10
Nov

Wrap – Week Ended 11/9/12

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Wrap comments will be included in the Monday post which will be posted Sunday. 

8 Responses to “Wrap – Week Ended 11/9/12”

  1. 1
    zman Says:

    Crysball posted this this morning of the Friday post, good stuff, thanks

     

    EGY    Q3  CC……………….The Little  Train  that  Could

    NUTSHELL:  Most  positive   CC   for  the  company  in my  memory.   Only  two  analysts   on  the call,   however,   many    major   & positive disclousures  ………not  the least  of  which  was  the  notification by the Gov't of  Angola   of  the  approval  of  their  partner  for  Blcok 5  while  the CC  was  ongoing.   Wisely,   the CEO  decdied  not  to reveal the partner  until  he  had  something   in writing………….other  than  a note  passed  down  the table.

    Here  are  the  HIGHLIGHTS:

    Dom,

    In  7 years  as  an investor   the  Friday  Q3  conference call  was    without  doubt   the best.

     

    Will  send detailed  notes   later, but  the  HIGHLIGHTS   IN A NUTSHELL are:

     

    Angola  has  approved  their  partner  to drill Block  5……….will  be  formally  announced  within  a couple  of  weeks……….they  have already  agreed upon  a drilling plan  and  funding  so  now  it  is a matter  of  finding an  available  Semissubmersible  Drilling Rig .  Initial  prospect  will  be  presalt,  but  they plan  to  drill  it  through  the  postsalt   Loengo  Prospect…………..so  if  they  don’t   have  success  in the  larger  presalt target  they  will  have  the  postsalt prospect  as  a backup.   Vaalco  never gave  up through  6 years  of  frustration   in  trying  to  bring  event  to fruition. Sonongal  had  6 people  at the Vaalco office    in Houston  last  week.   Expect  drilling  of  the first  prospect  to occur  within   150 days.  Note  Vaalco  must  drill     wells  by  the end  of  2014  to secure  their  40% interest.   They  see  no problem.

    Onshore   Gabon   [Mutamba ]  oil  discovery   was  agreed  to  as   a ‘’TIGHT  HOLE”   with  partner  Total………..so  full  details  won’t  be available  for about 45  days……….but they   can  hardly  contain  their  excitement  as  this   is  a  field  not  just   a single  well………they actually  drilled  a high angle  well from  the  same  island  pad  they  used 2 years  ago which  came  up as a dry  hole  but  had  all  kind  of  positive  geochemical  shows.   Previously this  had  characterized  as  a 15  million  barrel  prospect.   The well  is  5 miles  from  an existing  Total  Field  and  close  to  a Shell Pipeline.   They  will be  able  to bring  the well   on  line  very  rapidly………..and  also   plan  to  drill  several  more  wells  as  this  is  a Gamba  sandstone  structure……….just  like  Vaalco’s Offshore  Etame  field,  and  will require several wells  to  drain  the structure.    Note: In this well Vaalco  is listed as the operator……….in  subsequent  wells  in Mutamba  Total  will be  the operator  as  they  have vastly  more experience   and in-place infrastructure   on shore   drilling  in Gabon……….having  over  a hundred  producing  wells  and  30+ years  of  experience.   FINANCIAL  NOTE  While  the  current  Mutamba  agreement   is  50/50  between  Vaalco  &  Total the Gov’t  of  Gabon   has a 15% back  in rights,  which  will undoubtedly  be exercised  upon development  of the field.  The first well  had  3 sidetracks   to help   delineation.

     

    Financial   Note  from Greg Hullinger  CFO: There  is  an  immediate  $29 million  onetime  event  for  Vaalco  when  the  formal  announcement is  made   on  the above  two  items

    They receive  $5million  from  their  new   Angola  partner  to  cover   expense  incurred  by  Vaalco  over  and  above   its 40%  Working  interest  and   this  will be  an immediate cash payment….most of this  is  long  lead  items  for  drilling the first welll.

    Vaalco  uses  Successful  Efforts  accounting   and   they   will recapture   the   $24  million  they  had  previously  written  off  when  they  drilled  the Mutamba prospect  2 years ago  and  expensed  it  as  a dry   hole.  This  will  be  placed  into  the ‘cost oil’  account  and  further  reduce  the  taxes  they   have  to  pay the government  of Gabon.

     

    Offshore  Gabon [Etame concession]

    The   KCA Duetag   Ben  Rinnes   Jack-up rig  will  arrive   at the Etame  field  in early  December  to  start   a 5 well  drilling  program   [2 workover, 2 development  and  one  exploration]  with  an option slot  for  a 6th  well……..probably  Lead N  or  the  new   near  shore   lead  they are  currently  processing seismic  data.

    Vaalco [with partner consent]  is  proceeding  with  construction of  2  new  production  platforms  for  Etame………cost  about  $40  million  each……..install date  early  2014.   The objective  is to keep  the   Etame  concession  production  at  or  above   20,000 BOPD through   2016.    Each  platform  will provide  for 3 to 5   new  wells  to  improve  drainage  of   the Etame  field  and    develop  the

     

    Montana  Bakken    fields  [both  Salt  Lake  and   Poplar  Dome]   appear  to be   commercially successful:

    They  are  currently  completing   [frac’s]   in  both  fields   and    awaiting   flowback  data……..the wells are  not  BARN BURNERS, but  will provide solid returns, and  lay  the  ground  for  further  drilling plans  in 2013………probably4 to  6 wells  in each field.

