New Year – Same principles (Sirius Petroleum)

Good Afternoon Folks,

Typically SMVP offers an obtuse spin than the layman chatter page, We look to provide some clarity coupled with frank acute analysis. This week we looked at SRSP Sirius Petroleum:

The company has been slow getting off the mark and with a change in CEO’s Johnson making way for (Afren director) Toby Haywood. The change thrust sirius firmly back on track in developing the company from a vehicle into a Oil&Gas company. I believe Toby helped firm up the direction and relationships in Africa through his impressive resume as Afren Director.

On steering Sirius towards Nigeria the company appointed Bobo Kuti as CEO which again was a pivotal move bringing in a young dynamic leader with a wealth of knowledge of not only the geographic location but the politics and policies of the region. My feelings of speculative positives comes via the offtake agreement which it has in place along with an increased resource value, reported on 10th December 2013 by the worlds largest oil field services company schlumberger.

Summary of Independent Assessment by Schlumberger

·     Ororo Field hydrocarbon in place estimated at 35.2- 44.1 MMstb (P50 – P10 oil-in-place).

·     Seven oil bearing sands (D1, D2, D3, D4, D5, F and G) were identified in Ororo-1 well.

·     The P50 – P10 Recoverable Oil from the single Ororo-1 well estimated at 10.0 MMstb – 12.8 MMstb.

·     The Ororo-1 well flow tested at a combined production rate of approximately 2,800 barrels of oil per day (bopd) from two oil producing sands.

·     Ororo-1 well contains 125ft true vertical thickness (TVT) of net oil pay.

·     The P50 – P10 Gas Initially In Place estimated at 396.5 – 557.6 Bscf with Recoverable Gas of 276.9 – 390.66 Bscf (P50 – P10).

·     Ororo-1 well did not encounter any hydrocarbon water contact in any of the seven hydrocarbon bearing reservoirs which suggests that the contacts are located down dip of the Ororo structure.

·     The combined results from the petro-physical analysis, seismic interpretation and volumetric studies shows the exploitation potential of the field is good.

The company has funding in place by way of a £1.8m placing to carry the company forward during the development of its transition into the O&G sector. The offtake with Glencore is quiet a feat,  Glencore Energy is a subsidiary of Glencore International plc. which is a pretty impressive agreement to have secured. The (Orro-1 field) have exceeded the expectation of both Schlumberger and the company.

The risk lies in the failure to execute a proactive step forward however some of the delays I expect are down to the uncertainty of Glencore and Xstrata merger which tabled many strategic agreements across the Mining/Oil and gas sector. The very fact that Sirius managed to announce their agreement suggests that there is some substance to the fields size and value.

Note* GlencoreXstrata merged 2nd May 2013 – http://en.wikipedia.org/wiki/Glencore_Xstrata

I followed the LekOil story closely and tipped it at 38p before it shot up to 70p+, with some differences in the company setup (Lek hit the ground running where Srsp hasn’t) I do see similarities in news flow below.

Lek Rns: Nov 2013

Lekoil (AIM: LEK), the oil and gas exploration and development company with a focus on Nigeria and West Africa, and its partners Afren plc and Optimum Petroleum Development Ltd (together “the Partners”), announces the suspension of current drilling operations at the Ogo prospect located on the OPL310 licence offshore Nigeria and a significant upgrade to estimated gross mean recoverable resources compared to pre-drill expectations

Sirius Rns: Dec 2013

Sirius Petroleum Plc (AIM:SRSP), the Company focused on oil and gas development and production opportunities in Nigeria, is pleased to announce that Schlumberger, the world’s largest petro-technical services company, has completed an independent Field Evaluation Study on the Ororo Field in OML 95 (“Ororo”) which confirms significant oil in place in the field that are higher than the Company’s original estimates.  Sirius also announces that it is to embark on the preliminary process for a re-entry on the Ororo-1 well.

Clearly their are differences, Sirius drill shallow whilst Lek drill deep. Lek is partnered with Afren and Sirius has an Afren connection through Haywood. Sirius has a high value offtake agreement with Glencore. One has been quick off the blocks and the other a little slow. But at 3p with the possibilities it has SRSP really offers a fundamental journey far beyond 6p, Perhaps 10-15p. However my recent coverage has initiated a 6p target as both the technical and fundamentals support this call.

(you can follow the Dlc Sound cloud in the top right of the blog or click shareprophets link to the website should you wish to read the publication)

All the best for 2014.

SMVP

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