Fastnet Oil & Gas (LON:FAST) Davy values 44p
Fastnet's Deep Kinsale prospect - 'like Barryroe, only bigger'
Davy values the AIM quoted stock at 44p, calculations have given little credit is yet given for the Irish potential.
Fastnet's Deep Kinsale prospect - 'like Barryroe, only bigger' Fastnet Oil & Gas (LON:FAST) another very big number to think about.
An independent estimate of over 2.3bn barrels oil-in-place for the Deep Kinsale project in the Celtic Sea, off Ireland’s Cork coast.
The AIM-quoted explorer also confirmed that a 500 square kilometre 3D seismic programme has now been completed, significantly under budget.
The independent assessment estimated Deep Kinsale’s resources at 2.365bn barrels of oil in place.
Beyond this blue-sky number, and taking into account the project’s early stage, the assessment also put forward a more grounded estimate of 134mln to 691mln barrels.
Deep Kinsale is right next door to Providence Resources (LON:PVR) Barryroe project, which was confirmed as Ireland’s first commercially viable oil field last year.
Fastnet chairman Cathal Friel, is that it confirms the Deep Kinsale prospect to be just like Barryroe, only bigger.
Deep Kinsale is a large oil play located beneath a mature gasfield, just like Barryroe - which is beneath the old Seven Heads gasfield.
And, just like Barryroe, the targets are the Wealden reservoir sands – exploration to date points to the Middle, Lower and Basal intervals being present, as well as the much deeper Purbeck interval (found only in the western portion of Barryroe).
Friel also explains that the project is far from unchartered territory for the Fastnet team.
“Both Paul Griffiths (managing director) and John Craven (founding shareholder) worked the area in the eighties and nineties and they were always strongly convinced that there was a large oil accumulation immediately below the gas reservoir.
“For a number of reasons it was never explored before now. But, then the Barryroe (tests) became a catalyst for us to take a closer look.”
“We knew it was looking good. Even so, I think we were all presently surprised with the independent report that came out today.”
Friel explains that Deep Kinsale and Barryroe are very similar, to the extent that two practically run into one another and are “basically the same structure”.
“The only real difference is that Deep Kinsale is potentially bigger and less compartmentalised.
“According to the seismic the Kinsale gas reservoir is 1.7 tcf, 98% depleted, which is probably the biggest unfaulted structure in the whole Celtic Sea.
“So immediately below it - where the oil targets are – is also unfaulted.”
Fastnet has a 60% interest in the exploration project following its agreement with Petronas, the Malaysia’s state oil and gas firm, which operates the mature gasfield.
It earns this stake by covering the full cost of a ‘farm in’ well, which must start before the end of November 2015.
Petronas also has ‘back-in’ rights, which could see it pay retrospective costs, and ultimately reduce Fastnet’s stake down to 40% but only after the actual production of 250 million barrels of oil.
That said, it is hoped that drilling could get underway in mid summer 2014,Fastnet’s managing director, Paul Griffiths yesterday noted that the 3D investment “is beginning to pay dividends, as the results are proving to be a catalyst stimulating industry interest in our licence portfolio”.
Fastnet reckons 100mln barrels of oil would be commercial for Deep Kinsale - though that is based on an assumed oil price of US$40 a barrel, which is conservative in the current US$100 plus environment.
Since listing on AIM in June 2011, Fastnet has now marked up almost 6bn barrels of prospective in-place oil resources in three prospects in the Celtic Sea (Deep Kinsale, Mizzen and Shanagarry) and that does not include the 12bn barrel potential in the Molly Malone basin or in its more advanced prospects offshore Morocco.
Dublin based broker Davy believes the Irish offshore sector is entering a ‘very interesting’ period of activity and following this morning’s announcement it has upgraded its rating of Fastnet to ‘outperform’.
Today’s Deep Kinsale update has provided more evidence of the rapid pace at which Fastnet is pushing to develop its Irish assets, Davy said in a note.
“The in-place resource estimate points to potentially commercial quantities of oil being present. We think the outlook for the group continues to improve,” said analyst Job Langbroek.
Davy values the AIM quoted stock at 44p, calculations have given little credit is yet given for the Irish potential. |
