Fastnet Oil & Gas DAVY VIEW NAV per share for Fastnet is now 24p. -
The fact that the well was drilled quickly and on budget is good news for Fastnet, which was carried for up to a gross cost of $100m by SK Innovation, the South Korean conglomerate group. No well cost was provided, but we suspect it will not be far off the $100m gross cap indicated in the farm-out arrangement.
DAVY VIEW
The result of the Foum Assaka-1 well, offshore Morocco, is disappointing but should be seen in the context of a high risk, high return drilling programme. The fact that the well, the first in the Foum Assaka permit, encountered oil and gas shows is a positive take-away.
Primary target was salt play
The Foum Assaka well was targeted primarily at a salt play concept in the deepwater lower Cretaceous. The well was scheduled to target the Eagle prospect, which was estimated to contain 360m barrels on a Pmean basis. There was no specific guidance given to point to the reason for the well result. Oil was seen in side wall cores, suggesting the presence of a working petroleum system, so the outcome may have been well-specific.
The well was spudded in the middle of March and was originally scheduled to take up to three months to drill. The relatively quick well result reflects good weather and the quality of the drilling unit (Maersk discoverer). The data will now be used to calibrate seismic data and to refine the system analysis work. The statement implies that there will be a further test of the Foum Assaka licence in 2015.
Cost and valuation impact
The fact that the well was drilled quickly and on budget is good news for Fastnet, which was carried for up to a gross cost of $100m by SK Innovation, the South Korean conglomerate group. No well cost was provided, but we suspect it will not be far off the $100m gross cap indicated in the farm-out arrangement.
We valued the specific target at 4p per share in a total 11p per share valuation for the Moroccan offshore play. As a consequence, we estimate the post well risked NAV per share for Fastnet is now 24p. |
