Summary:-After completing this post I realise it is quite long...

Summary:-

After completing this post I realise it is quite long and does not really show anything new as I do have a reluctance to speculate. For those in a hurry here is a summary of this post and what we should expect to add value to our investment in the year(s) to come:

Partial Sales

WA-454-P: Ongoing.

Seruway PSC: Ongoing.

Thailand G2/48: Ongoing? – Q3 2013

WA-361-P: Q3/Q4 2013.

AC/P50 & AC/P51: Q3/Q4 2013.

WA-488-P: Q3/Q4 2013.

NT/P79: Q4 2013/Q1 2014.

AC/P53: Q2/Q3 2014.

Definite wells

The only certain well we can expect is Blackwood 2. This has been confirmed by Eni and indicated by MEO’s time line to follow ESN#1, possibly towards the end of 2013.

Contingent wells

These are dependent on a) funding partner, b) rig availability c) drilling schedule.

WA-254-P: 1-2 wells first half 2014.

Seruway PSC:

The PSC expires Dec 2014 and the activity schedule indicates the work programme requires one well 2013 and two in 2014.

The time line shows: Dec Qtr 2013 – 1 well @ Kuala Langsa and 1 well Ibu Horst.

NT/P79: 1 well second half 2014.

WA-361-P: 1 well Dec 2014.

Thailand G2/48: 1 Well 2014

AC/P50 & P/51: 1 well on each permit Dec 2014.

WA-488-P: 1 well in 2015 and 1 well in 2018.

Second Heron well depending on Eni’s election to continue. Decision Dec. 2013, well to be completed by Feb 2016.

Original Post

It is very difficult to keep a positive mind on our MEO investment whilst we are waiting for developments. The repetitious waves of anticipation during drilling programmes followed by lengthy delays waiting for news can be a bit wearing which is being shown on the MEO threads.

Even the traders have gone quiet but even so it has given us plenty of time to pick up some bargain shares around the lower resistance levels.

Now we are coming to the end of the June Qtr it is time to look back and see how the Activity Schedule is panning out. MEO will bring out the June Qtr report mid-July but let’s look forward to see when and where value may be added to our investment, as indicated in the March Qtrly report and strategic review:

* as per the 2013 March Quarterly summary: *

Bonaparte Basin - NT/P68 & surrounds:-

Under the NT/P68 farmin agreement Eni have until Aug 2014 to drill BW-2, after electing to drill in Feb this year. Even so MEO had BW-2 pencilled in for August following the ESN-1 well (see P3).

The Ensco 104 rig has been booked by Eni with the handover expected in early June. This has been delayed, as noted by ADL's tracking, but Apache should make the rig available in early July. Allowing 90 days for the ESN-1 well this will bring BW-2 on line for late Oct/Nov.

This may change if Eni decide to drill Penguin Deep first.

The ESN-1 well is important to MEO because of its close proximity to Tassie Shoal and possible link to Blackwood. There is also the anticipation that Eni may look at TS as a preferred downstream option.

With its high CO2 content the gas at ES (6.6Tcf @ ~28% CO2) and Blackwood is ideal for Methanol but Eni may just look at venting the CO2 for LNG production. We will wait and see.

In 2008 the estimate for Blackwood and Blackwood East GIP was 2473Bcf raw gas. With an estimated 70% recovery factor, Greater Blackwood could yield 1700 Bcf of raw recoverable gas. One methanol plant at TSMP would require 1400Bcf of raw gas to produce 1,750,000 tonnes methanol a year for 20 years of operation. Blackwood could keep at least one methanol plant running

ADL keeps asking what I think the estimated resource of Blackwood is now. The only figures we have are what were released in the:

* 2008 release here *

In this release the GWC was not confirmed and could be deeper. Eni have also conducted a further 3D survey which appears to have increased the size of the field (on the map at least) but, until B2 is drilled and/or the new estimates are released then we will be kept in the dark. Perhaps Blackwood could be twice as large and have enough gas for the second methanol plant.

