Edison Investment Research

Mexico shale potential

Mexico’s Secretary of Energy, Pedro Joaquin Coldwell, indicated in a speech in Houston last week that the country’s first auction for its northern shale fields, delayed because of low oil prices, could now take place as early as Q2 2017.

According to an EIA assessment report carried out in 2013, Mexico holds technically recoverable resources of 545TCF of shale gas and 13.1blnbbls of shale oil and condensate. The bulk of this sits in the Eagle Ford Shale of the Burgos Basin which is estimated to contain 343TCF and 6.3bnbbls. Since the reservoir in Burgos is an extension of its commercially successful equivalent in South Texas there are hopes that the US fracking successes can be repeated here. In the basins to the south and east of Burgos the shale geology becomes more complex and shale development potential is less certain.

Barents Sea - frontier drilling in 2017

The Barents Sea to the north of Norway is estimated to contain almost half of the recoverable undiscovered resources remaining in the Norwegian Continental Shelf (NCS). At present only two fields, Statoil’s Snøhvit and Eni’s Goliat, are in production but a number of discoveries since 2011 have the potential to be stand-alone developments and are currently being appraised. The recent 23rd licensing round awarded acreage exclusively in the Barents and for the first time included the frontier South East Barents. Statoil has already indicated that it plans to drill the high-risk/high-reward Korpfjell prospect located in PL859 in this frontier area as part of a five to seven well Barents exploration programme in 2017.

Understanding of connectivity in Senegal key to tapping upside for Cairn

by Elaine Reynolds

When Cairn Energy started its four well appraisal of its SNE discovery in late 2015, the key objectives of the programme were to:

This week, the company provided details of the results of the appraisal campaign as part of its half yearly results. The successful programme boosted 2C resources by 43% from 330mmbbls pre campaign to 475mmbbls and established flowrates of between 5000bopd and 8000bopd across four separate DSTs in two wells.

SDX initiation

Egyptian producers with development and exploration upside

SDX Energy (SDX) is a London/Toronto-listed company with interests in two producing onshore fields in Egypt. Crucially for a small E&P, it will be cash flow positive in 2017 and is unlikely to return to the market for more equity to develop assets. The current work programme (of new wells, workovers and water flood) could see a more than doubling of recoverable volumes and is both cheap and relatively low risk. Once this work starts to bear fruit (later in 2016/17), the low-cost production will put SDX in the enviable position of being able to largely fund development of exploration prospects, while giving it resources and operational credibility to add further assets in Egypt. Our analysis indicates that the share price is more than supported by current operations, giving upside potential for the near-term production increases we see as likely and free exposure to exploration upside.

Porcupine Basin Phase 2

The Porcupine Basin is an exploration hotspot, driven both by the interest in Jurassic plays similar to those found in the analogous Flemish Pass basin offshore Canada and in Cretaceous stratigraphic prospects similar to those encountered offshore West Africa. As such, the 2015 Atlantic Margin licencing round has been the most successful to date, with a record number of 43 applications from 17 companies. With Phase 2 of these awards announced in June 2016, we are providing an update to our Exploration Watch on the Porcupine basin published in April 2016. For a more detailed introduction to the basin, please refer to our original note.

Conoco sells Senegalese discovery blocks - fair price?

Conoco’s sale of its interests in Senegal can be used as a barometer of industry sentiment and as a yardstick on valuation of the assets.

We believe the deal reached was a fair reflection of the value of the assets given the current environment, where the collapse in the oil price has lead to a re-evaluation within the industry. Conoco may have signalled its intent to sell the assets, but as a result this was an open process where all comers could have bid.