TRGL: Second Well Confirms Considerable Potential
• NAV potential is $33-$41 per share without consideration for technology
investments
• Akayya #1 well exceeded expectations in terms of net pay and flow test
• Next two wells should have higher probability of success and the largest area
begins drilling in October
Potential is $33-$41 per share, largely driven by offshore Turkey, without
consideration for technology investments
We estimate total risked reserve potential of 28-35 million barrels of oil equivalent
(mmboe), compared to 2004 reserves of 13.8 mmboe. Offshore Turkey accounts
for the majority of the potential, but that could change. Operations in Romania and
France have been risked significantly, although recent results were positive.
The offshore Turkish potential is considerable because of reserve size and
reserve value. Based on a set of calculations, the productive acreage could yield
22-33 mmboe of net potential on an unrisked basis. Our projection above
assesses a 70% probability of success.
Low finding and development costs (estimated around $6 per barrel full-cycle),
proximity to shore, high-value market (price realizations could exceed $5 per
mcfe) and a low operating cost structure (estimated under $3 per barrel), suggest
the value of the reserves could exceed $18 per boe, or $3 per mcfe.
Akayya well exceeds expectations, and is better than last year's wildcat
The Akayya #1, drilled 4 miles southeast of last year's wildcat (and 5 miles
offshore), encountered approximately 141 feet of net pay. The Ayazli encountered
46 feet of net pay and 30 feet of potential pay. Only 33 feet was perforated in the
Akayya to produce 7.6 mmcf/d on a sustained test. The well is expected to be
economic based on this zone alone, with the balance of pay behind-pipe. All-in the
well cost $4 million. The Ayazli tested 15 mmcf/d, but from all five sections
encountered. We assumed average net pay of 100 feet to derive our reserve
potential for the offshore.
Next two wells have higher probability of success
Two more wells will drill in the appraisal program, but they should have a high
probability of success as they are step-outs from the Ayazli and Akayya
discoveries. The first well, set to spud next week, should reach total depth by
late-June, early-July. It is a step-out from last year's Ayazli #1 discovery, but is
targeting an optimal location derived from 3D seismic data shot late last year. The
structural closure spans nearly 2,000 acres in the Ayazli area.
The fourth well will spud in July and is a step-out from the Akayya discovery
located in a structural closure spanning 1,000 acres. Or the company may choose
to drill another step-out to the Ayazli. There is a chance that production could
commence from the Ayazli area in early-'06 from three wells, as the balance of the
basin is delineated.
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Above is an excerpt from a recent Morgan Keegan report on Toreador Resources. Congrats on your previous investment in this stock, hopefully you will be getting back into it soon because I believe its primed for an upside breakout. |