The decision by Eni regarding a second well at Heron has been deferred until December. I feel, as well as the stated 'further studies' this decision may also be linked to the success, or otherwise, of ESN1 and BW2.

The Barossa JV are also scheduled to drill 3 wells which were to start as early as April 2013 but now will more likely be late 2013/14. This is another potential third party gas supplier for Tassie Shoal although Santos has shown no interest in the past and ConocoPhillips want the gas to expand its Wickham LNG plant.

COPs outline is:

* here *

but I haven't seen a EP lodged or which rig may be used.

I had more or less written off Sunrise as a third party gas supply for Tassie Shoal but after checking the MEO website I came across a new (to me) document dated May 2013:

* Tassie Shoal LNG – an initiative to support economic outcomes for
Timor-Leste *

MEO presented this document as a result of an ’invitation by the Joint Standing Committee on Foreign Affairs, Defence and Trade to make a submission to the inquiry into Australia’s relationship with Timor-Leste.’

Greater Sunrise is estimated to hold a total contingent resource of 5.13 Tcf of dry gas and 225.9 million barrels of condensate. The gas has a high condensate ratio and low CO2 (5%) suitable for LNG.

The present JV is Woodside (operator - 33.3%), ConocoPhillips (30%), Shell 26.56%) and Osaka Gas (10%).

* Source – Woodside *

Under the ‘2002 Timor Sea Treaty’ taxation revenues would be set at 90% Timor Leste and 10% Australia.

The stalling point is how the Sunrise fields should be developed. Timor Leste wants the gas to be piped to their shores where a processing plant will be developed providing local employment.

Shell (and now Woodside) would like to develop Floating LNG (FLNG) technology for use at other fields. ConocoPhillips, on the other hand, who built and operate the LNG plant at Wickham Point in Darwin would like to expand that facility to liquefy Sunrise gas as well.

MEO in their submission have put forward their Tassie Shoal solution which would represent a saving of between AU$2.6b and AU$3.8b when compared to the onshore Darwin and FLNG solutions.

MEO also put other compelling arguments forward and, as such, are still in the running. I am not holding my breath but it is an interesting development.

For more info on the history of the Sunrise saga see:

* The Greater Sunrise Oil and Gas Project *

And discussion here:

* Woodside gas deal could redraw Australia-East Timor borders *

* Woodside’s 2010 FLNG argument is outlined here *

The whole concept of TS has merit in more ways than one but still needs a gas supply. Once this happens and the TS projects are underway it will be a viable alternative for the stranded high CO2 gas in the region. The low CO2 gas from fields such as Sunrise would be used for TSLNG and the stripped CO2 mixed with the gas used for TSMP, thus reducing the carbon footprint.

Bonaparte Gulf - WA-454-P:-

We have not had any news about the farmout/partial sale of 454P. This has been in process since Nov 2012 and was expected to be finalised by the end of May. This has been delayed and I hope we get some news Q3 2013.

The prospective resources in Marina are between 9.2 and 29 MMstb oil and 169-243Bcf gas. Marina Deep is estimated to have between 236 and 487Bcf gas with a 40% COS.

WA-454-P also has the Breakwater lead with prospective gas and oil or gas only scenarios.

* WA-454-P - Farmout brochure *

and

* Marina resource upgrade *

Once the partial sale is completed a rig will be sourced and 1-2 wells are planned for early 2014.

It is likely that Eni will use the Ensco 104 to visit Penquin Deep again after ESN-1 and, hopefully, B2.

The NT government are relying on Eni to find replacement gas at Penguin or nearby fields for the domestic use and ensure that RIO’s Gove refinery stays in production.

During the quarter MEO was also awarded WA-488-P. Eni drilled the last well (Windjana) in this permit. As usual, Eni have kept the results close to its chest so no potential estimates are known. I wonder if the substantial Beehive prospect, identified by MEO, is located near this well.

