LONDON, April 20, 2018 /PRNewswire/ --
Imagine an energy company spending 10 years exploring the Rawat oil concession in Sudan, Africa. During that time, they spend millions on shooting and acquiring 6,700 kilometers of 2D seismic, shooting and interpreting 1,000 square kilometers of 3D seismic, and drilling 13 exploration oil wells.
And while they did strike a little oil, incorrect seismic interpretation made them think that their blocks held far less oil than they had anticipated. So, they give up on the project. Included in today's commentary: Parsley Energy Inc (NYSE:PE), Kosmos Energy Ltd. (NYSE:KOS), Seadrill Ltd (NYSE:SDRL), Diamond Offshore Drilling Inc (NYSE:DO), Pioneer Natural Resources (NYSE:PXD).
See, it turns out their seismic studies were flawed. Now they will have to watch other energy companies produce millions of barrels in part based on all their hard work (and money).
See, the above story is a real one, taking place in a remote region of Sudan. It is the site of Block 25, the Rawat concession that a Chinese energy company gave up on because they incorrectly assessed the type of oil formation they were dealing with.
They thought the oil was locked in what's known as a structural trap - which is when faults in the earth caused by seismic activity trap deposits of oil and gas. But in this case, the oil is actually locked in a stratigraphic trap, which hardly any oil company outside of North America looks for…or is equipped to handle.
This kind of trap is formed when oil and gas are locked within sandstone that's encased in shale. Oil in stratigraphic traps is difficult to dislodge - and difficult to find - unless a driller knows what to look for.
Longtime oil man George Fulford - who's drilled 77 wells in Sudan over the last 40 years and has a near perfect success rate - deserves credit for having discovered the Chinese mistake. And Stamper Oil & Gas (STMP; STMGF) - an under-the-radar Canadian energy exploration company - is taking full advantage of it.
Fulford's conclusions not only interpreted the data correctly, the Sudanese government learned of them and its state-run oil company, Sudapet Co. Ltd., drilled eight new test wells.
The first five proved underwhelming, but the last three gushed out oil at a rate of up to 2,200 barrels per day (bpd). Now operators have identified 33 wells that can be drilled from Al-Rawat.
Plans are for an initial 6,000 bpd within the first year of operations growing as new wells are added on. One well achieved flow-rates of 2,255 bpd in January, so there's little question this goal will be achieved. And with today's rising oil market, all that oil could easily bring in millions more in the years ahead.
This is where Stamper Oil & Gas (STMP; STMGF) comes in. Stamper has a Memorandum of Understanding to buy 100 percent of State Oil Corporation for 25,000,000 shares and repayment of State's expenses. State has the right to farm-in up to a 50 percent interest in the Al-Rawat field pursuant to an MOU with Sudapet.
Now estimates of probable reserves on this property are around 182 million barrels, according to a recent report by a well-known Petroleum Engineering company. The project has 6,000 bpd ready to produce and intends to add the 33 wells to be drilled as they come on line.
Here are five more reasons to take a look at these developments in Sudan:
1. The company chairman has a long history of developing Sudan's oil deposits and cultivating good will.
It all began about 20 years ago, when Stamper (STMP; STMGF) Chairman Lutfur Rahman Khan served as Chairman and CEO of a company heavily involved in Sudanese oil exploration.
That company was Arakis Energy Corporation, which at the time was listed on NASDAQ (and was bought out in 1998 by Talisman Energy Inc.). Arakis Energy Corporation was able to boost the reserves of two huge Sudanese oil fields (the Heglig and Unity fields) from 150 million to 750 million barrels by drilling 77 successful wells.
As one might imagine, this success created many high-paying jobs for local workers. On top of that, Arakis Energy Corporation was actively involved in considerable humanitarian work and social development in Heglig, where they built a 40-bed hospital and provided three fully equipped ambulances. All of this generated a ton of good will and has endeared Khan and his team to the Sudanese government.
"We have built some great connections over there," said Greenway. "You walk in as royalty over there…(now) they want Canadian companies..."
2. The company is benefiting from China's $millions investment in oil discovery.
Imagine someone building a factory and equipping it with everything you need to produce one of the most in-demand products on Earth…and then giving that factory to you. That's sort of what happened here.
The bottom line is the millions of dollar in investment that the Chinese made exploring its former property allows Stamper (STMP; STMGF), on completion of all steps in the acquisition, to concentrate on its drilling, expanding its reserves, and on delivering, initially 6,000 bpd to market.
3. The Stamper management team has the skills needed to transform Sudan into a major oil producer.
This team includes George Fulford, who has 40 years' experience as a professional geophysicist and worked in Sudan from 1994 to 2003. During that time, he selected the drill sites of 77 successful wells. A remarkable near perfect success rate. Since then he's worked on other sites in Africa, as well as in Southeast Asia and South America.
