ca/Video/player.aspx?vid=384378

    Now here is a look at 2015, and a few words that are worth highlighting are that a 'significant discovery' have already been used to explain the actual filing to the government for the first well drilled called "Shpirag".

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    For Latest Presentation in full, see here.

    http://petromanas.com/Uploads/201505AGMPresentation.pdf

    The thing is there isn't much warning with volume, one day you see nothing happening then an event occurs triggering a volume spree. Here is a different venture stock (not peynf) that went from 4 trades to 405 trades in 1 day, and from 5500 shares to 1.3 million shares in volume overnight, (the point is you just never know when so you need to be early to make these kind of returns). There is no guarantee PEYNF would perform the same as below but the gap in what people in the market thought one day, versus the next day is the gap in value and that is where you make your profits for the risk you take.

    In the markets when there are fewer transactions and volume is down, the bid-ask spread widens. Price discovery, then, becomes difficult because stock valuation has a broader range in which to move. This price gap is when you can make money on the buying side by getting a bargain without competition from other bidders.

    Chart,: Credit to US GLOBAL

    After volume and activity tend to decrease, the spreads tend to widen.

    'Think of this in terms of real estate. If volume is up and homes are selling rapidly in Neighborhood A, both buyers and sellers have a good idea of what a fair price is, based on the dollar amount of square footage of nearby homes sold within a certain timeframe. Price discovery, therefore, is reasonable to understand.

    (In this case rather than square feet for a home, think acres of land bought for an oil well or oil exploration. We will soon know what each neighborhood or its land is worth)

    Then consider if homes in Neighborhood B languish on the market for lengthy periods of time, relative price comparisons begin to dissolve. Who knows what the homes should go for? Closing deals becomes tough because, in such a scenario, a buyer's bid might come in way under what the seller is willing to accept. As a result, the price of homes, even those in adjacent lots, can fluctuate wildly.

    (In Albania, we have the same Neighborhood B case where its tough to learn what price the land is actually worth per acre because so far its not actually producing oil, its just that all early indications buy major companies are that the oil is there in significant quantities)

    Tags: PETROMANAS
    Jul 14 4:21 PM | Link | 1 Comment
  • Iraq Prepares To Inject 800,000 Bbls To Global Supply Next Month

    If the below article comes to fruition, it should send low oil prices even lower, and that will make for a market bottom by July. With Iraq and Saudi squaring off for market share, the price war downward will set up conditions for the 1-1.5% excess supply to be battled out over the next 12-18 months. The June 5 OPEC meeting isn't expected any change in sentiment, so if that materializes and Saudi Arabia maintains their production, Oil supply is going to outpace demand leading to further price declines. This sets up a unique situation only seen once in 30 years and over the June / July period I will shortlist the best exploration picks with a 2-4 year buy and hold or buy and add strategy.

    [ REPOSTED FROM Jeff Reed on Oil Pro ]

    Iraq To Take Oil Market Share Battle To Next Level, Prepares To Inject 800 K/bd To Global Supply

    Iraq plans to increase oil exports to record levels next month, adding to an already saturated global oil market and indicating that Saudi Arabia isn't the only OPEC member dedicated to a market share defense strategy.

    As we have recently reported, all indications are that OPEC will adhere to its market share protection strategy at its upcoming meeting on June 5. Focus has largely and rightfully been on Saudi's adherence to this strategy, as the Royal Kingdom is the titular head of OPEC and sets the strategy for the 12-member group. But Tuesday brings news that Iraq is taking OPEC's market share strategy to a new level, even as it wages an ongoing bloody battle with ISIS militants.

    Iraq plans to increase oil exports by approximately 26% to a record 3.75 M/bpd next month, according to shipping programs seen by Bloomberg. The additional Iraqi exports are equivalent to roughly 800,000 bpd- almost 1% of global daily supply and surpassing OPEC peer Qatar's shipments. This represents a huge addition into already-saturated global market.

    The Bloomberg report notes that while shipping schedules are not concrete indications of future production, they are signs of what may come. Take a look at the following chart, which graphs scheduled tanker loadings (in red) against exports (chart source: Bloomberg & Iraqi Oil Ministry):

    As in recent months, Iraq may not achieve its June objective, as export capacity is now capped at 3.1 M/bpd, Deputy Oil Minister Fayyad al-Nimaa told Bloomberg earlier this month. However, any additional Iraqi supplies mean that OPEC will go even further beyond its 30 M/bpd output quota, according to Morgan Stanley.

    Here's another chart composed by Bloomberg that shows OPEC increasing production in recent months against its 30 M/bpd quota:

    Iraq's plans are especially significant given the country's ongoing battle against ISIS militants. In defiance of the threats posed by the terrorist group, Iraq has been increasing exports both from the Shiite south and the Kurdistan region in the north.

    http://oilpro.com/post/13589/iraq-to-unleash-tidal-wave-oil-into-global-market?utm_source=DailyNewsletter&utm_medium=email&utm_campaign=newsletter&utm_term=2015-05-27&utm_content=Article_2_txt

    Tags: OIL, WZGRF
    May 27 3:16 PM | Link | Comment!
  • Taranaki Basin Well Hits 7800 BBL/day For Cue Energy

    (source: Rigzone)

    Australia's Cue Energy Resources Ltd. announced Tuesday that production from the Maari MR6A development well in the Taranaki Basin, offshore New Zealand has been brought on stream, with an initial production rate of approximately 7,800 barrels of oil per day (bopd).

    The optimal production rate will be determined after several weeks of production history, taking into account reservoir management considerations. The Maari Field is currently producing approximately 14,000 bopd.

    Production commenced March 21 from the previously undeveloped Mangahewa Formation reservoir unit in the Maari Field. The well was drilled horizontally to a total depth of 15,016 feet (4,577 meters) of which approximately 4,265 feet (1,300 meters) was completed in very high net-to-gross, good quality reservoir section, as indicated by well log data.

    Based on initial production and currently available information the well is anticipated to meet or exceed pre-drill expectations and materially contribute to field production. The Maari Growth Project offshore Taranaki in New Zealand is being conducted to increase reserves, production, and recovery from the Maari field.

    Significant undeveloped reserves remain at Maari and Manaia and the additional development will enable extraction of these reserves.

    The Ensco 107 (400' ILC) jackup is now drilling the MR7A well to provide an additional in-fill producer in the Moki formation.

    Participants in the PMP 38160 Joint Venture are: Cue Taranaki Pty Ltd. - 5 percent Horizon Oil International Ltd. - 10 percent (a subsidiary of Horizon Oil Ltd.) Todd Maari Ltd. - 16 percent OMV New Zealand Ltd. (Operator) - 69 percent - See more at:

    http://www.rigzone.com/news/oil_gas/a/137809/First_Oil_Flows_from_Offshore_Maari_MR6A_Development_Well_in_Taranaki_Basin#sthash.wsl5GW3h.dpuf

    Tags: CUEYF
    Mar 24 3:52 PM | Link | Comment!
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  • $PTAXF the merger is done. court approved transaction to merge PetroNova and PetroAmerica.
    about 24 hours ago
  • $PENYF The bid applications from Shell and Petromanas indicate Shell is committed to further explore the deep carbonate plays in Albania
    2 days ago
  • $PENYF Petromanas Energy, $RDS.A Shell bid on 2 more Albanian blocks Block 4, Dumre 1.Shell Upstream Albania BV dhe Petromanas ALBANIA GmbH
    2 days ago
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