The aforementioned game changer discoveries were clearly depicted at the performance of these relatively small companies and their shares hit returns higher than 100%. As I have not found anything like this, I thought to write an article summarizing these game changer discoveries and how these discoveries impacted the market cap of these companies and the fortune of their shareholders.
In addition, this article will give the incentive to the investors to investigate further the neighbors of the following companies along with the drillers who contributed into this success. So they could find an investment opportunity in another company which still remains overlooked.
1) Petroamerica (PTA.V): It is a Canadian company which trades at the Toronto Venture stock exchange (PTA.V) and the U.S. stock exchange (PTAXF). It is focused on light and medium oil in Colombia. The company has assembled a large portfolio of prospective oil properties in the Llanos basin, and is joint-ventured on some of these properties with established producers in Colombia like the giants Petrobras (PBR) and Pacific Rubiales (PRE.TO). Petroamerica has interests in eight blocks, comprising a total of 1.8 million gross acres. The company's Balay and Las Maracas oil discoveries are located in Colombia's Llanos Basin, on the Balay and Los Ocarros Blocks, respectively.
For the month of October, the company averaged a total working interest production of 2,718 barrels of oil per day (2,468 bopd net after royalties). I believe the company will exceed its exit guidance of 3,000 bopd after the recent successful results in Las Maracas-5 (50% WI), in the La Casona-1 exploration well, which is situated on the El Eden Block (40% WI). The drilling for the Balay-4 well (15% WI) is ongoing.
The Las Maracas-5 well is currently flowing at 3,700 bopd of 32o API oil. La Casona-1 well produced under natural flow conditions light oil (36o API) at an average rate of approximately 1,200 bopd with 4.0 MMCFD of gas and a maximum oil rate of 1,288 bopd.
With the addition of the restricted production coming from the Las Maracas-4 well, the Las Maracas field is now producing at more than 5,000 bopd with minimal water through the long-term test facility. The Las Maracas-2 sidetrack well continues to produce at rates of approximately 1,150 bopd from the Mirador Formation, and the Las Maracas-3 and Las Maracas-4 wells, are producing approximately 2,000 bopd and 1,500 bopd respectively, from the Gacheta Formation. Las Maracas-5 well continues to impress, as it tested at a maximum rate of 3,762 barrels per day (bpd) gross from the middle Gacheta sand, only on natural flow over a 13-hour period. Short-term catalysts for Petroamerica's share price include additional testing at the Balay-4 well (15% WI) and the El Porton Curiara-1 exploration well (25% WI), among others.
Petroamerica uses the rigs of Tuscany International Drilling, which trades at the Toronto stock exchange (TID.TO) and the U.S. stock exchange (TIDZF). There are two articles linked to Yahoo Finance under the U.S. ticker (TIDZF), which is a buying opportunity.
Canacol Energy is a neighbor of Petroamerica in Llanos Basin and it is currently drilling in three different basins of Colombia (Llanos, Putumayo and Magdalena). The first results from Magdalena (85 feet of potential net oil pay in Mono Arana 1 well) are very encouraging. Canacol trades at the Toronto stock exchange (CNE.TO) and the U.S. stock exchange (CAAEF).
2) Second Wave Petroleum: It is another Canadian company which trades at the Toronto stock exchange (SCS.TO) and the U.S. stock exchange (SCSZF). It is focused on light oil in Canada. According to the National Energy Board of Canada, the Beaverhill Lake formation in the Swan Hills region initially had an estimated 2.9 billion barrels of oil originally in place. BMO Capital estimates though that there are an additional 2.5 billion barrels of oil in place in these potential unconventional developments around the Swan Hills Field. Second Wave holds 50,000 acres with a 40% working interest and another 10,300 net acres with a 100% WI in Beaverhill Lake in Judy Creek. It also holds 92,000 net acres with 100% WI in Judy Creek in the Pekisko formation. It estimates that it has a drilling inventory of 130 Beaverhill Lake oil wells and an additional 650 wells in the Pekisko.
