instances where a junior company has exposure to huge upside (800BCF prospective resource – could be worth over $2b) but a relatively low risk profile.
Usually, projects like this are expensive to acquire; however, the relationships in the Ukraine and the way the deal has been structured (vendors are getting scrip and the only cash paid is out of cashflow) has resulted in a very attractive investment proposition.
It is a large licence onshore Ukraine in a mature petroleum province, surrounded by producing oil and gas fields and criss-crossed with infrastructure. Any discovery can be quickly and inexpensively commercialised.
A High gas price environment US$12/mcf and 50% netback makes economics very attractive.
Prospects partially proven by two historic wells: • Shallow prospect no 1 = 130BCF – or ~$400m NPV potential. With a Company market cap of <$20m => 20x uplift – and this is only one of multiple prospects on the permit. o Independent log re interpretation suggests large gas / condensate pay in good quality reservoir o Cheap re-entry or twin well appraisal opportunity • Deep prospect no 1 = 162BCF – also $400m NPV potential. o More expensive to drill but larger follow up potential and likely to attract a farm-in partner
Near term catalysts: • Updated resource (additional vintage seismic lines are likely to be obtained which should increase the confidence around the resource) • Progress on farm-out of deep prospect (and possibly shallow) • Acquisition of additional licences • Chevron moved into the area next door to Cossack
