PROACTIVE NEWS SUMMARY: Gulf Keystone Petroleum, Genel Energy, Pura Vida, Providence Resources, Standard Chartered, Mariana ResourcesReported by Proactive Investors on Tuesday, 7 August 2012 (on August 7, 2012)
Three of today’s main stories by Proactive Investors were dedicated to the oil and gas sector.
One of the reports covered a note from Credit Suisse, which said the resumption of oil exports by the Kurdistan Regional Government is likely to provide only “short-term respite” to the current supply problems in Iraq.
Last week the semi-autonomous region of Iraq said it would resume oil exports at a rate of 100,000 barrels a day.
However, the fraught and politically complex relationship between north and south meant this wasn’t a straightforward offer to turn the taps back on.
The Kurdistan Regional Government has threatened to resume the embargo at the end of the month unless it receives an estimated US$1.5 billion in oil payments it says are being withheld by the Iraqis.
“What I have in mind is to restart the oil export for only one month, i.e. for all of the August period,” said the KRG’s Natural Resources Minister Ashti Hawrami in a letter written at the end of last month.
“If the payments are not released by the end of this period, then we agree to halt all the export at the midnight of 31st August.”
The source of the friction is the KRG’s decision to unilaterally award new oil licences to foreign companies in northern Iraqi region.
In the note, Credit Suisse analyst Thomas Adolff predicted the lifting of the embargo will be temporary.
“This is likely to be a short-term respite, and we see the chances of continued exports (ex trucking) from Iraqi Kurdistan as relatively low after August in the absence of its own export pipeline (only targeted for completion in late 2013),” he said.
A permanent resolution to the dispute between Erbil and Baghdad would have very positive implications for companies operating in Kurdistan - none more so than *Gulf Keystone Petroleum (LON:GKP)*.
Its main asset is a majority stake in the super-giant Shaikan Field, which contains 12.4 billion barrels of oil estimated on a P90 basis (denoting a 90 per cent certainty of being produced).
It also has interests in the Sheikh Adi, Ber Bahr and Akri-Bijeel blocks as well as producing oil for the domestic market from Shaikan.
And it is one of a number of ambitious mid-ranked explorers making its name by opening up one of the last few remaining new oil frontiers.
GKP and *Genel (LON:GENL)*, headed by former BP chief executive Tony Hayward, were first movers, followed *Petroceltic (LON:PCI) *and *Afren (LON:AF)*.
Another broker note said that a huge re-rating of *Pura Vida (ASX:PVD)* is inevitable.
Hartleys analyst Dave Wall notes other companies with Moroccan acreage of a similar size and quality to PVD’s are valued in excess of US$200 million versus PVD’s current US$12 million market value.
“The value proposition is extremely compelling,” he said in a note to clients, in which he set a 113 cents price target for the shares (versus the current price of 30 cents).
Pura Vida’s strong acreage position offshore Morocco, a hot exploration post code this year, is the reason for the broker’s bullish view.
Indeed, he says the firm’s early move to secure a 75 per cent interest in the Mazagan permit, spanning 10,900 square kilometres, was an excellent deal.
The company has reprocessed and has mostly re-interpreted existing seismic data - covering 3,570 square kilometres – which has allowed it to book potential recoverable resources of 2.4 billion barrels of oil.
It is currently re-interpreting the remainder of the data and, according to Wall, a farm-out process could occur as early as October. He says this would allow drilling to get underway late next year or early 2014.
Large US oil firm Kosmos Energy is planning to drill three wells in neighbouring acreage next year, and last month’s reported entry of London-listed Genel also highlights the increasing industry interest in Morocco.
The presence of Kosmos nearby is particularly significant. As the discoverer of the large Jubilee field offshore Ghana, it has been targeting new areas where it expects to find similar geology - formed millions of years ago before the world's continents are beleived to have separated.
Similarly, fellow Jubliee partner Tullow has made a 'related' discovery in South America, the Zaedyus field offshore French Guina, using this 'continental drift theory'. Other comparisons are made between potential discoveries in Morocco and Canada's east coast.
And it is in considering these apparently corresponding prospect that Hartleys derives its comparison to US$200 million peers.
