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$Colombia and Latin America
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GTE - thoughts on AcordioneroOn days like these when oil and GTE share price goes down hand in hand, I think it is important to lift the gaze a bit from the short term fluctuations and focus on the longer term potential. I've been trying to dig a bit deeper on Acordionero, and that is easier said than done. Surprisingly little information on this field is available in the public sphere (e.g. SPE papers, Petrolatina presentations etc.) Based on the information published by GTE and whatever little I have found, I have summarized my own conclusions/assumptions below: Lisama A sand is a relatively thick (~200 ft), uniform sand body (~20% porosity, a few 100 mD) very well suited to waterflooding, especially given the very steeply dipping nature up towards the crest. The heavy oil is an issue, but the temperature is quite high (~80C) which helps to lower the viscosity (~10 cp), hence limiting the risk of fingering effects (water shooting through the oil and reducing the sweeping effects). The reserve report has a STOOIP of around 200 mmbbl in the 2P case, with an upside of 260 MMbbl in the 3P case. Since the results from the recent wells have been exceeding expectations (lower OWC and cleaner sand) I would assume we are moving towards the 3P number. There is no reason why a well flooded reservoir with tight well spacing of this nature should not give up at least 30% of its oil. The strategy with hz wells produced at moderate rates (low drawdown) will lead to a more uniform displacement front (avoiding early water breakthrough). In my model I have around 240 MMbbl STOOIP and 70 MMbbl recoverable. Lisama C is thinner in nature, but with similar porosity and permeability as Lisama A, it is equally suitable for waterflooding. The higher API and slightly higher temperature (deeper) leads to a more favorable mobility ratio compared to the A sand, hence a higher recovery factor (35-40%) should be possible. My model shows a STOOIP for the C sands in the order of 60 MMbbl, and reserves of 21 MMbbl, for a total of 91 MMbbl for Acordionero. I believe the 3P production profile looks pretty reasonable with a peak around 23,000 bbl/d from 20 producers. An interesting thing that I came across trying to understand this asset is that it extends across the block boundary into Ecopetrol lands. I have not been able to find a map that shows where the structure closes to the north, but I have made a rough estimate based on the contours and direction of the eastern fault leading me to believe that perhaps ¼ to 1/3 of the total STOOIP of the Acordionero field (not the number I quote above which is within the Midas block) could be outside the block boundary. I asked GTE about this, but they were tight-lipped. They only confirmed that Yes, it does extend northwards, and Yes, the reserve report only takes into account the volumes inside the GTE block, and Yes, there are no regulations in Colombia regarding unitization…I would not be surprise if GTE is looking/talking to Ecopetrol trying to find a solution to this. I doubt Ecopetrol will focus much on a relatively small field/block like this, and could let it go for the right price (as far as I can tell, that block only contains a few mature small oil fields with limited production) In a status quo scenario, the oil north of the boundary will be drained to some degree by the wells to the south (since I assume that these are relatively permeable sands and there are no signs of internal faults on the maps provided). How much is really hard to say without a dynamic model, but just to throw a number out there, if 1/3 of the reserves north of the border were to be drained by GTE’s wells, we could be talking about an additional 10 MMbbl of oil (assuming 100 MMbbl STOOIP and 10% rec factor) at 0 cost. If we look at the cost picture, the reserve report (3P which is closes to my assumptions) assumes Capex from 2017 going forward of 199 MUSD. Removing the 5 MMbbl or so already produced, we are looking at a F&D cost (point forward) in the order of 2.3 USD/bbl, similar to LLA34 (i.e. world class). Another upside is to build a pipeline to connect Acordionero to the network, in order to achieve a higher netback. It seems that pipeline running south to the Barrancabarmeja refinery goes through the block, so I imagine it should be possible to connect to this at some location (will probably have to dilute the crude to meet the specs) My back-of-the-envelope value for a barrel of oil in the ground in Colombia (assuming there are no ridiculous x-factors attached to the block) is 10 USD/bbl. Given the low F&D costs, and the potential of high netbacks despite the heavy oil discount, I would be tempted to use 12 USD/bbl, giving the Acordionero field a value of around 1 BUSD, or some 80% of GTE’s current EV. My next contribution to this board will be on the A-lime potential in the Costayaco fields, which is even more promising than Acordionero, so stay tuned J //Darcy |
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