Gold Oil (AIM: GOO) the oil and gas exploration and production company with interests in Columbia and Peru, announced this evening that is had received an approach for the company. Gold Oil stated that the approach was "preliminary in nature" and that there could be no certainty that a formal bid would be forthcoming.
Both Kappa Energy, a private Columbian oil and gas company, and Solana Resources, a TSX and AIM listed company also operating primarily in Columbia have received bids in recent weeks from mid-tier North American oil and gas players; Gran Tierra Energy for the later and Pacific Rubiales for the former. Speculation is likely to be rife that at similar sized bidder is behind the approach for GoldOil.
Gold Oil has two huge licence areas in north-west Peru. Block Z34 lies offshore and covers 371,000 hectares, the equivalent of 17 North Sea blocks. It’s close to four major oil fields that lie in the shallow waters to the east. A gas discovery has been made to the south while Shell has farmed in to the north.
Within Block Z34 the water depth varies from 400 ft to 10,000 ft although the much of the block can be reached from the shallower sections. Gold Oil believes the shallower areas of Z34 could contain 250 million barrels. Gold Oil has 50% participation and is the operator. Plectrum, which has since been taken over by Cairn Energy, farmed in for the other 50% and will carry Gold Oil’s initial costs for seismic acquisition.
GoldOil is also working on onshore in Block XXI. This is another large licence area, covering 303,000 hectares. A 30-year licence for oil and 40 years for gas was granted here in 2006 and the first well, SA 1-X, was sunk the same year. Two hydrocarbon bearing sands were discovered over 315 gross feet in the Verdun and over 250 gross feet in the Palaeozoic. Water inflows prevented any hydrocarbons flowing to the surface and the well was subsequently plugged and abandoned.
In Colombia Gold Oil has a 58% working interest in the Nancy-Burdine-Maxine oil fields.The Nancy-Burdine-Maxine fields were discovered by Texaco in the mid-1970s and produced oil for about 20 years before succumbing to the low oil price. Nancy 1 was re-entered in 2006 having previously produced as much as 1,400 barrels per day under Texaco. Initial production on re-entry was 700 barrels but has since declined to below 400. Still, this provides useful cash flow. Reserves for this well, as of last July, were 121,000 net to Gold Oil on a 3P basis. An updated reserves report is currently being prepared and, if positive, should be followed by a small programme of infill seismic and the re-entry and workover of 5 Burdine wells.
The company also has an 18.4% net revenue interest in a similar, nearby low-risk development block acquired by Gold Oil in February of this year for $4m. Called Azar, it contains the Palmero #1 well which was drilled but not tested in the mid-1990s. This well has just been re-entered and tested at 45 barrels of 15 degree API oil per day under natural flow. It’s reckoned that this can be increased to 150 to 250 barrels per day by artificial lifting and there’s potential for 300,000 barrels net to Gold Oil. 3D seismic was shot earlier this year which has shown an interesting prospect that will be drilled later this year or early next year depending on rig availability.(Gold earns a 20% interest for a 10% contribution to the well)
Gold Oil's third Colombia licence area, Rosa Blanca (Gold Oil 40%) is potentially higher impact. A single vertical well, for which Gold Oil is fully carried, is due to drilled by December 25 of this year under terms of the licence and construction of the drilling platform has commenced. P50 resources for Rosa Blanca have been put by Gold at 26 million barrels where up to 25 horizontal wells could potentially produce up to 12,000 barrels a day although Osage, the farminee carries substantially higher potential resources.