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Jupiter Energy unveils oil sale agreements

Earlier this week Jupiter announced that trial production had begun had from its first wells in Kazakhstan

A busy and productive week for Jupiter Energy (LON:JPRL, ASX:JPR) concluded with news the Kazakhstan explorer and producer has secured a prepayment plan for crude sales with two oil traders.

It will receive US$400 per tonne of oil, or the equivalent of US$58 a barrel, and has sold initial production 6,000 tonnes for US$2.4 million.

Half has already been received, and the remainder will be paid next week.

Chairman Geoff Gander said: “We are pleased that we have been able to reach terms for the presale of oil.

“It provides the oil traders with security of supply and Jupiter Energy with cash to assist in the continued development of Block 31.”

Earlier this week Jupiter announced that trial production had begun had from its first wells in Kazakhstan.

Total daily output from wells J-50 and J-52 is expected to be around 600 barrels of oil a day, which will be transported by tanker to a nearby storage facility.

Licence applications for J-51 and J-53 are “progressing" and will be submitted to the Ministry of Oil & Gas for approval “soon”.

“The approval process is expected to be completed by the end of this year and the company expects to end 2012 with revenue from four wells on trial production,” Jupiter added. 

All four wells are part of the Block 31 permit, located in the oil-rich Mangistau Basin, close to the port city of Aktau.

Trial production lasts for up to three years, during which time the oil can be sold into the local market at a discount to the prevailing price of crude.

Jupiter said today it intends to move these wells from trial to full production, and therefore from domestic to higher income export oil sales, before the cut-off.

“More detail on the plans to move to full production will be released later this year,” it added.

Today’s announcement marks the stepping stone between exploration and Jupiter becoming a fully fledged oil producer in Kazakhstan.

In an interview with Proactive Investors last November, on the day of the group’s AIM listing, chairman Geoff Gander predicted the four wells would likely bring total production to a none-too-shabby 1,500 barrels a day.

The plan then is to ramp this up to 4,000 by 2015. The estimated capex to take Block 31 to self funding stage is $40 million.

The completion of the J-53 well will be the cue to bring in an independent consultant, who will re-assess the company’s proven and probable (2P) reserves base, currently estimated at 24 million barrels, Gander said in the interview.

The hope is that this figure will rise to around 35-40 million barrels.

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