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Tuesday, February 12, 2013

Emperor Oil - African Junior On The Cusp Of Strong Production Growth

Interesting article over at Beating the Index and shared with permission:

Oil and Gas exploration in East Africa comes with some risk, but offers huge potential rewards in return.  That’s particularly true for junior companies who can secure large acreage positions with world-class oil prospects.

But it can take years just to assemble the land and shoot seismic. These companies also need to have deep pockets since an exploratory well can cost in excess of $10 million. No chump change for a junior taking on a high level of risk.
The odds only favour a few; Africa Oil (TSXv-AOI) is one such junior running from $2 to $11 last year after making a huge discovery.
Emperor Oil (TSXV-EM) could be another company; it recently signed a MOU on a large block of land in Sudan’s Rawat Basin.  Unlike Africa Oil however, Emperor’s production could be up and running in less than a year with no exploration risk and for a lot less money.
The reason is that Emperor Oil’s acreage comes with 3 commercial discovery wells with 95 million barrels of recoverable oil. The reserves, assigned by an independent petroleum engineering report (NI-51-101), are limited to a small 20 sq km area where the 3 wells are located. Emperor Oil owns 42.5% working interest in a 10,000 sq km concession known as Block 7.
The company will recomplete these wells at a cost of approximately $500,000 per well – that’s a maximum of $1.5 million with zero exploration risk.
Each of these wells could flow 10K bopd based on equivalent wells in Southern Sudan. Production would initially be restricted to 2,000bopd since it will be trucked. The company’s 3 wells are 60km away from a central processing facility where the main export oil pipeline passes through towards Port Sudan on the Red Sea. The oilfield would have to be connected by pipeline to the main processing facility before pumping the wells at maximum capacity.
Emperor is working in the Rawat Basin, which is part of the greater Melut Basin to the south, a proven producing basin currently responsible for 350,000 bopd. Advisory board member Mr. George Fulford, P.Eng, a geologist and geophysicist with years of experience in Sudan, believes there are several oil fields in Emperor’s Block 7 in the Rawat Basin waiting to be discovered:
“there are several geological areas with almost identical geophysical features as those existing in the Rawat Basin Oil Field, each with similar oil bearing traps recurring every +/- 20 kilometres”.

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