CEO David Greenway, who has two decades experience managing, financing and developing growth strategies for a variety of firms, particularly junior public resource companies. For example, he achieved great success as CEO of Chief Consolidated Gold Mines and SNS Silver Corp., and now he's ready to make a similar splash with Stamper.
Chairman Lutfur Rahman Khan, who has more than three decades of experience in the oil and gas sector. Most importantly, he's keenly aware of the difficulties of working in Sudan, thanks to his time serving as Chairman of Arakis Energy Corporation from 1995 to 1999. During this period, he oversaw the acquisition of a 12.2-million-acre oil concession in Sudan. That acquisition proved to be a huge triumph, as it resulted in the discovery of 1 billion barrels of oil.
4. The price of oil has been rebounding and looks likely to continue trending upward.
For the last few years, institutional capital has been ignoring the Brent crude market due to shale oil saturation and the depressed oil complex. But now that's changing, as evidenced by Brent's rise from about $30 per barrel to $68 (as of April 5, 2018).
JP Morgan expects this uptrend to continue throughout all oil markets and cites the following reasons:
- Stronger economic fundamentals
- Synchronizing global economic growth
- Continuing geopolitical tensions
- The likelihood of further OPEC production cuts
Obviously, stronger oil prices bode well for well-run energy companies…especially those sitting on huge new oil discoveries.
5. Stamper have positioned themselves for a rare ground-floor opportunity in energy
Also active in the mining industry include:
Parsley Energy Inc (NYSE:PE) is a major player in the Permian shale play. The company's assets are primarily located in the Midland and Delaware basins. Specializing in acquisition, development and exploration of unconventional oil and natural gas reserves, Parsley Energy trades around a modest $30/share and has an impressive $9.35B market cap.
Kosmos Energy Ltd. (NYSE:KOS) is a company which focuses on oil and gas exploration, development, and production in emerging areas offshore West Africa. With assets in Ghana, Mauritania, and Senegal, the company already has a strong portfolio. But the real draw for investors is the licenses it carries for potential exploration in Sao Tome and Principe, Suriname, Morocco, and Western Sahara.
Seadrill Ltd (NYSE:SDRL) is a company that offers services relating to everything offshore. As an offshore drilling contractor, Seadrill is a go-to for companies rushing to complete their deepwater projects. As offshore regains its popularity and new finds are ready to be developed, Seadrill has a wealth of resources to complete, maintain, and nurture these projects.
Diamond Offshore Drilling Inc (NYSE:DO) is a Houston-based oilfields services company with contracts in Gulf of Mexico, South America, Australia, Southeast Asia, Africa, the Middle East, and Europe, the company is well represented across the world. Its fleet includes 24 offshore drilling rigs, 19 semisubmersible rigs, and one jack-up rig.
Pioneer Natural Resources (NYSE:PXD) is another oil and gas exploration and production company whose main operations are primarily located in the Permian Basin, Eagle Ford, West Panhandle, and the Raton field. The company also owns interest in eight gas processing plants and nine treatment facilities.
By. Charles Kennedy
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This news release contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements. Forward looking statements in this release include that the Sudan oil discovery will prove as large and as significant as expected; that probably reserves can become proven reserves and that the reserves can be produced; that SOC will have sufficient funds to acquire and will pay for 35 percent of the developed oilfields of over $40M and then the undeveloped oilfields of over $26M,and that Stamper will be able to purchase 100 percent of SOC; the projected number of wells to be added; that the Sudan project will be able to produce oil as currently scheduled and at the targeted low costs from its Sudan property; that STAMPER will obtain operating permits on its properties; that the oil when produced by STAMPER will be high quality suitable for standard use; and that STAMPER will be able to carry out its business plans. These forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Risks that could change or prevent these statements from coming to fruition include that Stamper may not get TSXV approval for its purchase of SOC; SOC may not be able to pay the costs of acquiring its 35 percent of Block 25; the group may not get regulatory approval for their operations, aspects or all of the properties' development may not be successful, production of oil may not be cost effective as expected; there is substantial political risk and also risk of war in Sudan, which have the potential of disrupting or destroying production and assets; STAMPER may not raise sufficient funds to carry out its plans, changing costs for extraction and processing; increased capital costs; the timing and content of upcoming work programs; geological interpretations and technological results based on current data that may change with more detailed information or testing; potential process methods and resource recoveries assumptions based on limited test work with further test work may not be viable; world oil prices may drop; the availability of labour, equipment and markets for the products produced; and despite the current expected viability of its projects, that the oil reserves are not proven or cannot be economically produced on its properties, or that the required permits to build and operate the envisaged facilities cannot be obtained. Currently, STAMPER has no revenues. The forward-looking information contained herein is given as of the date hereof and the Company assumes no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.
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