The pace of oil and gas exploration is frightening, and discoveries are weekly,
if not daily, with volumes investors would only have dreamt of a decade ago.
With each new discovery, it becomes difficult to keep track of the playing
field, and even more difficult to rank the potential. There are also a lot
of juniors popping up on the scene now, exploring, finding and developing with
the intent to lure the bigger players to buy them out. So we'll make it easy
for you here, with our list of 6 key oil and gas discoveries so far this year,
followed by a short list of the companies we think have the best potential--and
they're not necessarily the ones who have made the biggest discoveries.
Last year, it was all about East and West Africa, with game-changing finds
in Kenya, Mozambique, Angola, Ghana and Ivory Coast that have sent explorers
on a feeding frenzy looking for analog plays in the region and finding plenty.
This year, so far, we like the discovery revival in the Gulf of Mexico and
handful of new sub-salt and pre-salt plays.
6 Key Discoveries of 2013
Shenandoah-2/Gulf of Mexico
In mid-June, Anadarko Petroleum (APC) announced a major new discovery in this
deep-water play: more than 500 million barrels of crude oil in the Shenandoah-2
well. This find is important: the implications are massive and this means we
could be looking at a major oil rush in the Lower Tertiary trend. (Anadarko
shareholders should be thrilled). And it wasn't easy (or cheap): Anadarko drilled
through some six miles of rock in water at a depth of 5,800 feet.
The Lower Tertiary trend and its sub-regions could hold up to 15 billion barrels
of oil. What this discovery means is that the US oil boom is far from over,
and the Gulf of Mexico Lower Tertiary trend is still surprising us. Anadarko's
find solidifies a trend that began with ExxonMobil's 2010 discovery of the
Hadrian field (700 million barrels); Royal Dutch Shell's discovery of the Appomattox
field (500 million barrels); Chevron's discovery of the Moccasin field (200
million barrels); and BP discovery of the Mad Dog field (est. 4 billion BOE).
Coronado Prospect/Gulf of Mexico
In May, Chevron Corp (CVX) announced a new discovery at its Coronado prospect
in the Gulf of Mexico, at the Walker Ridge Block 98-1 well. The well is some
190 miles off the coast of Louisiana in the Lower Tertiary sub-salt trend,
in water of around 6,127 feet, but it's been drilled to a depth of 31,866 feet!
(One of the deepest wells ever drilled and probably cost at least $250 million,
though we don't know for sure). The scale of the reserves is still under appraisal
for commercial viability, and Chevron currently holds a 40 percent working
interest in the prospect. Other owners of the Coronado prospect are ConocoPhillips
( COP ) with a 35 percent stake, a subsidiary of Anadarko Petroleum Corp. (
APC ) with a 15 percent stake, and Venari Offshore LLC with a 10 percent stake.
Harpoon Discovery/Newfoundland
In mid-June, Norway's Statoil announced it was evaluating a new discovery
of high-quality oil off the coast of Newfoundland, about 500 kilometers northeast
of St. John's. The Harpoon discovery is under some 1,100 meters of water. While
we don't know the extent of the Harpoon discovery just yet, what we like is
that it is only 10 kilometers from the earlier Mizzen discovery, which is estimated
to hold between 100 million and 200 million barrels of oil. Statoil owns a
65% stake in Harpoon (the rest is owned by Husky).
Offshore Cote d'Ivoire
In late April, France's Total SA announced a major discovery in the deep waters
off the western coast of Cote d'Ivoire, encountering 91 feet of net oil pay
while drilling in Block CI-100 in about 7,400 feet of water. It was the first
block Total drilled. What is significant about this discovery is not the net
feet of pay, but the fact that it confirms an extension of reserves in the
Tano basin, home to the giant Jubilee field in neighboring Ghana. The Jubilee
field is one of the richest oil fields in Africa with potential reserves eclipsing
1.8 billion barrels. This is the second major find in Cote d'Ivoire recently;
last year Tullow Oil--which is also exploring in Ghana, made an offshore discovery
here as well.
Gullfaks, North Sea
In April, Statoil said it could be sitting on 40-150 million recoverable BOE
in the North Sea in its Gullfaks license, where it is still working to confirm
its findings. Gullfaks is in the North Sea's Shetland Group/Lista Formation.
The Gullfaks finds are younger, shallower deposits than its primary areas.
Gullfaks has three permanent installations that have so far produced over 2.4
billion barrels of oil and over 56 billion cubic meters of gas. Statoil is
the operator of the license, with a 70% interest, along with Petoro (30%).
The Gullfaks discovery follows two other recent massive discoveries in the
North Sea: Johan Sverdrup and King Lear.
Santos Basin/Libra, Brazil
In May, Petrobras doubled the estimate for its Libra field to 12-15 billion
barrels. This makes it Brazil's largest ever discovery. Brazilian officials
say it could easily produce a million barrels of oil per day once it is fully
developed--that's TWICE the output of OPEC-member Ecuador. Production could
begin in five years, with plans for up to 12-18 production vessels permanently
anchored on the field, each of them pumping up to 30,000 barrels per day. For
state-run Petrobras, which owns the field, it means more expenditures and more
debt (and it's already drowning). The answer: Petrobras is taking the show
on the road, preparing to offer foreign investors up to a 30% stake in this
amazing prospect. (The Libra auction will take place in October, and 70% of
the field will be up for grabs).
