By Stewart Dalby
Is there corporate life after death? You might conclude, after the recent experience of ASX and AIM-listed Tangiers Petroleum, that there is. I exaggerate. Tangiers did not die, but following the news last August that the Tao-1 exploration well on the Tarfaya block offshore Morocco was a duster, the company was in a parlous state.
A previous CEO, Eve Howell, had sold off the group’s potentially company- making acreage in Australia, and Morocco was the only asset left in Tangiers starter pack portfolio. Tarfaya was also touted as potentially company-making, so a lot was riding on the TAO-1 well.
Not only was it unsuccessful, however, there was a cost overrun on the well. After a collapse of the share price and a trading suspension in August 2014, Tangiers decided to exit Morocco by assigning its 25 per cent interest in the Tarfaya block to farm-in Partner Galp Energia of Portugal for consideration of US$3.4 million.
When suspension of trading was lifted Tangiers raised A$1.2 million in September 2014 and a further A$1.2 million December last year, to keep going and hopefully start again.
The latest Managing director, David Wall (he was appointed MD in April last year and is the fourth CEO or MD I can count in the past six years) has been quietly optimistic and had a plan. He said last September: “Whilst we are now starting from a low base the Board is confident that we have the right ingredients in place to build a successful oil and gas business.”
His confidence has started to look well founded. The company has recently announced that it has made a successful bid for a large acreage position onshore Alaska in a prolific liquids–rich area with multiple objectives at a modest price.
An important catalyst has been David Wall’s relationship with Paul Basinski. Paul’s company, Burgundy Xploration, now becomes the co-venturer with Tangiers in the new Alaska venture known as the Project Icewine. Paul spearheaded Conoco Phillips’ early entry into the highly successful Eagle Ford Shale Play in Texas. He has been working on the Icewine project for the past 6 years and believes it could be part of one of the last great liquids shale plays in the US.
What Icewine means is that Tangiers becomes the operator on almost 100,000 contiguous acres and has a 87.5 per cent working interest (WI) which it is acquiring for just US$3.5 million or US$30 an acre (US$520,000 of which has already been paid). There 16.5 per cent royalty (12.5 per cent to the Alaska state government and 4 per cent to Paul Basinski).
There are excellent fiscal terms with Alaska State tax incentives on exploration drilling of 85 per cent cash refund (2015), 75 per cent (mid 2016) and thereafter 35 per cent. There are rebates of 40 per cent on seismic. There is good infrastructure with year round operational access with both the Dalton Highway and Taps pipeline running through Icewine acreage.
Icewine is covers part of un- conventional primary objectives in a shale complex that sourced the 13bn Prudhoe Bay Oil Field. The US Geological Survey (USGS 2012) estimated there could be 2bn barrels plus of recoverable oil in the HRZ/HUE shale which sources the largest field in Northern America and it has never been tested. This estimate is North Slope -wide.
North Slope–wide also, there are shallow secondary conventional objectives which are the hottest play on the North Slope with Tangiers acreage offset by two discoveries. The USGS says the Central North slope is ranked No 1 for remaining conventional oil potential (3.98 bn barrels excluding Alaskan Reserve Areas). Fifty per cent of this potential is in the Brookian sequence which is what Tangiers will be targeting. Other companies operating on the North Slope include Repsol and Great Bear.
- So what can Tangiers shareholders look forward to in terms of news? There should be results before long from the three wells on Great Bear’s adjacent acreage to the north of Icewine. Great Bear has upwards of 500,000 acres and is targeting a play similar to what may be found on Icewine. Great Bear’s results are kept for the most part confidential, but Tangiers says it has gleaned useful information from press releases on the previous two wells that the company has drilled.
- An independent technical report on the Alaska Icewine Project is being prepared and should provide investors with a better idea of the size of the prize as estimated by an independent third party.
- An updated report on prospectivity based on the reprocessing and re-interpretation of 2D mic on Icewine. This should give an indication on the conventional potential of the acreage.
- There could be a possible farm-out in mid-late 2015 and, finally, there could also be drilling in late 2015/early 2016.
These are early days but as David Wall says: “Project Icewine is the first step towards rebuilding the company.” The shares closed at 0.65p last Friday in London a lot higher the 0.35p (A0.6c) that investors paid at the September 2014 raise. So Tangiers is not only alive but also in improving health.