BILLION BARREL BONANZA, page-301

There is plenty of newsflow expected soon as per below.

SGC is significantly undervalued at the moment in comparison to its peers, especially when the following three factors are considered:
1) Production,
2) Reserves/Prospective Resources
3) Exploration Prospects

Looking at each of these three factors further:

Production

With the Alberta/British Columbia (ABC) prospect acquisition in Canada due to settle shortly it will take SGC’s share of production to ~2000 BOEPD.

SGC expects to bring the Borba well into production at a flowing rate of 3,000 mcfpd, which is the equivalent of about 400 BOEPD net to SGC after royalty.

Every BCF at Borba equals about US$4m US, A$5.2m cashflow. Borba may produce 5 BCF which is about US$20m US, A$26m which is more than the SGC current market cap. Everything listed below has not been factored into the share price yet.

Based on the Canadian assets and Borba combined, in the next few months SGC is going to be a ~2400 BOEPD producer. And production will be instant as there is already associated infrastructure.

As mentioned by GJ, based on the Canadian production alone it will propel SGC into the Top 10 producers of oil and gas listed on the ASX.

Following the recent Philippine acquisition there is potential for production to commence in the short term. The West Linapacan field is a key focus in the re-development plans that SGC is currently working on.

“The Company has commenced an evaluation of the discovered oil resources in the licences with a view to realising early oil production from them. Potential development concepts that will allow them to be brought to production may include plans for 3 currently shut-in wells in the redevelopment of the West Linapacan Field and a potential parallel exploration programme.”

As Joanne mentioned in the Aus biz interview West Linapacan was shut in in the 1990’s due to the low oil price and also the facilities that were on the field at the time couldn’t handle the onset of water production from the field. She said that there are some lessons learnt that can be brought to the redevelopment of the field. Will consider the existing 3 shut in wells in the context of a redevelopment.

West Linapacan A had a peak production rate of approx 18,000 bopd and produced over 8.5m bbl.

West Linapacan B had a test production rate of approx 2,900 bopd.

So combined production rate is approx 21,000 bopd.

Let’s assume that the redevelopment can get the production back to 50% of previous which would be 10,500 bopd.

SGC has a 22.279% working interest the field, therefore SGC share of production would be approx 2,300 bopd.

Using a back of the envelope calculation:

If the profit margin is say a very conservative $10 per barrel it generates $23,000 per day and $8.4m per year.

If the profit margin is say $20 per barrel it generates $46,000 per day and $16.8m per year etc

If the profit margin is say $30 per barrel it generates $69,000 per day and $25.2m per year etc etc

All this at a time when rising oil and gas prices are expected. There is talk of $100 oil soon or the price could even go substantially higher.

Reserves/Prospective Resources

When the ABC prospect acquisition in Canada settles it will take the 1P reserves for the combined Canadian assets net to SGC to nearly 6.5 million barrels. The 2P reserves will be over 11 million barrels. These are some serious numbers being added to the SGC bottom line and balance sheet.

In the Philippines there are 6 oil pools/oil columns in the prospects. Joanne mentioned in one of her interviews that the first thing SGC will do is to assess the discovered resources across the 6 oil pools and evaluate potential development options needed to bring into production. SGC will provided a prospective and contingent resources update shortly once a third party review has been completed. These will be further resources that get added to the SGC balance sheet.

Exploration

GJ mentioned that there are lots and lots of exploration opportunities in the Canadian prospects such as 1) offsetting the production 2) drilling deeper under the current production. GJ mentions "Big oil and gas" in one of his interviews 3) will high grade the portfolio opportunities and will use cashflow from production to drill the best of the opportunities.

In the Sacramento Basin they have identified 5 lookalike Borba targets that they will look at drilling shortly. GJ said that they have also just picked up amazing aerial geophysical data. They will integrate this into their database which will more than likely provide many more opportunities.

In the Philippines Joanne mentioned that SGC will look at what can be done to mature the exploration portfolio.

There is >2 billion barrels of oil potential at SC58 prospect in the Philippines, one of four service contracts. The Balyena prospect in SC58 has a prospective resource of 1.3 billion barrels on its own. “The block contains an extensive deep water fairway with a number of large multi hundred million barrel structures comparable in size to the giant Shell operated Malampaya gas field”.

#valuecatalysts
#substantialupside