Courtesy of BigBiteNow Also, in my opinion there is little value in proclaiming what the CHAR cash balance will be at Christmas 2019 because the actions planned over the next few months are the true catalyst here. By Christmas 2019 the Lixus license will be much further advanced and with it highly likely the SP. There is no drill commitment currently planned for 2019 and the company has clearly stated that it will be partner driven. I have found enough documented evidence to demonstrate that the Lixus discovery is viable and highly profitable at current Morrocan gas prices. Morroco still imports the vast majority of its gas and is driving these sorts of developments to help alleviate that. So there is going to be great interest in a new phase 1 90MMscf/d gas supply. So the demand will be there. Therefore, it is going to find interest and likely quite a lot of it. Everything therefore points to a partner being found and the drill happening at reduced costs to CHAR. Therefore, if they do raise it will be for a material reason (likely the appraisal drill but as I demonstrated on Friday, this cost should be around $15m and so is well within the cash levels of CHAR, if they farm out a percentage of the sdrill, which they have said they will). Said drill will highly likely also come at a much higher SP, because it will be post CPRs, post feasability study, post market study, and post partner sign up. All of which have the ability to drive the SP and all of which to date, are likely to prove positive and support the de-risking of this project and! the current SP is still only at cash levels. Trust issues and pereceived previous poor management performance aside, Lixus is a lot bigger than simply re-rating the SP to current cash levels, end of. So its a strong buy for me based on my research. But always always DYOR
Courtesy of BigBiteNow @MrJinx It is interesting that out of all of that information you decided to focus in on my example of a means to realise the development. It was the least factually based part of the entire post. The reality is this is all about fair value and the potential for realising a development at Lixus. How on earth do investors in a company that to now has gone after ‘giant’ oil plays, expect said small company to achieve this by retaining the majority of the ownership, and to do it without substantial dilution. The best way they can do this is to find a partner who is willing to drive the project and the majority of the costs involved. To do that with a wildcat requires a great deal more of the potential prize, and that is all it is when nothing has been drilled yet, to be given up to make it worth the partner’s while. With Lixus CHAR have effectively been given 75% an oil discovery that is better than the one that CORO have bought 15% of for nearly $5m in shares and cash, which means they have a far better bargaining position. The work currently being conducted on the CPRs, the feasability study, and the Morrocan gas market, will futher de-risk the play and enhance the bargaining position that the company holds. I have clearly demonstrated in my posts from Friday and yesterday that there is a great deal of profitability to be had from this discovery, which should improved greatly as the above plans etc are released. Whether that means that CHAR agree a free carry, or that they retain a greater percentage of the development wasn’t the key message for me. What the CORO figures clearly show is that even with a limited retained interest, CHAR has an asset that demands an NPV of several multiples of what we are currently seeing, and as these plans are released we should start to see some of that value in the SP. I am very much aware of the past dilution of lack of trust that LTHs have in the management team, but this management team never had a +300BCF dikscovery off the coast of Morroco before, a market that right now would deliver substantial netbacks. It remains to be seen what they do with it but at the very least their position is far stronger and so the percentages are very much in their favour, and at 4p a share and still just current cash levels, there is not enough value in the MC for what has been achieved, what will happen in the next few months, and hoe strong an asset the Lixus license is.
Chariot Oil & Gas expands Morocco footprint with new Lixus licence
Courtesy of BigBiteNow Yes, quite surprising especially with Malcy singing from the rooftops.
Courtesy of BigBiteNow Unbelievable lack of knowledge and disinterest by the market. Company really has to ratchet up PR now to get the message out of just what has transpired here with the Lixus licence award. This is akin to being awarded an initial first round wildcat licence , spending $150 million on seismic and drilling and discovering an initial 70 mmbl oilfield with excellent chances of tripling this with new data modelling and info gained from RD1… unbelievable… The 2 x £ 20k trades this avo were my bed and Isa’s.
