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Gold/Mining/Energy : Canadian Oil & Gas Companies -- Ignore unavailable to you. Want to Upgrade?

To: RIK who wrote (5141)	6/4/1998 10:18:00 PM
From: Greywolf	Read Replies (1) \| Respond to of 24921

Red Sea Oil (RSO.AL) Stockholm Thursday 4 June The meeting was attended by Alex Schneiter, Chief Geologist and Ashley Heppenstall, Head of Finance. The latest find in Libya is the second largest since 1988, Lasmo has the honour of fielding the largest ie Elephant. The drilling season for RSO begins in the middle of July with an exploratory well this is congruent to further testing by another rigg of the J1-85-well. Schneiter is pretty sure J1-85 contains oil. The test drill will take around 20 days to complete, with a result expected in the middle of August. Costing for the drill is $2 milj. With the low cost of setting the well into production taken into account even a small find would be of interest, the company hopes to find 65miljon barrels. The first exploration well which is to be started in the middle of July is expected to take 30 day's to reach max depth, after which a 40 day test period will follow. 4 levels are to be tested with a result due in September. The second well will be started after the first test results ie September. Seismic shows that there is a possibility that ENN extends to the North with an eventual increase in reserves of around 30%, this will also be tested. Seismic is now to be collected and should be finished by the end of June at which time a 2D seismic of 1600km will be initiated which will carry on until December. Due to limitations in the excisting rigg the deepest levels, Basal Sand are not to be tested this summer but rather efforts will be centered on pre-production drills so a plan of action can be submitted as soon as possible. Hopefully a start to production can follow within 12 months or at best within 9 months. Schneiter thinks the plan could be given the go-ahead by October or November at the latest. As touched on earlier the reason for the RSO stock's behaviour the last couple of day's is that an American Fund Manager has seen fit to sell 1,2milj shares. This has been done without prior knowledge of RSO or on any information from RSO. These thing's happen says Schneiter. The potential of NC117 is 2,7 bilj barrels it could be in excess of 3 biljon but 2,7 is a number the company can substansiate. The southern ares of the block hold larger prospects than does the North. The Southern structures could hold up to 8 times that of the North as the structure that Schneiter showed was 8 times larger than ENN. The chances of this being so were deemded to be good. The Basal Sands in ENN has 3 zones and they are all to be tested. Because the 4 zones already tested all showed good flows it is expected that the three new ones could hold 62,5milj barrels. At least 7 companies are interested in farming part of NC117, a bidding round will take place in August. The outfarming would be 25% and the cost would be $2milj per % of the block, this could increase in price as new details become availabe concerning the extent of the reserves. The oil that has alreday been found is consequently valued at $2,5pb = $200milj total. It is thought that if Lundin can get the Vietnam contract signed he could finance the drilling himself, or rather Lundin Oil could. The contract is expected to be signed within a month ie beginning of July. RSO would retain about 25% of all oil produced in Libya as the state takes 75-76%. With a production cost of about $2PB Lundin could at today's rate keep $13PB. The Lundin family is thought to own about 10-15% of the shares in RSO. About 300 people will be employed to work in the block. Troy is the company set to do the evaluations. Further it was noted that the large Al-Feel structure will be passed over for the time being due to the possibility of heavy concentrations of worthless CO2 in the structure. It's proximity to an old vulcano is the reason given. Schneiter thought that RSO today should be valued at a conservative $2PB, which should entail a share price of around $4. it was also noted that companies of the same structure are valued at a premium of 50% to what RSO is valued at today ie RSO should have a stock price of $6. Schneiter think's the stock undervalued but puts the reason down to poor information from the comapny. The company has been busy assessing the current data and of late it is more carefull in it's release's and therefore there has been an information glut. 5 water induction holes are to be drilled at the peremiters of the field to increase the pressure and press the oil towards the middle, these holes as well as the production holes will be drilled in 1999. The availability of water is to be assessed but should present no problems. Of the reserves already discovered half are in the Zelten level and less than half in the Facha. This gives 256miljon barrels in place with a recovery factor of 32,7% which gives you 84milj barrels of recoverable oil. This number does not include Beda and the other Zelten zone's. There is sufficient gas in the Zelten zone to lift the oil but not so much that it presents a problem. Zelten had a flow rate of 7,000BPD for 6 hours without a trace of water. The Facha structure has the dangerous gas H2S which ment not more than 700BPD could be extracted as there was no equipment present to take care of the toxic gas. This will not be a problem at production time. It is asked why the plan to transport oil by truck was canned and the answer given was that it would hamper the full production plans. Maximum production levels of 27,000BPD will be attained in 12 months after start of production, If the J1-85-well lives up to hopes then the total production level would be 30,000BPD. Schneiter stressed the good quality of oil at ENN and said there is a large market and need for oil of this quality. It was also asked how large NC117 is and the answer given - equivalent of 100 North Sea blocks! Also the meeting asked why the press release's were so late in coming. Here we see some of the cultural differences as the Libyan authorities can't see why, if Total of france only delivers 4 releases per year RSO should have more. For RSO Libya is it's only asset for Total...well they do have few more wheels to roll on. Schneiter foresaw a better relation with Libya in the future. Taxation in Libya is better than Malysia which itself is very good. Especially at a low oil price. At a production cost of $2PB, operating cost is $0,50 and pipline tariffs are $1,50. The cost of the evaluation drills this summer is $17,5milj, cost for infrastructure in the field would be $76,5miljon which gives you a total of $93,5miljon. Of the total pipeline cost's are $17milj. Once the project plans are OK'd by the Libyan's the cost of all this is shared 50/50. Schneiter, Heppenstall and Magnus Nordin are to have a meeting at Matteus Brokerage on 5/6 at 08.15.