We also covered today’s news fomr *Providence Resources (LON:PVR)*.
The oil and gas group has mapped another potentially significant oil target offshore Ireland.
The Barryroe project, which is set to become Ireland’s first commercial oil field, has been the focal point and a source of excitement in recent months but it is just one of several projects the company is pursuing.
It already has five more targets slated for drilling in the current campaign over the next eighteen months. Today, it highlighted the Drombeg prospect, offshore Cork, as an additional target that is nearing ‘drill ready’ status.
Drombeg is in the southern Porcupine basin around 60 kilometres away from the Dunquin exploration prospect, which will be drilled in partnership with ExxonMobile next year.
And third party analysis, carried out by contractor Ikon Science, suggests it could span an area of 240 square kilometres, with hydrocarbon bearing sandstone reservoirs having thicknesses of 200-300 feet.
Ikon also believes there is a large Jurassic feature existing beneath the prospect.
Providence owns an 80 per cent stake in the project and it says it will now seek partners for a drill programme to test Drombeg.
“Given Drombeg's location and water depth, it is likely that we will seek a capable joint-venture partner with deepwater operating experience though that view may change with positive results from the upcoming Dunquin well,” said John O’Sullivan, technical director.
"We hope to be in a position to update the market on the prospective oil and gas resource potential of Drombeg during Q4 2012."
Away from oil and gas, the banking sector was hit by another scandal today.
*Standard Chartered (LON:STAN)* had £8.4 billion wiped off its market value after shares tumbled almost 24 per cent on threats by New York state regulators to revoke its licence for illegal dealings with Iran.
Brokers across the board today lowered their sights on the stock, noting the potential reputational damage of allegations the bank conspired with the Iranian government to hide US$250 bln worth of transactions.
Some suggested the Asia-focused bank could lose its clearing licence for US dollars, in effect wiping as much as 40 per cent off the group’s earnings.
Others, such as Nomura, which was one of the City firms along with Canaccord Genuity and Oriel Securities to downgrade the stock, said this was not a likely outcome.
“It’s difficult to think that the bank could lose its licence, but you can’t rule it out,” said Nomura analyst Chintan Joshi.
Analysts previously had Asian banks StanChart and *HSBC (LON:HSBA)* marked down as their preferred picks over British lenders.
The London-based bank vehemently denied allegations, stating that “99.9 per cent of the transactions relating to Iran complied with the regulations” and those that did totalled just US$14 mln.
The rebuttal followed a sharp sell-off of Standard Chartered shares in Asia overnight after the New York State Department of Financial Services (DFS) issued a 27-page order against the bank.
The DFS alleged that between 2001 and 2010, Standard Chartered’s US unit operated as a “rogue institution” allowing billions of dollars of money from Iranian institutions to flow through it.
The head of the DFS, Benjamin Lawsky, has called for the bank to appear before a hearing on August 15 to justify why its licence should not be taken away.
In the mining sector, *Mariana Resources (LON:MARL, TSE:MRY)* said this morning re-sampling of an earlier batch of drill holes from Calandria Sur deposit in Argentina had found low grade gold and silver in the rocks outside and below the main rhyolite dome.
The dome is host to the 441,000-ounce indicated and inferred gold resource.
However, today’s results and those earlier this year when the company first re-examined the rock around the dome have altered the understanding of Calandria Sur.
A total of 26 holes from this second batch of 33 previously drilled holes contained gold and silver, which is described as “disseminated and veinlet/stockwork” in style.
The best intersections from rock on the eastern border of the main resource included 11 metres at 0.5 grams per tonne and 5 grams of silver and 24.5 metres at 0.8 grams of gold and 12 grams of silver.
Below the deposit, Mariana uncovered a 9.5 metre section at 1.2 grams per tonne of gold and 19 grams of silver and 27 metres at 1.2 grams per tonne and 13 grams of silver.
Crucially indications from LeachWell assays indicate high gold recoveries from the country rock hosted precious metal compared with the dome hosted mineralisation.
Chairman John Horsburgh said: “Re-sampling results will be evaluated in conjunction with the forthcoming results of the recent drilling with the potential for a revised resource statement early 2013, if results are positive.”
Links: Full news story
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