Courtesy of BigBiteNow I would encourage those interested in Chariot to review the recent CORO acquisition of 15% interest in the Duyung field near Singapore. CORO have paid $4.8m for a 15% interest in a field that has current has (independantly certified) 2C gross resources of 276 BCF (41 BCF net to CORO). Chariot have acquired Lixus with Repsol confirmed 100 BCF reserves (75 BCF net to CHAR) and independantly assessed 2C gross resources of 307BCF (230 BCF net CHAR) for zero cash outlay. Slide 13 describes the value proposition for CORO shareholders. With their 15% of the 276BCF gross resources signalling $60m of NPV at 10% discount when prices of $9.25 per MMBtu are achieved, against ; Development costs of $0.90 per MMBtu Opex $1.25 per MMBtu Average gas price $9.50 per MMBtu Chariot employ SDX Energy supported gas prices for Morroco of on average $9.50 per Mcf Note - The conversion is about 1 MMBTU = 0.973MCF so technically one could argue a higher price than those stated by CORO. The CORO Duyung development at 276BCF and $0.90 per MMBtu would have a build cost of $250m but involves a 16km tie back to an existing gas pipeline rather than CHAR 40km tie back to on shore plant (still to be determined), and 4 well have been drilled against CHAR 1 with 1 further appraisal planned. However, this level of capex begins to add considerable more weight to my circa $360m capex estimate included in my post of 12.04.2019. The CORO Duyung development has a further 350BCF of low risk further upside, which is not included in the valuation. CHAR are currently looking at further 116BCF of low risk upside but have CPRs for a combined 400BCF on the Anchois satellites and another 800BCF on the other block prospects. So we are talking CORO 626BCF against CHAR 800BCF rising to possibly 1700BCF. CORO at $60m NPV for 15%. So what sort of NPV can we expect for CHAR at 75% ownership of a bigger asset with no acquisition costs. Yes there will be greater capex becasue of the distance to shore but CHAR has up to 60% of equity in the license with which to play with before they even reach the CORO level of ownership, and one can make a very strong argument for the at the very least, the same level of NPV being achieved, but likely considerably higher given the size of the asset at Lixus and the likelihood that they can retain more of the asset upto first production. But even at $60m NPV we are talking 12.6p per share valuation for the Lixus license, given we are still sitting at around current cash levels. For every 5% more they retain of the asset we can add a further 4.2p onto that valuation. Some investors have bemoaned that CHAR may “give away” a condierable amount of the Lixus license. Well I would gladly take 20% and a free carry through full appraisal because its a 4 bagger from these levels. [link]
Courtesy of BigBiteNow The enclosed document below is a cost analysis for subsea infrastructure development. It has a lot of detail on the sort of considerations needed in establishing the capex costs for such a project as Chariot is proposing. Pages 188-191 demonstrate a 2007 case study on a typical subsea development with manifolds and subtree assemblies like the one Repsol and Chariot has now outlined. Total capex is set at $169m However, the study only allows for 15km of flowline costs and umbilical cords aren’t long enough. Plus this project requires 4 subsea-trees, where as there are 3 in the case study (+$4.5m) I have made these adjustments and the adjusted capex figure on that simple basis comes out at $315m. If we apply inflation to this figure then we are at $385m. However, the case study is for an installation in deep water at + 1,370m where as Anchois is in shallow water at 388m. Plus costs for this type of work are reducing as the technology has matured over the last 12 years or so. Therefore, i would feel safe reducing this figure by 15%. That gives a total capex of circa $330m To that we then need to add in 2 more wells to achieve the 4 well phase 1 development scheme. So another $28m although the development plan for Repsol does show that they could achieev production from 2 wells. Total cost now sits at circa $358m That would deliver a 90MMcf phase 1 development scheme of 16,000 bopd equivalent but at the current lower end $7/mcf netback, that would deliver $230m in netbacks for phase 1 and payback in circa 18 months, and plenty of cash to drive the second phase 2 90mmscf development. I recognise that the calculations are not accurate but i am merely seeking to de-risk the play and establish achievability, and from what i can see the Morrocan as market is needy enough and has such excellent pricing, that such a development at Lixus is very much on and partners won’t be hard to find. [link]
Courtesy of BigBiteNow Further to my earlier post regarding the already proposed and defined 2 well development plan for Repsol, I took a closer look at the likely costs that could be expected to get such a field into production. Firstly, there is the appraisal well. Chariot have already been involved in a drill off Morroco with the Rabatt Deep 1 well. That well whilst is far deeper water than Anchois-1 (1,110m v 388m), was drilled to to a depth of 3,180m in 48 days. That’s very loosely about 66m a day. Anchois-1 was drilled to 2,435m but the appraisal well is planning to test the Gas Sand C structure, which is deeper but slide 18 of the latest presentation demonstrates that the Anchois-1 well drilled deeper than that already but it was outside the line of Gas Sands C. In order to create a safety margin, if we say that they will drill