good news , page-7

the analysts view
Two DSTs of the Upper Cenomanian oil and condensate rich gas zones have returned strong flow rates. We view that the Gazelle P3-ST1/2 well has both enhanced the economics of the proposed Gazelle Hub development as well as highlighted substantial exploration upside. The drilling programme will now move on to the Gazelle-P4 appraisal well, which, combined with the results from P3-ST2, seeks to convert 59mmbboe into reserves. We value RIA at $620m or $0.86/sh. Buy.
Key Points
RIA has successfully completed DSTs of an Upper Cenomanian gas-condensate pay zone and oil bearing pay zone, with excellent flow results confirming the reservoir productivity of the UC1 section.

Maximum constrained flow rate achieved from the gas-condensate zone test of 19.5mmscf/d plus 133bbl/d of associated condensate.
The extrapolated flow rate expected from production tubing is 33mmscf/d.

The flow rates are therefore very favourable to the proposed 100mmscf/d Gazelle Hub development noting that the earlier Gazelle-2 well tested at 32.5mmscf/d (ie 2 wells have capacity to deliver over 66% of required capacity).

The oil zone tested at a constrained rate of 760bopd before ingress of gas (from the overlying reservoir) behind-pipe curtailed the test.
The well is now suspended for a future producer and flow results will be used to upgrade existing resources and ultimately book reserves via FID (to be lodged with Gov’t in the Dec H).

The rig will now move on to commence drilling of the Gazelle-P4 appraisal well. Additionally the company is weighing up its options with respect to drilling the Chouette exploration well.
Analysis
We view that the Gazelle P3-ST1/2 well has successfully derisked the proposed Gazelle Hub development.
The flow rates provide very favourable support to the proposed 100mmscf/d Gazelle Hub development. We highlight that that the earlier Gazelle-2 well tested at 32.5mmscf/d thus combined with the extrapolated rate achieved from the recent P3-ST2 test, 2 wells have capacity to deliver over 66% of required capacity).
Consequently, strong flows from the condensate-gas test have positive bearing upon the overall development economics: Less wells to deliver 100mmscf/d equals lower capex.
The oil flows implied from the first DST remain a bonus in our view. We view whilst there were complications with the test we are satisfied that the UC oil bearing zone is of sufficient quality that it can contribute to the planned 8kbbls/d initially.
The oil can then be sold on the open market providing strong profitability for RIA on the overall field economics.
Additionally, the well has delivered some significant appraisal and exploration upside:
Increase to the vertical extent of the primary Lower Cenomanian gas bearing reservoir by 200m;
Demonstrated extension of the Upper Cenomanian oil pay with discovery of UC3 oil sand in the first side-track;
Proof of reservoir deliverability/quality of the Upper Cenomanian pay zone;
Establishment of continuity of the Upper Cenomanian pay section between the historical IVCO-14 and the P3-ST2 wells;
Discovery of the new, well developed Lower Cenomanian potential reservoir sand in P3-ST1;
The Condor penetration has substantially enhanced the prospectivity of the greater Condor feature.
The results achieved will be fed into an upgraded CPR regarding Gazelle Field volumetrics. Upside potential is enhanced by the good flow rates, the 200m extension of the known Gas Down-To (GDT) and the continuity of the Upper Cenomanian pay between the new and historical wells.
This information will then be submitted as part of FID this H: Reserves will be booked on the back of FID, enabling bankability for the Gazelle Development.
The rig will now drill the Gazelle-P4 well which is designed to appraise two additional oil reservoirs (UC-2 and UC-4), three additional gas reservoirs (UC-3, UC-5 and LC-1) as well as obtaining an additional penetration of the LC-2 reservoir.
Noting the delays during the progress of the P3 well RIA’s funding position is tight. However, RIA’s large 85% equity position provides significant capacity to attract a material farm-in to advance appraisal and development of existing and new oil and discoveries on the block.
The company is weighing up its options with respect to drilling the Chouette exploration well.