Kifaru-1 disappoints for Wentworth Resources

By Amy McLellan

There has been disappointment for Wentworth Resources after the Oslo- nd AIM-listed company announced the Kifaru-1 exploration well in the Rovuma Onshore Concession in northern Mozambique has come back empty handed.

Kifaru-1, operated by Anadarko Petroleum, the US independent powerhouse behind the giant gas fields found in the deep waters offshore, was drilled to 3,100 metres in Eocene age rocks but failed to find an economic reservoir.

This is a disappointment as Houston-based Anadarko had hoped the block would be the onshore extension of the supergiant gas play in the deep offshore.
The well, expected to cost less than the pre-drill estimate of US$43 million as operations only lasted around 40 days, a welcome relief compared to the over-time Tembo-1 of late last year, has satisfied the drilling obligations on the block.

Wentworth’s MD Geoff Bury said the company would now be working with Anadarko to evaluate the data and work out next steps on the block, where Tembo-1, which finally reached TD of more than 4,500 metres in December, found 11 metres of natural gas net pay in Cretaceous aged sands.

Wentworth has a 13.64 per cent interest in exploration operations in the block. Shares in the AIM company were down more than 14 per cent on the news at 26.75 pence, and analysts at Investec Securities reduced the target price on the stock from 70 pence to 65 pence as they removed all remaining Mozambique exploration from their valuation as there’s no line of sight on further drilling.

This exploration well may have been a bust but Wentworth still has plenty to play for at its Mnazi Bay project in Tanzania, which is heading towards first gas. Wentworth has a 32 per cent stake in this Maurel & Prom-operated project, where a key gas sales agreement was signed last year.

Under this agreement, gas will be sold from the Mnazi Bay and Msimbati fields in southern Tanzania to the Chinese-funded but Government-owned Mtwara to Dar es Salaam pipeline and Madimba central processing facility, currently under construction.

The gas will be supplied at up to 80 million cf/d for the first eight months, with an option to increase over time to a maximum 130 million cf/d for up to a 17-year supply period – this higher level would require the drilling of three more development wells.

This is a game-changing project for Wentworth, with analysts at Investec estimating the field will generate net cash flows of more than US$20 million during the first two years.

The initial delivery is expected to begin by 22 April 2015 at a fixed price of US$3.07 per MCF, escalating with the US CPI Industrial index. First gas from the field will not only be a major milestone for Wentworth but also for Tanzania as it lays the groundwork for clean, reliable and domestic energy supplies to drive economic growth.

Nor is this the end of Wentworth’s exploration ambitions: the Mnazi Bay Concession is reckoned to host 1.5 TCF of P90 unrisked prospective resources – and Wentworth has a near 40 per cent stake in the exploration acreage.

But that is for the future: after the disappointment in Mozambique, and the current market mood, investors are going to want to see the existing reserves monetised and the revenues banked.