the same depth again, which is unlikely, then at 66m a day the drill should take around 37 days. If we add in 20 days for completion, then we are at 57 days. The enclosed June 2018 presentation (slide 6) demonstrates current drill ship costs. Remember RD-1 was drilled by the drill ship Poseiden. So there is form. On that slide the current day rates for such ships is around $200k. At 57 days we are talking around $11.5m for the appraisal drill. If we add 20% for contingences then we are at $14m. Now to achieve that same goal Chariot gave away 40% and operatorship to ENI, but that was a wildcat drill with no previous successes. Lixus has a proven discovery with a known minimum 100BCF reserve applied to it by Repsols team. The process to establish the best route to market and indeed the market that it will enter will demonstrate the feasability of the development plan prior to a partner being sort. Said partner isn’t going to need 40% and operatorship to be willing to carry that sot of appraisal drill cost, given the existing information at hand. The two scenarios are therefore completely different. Between the information in those 2 posts, there is enough evidence to demonstrate that the project is feasible, has sufficient known reserves, proven by the previous owners, and that the appraisal well is cost effective. If those factors are known and accpeted, then the 2-3 month news cycle here will be sufficiently positive enough to allow a substantial re-rate from these levels, which itself will give Chariot greater options for the funding of the appraisal well and the securing of a partner for the development. [link]
Courtesy of BigBiteNow I have been taking a much closer look at the Chariot Lixus license in order to gauage their chances of success. I appreciate that LTHs here are a little dubious as to their chances but from what I have seen the asset looks very strong given its geographical location and proposed market. The enclosed slideshow is a previous project report for a field plan conducted for the previous Repsol led partnership. It demonstrates that there was a clear plan to develop the play as a 1 field 2 well play with futurer tie ins. This is highly likelly driven by the high netbacks that can be achieved in the Morrocan market and is essentially what Chariot are now proposing. The plan describes a subsea installation with 1 manifold and 2 subsea well satellites. The author describes the current expected reserves to be 100BCF from Anchois 1. The only potential negative I can find is the comment about "potential restrictions with gas bearing sands detected. The selection of the subsea technology is described as follows ; “The Field Development contains a Subsea, Offshore Flowline and Pigging Line infrastructure. The concept selection carry out is a Subsea System tied back and exported to Onshore Plant (“Subsea Wells Tie-back to Onshore Plant”) via flow lines and control umbilical.” “The field itself shall be designed with flexibility for new tie-in of the new discoveries further in the area.” So very similar to Chariot and it looks very much like they are looking into the very same plan that Repsol has already put together back in 2011. It goes on to say that the design allows for ; “A considerable reduction of the CAPEX, due to a minor controls requirements and the installation Cost, in contrast the Net increases in Oil production” The english translation isn’t perfect but the gist of what he is saying is very clear. In essence there is already a very simple field development plan in place that requires just one further appraisal well (that is planned by Chariot for next year) in order to achiev this field development plan and go into production. There is already a Repsol recognised 100BCF reserve from Gas sand A and B. It is not going to take a great del more success in and around the Anchois discovery and its satellites to achieve the phase 1 parameters, and the above scheme allows for a low cost solution, which can have additional wells added to it. It isn’t the whole story but this plan at the very least demonstrates that the feasability study is going to demonstrate an affordable solution even with limited further success with the drill bit. With netbacks in Morroco running at $8-9/mcf, a very profitable simple field development plan looks likely, and that isn’t priced in here at all. [link]
Courtesy of BigBiteNow Another note worthy fact from SDX is that the centeal processing facility and 10km long pipeline in Egypt is costing SDX $18.5m for their 55% share. Assuming capex is proportionately shared out then the total facility would be around $34m. That’s a ball park figure but gives a good idea of the cost and it is certainly no deal breaker. There are of course the costs to add to the subsea flowline and drill costs to consider but then Chariot has 75% working interest with which to play with also. Lastly, SDX has made some very good discoveries in Morroco and their success rate with the drill is very good indeed. However, their ; “Total (NET) Proved Plus Probable Plus Possible Reserves” across their entire portfolio, so Egypt and Morroco combined, comes in at ‘just’ 33BCF of which the high return Morrocan assets contribute around 6BCF. I say just because right now Chariot has a proven gas discovery (2C resources) that delivers NET (75% working interest) of 230BCF with major upside potential to come. That’s near 700% more than what SDX has taken minimum 4 years to achieve and they achieved it with one simple concession award from the Morrocan government and a maximum $1m initial cash outlay.
