Petsec Energy Ltd’s (ASX:PSA) (OTC ADR:PSJEY) updated U.S. oil and gas reserves provide a net present value at a 10% annual discount rate (NPV10) of US$34.8 million, which equates to circa A$0.14 cents a share.
With shares trading on the ASX at around $0.098, this represents strong upside.
NPV was calculated using the forward swap prices in effect on 31 December 2017 and is a 39% increase on the previous year.
Yemen asset has NPV of $US155 million
The value of Petsec’s oil and gas assets in the An Nagyah Oilfield in Yemen are not reflected in the share price.
An NPV10 of circa US$155 million was placed on these assets in 2016.
On a combined basis, the independently estimated proved (1P) oil and gas reserves net to Petsec’s economic interest as of 1 January 2018 were 11.9 billion cubic feet (Bcf) of gas and 5.6 million barrels of oil – equivalent to 7.6 million barrels of oil equivalent (MMboe).
Estimated net proved and probable (2P) reserves net to the company’s economic interest were 15.9 Bcf of gas and 6.8 million barrels of oil – 9.4 MMboe.
The U.S. oil and gas proven reserves (1P) estimates as of 1 January 2018 of 3,035 Mboe were 10% higher than the previous year as a result of additions of 339 Mboe less production of circa 59 Mboe.
Petsec U.S. operations
Petsec has operations in the shallow waters of the Gulf of Mexico and state waters of the Louisiana Gulf Coast region of the USA.
The company holds interests in three producing fields – the Jeanerette and Mystic Bayou Fields onshore Louisiana, and the Hummer Gas/Oil Field offshore Gulf of Mexico.
The Hummer Field structural trend extends over 10 kilometres through Main Pass Blocks 270,273 and 274, which cover 15,000 acres in the Gulf of Mexico, offshore Louisiana, USA.
Logs from the discovery well indicate five potential reservoir intervals, one of which was completed for production.
All five sands are expected to be targets of future drilling for expansion of the Hummer project in the three blocks.
The Main Pass Block 270 ‘B’ platform facilities have an initial design handling capacity of 50 MMcfpd plus 1,000 bopd which will accommodate the discovery well, Main Pass 270 B-1.
The facilities have been designed with space available on the deck to expand production capacity and accommodate increased production from additional wells expected to be drilled from the ‘B’ platform and any proximal well head platforms.
Aim to restart Yemen operations
The company also aims to restart production at the An Nagyah Oilfield in its Damis (Block S-1) Facility in Yemen.
Damis holds five sizeable oil and gas discoveries – the developed An Nagyah Oilfield, which was producing until it was suspended in 2014, and the undeveloped fields of Osaylan, An Naeem, Wadi Bayhan and Harmel.
The four undeveloped fields hold substantial oil and gas resources in excess of 34 million barrels of oil and 550 Bcf of gas, representing substantial potential future growth of reserves and production.
Additional financial options
Petsec has also extended the timelines relating to its convertible note facility, providing additional financial options.
The US$5 million drawn down under tranche I has been extended from 23 January 2019 to 23 July 2019.
Tranche II expired on 5 January 2018 but has been re-established, which will provide Petsec with access to a further US$5 million to fund the restart of production at An Nagyah Oilfield.
Funds applied to Hummer development
Funds from the first tranche of the convertible note facility were applied to fund the development of the Hummer gas/oil discovery in the USA.
This included construction and installation of a 4-pile jacket, completion and testing of the initial well to determine production rates and gas and oil volumes, and construction of the production facilities on the Main Pass Block 270 Field.
The well was brought into production on 21 November 2017 and is producing at a rate of circa 17 MMcfpd and 340 bopd.