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Monday, 25 March 2013
Manas Petroleum’s Tajikistan acreage key to undergoing planned transformation to producer
Manas Petroleum (CVE:MNP) is on the brink of closing a share purchase agreement that will give it an 80 percent stake in producing oil assets in Tajikistan, expanding its existing footprint on what the company's chief calls "world class acreage", as the junior works toward its transformation from a pure exploration company to both a producer and explorer.
Late last year, the oil and gas explorer inked a deal to acquire 80 percent of an unnamed Swiss entity with eight producing fields, which hold 2P reserves of 30 plus million barrels of oil and additional gas. Current production is less than 300 barrels of oil per day.
Manas is looking to rehabilitate the assets and increase production through proper maintenance, including investing in new equipment, appraising and exploring missed extensions and prospects, and selling the oil locally at a price that competes with import crude oil from Kazakhstan.
The production forecast, according to an internal evaluation of a 25-year production and based on 4 years of investment using a yearly decline of six percent, showed peak production of more than 3,200 barrels of oil per day will be achieved at the end of year four. This does not include any upside and therefore production could be higher with increased investment, the company says.
“TOTAL just entered Tajikistan, and China National Petroleum Corp – one of the largest Chinese companies – has entered into a joint venture in another basin in the region,” says President Dr. Werner Ladwein, who has 30 plus years of experience in the oil and gas industry, previously heading up Petrom, the largest exploration and production company in Southeastern Europe.
“The region hosts world-class acreage, with a working petroleum system in place, including infrastructure and a railway system to export oil.”
The company’s President explains that Russian geologists discovered the main structures, at the time of the Soviet Union, but didn’t have the drilling technology and the project management skills necessary to succeed.
Manas is armed with exploration assets in Tajikistan and Kyrgyzstan in the Fergana Basin near producing fields, which together span 4,192 square kilometres and form “one large, connected area”. It has already acquired 2D seismic data on 1,960 km.
Drilling on these licenses, with several drill-ready prospects, is planned for the last quarter of this year, with the company waiting on some long-lead items in terms of equipment, as well as the finalization of a drilling contractor agreement and the execution of a partnership to share the costs.
The exploration program is set to be cost-intensive, with the first well expected to cost between $20 to $25 million. The company is targeting more than 100 million barrels of oil equivalent from one of the first prospects, known as West Supetau – which has a target depth of 3,500 to 4,000 metres.
“We’re in discussions with potential partners right now, and we should have a better idea of the process by the end of April,” assures Dr. Ladwein.
The company is also in discussions with a “couple of parties” to complete a financing in the next six to eight weeks, which is necessary to close the share purchase agreement and which should cover work for the first year. It plans to be self-financing out of cash flow afterward, with investment on the rehabilitation project expected to be some $60 million over four years.
Meanwhile, under a production sharing contract for its existing exploration assets in Tajikistan, for which the terms are confidential, Manas pays no royalty, and has no export limitations, with a 30-year development and production period, plus two extensions of five years each.
The company says the resource potential of the Fergana Basin is around 4 billion barrels of oil, based on an EIA report, of which 75 percent has yet to be discovered.
In addition to this potential yet to be covered, Manas also has a 74 percent working interest in the Gobi blocks in Mongolia, with the acreage surrounding two producing fields owned by Sinopec.
Under a production sharing contract with the local government, its exploration phase expires in April of next year, with the company looking to extend the period and the acreage in an effort to evaluate additional area and drill outstanding commitments in existing and new areas.
Dr. Ladwein says, however, that Mongolia is not the company’s main focus, with the bulk of its resources being used toward advancing its assets in Tajikistan.
It also has a 14.4 percent equity interest in Petromanas (CVE:PMI), which has several drill-ready prospects in Albania. Petromanas also owns acreage in France and Australia.
Uzbekistan remains on the company’s horizon, with the company viewing the region as another potential rehabilitation and exploration opportunity. It has signed a memorandum of understanding with Uzbekneftegaz, the state-owned oil and gas company, to screen fields at the edge of the Amudarya Basin.
The Central Asian country has proven reserves and high potential in some areas, according to Manas, but oil production declined by just over 50 percent in the period from 2001 to 2009 due to a lack of investment and technology - implying potential upside.
Insiders of Manas hold 29 percent of the company’s shares, an indication they are confident in the company’s future plans. The junior oil and gas explorer has a market cap of $12.77 million, with its shares changing hands at around 7.5 cents on the TSX Venture Exchange.