Bargain Barrel: This ASX oil junior is steadily ramping up production
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It is at the bottom of the ASX barrel that punters sometimes find some absolute gems that, with a little polishing, could truly shine. In this column, we examine companies with market caps around the $10m mark that may well be a bargain hunter’s fondest dream.
Junior listed oil companies have been in a bit of a rut lately, thanks to low oil prices and perhaps some weariness from shareholders about the need to raise capital to keep the lights on.
However, Bass Oil (ASX:BAS) is one of a handful of companies that not only has a steady stream of cash flow but is poised to drastically increase its oil production.
In the December 2019 quarter, the company enjoyed a new quarterly record net production of 45,123 barrels of oil – about 892 barrels per day (bpd).
Oil sales for the quarter totalled 44,520 barrels, generating sales revenue of $2.44m.
And this is set to grow.
The recently completed Bunian 5 well flowed at an average rate of over 860bpd from the TRM 3 sandstone and a further 650bpd from the K sandstone.
Modifications are now underway to the production facility to allow for the anticipated production increases from Bunian 5 and other wells.
The company has already completed workover operations on the Bunian 4 well and expects to bring it online soon for testing.
While Bunian 4 is in a structurally similar location to Bunian 5, it has never been on production for Bass.
Managing director Tino Guglielmo told Stockhead that the company is integrating all the data from the latest drilling program before updating its reserves and production forecast for the Bunian field.
“We have got indications from field performance and the drilling results that there is the potential for Bunian field to grow and there is also the potential for a structure we identified a couple of years ago to grow the total reserves space in the field,” he said.
This is likely to be drilled in the first half of 2021.
Guglielmo is also looking to drill an additional development well on the Tangai field this year that could further increase production.
Bass is also actively screening a number of growth opportunities.
“There are plenty of opportunities to grow our business in Indonesia and we want to take advantage of that because we have established our reputation and presence,” Guglielmo said.
The company is looking to have interests in three types of properties.
These include exploration plays, existing properties with existing production and the potential to increase recovery and transformational deals involving existing producing properties that provide step change growth opportunities.
Our other featured company this week is Middle Island Resources (ASX:MDI), which has just commenced a 17,400m drilling campaign to extend or assess some 17 open pit gold targets and deposits at its Sandstone project in WA.
“Once we have done that (the drilling program), we will certainly be identifying resource additions. It is just a question of how much,” managing director Rick Yeates said.
Sandstone currently has a resource of 537,000 ounces of gold.
“The plan will then be to bring those resources into the updated pre-feasibility study and using more contemporary gold pricing with a view to recommissioning the project.”
He told Stockhead that refurbishment of the Sandstone processing plant would take about five months.
“So potentially, we could be recommissioning by the end of the calendar year.”
Along the way, Middle Island is pursuing a strategy of consolidating the gold resources in the district, which it has calculated at about 1.8 million ounces in total.
“Whether that is by toll milling, by production sharing, asset level consolidations or corporate consolidations it would vary by circumstance to circumstance,” Yeates added.
“If and when we get into production, then that would certainly help to catalyse that strategy.”
In the longer term, Middle Island has also identified a couple of underground targets including a very large, low-grade deposit and a smaller, higher-grade opportunity.
The company expects to fund drilling on these targets out of potential future cash flow from the Sandstone open pit.
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