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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.
November 10th, 2012 at 8:07 amAll IMHO
p.s. Would encourgae those interested in Vaalco to listen to the CC replay available on the Vaalco website.
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.
November 10th, 2012 at 12:34 pmI 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:
November 10th, 2012 at 2:56 pma. 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.
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.
November 10th, 2012 at 5:19 pmRe: 4. I forgot to add the link http://www.nationofchange.org/mckibben-spearheads-plan-hit-dirty-energy-where-it-hurts-1352564230
November 10th, 2012 at 5:19 pmHere is another anti-fraking article. This one on the dangers of radium being radioactivity being released. http://www.nationofchange.org/fracking-radioactivity-1352562120
November 10th, 2012 at 5:26 pmShould prompt more spending on cyber-security programs-haven't seen the WSJ article mentioned this article:
November 10th, 2012 at 9:48 pm-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/
The Monday / Tuesday post is up:
http://zmansenergybrain.com/2012/11/11/monday-and-tuesday/
November 11th, 2012 at 12:01 pm