     

    They  recently acquired a 10,000  acre  leasehold  in  South Dakota  as a Red River  formation  prospect   and  have  comps  from  nearby wells. They expect to spud  the   initial well   before  the end of this calendar  year.

     

    Equatorial  Guinea.  The  gov’t  approved   their  acquisition  of  a 31%  working  interest  in Block  P  on Nov. 1.   They acquired Petronas interest which is leaving West  Africa.  Devon  Energy   was  formerly   in  the block   when  they  drilled  the first  4  exploration  wells.  The Government  of  Eq. Guinea [GE Petrol] acquired   Devon’s   31%  interest  in  2011   and    is  most anxious  to  develop  Block  P.       In  total GE Petrol  has   51%  Working  interest [31%they  purchased from Devon plus  20% carry]  and  while  GE Petrol are  on paper  the operator……….the government  has  no  people  or  expertise   in exploration  or  development …………..hence  Vaalco  will  be  the technical  operator   of  the Block  P  concession   in fact.    Starting  over  6 months  Vaalco was  given  access  to all  the  seismic  data  and drill  logs    on  the  Venus  discovery  and  the  other 2   best  prospects  so they are  hitting the  ground running.  By  prior  agreement  with  GE Petrol  they  are  going  to  drill  up  the  2 prospects   as this will determine  what  size  FPSO   they  will  need.   The FPSO  sizing and  acquisition  is the   pacing  factor  to  the   Block  P  development.

    Would  anticpate   the  street  will take  renewed  interest   in Vaalco, as  beginning  in  2014  would  expect  them  to  outspend  their  cashflow   and   given the pristine condition of their  balance  sheet  and   history  probably start  with  a senior  debt  issue.

    All IMHO

    p.s.  Would  encourgae   those  interested in   Vaalco  to listen  to  the CC  replay  available  on the  Vaalco  website.

  2. 2
    DaveH Says:

    More details on the WHZ dividend:  WHZ@NYSE (Name: WHITING USA TRUST II) announced a cash dividend with ex-dividend date of 20121115 and payable date of 20121129. The declared cash rate is USD 0.76062.

  3. 3
    DaveH Says:

    I was looking at various stocks I own.  I noticed that I had bought some PWE on 12/19/08 and the price of PWE was back to slightly below what I paid on that date.  But there have been a lot of "moving parts" in the stock over that period.   When I bought it was paying about 20% dividend.   The dividend eventually went down has been consistent since March 2011 and is about an annual 10% at the current price.   Other moving parts are:
    a. oil up somewhat
    b. NG down a lot
    c. Canadian currency up almost 25%  (it is a Canadian company)
    d. Management selling a lot of stock, diluting stock holders
    e. Several top executives left the company this month.   Some major investors had been pressing for management changes
     
    Z did a nice analysis of the company fundamentals on 7/12/12 at 11:57AM.   
    The price of the stock is back to almost its low, adjusted for dividends, in March, 2009, which was its lowest since it started trading in 2005, adjusted for dividends.  Over the almost 4 years I have held it, the stock has returned an annualized 7.6%, adjusted for dividends.   Not great but since it seems to be beaten down now, not too bad IMO.   
    The potential for the future has several good points:
    1. Owns some good oil/gas assets
    2. New management coming in with mandate to turn it around
    3. Canadian company.   If you are concerned about the fate of the USD due to deficit spending , fiscal cliff, ineffective congress, etc, it might be good to have some money in an investment based on the CAD as the Canadian government and banking system have been much more better than the U.S. counterparts in many ways.   This is partly reflected in CAD being up almost 25% from 2008 but there could be more to go.
    This one takes a lot of patience but since they have been paying consistently 10%/year dividend, I could live on that okay while waiting for the stock price to go up.

  4. 4
    DaveH Says:

    Fracing in N. Dakota led to the cholera outbreak in Haiti??   Not that I agree with this thesis but these people are making a push to have the endowment funds of universities sell their E&P stocks.   Something to be aware of.

  5. 5
    DaveH Says:

    Re: 4.   I forgot to add the link http://www.nationofchange.org/mckibben-spearheads-plan-hit-dirty-energy-where-it-hurts-1352564230

  6. 6
    DaveH Says:

    Here is another anti-fraking article.   This one on the dangers of radium being radioactivity being released.  http://www.nationofchange.org/fracking-radioactivity-1352562120

  7. 7
    choices Says:

    Should prompt more spending on  cyber-security programs-haven't seen the WSJ article mentioned this article:
    -Chevron implied that stopping Stuxnet was no big deal but as I understand Stuxnet is not even close to state of the art these days.
    http://rt.com/usa/news/stuxnet-chevron-cyber-virus-348/

  8. 8
    zman Says:

    The Monday / Tuesday post is up:

    http://zmansenergybrain.com/2012/11/11/monday-and-tuesday/

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