logo-loader

Savannah looks for a farm-in partner to drill its Niger acreage ‘within months’

Published: 01:45 07 Oct 2015 AEDT

savannah_good
Savannah Petroleum is keen to start drilling in Niger

Savannah Petroleum’s (LON:SAVP) principal asset is the R1/R2 production sharing agreement (PSC) covering a 8,406 sq km area in the Agadem Rift Basin, in south-east Niger, in Africa.

Andrew Knott, Savannah’s chief executive, told Proactive Investors gaining the licence was a ‘unique opportunity`.

Some would say it is what every oil man or woman dreams of. The blocks contain proven but undeveloped oil reserves; lots of them.

The Savannah blocks cover an area which represents approximately 30.5% of the original Agadem permit . Savannah acquired them in July 2013 when the China National Petroleum Company (CNPC) mandatorily relinquished 50%..

During 2009-2013 CNPC made an estimated 77 discoveries from 99 exploration wells on Agadem potentially unlocking 832mln barrels (mmbbls) of proven and probable (2P) reserves.

By the time Savannah listed in London in July 2014 the company’s independent competent person's report, compiled by CGG Robertson, estimated the concession held gross best risked prospective resources of 573mmbbls of oil.

The company’s interim results figures, released in September, said that after the gathering of a substantial database and a 36,949-sq km full tensor gradiometry (FTG) survey, CGG Robertson doubled the resource estimate to a gross best risked 1,191mmbbls.

Post the six month reporting period ending June 30, Savannah raised US$36mln through a placing with a lot of institutional support..

Some of this money was used to buy the adjacent R3/R4 Blocks so there could be further resource upgrades to come in Niger.

But, on the basis of the current estimates for R1/R2, the risk profile of the 14 drill-ready prospects and 37 leads has indicated a gross mean risked recoverable resource of 259mmbbls, up from 215mmbbls due to 100 % owner of the blocks, Savannah.

Looking at the economics, CGG has set a break-even price of US$43 a barrel for any oil raised.

Turning to the outlook, Savannah says the seismic acquisition planning and tendering work for the R1/R2 licence areas is expected to be completed in the fourth quarter.

Well engineering work on high graded exploration prospects is also expected to be completed in the fourth quarter of 2015.

Subject to partner introduction, operational exploration activity is expected to re-start in the coming months.

This really is a key issue. In an interview Knott said wells cost around US$4mln to drill and historically there has been a 70 to 80% success rate with exploration wells on the blocks

The company has some money left from the July capital raise -- possibly US$10 mln. So why does it need someone to farm-in to the project?

Knott said: “We are not talking about one well here. We envisage an extensive 3D seismic programme, which would cost around US$100 mln and we are looking at 30 wells. So, say around US$250mln in all.”

He added: “This is cheap when you know that one well in the Falklands can cost over US$100mln.”

Knott said there had been “significant interest” in R1/R2, and he told Proactive Investors: “I’m very confident that any partner introduction will be done at a very material premium to that implied by our current share price.”

Broker Shore Capital’s Craig Howie said:” Securing a partner remains a key objective for Savannah, ahead of the recommencement of exploration activities later this year.

“We acknowledge that the farm-out market remains subdued in the current oil price environment and will be keeping a close eye on progress here.

“However, we highlight the respected and well invested management team and very high rates of drilling success achieved by CNPC in adjacent acreage.”

Howie’s ‘risked’ net asset value is 58p a share – a significant premium to the current price of 28.5p.

Unsurprisingly, his recommendation on the stock is ‘buy’.

Australian Strategic Materials signs US$600 million LoI

Rowena Smith, CEO and managing director of Australian Strategic Materials Ltd (ASX:ASM, OTC:ASMMF), joins Jonathan Jackson in the Proactive studio to discuss the company’ s Dubbo Project, in Central West New South Wales. This project aims to extract and process critical minerals and rare earth...

10 hours, 39 minutes ago