Conference report 2: Tangiers Petroleum reinvents itself with “unique” Project Icewine on Alaska’s North Slope

By Amy McLellan

Hit hard by the TAO-1 duster offshore Morocco, Australia’s Tangiers Petroleum has re-invented itself, with new management and a new asset. The company, which is dual listed on the ASX and AIM, was the high bidder on a huge tract of acreage in Alaska, known as Project Icewine, where there’s an exciting shale play as well as conventional oil targets in the number one ranked oil province in the US.

“We’re effectively a start-up company,” said managing director David Wall, who was appointed in April 2014 after the previous management team left when they lost the confidence of major shareholders and just ahead of the TAO-1 spud. “There’s a history to Tangiers but it’s largely irrelevant because we are a new company, with a new management team and a new and unique asset.”

That asset is Project Icewine, which stretches for almost 100,000 acres on the North Slope and comes with enviable terms: it’s a ten year lease, which gives the micro-cap time to assess and drill up the opportunity, and a generous 16.5 per cent royalty.

The acreage has year-round access via the Dalton Highway and the TransAlaska Pipeline runs through its acreage, providing unique access to premium global markets rather than tying the company to WTI pricing. What’s more Alaska, keen to encourage investment to offset steep declines in the production that is the life blood of this Arctic state, offers a generous 75-85 per cent exploration and development cash rebate.

The company was able to scoop this prime piece of oil and gas real estate because dropping oil prices meant there was little competition in the lease sale in November, allowing Tangiers and its partner, Houston-based Burgundy Xploration, to emerge as the high bidders. Other companies may not have seen what Tangiers and its partner can see here.

Paul Basinski, veteran geologist and the founder of Burgundy, was instrumental in helping his former employer ConocoPhillips find the sweet spot in the game-changing Eagle Ford Shale – indeed, he even named the Sugarkane field, the EFS field that helped ASX-listed Aurora deliver 95 per cent fold growth between 2005 and 2014.He has now used that proprietary methodology to identify a potentially huge shale resource on the North Slope.

The Icewine HRZ shale play ticks all the boxes, said Wall, who worked for Australian oil major Woodside before spending six years as an oil and gas equities analyst, experience that means he has valuable contacts among the institutional investment community. Those boxes include a “second to none” net-to-gross pay ratio, maximum frackable pay thickness, excellent continuity and tier 1 porosity. A report from DeGolyer & MacNaughton puts the prospective recoverable unrisked oil resource at almost 500 million barrels gross.

As well as the shale play, there’s also an exciting conventional opportunity. Because of historic imaging problems that can now be addressed with modern 3D seismic, the Central North Slope remains underexplored yet, according to the US Geological Society, there’s thought to be 4 billion barrels of undiscovered technically recoverable prospective resource here. Tangiers can see opportunities on its acreage in the Brookian sequence and, happily, this potential is going to be tested by a nearby operator this year.

“There are some catalysts coming up for us this year and they are driven by someone else spending their money next door to us rather than us spending our own money,” said Wall. “Someone else’s money is always the best type of money.”

The neighbouring activity on the Great Bear acreage involves a three-well programme over the first half of 2015, with one well, Talitha-1, just 2.5 miles north of Icewine. The Great Bear programme is targeting large Brookian prospects that are based on new 3D seismic. Repsol is also drilling on the Brookian fairway this year, although its acreage is 80 miles to the northwest. This activity will certainly provide more data on the play and help derisk the Icewine story.

The economics of the conventional play are reckoned to have a breakeven of around US$30- US$35 per barrel, although the unconventional play would require prices of US$65 a barrel. Before Tangiers gets to this point, however, it needs to access funding: it currently has about A$600,000 in the bank.

First up will be an equity raise of around A$6 million so it can make the final A$3 million payment for the lease, and then a farm-out to bring in funding for exploration activities: it has an 87.5 per cent stake so there’s plenty of flexibility to farm-down.

The current market may not be the best for attracting partners but, beyond the potential scale and materiality of the project, there’s a clear reason to invest here as farminees would be eligible for that 75-85 per cent cash rebate on exploration expenditure in 2015/2016. “In a low oil price environment, Alaska is somewhere you get very efficient allocation of capital,” noted Wall.

This was a confident and well put together presentation that ably highlighted a unique asset in one of the most prolific hydrocarbon provinces in the world: the giant Prudhoe Bay on Alaska’s North Slope may be decline but it is still America’s largest onshore field with 15 billion barrels of recoverable resources. It will be an interesting year ahead for the new-look Tangiers.

