Highlights of todays conference call:
Participants to the call were urged to approve the Sands/IPC merger. It was not just a valuation issue, but the strong cash flow from Sands greatly compliments the long term prospects from IPC. The $300M corporate debt financing was again confirmed, precluding any need to dilute equity. This plus cash flow from phase one will supply all of the financing necessary for the Malaysian Block PM-3 second phase development.
The circular which has detailed information on both Sands and IPC is available as a download from the SEDAR database (Acrobat PDF file format).
sedar.com
A road show is planned for January in the US to increase exposure of the company to analysts and institutional investors. (Yay!)
They do not feel the market is giving any premium to future exploration success in Malaysia, particularly in the new prospect recently discovered by the Bunga Seroja well. Five wells are planned in 1998 to test new prospects. There are approximately 41 prospects that they have targeted for testing, and are expecting a trebling of reserves from Malaysia in the future (timeframe unspecified).
The North Sea JV's continue to provide cash flow, while reserves have continued to increase through an aggressive drilling program. They mentioned buying an additional interest in the Sedgwick Field from Texaco, which I thought I heard them say would increase production by 10,000 bpd and increase reserves 15%.
They did mention that they were moving towards concluding a deal in the Caspian Sea.
Testing is to begin on the B1-NC177 well tonight. They will test the lowest level, the Beda, first, then work their way up. Full testing will take close to 30 days. As reported, the surprise level was the Zelten. It is such a large zone that they have divided it into the Zelten and Upper Zelten and are planning several tests in this zone. A total of 5 tests are planned throughout the 4 levels. The Zelten is the primary oil producing zone in fields such as the Intestar (sp?) field to the North. It is a highly porous zone, so they presumed that the oil would have leached out, but it appears to have been trapped by the reefal structure below. They are not "counting their chickens", as nothing is certain until the testing is completed, but if the tests bear out the initial shows, there will be a "significant impact on the Lundin Group". Over 9 leads have been identified in the NC 177 block, some of them even larger than the one currently under test.
Sudan drilling will begin with two back to back wells in late 1998. They continue to look at all of their options in the Sudan, including increasing their stake in Arakis Energy, which they feel is very undervalued.
Hope this provides some info. There were many figures thrown out quickly, and my short hand is very limited, so I hope I captured the essence of what was discussed. I believe in many instances they were less forthcoming than in their Swedish conferences due to the voracious legal eagles in the US. They refused to discuss or speculate on potential reserve figures for B1-NC177 as example, whereas Tomas has more concrete guestimates to work from. Incidentally, they work with $3 per barrel NPV for valuing the Libyan potential reserves. Their early, conservative estimates were around 38M barrels, but they are now looking at "many times that", again, if testing confirms the initial shows.
Alex |
