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GeoPark CN-V block notes GeoPark CN-V block, Neuquén basin notes Much of investors' attention has been focused on the incredibly successful LLA-34 block in Colombia. Thought I would look more closely at GeoPark's prospects in Argentina as they may be the most exciting exploration targets on the horizon. In 2016, GeoPark farmed into the CN-V block for 50% working interest and operatorship during the exploration phase. Upon commercialization, operatorship returns to Wintershall, the oil and gas subsidiary of German industrial giant BASF. The commitment is for two exploration wells up to US$5M per well for a total of US$10M. Beyond US$5M a well, costs are equally shared. The CN-V block is in the northern tip of the Neuquén basin not too far south of the Mendoza wine growing region (which I would like to mention in passing is stunningly beautiful). 181 km^2 of 3D seismic has been recorded. Two conventional 4WDC and 3WDC fault enhanced traps in the Neuquén group are targeted. 27-32 degree API oil is expected. The Vaca Muerta shale/kerogen formation and the Agrio formation are mentioned as having ‘upside potential’. Both are considerably deeper than the conventional reservoir targets. 4WDC = four way dip closure; 3WDC = three way dip closure. GeoPark drilled the Rio Grande Oeste 1 exploration well in the CN-V block during Q2 and should complete and test the well during Q3 2017. Presumably this well is referred to as Prospect 1B in an earlier presentation. The unrisked mean resource (UMR) estimate is 15 mmbbo with a chance of success (CoS) of 36%. The Prospect 1A UMR is 8.4 mmbbo with a CoS of 30%. These are modest-sized targets. The CN-V block is adjacent to YPF’s Loma Alta Sur Field which produces ~ 5.7 Kbbl/d. YPF produced 573.5 Kbped of total hydrocarbons in Q1 2017, slightly less than Q1 2016. Half of that is natural gas. During the same period YPF reports net production from shale areas to YPF of 34.3 Kbped of hydrocarbons composed of 16 kbbld of crude oil, 5.8 Kbbld of NGL and 2.0 Mm3d of natural gas. 14 wells targeting the Vaca Meurta formation have been put into production. CN-V block partner Wintershall produces roughly 71 Kboed in Argentina. It has been active in Argentina for more than 35 years and owns interests in 15 oil and gas fields. Wintershall has focused on conventional oil and gas to date but believes it is well positioned to meet the technological challenges of finding and producing unconventional oil and gas due to its experience with complex reservoirs and its expertise gained producing tight gas in Germany. Musings Argentina is looking better for foreign investment in oil and gas exploration than it has in decades. The geology is promising, conventional and unconventional. The conventional targets in CN-V almost look like a sure thing. I am not aware of any plans to drill and test the Agrio and Vaca Muerta formations. This may be just as well. Even if the Vaca Muerta shale compares favourably to US shales, surely per unconventional well costs are significantly higher than in the USA. The trouble is that Argentinian conventional resources do not appear to be that junior exploreco friendly. The miserable histories of Madalena Energy and Americas Petrogas serve as a warning. The unconventional formations would indeed look more interesting at higher prices but for the moment appear to be the purview of larger companies able to finance a lengthy learning curve. I know little of BASF’s subsidiary Wintershall but suspect it is a good partner. I do like the 50%/50% working interest split, it denotes a collegial environment. I suspect that there exists some complementarity of skill sets between the two companies. GeoPark certainly appears oriented to growing a much larger company. The rhetoric and style suggest that GeoPark is in it for the long haul. If the company wishes, GeoPark could divert additional rents generated in Colombia to more exploration and development in Argentina. GeoPark also has a relatively small working interest (18%) in two shallow heavy oil blocks in the northern Neuquén basin. Four exploration wells are scheduled to be drilled in the next few months, 3 wells in the Sierra del Nevado block by YPF, and 1 well in the Puelen block by Pluspetrol. The net production potential is small but any finds could be long-life reserves. From the perspective of the company and its long-term goals, these are all honourable compelling exploration bets. From the perspective of impatient retail investors, there may not be much here to noticeably move the share price. The LLA-34 block will continue to be the primary driver of share value for GeoPark as it periodically continues to make new 52 week highs. Nonetheless, the Neuquén wells, one exploration and one development well in the Chilean Fell block targeting natural gas, as well as the one exploration and six appraisal/development wells being drilled in the LLA-34 block during Q3 2017 should generate lots of news for an operational update sometime in the autumn. -TR |
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Msg # | Subject | Author | Recs | Date Posted |
8064 | Re: GeoPark CN-V block notes | murdochjak | 0 | 7/19/2017 7:07:08 AM |