Click here to see the Tangiers Petroleum presentation

Conference report 2: Tangiers Petroleum reinvents itself with “unique” Project Icewine on Alaska’s North Slope

By Amy McLellan

Hit hard by the TAO-1 duster offshore Morocco, Australia’s Tangiers Petroleum has re-invented itself, with new management and a new asset. The company, which is dual listed on the ASX and AIM, was the high bidder on a huge tract of acreage in Alaska, known as Project Icewine, where there’s an exciting shale play as well as conventional oil targets in the number one ranked oil province in the US.

“We’re effectively a start-up company,” said managing director David Wall, who was appointed in April 2014 after the previous management team left when they lost the confidence of major shareholders and just ahead of the TAO-1 spud. “There’s a history to Tangiers but it’s largely irrelevant because we are a new company, with a new management team and a new and unique asset.”

That asset is Project Icewine, which stretches for almost 100,000 acres on the North Slope and comes with enviable terms: it’s a ten year lease, which gives the micro-cap time to assess and drill up the opportunity, and a generous 16.5 per cent royalty.

The acreage has year-round access via the Dalton Highway and the TransAlaska Pipeline runs through its acreage, providing unique access to premium global markets rather than tying the company to WTI pricing. What’s more Alaska, keen to encourage investment to offset steep declines in the production that is the life blood of this Arctic state, offers a generous 75-85 per cent exploration and development cash rebate.

The company was able to scoop this prime piece of oil and gas real estate because dropping oil prices meant there was little competition in the lease sale in November, allowing Tangiers and its partner, Houston-based Burgundy Xploration, to emerge as the high bidders. Other companies may not have seen what Tangiers and its partner can see here.

Paul Basinski, veteran geologist and the founder of Burgundy, was instrumental in helping his former employer ConocoPhillips find the sweet spot in the game-changing Eagle Ford Shale – indeed, he even named the Sugarkane field, the EFS field that helped ASX-listed Aurora deliver 95 per cent fold growth between 2005 and 2014.He has now used that proprietary methodology to identify a potentially huge shale resource on the North Slope.

The Icewine HRZ shale play ticks all the boxes, said Wall, who worked for Australian oil major Woodside before spending six years as an oil and gas equities analyst, experience that means he has valuable contacts among the institutional investment community. Those boxes include a “second to none” net-to-gross pay ratio, maximum frackable pay thickness, excellent continuity and tier 1 porosity. A report from DeGolyer & MacNaughton puts the prospective recoverable unrisked oil resource at almost 500 million barrels gross.

As well as the shale play, there’s also an exciting conventional opportunity. Because of historic imaging problems that can now be addressed with modern 3D seismic, the Central North Slope remains underexplored yet, according to the US Geological Society, there’s thought to be 4 billion barrels of undiscovered technically recoverable prospective resource here. Tangiers can see opportunities on its acreage in the Brookian sequence and, happily, this potential is going to be tested by a nearby operator this year.

“There are some catalysts coming up for us this year and they are driven by someone else spending their money next door to us rather than us spending our own money,” said Wall. “Someone else’s money is always the best type of money.”

The neighbouring activity on the Great Bear acreage involves a three-well programme over the first half of 2015, with one well, Talitha-1, just 2.5 miles north of Icewine. The Great Bear programme is targeting large Brookian prospects that are based on new 3D seismic. Repsol is also drilling on the Brookian fairway this year, although its acreage is 80 miles to the northwest. This activity will certainly provide more data on the play and help derisk the Icewine story.

The economics of the conventional play are reckoned to have a breakeven of around US$30- US$35 per barrel, although the unconventional play would require prices of US$65 a barrel. Before Tangiers gets to this point, however, it needs to access funding: it currently has about A$600,000 in the bank.

First up will be an equity raise of around A$6 million so it can make the final A$3 million payment for the lease, and then a farm-out to bring in funding for exploration activities: it has an 87.5 per cent stake so there’s plenty of flexibility to farm-down.

The current market may not be the best for attracting partners but, beyond the potential scale and materiality of the project, there’s a clear reason to invest here as farminees would be eligible for that 75-85 per cent cash rebate on exploration expenditure in 2015/2016. “In a low oil price environment, Alaska is somewhere you get very efficient allocation of capital,” noted Wall.

This was a confident and well put together presentation that ably highlighted a unique asset in one of the most prolific hydrocarbon provinces in the world: the giant Prudhoe Bay on Alaska’s North Slope may be decline but it is still America’s largest onshore field with 15 billion barrels of recoverable resources. It will be an interesting year ahead for the new-look Tangiers.

Click here to see the Tangiers Petroleum presentation