Oilexco: Well-Oiled North Sea Cash Machine

| About: Oilexco Inc (OILXF)

Oilexco [TSX:OIL, LSE:OIL, OTCBB:OILXF.PK], has become a bit of a Canadian hydrocarbon darling of late, morphing gracefully from junior explorer into mid-tier producer. The disciplined and methodical deployment of capital that has become the company’s trademark have got both individual and institutional investors smugly satisfied with the share price appreciation, which recently touched a high of $16.44 back in November last year.

It looks like its going to be heading straight north again, as increased institutional attention is attracted by the liquidity and growth potential.

In February, the company updated shareholders on its activity in its 40% owned Huntington Prospect in the UK Central North Sea. Oilexco’s partners in the discovery are Altinex Oil (NASDAQ:UK) Limited (20%), E.ON Ruhrgas UK Exploration and Production Limited (25%), and Carrizo Oil and Gas, Inc (15%).

The partnership identified at least 452 feet of oil column, that could be just a minimum as the crest of the structure has not yet been drilled.

In December the Company also participated in the drilling of the Mallory 22/14a-7 exploratory well targeting oil in Upper Jurassic Fulmar sands. The 22/14a-7 well is located 4 miles to the northeast of the Company’s Huntington oil discovery in the adjacent Block 22/14a. The Company participated in this well by paying 54% of the drilling costs for a 27% interest in all zones below the Lower Cretaceous Chalk to evaluate a possible extension to its Huntington Fulmar oil discovery.

"To further delineate the extent of the reservoir, additional appraisal of the Huntington Fulmar oil accumulation is being planned, using one of Oilexco's two long-term contracted semi-submersible drilling rigs during the second half of 2008," the firm said.

The 22/14a-7 well successfully encountered Upper Jurassic Fulmar sands with an apparent oil/water contact within 12 feet in elevation to the apparent oil/water contact intersected by the Huntington 22/14b-8 appraisal well. This indicates the oil accumulations at Mallory and Huntington are possibly common. Further appraisal drilling is necessary to evaluate and delineate the extent and commonality of the oil accumulation.

Arthur Millholland, President and Chief Executive Officer, commented “The continued success at Huntington represents one of the most exciting developments in the UK North Sea in recent years. Whilst Huntington is one of a number of appraisal, development and exploration projects that Oilexco is progressing in 2008, the size of the discovery offers significant upside potential to the Company and we are pleased that the development studies are being rapidly progressed.”

Oilexco has been very consistent in reliably adhering to their corporate strategy, and conveying that strategy to its shareholders.

They have demonstrated the ability to remain agile as they grow, ordering subsea equipment in anticipation of future discoveries, and focus on maximizing their knowledge of the geology into which they sink exploration dollars prior to spending money on development drilling.

For example, on their Brenda Field, they drilled 14 appraisal wells with the result that their shareholders and bankers have full confidence that they know the field reservoir and can deliver what they promise.

Key to their rapid growth has been their ability to remain largely in control of their destiny as they succeed by signing long term contracts with drilling vessel, meaning they can drill when and where they want to without being subject to rig availability delays – a constant source of aggravation for other companies.

The company leapt into the public eye last year with the acquisition of interests in the Blamoral, Glamis and Sterling oil fields, which made them a North Seas facility operator.

The company has been able to execute its aggressive growth strategy by accessing relatively cheap capital in the form of a US$500 million credit facility from a banking syndicate led by the Royal Bank of Scotland.

“The increase in debt capacity provides us the financial means to significantly increase our production over the next several years”, said Arthur Millholland. “It allows us to quickly move from discovery to production, which is a key part of our strategy”.

Oilexco is an oil and gas exploration and production company active in the United Kingdom. Oilexco’s producing properties, exploration and development activities are located in the UK Central North Sea, specifically in the Outer Moray Firth and Central Graben areas. Oilexco operates in the United Kingdom through its wholly owned subsidiary, Oilexco North Sea, a company registered under the laws of England and Wales. Oilexco shares are listed for trading on the London Stock Exchange [LSE] and the Toronto Stock Exchange [TSX] under the symbol “OIL”.

The company has 218.7 million shares issued and outstanding.

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