OK now, let's try to figure out what is going on with TYK.
If --like the last time-- it drills two dry holes in Tanzania, the stock will have been diluted by about 4%. On the other hand, if they hit something, it could add a lot to their cash flow?
Just anxious not to be too much of a patsy in holding this.
Sorry--I can't fix the formatting of what follows--
This is from: thewebmarket.com
Tanganyika Oil Company Ltd (TYK VSE $1.70)
Tanganyika is the operator and has a 50% contractor's share in the 625,000 acre West Gharib onshore concession in Egypt, just west of the
Gulf of Suez. The basin is the major source of Egypt's 850,000 b/d oil production. Several offshore fields in the Gulf of Suez have in excess of
1 billion barrels of oil in place and the onshore fields have up to 250 million barrels of oil in place. Two new discoveries were made offshore in
1998 (Penzoil and Amoco) with 3D seismic. Tanganyika is doing the first onshore exploratory drilling that has been done in years. The Hana
discovery was drilled with 3D seismic and the field is believed to have about 60 million barrels of oil in place. The contractor gets 30% of the
profit oil free and clear of all costs, taxes and royalties.
The President of Tanganyika is Mr. Ed Molnar, a veteran oilman and a very good operator. The largest shareholder is the Lundin family and
the Chairman is Mr. Lukas Lundin. Lukas Lundin can ensure that capital is available for Tanganyika for the development of Hana. With
immediate cash flow and low development costs, minimal new capital will be needed.
The Hana field is believed to have about 24 million barrels of recoverable oil reserves (26 degree API) and the field is located within 3-4 miles
of operating infrastructure. The reservoir is the Kareem sandstone of Miocene age and it is a very good reservoir. Two wells have been
drilled and will be on production in the next 1-2 weeks at 3-4,000 b/d. The development plan assumes 7 wells and peak field production of I
0,000 b/d. By year end a rig will be on location to develop the field. The Hana 3 and 4 wells will be drilled to the Kareem and will come
onstream immediately. The Hana 5 well will be deepened to the Nubian sand, an important oil reservoir in this area.
The Hana economics are summarized based on US$19.00/Bbl Brent, as follows:
Year 00
Year 01
Remaining
Total
Field Production
(B/D)
7,900
10,000
-----
(mils B)
2.9
3.6
17.5
24.0
Field CF at $20.95/B (1)
(mils $ Cdn)
60.8
75.4
366.6
502.8
Contractor's share
(%)
35%
34%
30%
(mils $ Cdn)
21.3
25.6
109.8
156.7
Tanganyika's 50% share
(mils $ Cdn)
10.6
12.8
54.9
78.3
Tanganyika's 50% CFPS
($Cdn)
$0.59
$0.71
$3.05
$4.35
Economics : Development Costs Cdn $19 mil.
Investment Returned 8.2x, Payout 4 months
(1) Assuming a US$ 19.00 Brent reference price, less US$ 3.25 Suez discount, less shipping and terminal charges of US$0.40 and operating
costs of US$1.10 (almost all variable costs). The operating cash flow is US$ $14.25/BbI or Cdn $ 20.95/BbI.
The unrisked value (pv 15%) is Cdn $3.00 per gross barrel before government take or Cdn $10.00 per net barrel after all taxes and royalties for
the contractor's 30% share. The unrisked present value of Hana for Tanganyika's 50% contractor share is Cdn $36 million or Cdn$2.00 per
share. The company has several more seismic leads on the 625,000 acres West Gharib block and the higher potential Nubian sand will be
tested in the 5 th Hana well.
In addition, the company has a 2.53 million acre concession in Tanzania. Five wells have been drilled on the concession, three each by BP,
Shelf and AGIP and two by Tanganyika in 1996 and 1997. The Mita G-1 well drilled by Tanganyika had oil and gas shows and management
believes the Mita prospect area has the essential elements for a prolific hydrocarbon province. At least one or possibly two wells will be
drilled next summer, probably by a farmout.
The Hana discovery provides some hard value to Tanganyika which before had only exploration value. We recommend the stock as a well
managed junior international oil company. The company has the potential to add more low cost reserves on the West Gharib block and has
the ability to finance.
Contractor Interests in West Gharib
Tanganyika has a 50% contractor interest, TransAtlantic Petroleum (TNP.U TSE) has 30% and Drucker Industries (BB.DKIN) has 20%
(subject to a 7% NPI) in West Gharib. The table below compares the Hana value and cash flow assigned to Tanganyika with the other
companies.
Company
Net
Int.
mils
Shs
Currencies
Mkt
Price
Hana Pv 15%
Hana CF (Yr 2000)
Mils $
$/Sh
P/Value
Mils $
$/Sh
P/CF
Tanganyika
15%
18
Cdn $
$1.70
36.0
2.00
0.85x
10.6
0.59
2.9x
TansAtlantic
9%
63
US$
$0.15
14.7
0.43
0.35x
4.3
0.07
2.1x
Drucker
6%
32
US$
$0.40
9.1
0.31
1.29x
2.7
0.08
5.0x |