Courtesy of BigBiteNow Good morning. The market clearly hasn’t taken the time to fully appreciate what the Lixus concession and discovery truly means for Chariot Oil. I have seen several references here to SDX, a company I have also invested in and that currently operates in Egypt and Morroco. SDX is currently building a central processing facility in Egypt (not Morroco) with a gross plateau production rate of between 50-60 MMscf/d, with the conventional natural gas being sold to the state at a price of US$2.85/Mcf. SDX has a 55% working interest and is operator in this concession. Whilst the project is delayed there is much excitement for what this project will do to transform SDX’s fortunes by adding what will be circa 5,500 bopd net equivalent production to the business. However, it is in Egypt, a jurisdiction where the 75% ownership enjoyed in Morroco simply isn’t available. Nor is there a 10 year corporation tax holiday on production and the realised price is ‘just’ $2.85/Mcf. In Morroco, SDX operations enjoyed an average realised price of $10.33/Mcf in 2018 with netbacks estimated by Edison at the start of that year at between $8.5-9.0/Mcf range for realised prices of $10/Mcf. [link] SDX are no doubt delighted with their project in Egypt but be under no doubt, it would be a far stronger project if it was based in Morroco and creating far more excitement. With Lixus, Chariot have just that and then potentially a lot more. Yes risks remain and the Morrocan market has to be fully analysed to establish how much gas it can handle and at what sort of pricing but at netbacks pushing $9/Mcf there is plenty of headroom considering that the potential netback is some 315% more than the full prices SDX will be achieving from their processing facility in Egypt. That would be enticing enough if we were simply just comparing a like for like outcome. However, Chariot’s outline plan points towards a 70Mmcf/d phase 1 development. If they only achieved the 70Mmcf/d outcome then i am in, i am present, i am invested, because of those potential netbacks. However, that phase 1 development plan has room to expand to 90Mmcf/d if the deeper Gas Sand C comes in, which carries risk but nothing too testing. A great percentage play given that the 70Mcf/d is enough. But if that weren’t enough then we have phase 2, which can deliver another 90Mmcf/d if the satellites around Anchois come in, and has the added bonus of a low risk Anchois N potentially contributing 238BCF of the anticipated 674BCF needed for this phase (so 35% of the total) and currently holding a 51% chance of success. However, the investment case doesn’t require 90Mcf/d from phase 1, nor phase 2, nor Anchois N, nor the 5 eastern prospects, or even the reported “giant scale prospective resources in the sub-Nappe” that are being reported. All of that is free carried and a bonus. I very much like.
