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Tangiers Petroleum gears up for exciting period as spotlight falls on Morocco

By Ian Lyall October 10 2013, 10:00am

The AIM-listed group has a 25% interest in the Tarfaya block where it is partnered with Galp Energia. The AIM-listed group has a 25% interest in the Tarfaya block where it is partnered with Galp Energia.

October is an important month for Morocco's nascent offshore oil and gas industry as Cairn Energy sinks the first two wells planned before the year-end, firing the starting gun on a most frenetic period of activity.

If all goes to plan then up to 10 wildcats could be put down in the next year to 18 months that, if successful, could open up a whole new oil frontier.

For Cairn and the likes of Genel and Kosmos that are prospecting in the area, a discovery will probably only add a few pence (or cents) to net asset valuations of these larger independents.

However, the drilling could be company-making for the juniors that are carried on these expensive campaigns in Morocco.

One business looking forward to the flurry of activity of the coast of north-west Africa is Tangiers Petroleum (LON:TPET).

The AIM-listed group has a 25% interest in the Tarfaya block where it is partnered with Galp Energia.

The deal with the Portuguese outfit has a headline value of US$41mln, including back costs of around US$7.5mln.

The plan is to drill the Trident target, with a P50 recoverable resource of 423mln barrels, in the second quarter of next year.

The tie-up still needs to undergo the formality of ministry sign-off, which could occur in a matter of weeks.

Trident is the largest of four prospects that give a P50 resource total of just shy of 870mln barrels unrisked recoverable oil.

So, success really would move the dial for a business currently valued at US$30mln and which is looking to claw its way to the US$100mln mark.

Tangiers and its chairman Eve Howell hope to get to the landmark by bringing more assets into the group.

The payment from Galp, combined with the US$7.1mln it will receive from an option underwriting agreement unveiled on Thursday, will put see the coffers swell to US$19mln. It also gives the firm a decent sum to fund acquisitions.

Howell won't say where the group is looking currently. However, the search to date has been educational and has told her where the company WON’T be acquiring assets.

"There are obviously some trouble spots we are avoiding and areas that are very popular with the big companies where we don't want to compete," she revealed.

"And we aren’t looking at deep water. We would look at shallow shelf areas and onshore, as well as basins that have some maturity and ability to make a judgement on the chance of success.

"There are some basins that are lightly explored where we wouldn't want to get into the long lead times where you have to start from scratch.

"We are looking at areas where some work has been done and you are looking at drilling in the short term."

And it is unlikely the group will acquire production just for the sake of saying it is producing oil.

One modest fundraising since Howell and the new team took control has seen Tangiers through to the point where it will be financially self-sufficient for the foreseeable future, and this is something that marks the business out from other juniors competing in the space.

"We are pleased, particularly with the market so depressed, we haven’t had to raise [money]. We are glad to have dragged ourselves through that," said Howell. "We don’t have to raise unless there is a good reason to do so."

The one fly in the ointment so far has been the progress, or lack of it, with the Australian offshore assets, which includes a block in the Bonaparte Basin, 250 kilometres south-west of Darwin.

This led Tangiers to terminate its joint-venture with China's CWH Resources after the latter failed to take the project forward within the prescribed timeframe.

Howell said there was no clear explanation why CWH did not finalise the selection of a seismic vessel on deadline, but she explained that the process had become a distraction and drain on management's time.

The search is on for a new partner to take the assets forward.

"There was a deadline we had to achieve. I don't know the fundamental reasons why they weren't [achieved]," said Howell.

"We are a small team, there is a limit to what we can do and we do have a very focused strategy.

"The day-to-day focus is growing the company through Africa and the jewel in the crown is Morocco."

http://www.proactiveinvestors.co.uk/companies/news/62012/tangiers-petroleum-gears-up-for-exciting-period-as-spotlight-falls-on-morocco-62012.html