http://www.heraldsun.com.au/business/in-the-black/morocco-the-hot-new-province-for-oil/story-fni0d787-1226684621165
JOHN BEVERIDGE HERALD SUN JULY 25, 2013 12:00AM
IF you are looking for a hot new oil province, it is hard to go past offshore Morocco.
A host of explorers large and small will be poking holes in the seabed over the next couple of years - something that Esso started to do back in the 1960's before it was understandably distracted by some highly successful hits in Bass Strait and the North Sea.
"There is nowhere in the world that I know of that is having this amount of drilling activity at different levels and with various operators," said Tangiers Petroleum executive chair Ms Eve Howell, an experienced oil executive who worked at Woodside and Apache.
At least 10 wells will be drilled starting later this year and some of the major companies involved include Galp, Total, Cairn, Kosmos, Chevron, Plains and Genel.
It is not hard to see why all of the activity is happening with a very large billion barrel oil discovery off the Canadian coast neatly lining up with Morocco as a "conjugate margin" - a more sophisticated version of cutting out the continents and joining them back together to find similar rocks.
The offshore Cap Juby oil field was discovered in Morocco in the 1960s but the area is still relatively unexplored with only one well drilled for every 10,000 square kilometres compared to the global average of 80.
Only eight wells have been drilled since 2000 so the availability of modern 3D seismic mapping should also greatly improve the selection of likely drill targets and the chances of at least one of the drills encountering some oil.
Tangier's large Tarfaya field is certainly in there with a chance, being in the same Jurassic carbonates that hosted Cap Juby and with the potential to host up to 867 million barrels of recoverable oil in four reservoirs.
Even with small recovery rates a positive discovery would be a transformational event for Tangiers, which has retained an impressive 25 per cent free carry after the drilling was farmed out to Galp Energia.
Foster Stockbroking used conceptual modelling to estimate that the largest prospect, called Trident, had unrisked upside of around $10.60 a share, which makes the company a spectacular combination of high risk and reward.
Unusually for a small explorer Tangiers is also reasonably well capitalised with more than US$10 million coming its way in cost reimbursements.
Tangiers also owns a couple of interesting gas prospects in the Bonaparte Basin south west of Darwin and it is entitled to 27 per cent of those after another farmout deal.
It goes without saying that offshore oil drilling is a risky business but Tangiers is a worthy speculative buy purely on the basis that there are so many major oil companies jealously looking at its relatively shallow offshore Morocco permits of 11,282 sq kms.
Any oil discovery in the area is sure to give Tangiers shares a kick.
The improving iron ore dynamics were once again on show with Atlas Iron shipping a record 2.22 million tonnes in the June quarter.
While the iron ore price has been bouncing around a lot after a sickening plunge below US$90 a tonne last year, chief executive Ken Brinsden said there are few signs of slackening demand.
Where the price goes from here is anybody's guess but most analysts have it trading somewhere between US$110 and US$130 a tonne, which is no disaster.
It is hard to work out Atlas' exact costs but pre-royalty cash costs of around US$50 a tonne should leave a reasonable margin even if the total cost is US$20 a tonne higher than that.
Like all of the iron ore producers, Atlas is taking a scythe to costs which will be a big help when combined with the beneficial effects of the fall in the value of the Australian dollar.
Production should continue to rise as the new Abydos mine and recently approved $146m Mt Webber project come on line with further expansions also possible if access to rail is forthcoming.
Down the track it is not hard to see Atlas profitably shipping 14 million tonnes a year, with a caveat that the iron ore price remains in the current post boom sweet spot.
A buy for those who think yesterday's soft Chinese manufacturing numbers are a blip rather than the start of a downward trend.
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