Buzz builds for PanCon as ExxonMobil moves in next door
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The Perth-based boss of Pancontinental Oil & Gas, John Begg, headed to the eastern States this week to bring investors up to speed on next month’s drilling of the potentially high-impact Cormorant 1 oil exploration well offshore Namibia.
As Begg’s presentation notes state, the greatest value adding moments for oil and gas exploration companies come from the drill bit when a discovery with some scale, and clear commercial potential, is made.
The high risk-high reward characteristics of the oil and gas exploration patch was on full display last month when fellow ASX junior Carnarvon Petroleum (ASX:CVN) struck oil in its Dorado 1 exploration well offshore Western Australia.
Carnarvon is a 20 per cent partner in Dorado, with unlisted Quadrant Energy the operator and 80 per cent partner.
Carnarvon was a 14c stock ahead of Dorado discovery and got as high as 69c in the initial enthusiasm for the find being one of the biggest ever offshore WA.
Carnarvon has since come back to 40c after a gas appraisal well in the broader region did not live up to expectations.
Its market cap is nevertheless up by more than a factor of three on continuing excitement about Dorado.
Pancon’s (ASX:PCL) leverage to the upside – should Cormorant 1 also hit oil – is something that Begg can be expected to highlight in his meetings with investors up and down the east coast this week.
It is currently a 0.8c stock.
But it is not quite the penny dreadful the share price implies because the company has 5.26 billion shares on issue, giving it a market cap of $42 million.
The big number of shares on issue is a function of Pancon having been in existence for a long time.
Pancon has a 20 per cent free carried interest in Cormorant 1 meaning it bears no cost in the drilling of the likely $US35 million well.
The well site sits in 545m of water in one of Pancon’s two blocks offshore Namibia.
African oil exploration specialist, the London-listed Tullow Oil plc, is operator of the well which is expected to “spud in’’ or start sometime in September following the arrival of the drill vessel Ocean Rig Poseidon in Namibia’s Walvis Bay.
One month til results
Reflecting the key role Pancon has played in bringing frontier oil exploration to waters offshore Namibia, the company is to receive a cash payment of $A7.3 million once the well spuds.
It should take about a month for results to be known.
The oil potential of Cormorant 1 is rated at 124 million barrels (recoverable).
Begg told this column ahead of his east coast roadshow that the prospect is one of four large prospects mapped in a cluster using the latest 3D seismic capabilities.
The collective oil potential of the four prospects has been estimated at 915 million barrels.
Yet to be tested
Potential is all it is as this stage as the structures mapped by the joint venture are yet to be tested with the drill bit to confirm the presence of hydrocarbons.
“Cormorant is not the biggest one — but it is the one the joint venture has chosen to drill first because we think it has the best chance of success,” Begg said.
“And you should always drill your best prospect first.’’
The recent arrival in Namibia’s offshore waters of the mighty ExxonMobil has created a bit of buzz around the region.
It recently picked up a 40 per cent interest in an exploration block adjacent to the one in which Cormorant is located.
ExxonMobil’s arrival added to the industry talk that Namibia’s offshore waters have become a global exploration hotshot — something that was already in train before oil prices collapsed in 2014, only to recover to current levels.
“This will literally be transformational for Namibia if we can find a big oil discovery in our block,” Begg said.
The same goes for Pancon itself.