Brokers say Phoenix standalone viableTuesday, 14 April 2015
Haydn Black
EUROZ Securities’ analyst Michael Skinner and Taylor Collison’s James Bullen have a difference of opinion with rivals at Hartleys, with much higher share price targets on Carnarvon Petroleum, with both saying that Phoenix and Phoenix South wells appear adequate to justify a dual development scenario in the emerging Bedout Sub-basin.
Skinner, who increased his target to 29cps, said with 28 million barrels (2C) across Phoenix [9MMbbl] and Phoenix South [19MMbbl] the discoveries look promising, and with just one well drilled into the 46 square kilometre Phoenix South structure, additional wells will likely increase the low and mid case volumes towards the 56MMbbl 3C estimate.
Phoenix-1 is an old BHP Billiton well from the early 1980s that was believed to be a gas discovery, until Apache Energy redrilled it in an adjacent structure last year and discovered oil.
Another broker, Taylor Collison, which has 25cps value ascribed to Carnarvon concurs the fields may be viable for development now.
“While more work is clearly required this does place them in what we consider the commercial range. This view is based on Apache’s previous development of the Balnaves field (17MMbbl) and Coniston field tie-back (15.7MMbbl),” analyst Bullen said.
Skinner said more than enough oil may have been found to justify a platform or leased FPSO development, regardless with what happens at this year’s Roc-1 exploration well where there is a best estimate potential for 42MMbbl with blue sky to 133MMbbl.
“Roc-1 lies up dip along the spill chain from the Phoenix South-1 discovery, similar – if not improved – geological and reservoir characteristics are expected,” Skinner said, describing it as the jewel in Carnarvon’s crown.
“The third-party assessment has defined a 41% geological chance of success attributable to the prospect.
“Simply put, it has been judged that there is a 41% chance of discovering a reservoir that flows hydrocarbons at a measurable rate; this stands independent of commerciality.”
Success could see a hub developed at Roc-1, tying back Phoenix South and Phoenix.
“The prospect is of a larger size and more critically is located in shallow water, this key factor will significantly reduce associated capital expenditure,” Skinner said.
He said drilling the well was a key catalyst for Carnarvon, although exactly when the well will be drilled depends on the schedule of operator Apache (30%).
Also in the JV are JZX Nippon (30%) and Finder Exploration (20%).
Carnarvon, the only listed company in the JV, will be free carried for up to $US70 million.
“There are very few (if any) ASX listed peers that provide risk protected exposure ($US100 million cash and a $US70 million free carry) to such sizeable volumetrics and upside potential,” Skinner said.
“Carnarvon remains undervalued trading at or near cash backing of $0.105/share, and little to no value is being attributed to the company’s asset suite inclusive of the material oil volumes defined so far.”
Skinner said that the plan to conduct a new large-scale seismic program across the greater Phoenix area to refine the hydrocarbon prospectivity of now what is now believed to be a potentially significant new oil province in the North West and better define further Phoenix South-style structures, some of which appear significantly larger in area and volumetric size provides further upside.
With Carnarvon investing $10 million of a $50 million 22,000sq.km seismic survey the company is banking on multiple sizeable discoveries may follow in years to come.
The JV has licenced an additional 9000sq.km of seismic, and the 3900sq.km Zeester seismic survey should yield further targets.
A particular target is the Bandy prospect, which Finder Exploration says has an aerial extent over 750MMbbl oil-in-place, with potential over the Legendre, North Rankin equivalent and Upper Keraudren formations.
“Moreover deeper reservoir zones (largely untested) may hold further potential. These zones will likely be appraised in subsequent drilling programs,” Skinner said.
“We highlight that Carnarvon holds equity in three permits adjacent to the Phoenix South-1 discovery.”
He said the company would probably farm-down from 30% for cash or a carry in those blocks, as well as a 1-2 well carry over the 100% owned Cerberus permit in the Carnarvon basin.
CVN Price at posting:
11.2¢ Sentiment: None Disclosure: Not Held
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