Courtesy of BigBiteNow @topsharepicks whilst nobody outside the company can say for certain that “big farm in” news could not come at any time, the likelihood in Brazil, which i have seen mentioned on this BB several times of late, is that this will not happen until the AP-1 block has been drilled by Shell and its partners. Slide 20 of the latest Chariot presentation is clear ; “Partnering process initiated for a partner to join in drilling to follow a play opening commitment well to be drilled by a third-party in the neighbouring deepwater block” Now whilst there may be a partner out there willing to commit prior to this, it really doesn’t make commercial sense to do so when they can wait until Shell have drilled and establish a better idea of the chances of success. The same is being played out by Chariot themselves with the MOH-B and KEN-A ‘potential’ drills. That Shell drill is not currently planned for 2019. You have every right to believe and argue whatever case you may wish but personally I believe the Brazil angle to be premature and an unnecessary distraction from the Lixus announcement. I didn’t buy in for Brazil but i did buy in for the potential revenues and developments that a successful Lixus will open up. However, I am much more excited about the further Lixus drills and potentially what it could do for opening up the MOH-B play. As an example, the very last slide of the April presentation from Chariot states that Anchois N has the potential to add a further 238 BCF in 2C resources with a 51% chance of recovery. Now that is an internal estimate and Anchois N is till to have a CPR carried out on it but that is included in the works due over the next 2-3 months, and given it has by far the greatest chance of success assigned to it, could well be a very interesting development over the next 2-3 months. To drive that point home, I refer you to slide 8, which is the outline development plan that has been put together to date. Phase 2 currently only considers the 3 satellites that have a CPR on them, and yet it is capapble of delivering a further 90 mmscf/d. However, the slide clearly states ; “Anchois N yet to be audited and may materially impact on a Phase II development” So the satellite with the current highest assumed chance of success and circa 238 BCF in potential gas pay, isn’t even part of what is a potential 180mmscf/d field development plan. Such a development reduces the need to succeed on the satellites and reduces the risk of the overall play. It is these potential game changing positives that will potentially come out in the studies that are due in the next 2-3 months. They have the potential to deliver a very large field plan that will be selling into Chariot’s highest margin market by far and will enjoy a 10 year corporation tax holiday on production, something Brazil doesn’t get near. That is why i am here for Lixus and not those ‘big farms ins’ which are a red herring and a distraction.
Courtesy of BigBiteNow I have taken a position in here having previously bought SDX, so my understanding of the Morrocan gas market is good and their pricing structure makes the Lixus block a very attractive asset. 75% ownership of 70mmboe of 2P resources for just $1m commitment is significant. I do however believe that the talk of the Brazil farm in is far too early because the company and highly likely any potential partner, is waiting for the results of the Shell drill on the neighbouring block AP-1, which as far as I can find is currently not scheduled for 2019. Mohammedia (MOH-B) looks far more likely to be the front end ‘giant’ scale drill that finds a partner and a path to being drilled, but it is not the key reason i have decided to buy in. This is all about Lixus, which is a deal that has and continues to take the market by surprise. From what I can see the next 2-3 months actions are designed to set up Anchois as a commercial find through a series of studies that will turn those 2C resources into proven commercial ones and attract a quality partner for what is an appraisal well. Hence the drive to establish the development plan and the Morrocan gas market. There is risk and I am wary of the managment’s performance to date. However, the asset is that good that on a risk reward basis that I find it compelling enough to take a position. What’s more the discovered resources sit within gas Sand A and B and are to date capable of supplying 70mmscf/d for over 10 years. That is without the as yet not drilled Gas Sand C, or indeed the other 9 prospects that are noted on the block. So everything else could fail and they could still bring home a 70mmscf/d discovery. If as suspected the development plan and gas market studies deliver the sort of returns I expect, then that will be the key catalyst here front end and not Brazil or even MOH-B. They are pure bonuses later down the line, Lixus is more than enough for now. So I am a buyer.
Malcy's Blog: Oil price, Chariot, JOG, Soco, IOG And finally Seems like Malcy fill follow the whole journey to production and to a much higher shareprice with us. Surely he will not be the only one. [link] CharCharChar.png1263x949 194 KB
Malcy's Blog: Oil price, Chariot, JOG, Soco, IOG And finally Vox Markets Versarien, Strategic Minerals, Emmerson and Malcy on O&G - Vox Markets On today's podcast: Versarien sign a term sheet with Beijing Institute of Graphene Technology. Strategic Minerals provide an operational update. Emmerson sign a heads of agreement for 100% Offtake. Interesting chat by Malcy from 38 mins on about the Price of Oil, Fund mgrs, Bond market, Aramco, Chevron offer for Anadarko, etc Talks Chariot from 50:30 mins on