What's Worth Owning
Genel Energy (LON:GENL)
We can't get enough of Anglo-Turkish Genel, which is advancing like a hurricane
in Kurdistan (discovery after discovery and amazing drilling success), and
also faring nicely in Africa. Shares in the company have advanced almost 50%
over the past year on success in Kurdistan, and now it's about to hit the roof
as its crude oil pipeline nears completion and is slated to start pumping crude
to Turkey by the end of September. There is a short window of opportunity here
to get in while this is still a bit undervalued. (And there are a number of
undervalued stocks operating out of Kurdistan).
Genel is the largest
producer in Iraqi Kurdistan, and its holdings are impressive. We're talking
about 7 production-sharing contracts with some nice geological diversity.
Its largest producing fields in Kurdistan are Taq Taq and Tawke, which have
an estimated gross proven and probable reserves of 1.4 billion barrels of
oil and gross proven, and probable reserves of 1.9 billion barrels. By 2014,
Genel is aiming for a production capacity of 140,000 net bopd.
Anadarko Petroleum (APC)
Anadarko has great onshore assets in the US Gulf of Mexico and diverse offshore,
deep-water assets off the coasts of Algeria, Ghana, Mozambique, Brazil, China,
Indonesia and New Zealand, with proven oil and gas reserves at about 2,560
million BOE as of end 2012. We're looking at liquids-natural gas ratio of 46%-54%.
For 2012, Anadarko saw a 10% increase in overall production. This year, Anadarko
plans to spend some $5.5 billion developing its onshore US assets alone, and
about $1 billion on its overseas plays. So we expect another nice increase
in production for 2013. The company will shift its key activities a bit to
account for low natural gas prices, so we'll see more focus and money spent
on the Gulf of Mexico and less at the Marcellus shale, for instance. Anadarko
is trading at $86.10 per share with a total market cap of more than $43.1 billion.
In the second week of June, shares of Anadarko rose 3.7% on the news of a
major new discovery in the deep waters of the Gulf of Mexico (Shenandoah-2,
mentioned above).
Noble Energy Inc (NYSE:NBL)
When you think about the Levant Basin these days, you think about Houston-based
Noble Energy. In late May, Noble announced a new discovery in the Mediterranean
Sea, just 20 miles northeast of its Tamar field in its Karish
well after drilling to a total depth of 15,783 feet. The well encountered
184 feet of net natural gas pay, and Noble thinks it potentially holds up to
2 trillion cubic feet of natural gas. This brings its estimated
combined resources in the Levant Basin--including the Tamar and Leviathan
fields--up to 38 trillion cubic feet of natural gas. Noble is definitely on
a roll in the Levant Basin, and this latest discovery is its 7th so far in
the eastern Mediterranean.
Back in the US, it's more good news for Noble. In mid-June, Noble confirmed
that its second Gunflint appraisal well in the deep waters of the Gulf of Mexico
had an estimated gross resource of 65-90 million bbl of oil equivalent. This
means Noble's plans for a subsea tieback development at Gunflint are a green
light for this year. Production is targeted for the end of 2015 at both Noble's
Gunflint and Big Bend deep-water discoveries in the Gulf of Mexico.
Oryx (OXC)
Sorry, but it's got to be Kurdistan--again, but this time Oryx, a company
we've written
about before but you may not have heard of. If you haven't you're missing
out. About a month ago, Oryx--the upstream division of AOG--offered
up 17% of its shares (16,700,000 common shares) on the Toronto Stock Exchange
for C$15 per share) with gross proceeds of $250 million. The proceeds will
allow Oryx to complete its exploration and appraisal plans through mid-next
year, and they expect some serious results over the next 12 months.
Oryx is the brainchild of Swiss billionaire Jean Claude Gandur, who made his
grand entrance onto the oil and gas scene in 2008 with the sale of Addax Petroleum
to China's Sinopec for $7.2 billion. Since then, he's been out of the fossil
fuels game--so Oryx is his re-entry ticket. Gandur owns 77% of Oryx through
AOG.
Oryx is exploring in west Africa and Iraqi Kurdistan, but it's the Kurdistan
assets we really like. Gandur is an excellent diplomat who can navigate power
brokers, which will make or break a junior company in this territory. Oryx
isn't making any money yet, but it will, and that's why we think now is the
time to get in on this. It could very easily go the way of Addax, which was
making about $300 million annually in net income when it was sold to Sinopec.
Gandur has dumped $700 million into Oryx, which has been busy buying up licenses
and drilling wells. It's sitting quite nicely in Kurdistan right now with a
100% focus on oil and 143 billion bbls of proven oil reserves.
By. OilPrice.com Premium Analysts
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