Alan, here's the Yemen section of the VPI report
I'll post it on Yahoo as well.
Lehman Brothers Energy Equity Research
John M. Selser
Senior Exploration & Production Analyst
Fauzla Rashid
Exploration & Production Analyst
Yemen
On February 24, 1998, VPI announced it had entered into an agreement to form a joint venture with TransGlobe Energy Corp. to pursue exploration opportunities in the Republic of Yemen. Vintage will earn a 75% interest in the 1.1 million acre S1 Damis Block in exchange for a $11 million work commitment. Under the agreement, VPI will shoot 58 sq. miles of 3D seismic and drill 32 exploration wells over the next 2.5 years. TransGlobe and the Yemen Ministry of Oil and Mineral Resources have agreed to these terms, but the country's parliament must ratify the agreement. We expect this ratification sometime in May after which it will go back to the Ministry for final approval. If approved, we would expect 3D seismic acquisition to begin this year with exploration drilling in 1999. First production, if successful, would most likely not occur until 1999 or 2000.
TransGlobe is a small Canadian independent oil and gas company formerly known as Canadian Dusty Mac. About a year ago, the company went through a restructuring that included an asset writedown and management change. Ross Clarkson was brought in as Cheif Executive Officer. Ross has 21 years of oil and gas experience internationally and in Canada. From 1988 - 1996, he was senior geological advisor with Petro Canada, including resident manager of Petro Canada (Yemen) Inc. from 1989 - 1993. He was also senior project geologist with Canadian Occidental in Yemen in 1987.
(description of Yemen I won't bother to type)
We believe TransGlobe's new management relied on its local knowledge to acquire 2 blocks in 1997. One of the blocks, S1, is subject to the contract with VPI. This block was previously held by a Soviet oil prospecting expedition between 1983 - 1990 and by Shell between 1990 -1993. Shell drilled 4 wells that encountered several oil sands, but the wells were not tested. It is now believed, on further review, that some of these targets hold commercial potential under the terms of the new Production Sharing Agreements. The contract will focus initial efforts on the delineation of this prior drilling. Beneath the previously encountered horizons, VPI believes additional potential exists.
VPI was able to use its financial strength to secure a position in this contract. Although not a large capital commitment, it was significant enough to gain entrance. we believe this capital of about 2% of the annual VPI budget is well worth the risk. Yemen, at this point, is speculative. The contract needs to receive parliament and secondary Ministry approval. We expect both by mid year, but approval is a necessity. Secondly, although it is believed Shell found oil on the block between 1990 - 1993, the amount and commercial viability is still in question. If commercial quantities of oil are found in 1999, we could see cash flow generated as early as 2000. A 50,000 bopd development could generate an estimated $0.78 per share to VPI. This area holds the general risk associated with 5 letter stocks ending in "F", but regardless, we like the potential of Yemen. |
