Tangiers Petroleum Gives An Update On Its High Impact Projects...

Tangiers Petroleum Gives An Update On Its High Impact Projects In Morocco And Australia



It seems a long time since we have heard from ASX and AIM listed Tangiers Petroleum. We last wrote about the small cap company with big ideas in March when it was on the brink of closing in on two major farm-in deals for its high impact drilling projects offshore Morocco and Australia. Well, a Quarterly Report for the period ending June 30 2011 shows the company’s management has not been idly sitting on its hands since March


The report says the agreement for the Australian concessions was executed on May 21. This means approval has been given for the final terms of its farm-out agreement covering the company’s highly prospective offshore permits with CWH Resources and Ansbachall Pty.

The deal covers two permits WA-442-P (Turtle) and NT/P81 (Barnett) which lie off the coasts of Western Australia and the Northern Territory in the southern Bonaparte Basin some 250 km southwest of the port of Darwin. The agreement sees China's CWH Resources, in its first JV in Australia, spending A$35 million on exploration activities to earn a 70 per cent interest and operatorship of the licences.

Tangiers’ stake will fall from 90 per cent to 27 per cent and junior party Ansbachall will take 3 per cent. The CWH spend covers the remaining work commitments on the blocks, which includes 3D seismic acquisition and drilling. Tangiers will be required to contribute 27 per cent of all ongoing exploration expenditure in excess of the agreed cap.

The farm-out is rather less generous than Tangiers investors would have hoped – it had previously indicated holding on to about 45 per cent of the equity – especially as the company has talked of the world-class resource potential here. The block is not only home to a shallow oil discovery, that flowed 900 bpd on test, but also superstructures, such as the Milligans Fan oil play, or the Nova prospect (and below that, Super Nova).

Tangiers now says the Milligan Fan oil play comprises 14 leads with estimated combined mean unrisked oil-in place of 683 million barrels; the combined estimate for gross un-risked mean prospective resources is 218 million barrels of oil (Competent Persons Report, ISIS). As for the deep gas play—the estimated gross mean prospective resources for the Nova Prospect is 3.46 trillion cubic feet of gas (tcf).Should these mouth-watering numbers ever be confirmed by the drillbit, then it's fair to say that ASX-quoted CWH will have got a terrific deal. For Tangiers, however, this is part of its strategy to reduce its exposure to Australia in order to tighten its focus on Africa.

While the company says during the quarter the joint venture partners continued with the planning of the acquisition of 3D seismic across the two contiguous permits in Australia, on the vast African continent, Tangiers current flagship scheme in Morocco is also progressing. During the quarter all documents required for the assignment of the interest and operatorship to Galp Energia of Portugal were finalised with the Office National des Hydrocarbures et des Mines (ONHYM) for submission to the Moroccan Ministries of Energy and Finance for their approval.

This North African country is enjoying an industry buzz right now with not only juniors like Tangiers and Fastnet Oil & Gas setting up there but also majors like Chevron piling in.

Tangiers is more advanced in its seismic and drilling preparations with its Tarfaya Offshore block in Morocco than with its Australia assets. A 677 sq km 3D seismic survey has greatly improved the imaging of the three priority prospects – Trident, Assaka and TMA – showing much greater definition than the 2D data, acquired in 2004. According to Tangiers, a single well (the proposed TAO-1) targeting the Jurassic-aged Trident prospect and secondary objectives at Assaka and TMA, could test best estimate prospective resources of 750 million barrels of recoverable oil with a geological chance of success of 23 per cent, up from 14 per cent pre-seismic. Trident now carries a mean recoverable oil potential of 423 million barrels, with the shallower Assaka and the deeper TMA prospects given mean recoverable potential of 144 million and 191 million barrels respectively.

Tangiers says this is in line with the in-house estimates of Galp Energia , which it first secured as a partner last December 2012. Galp has agreed to invest US$41 million in the project, including a US$7.5 million payment to Tangiers to cover past costs. This will earn the Galp group a 50 per cent interest in the Tarfaya, with Tangiers retaining a material 25 per cent interest alongside state oil company ONHYM. This farm-out was a key milestone for Tangiers, ensuring it is fully funded through the high impact well. Of the the £19.73million (A$31.3 million) market cap company, one analyst has said: “Tangiers has conducted two exciting farm-out agreements, providing the company with full carries over US$68 million of exploration activity while retaining material interests in two exciting exploration areas.”

Tangiers did fall a little following the update and have a faded a little since to 12.25p in fact. But analysts seem to feel the shares deserve a re-rating. They are off the 52 week low of 10.88p but still well below the year’s peak of 30.13p. One broker has placed a target price of 90p on the stock. So still some way to go, hopefully.