Dominion Petroleum (LON:DPL) said the Kianika-1 well in the Mandawa production sharing agreement (PSA) in Tanzania, where it has a 10 percent working interest, has been plugged and abandoned, and its commitment to the initial exploration phase is now concluded.
The group announced late last Friday it was advised by operator Maurel & Prom that the Kianika-1 well has reached the planned depth of 3,040 metres. The targeted carbonates of the Mid Jurassic Mtumbei formation were found with good reservoir characteristics, however no hydrocarbon shows were encountered.
Under a farm-out agreement with Maurel et Prom, Dominion's funding requirement in respect of the Kianika-1 well on the Mandawa licence was reduced from 100 percent to 20 percent of the drilling costs and to 10 percent of associated expenses. Dominion retains a 10 percent interest in all profits earned from the Mandawa licence.
In a note issued this morning Ambrian Capital reminded investors that Mandawa is non-core acreage, which was underlined by the farm-out to Maurel & Prom.
The broker assigned a net present value (NPV) of less than 0.0 pence per share, reflecting low gas resources assumed at the well and a low interest in the PSA.
Ambrian said that the disappointment has made it likely that the company will relinquish the remaining stake, allowing it to concentrate on its more highly prospective acreage offshore Tanzania in the East African Margin where 3D seismic is currently being processed over its Block 7 and could "offer significant potential value for shareholders".
"Moreover, we see further upside from its extensive 2D seismic programme at the Lake Edward Basin in the Democratic Republic of Congo/Uganda planned for 1Q11," said Ambrian.
Ambrian retained its ‘buy’ recommendation for the stock as well as its target price of 6.5 pence, compared to the current market value of 6 pence per share.
Last month, Dominion completed a 1,236 square kilometre 3D seismic survey on the Alpha prospect and other prospects in deep-water Tanzania.
It also highlighted a recently completed competent person’s report (CPR) that put the Alpha prospect’s mean prospective resource at 1.1 billion barrels of oil, or 7 trillion cubic feet in the gas case.
Last month, BG Group (LON:BG) and Orphir Energy struck oil in the Pweza-1 well. It was the first discovery of its kind in Tanzania. Crucially it proved the existence of a working hydrocarbon system in deep-water Tanzania.
Elsewhere Dominion is readying further seismic operations, in the Lake Edward basin which straddles Uganda and Democratic Republic of Congo.
It will start work on the first ever cross-border 2D seismic survey in the first quarter of 2011. Dominion plans to acquire over 300 kilometres of seismic data.
It is expected to last between 3 to 4 months.
The survey follows on from the Ngaji-1 well which was drilled in the Ugandan area of the project. The well did not identify any significant hydrocarbons, but it did provide more information about the prospective area.
Dominion said that Ngaji-1 well confirmed the presence of excellent quality reservoir sands as well as hints of source potential.