It is interesting to note that MEO intends to commence the farmout/partial sale of WA-488-P early 3Q-2013 which may tie in with 454-P.

WA-488-P requires one well to be drilled in 2015 and one in 2018 but perhaps this will be brought forward especially when we take into account the early partial sale.

* Source here *

North Sumatra, Indonesia Seruway PSC:-

As part of the purchase, and to retain this PSC, MEO had to drill a well before the end 2012. We were told that there was interest in the Ibu Horst but not Gurame. The result was that MEO sole drilled Gurame Deep which was probably believed to be the most drill ready and cheapest, prospect at the time. The resulting lack of success and strain on funds has led to the present low SP.

The Ibu Horst contains two main prospect groups, the Juaro Complex and Ibu Alpha.

The Juaro Complex is estimated to contain a prospective recoverable oil resource of 230MMstb (best estimate) plus 63 MMstb in minor reservoirs.

The Ibu Alpha prospect is believed to contain a prospective recoverable oil resource of 24 MMstb (best estimate).

Also on the PSC is the Kuala Langsa gas field which straddles into the neighbouring PSC. It is estimated to contain ’contingent recoverable raw gas (Best Estimate) of 1.5 Tcf, inclusive of uncertain CO2 composition in the range 50-80%’.

A partial sale process is currently underway with 2 wells marked for the end of this year and/or next year.

* More info here *

Bonaparte Gulf – NT/P79:-

A well is due on this permit during the second half of 2014 with a partial sale process due to start, pending confirmation of a drillable prospect. 2D data is presently being studied. See P9 quarterly report.

* Farmin release *

Ashmore Cartier - AC/P50, 51 & P53:-

MEO have varied the work programmes on AC/P50 & 51. This means that 1 exploration well is required during the year beginning 21/04/2014 for both permits.

* AC/P50 & 51 work variations *

No identified prospects have been released by MEO but that may change once the partial sale process begins. This is due to begin during the second half of 2013.

2D seismic shot over AC/P53 is being studied and a partial sale process will commence Q2 2014.

Carnarvon Basin - WA-360-P, WA-361-P:-

WA-360-P: MEO are processing data and waiting for the 2014 release of data from Woodside’s Ananke #1 well which came up dry. They want to compare this with data from Artemis and the Foxhound 3D of the Maxwell prospect.

* WA-360-P renewal *

WA-361-P: The Heracles prospect is the point of interest on this permit. A well is due in 2014 and a partial sale is due to start Sept Qtr 2013.

Gulf of Thailand G2/48:-

MEO owns 50% of this Concession where two unsuccessful wells were drilled 2012.

MEO is due to commence a partial sale process seeking to be carried for another well which is due in 2014.

Conclusion

There are quite a number of LT holders who decided to stay with MEO through and after the unsuccessful drilling programmes late 2012. This is on top of Artemis, Zeus and the problematic original Heron and Blackwood gas discoveries.

In the past we have waited for individual farmouts with Petrobras (WA-360-P) and Eni (NT/P68). Even though they were unsuccessful these farmouts did give MEO funds to increase their portfolio but during these times there was little else to protect our investment.

I still think it is different now.

During the 2012 drilling programmes I decided to leave my investment MEO, as I have before, because more projects on line lessened the risk this time. This post outlines my views on this because the money invested in seismic and previous wells have eventuated in so many potential lucrative partial sales. There is one definite well at Blackwood and more wells to come at least in 2014/15.

One thing I have said before is that the strategy of finding projects working on them to develop prospects and farming them out is fair enough for developing a junior company. But it has to reach a time when there is light at the end of the tunnel and LT investors see some indication of a return on their investment.

Lets hope the present portfolio holds the key to unlock some long awaited wealth creation.

MEO does not even appear to be a trading stock at the moment but if MEO’s business strategy works then that should change when news starts flowing in and the coffers start building up again.

All along I have known patience is the key with MEO and I still feel my investment is safe, given time.

But this is only my opinion and, like the MEO management, haven’t been very lucky so far.

#:>))