The company drilled several wells during the first half of 2012 and it hit some great IP rates, proving that it sits on the sweet spot of the Beaverhill Lake formation. Actually, few know the TOP-30 oil wells drilled up to February 2012 in Western Canada and even fewer people know that 4 out of the TOP-16 oil wells in Western Canada are owned by Second Wave Petroleum.
Reading the recent third quarter 2012 report, an investor can find the IP rates of the last eight gross wells tied in since the beginning of the third quarter of this year. The peak daily gross oil rate is higher than 2,000 barrels of oil equivalent per day (boepd) for four of them while the remaining four wells flow in the range of 1,300 to 2,000 boepd.
Its great drilling results in the first half of 2012 were the reason that the price hit $3.60 and it also received some unsolicited proposals to be acquired, according to the company's news. The deal did not come through and the share price dropped significantly in the second half of 2012, as this rejection coincided with the severe correction of the American stock exchange and the steep decline of the oil price.
In addition, the company did not drill any wells during third quarter 2012, so the production declined from the first quarter 2012 highs. The company focused on improving its infrastructure instead (field electrification and pipelines) to reduce its costs. It also plans to initiate a waterflood program this month to increase the production from the existing wells.
The thing is that nothing has changed fundamentally in the company as the oil is there while the majority of its acreage is still undeveloped. The company does not have much free cash available in its credit line but the quarterly funds from operations are positive to fund its operations. Brookfield Asset Management (BAM) is the largest shareholder of the company with a 47.5% stake.
Second Wave Petroleum is a unique buying opportunity currently.
3) Africa Oil: It is another Canadian oil and gas company which trades at the Toronto Venture stock exchange (AOI.V) and the U.S. stock exchange (AOIFF). It has assets in Kenya, Ethiopia, Mali and Somalia through its 45% stake in Horn Petroleum Corporation. Africa Oil's East African holdings are within a world-class exploration play fairway with a total gross land package in this prolific region in excess of 300,000 square kilometers. The East African Rift Basin system is one of the last of the great rift basins to be explored.
The company was very lucky to hit oil with its first exploration effort back in March 2012. The initial successful results from Ngamia-1 well (AOI 50% WI, Tullow 50% WI) in Kenya which encountered over 100 meters of net light oil pay in the Upper Lokhone Sand Section grew during the next months, finding an additional 43 meters of potential oil pay in the Lower Lokhone Sandstone section. This was the first oil discovery in Kenya and boosted the share price by more than 500%.
The next well of Africa Oil, Twiga South-1, was drilled in September and it represents the next step in expanding the play northward into the Lockichar basin and proving up the “string of pearls” concept along the main basin bounding fault. The company said recently that it encountered oil, but no further details have been provided yet. Thus, the commercial viability of this discovery has yet to be ascertained.
The company will continuously drill high-impact exploration targets for the remainder of 2012. In onshore Kenya, the Paipai-1 well in Block 10A, was drilled in October and the market still awaits for the results. In onshore Ethiopia, the exploration drilling campaign will commence with the Sabisa-1 well in the South Omo Block before year-end.
Tullow, Africa Oil's partner, indicated it would be at least a year before it knows whether its March discovery (Ngamia-1 well) can be extracted and exported. In addition, the company has a market cap of $2.2 billion, which is not supported by the numbers of its balance sheet. All that being said, the investors have to be very careful before committing any money in Africa Oil at the current price.
In terms of Somalia, the first 2 wells drilled by Horn Petroleum (45% owned by Africa Oil) did not find oil.
Africa Oil has utilized the rigs of Weatherford (WFT) for its first oil discovery in Kenya.
4) Mart Resources: It is a Canadian oil and gas company which trades at the Toronto Venture stock exchange (MMT.V) and the U.S. stock exchange (MAUXF). The company is focused on production and development opportunities in the proliﬁc Niger Delta region of Nigeria. The Umusadege ﬁeld in Nigeria’s Niger Delta region is Mart’s core strategic asset which is being developed in partnership with Midwestern Oil and Gas Company Plc and Suntrust Oil Company Limited. Mart’s net proved plus probable (2P) oil reserves in the Umusadege ﬁeld in March 2012 were 17.8 million barrels.
The company's UMU-9 well commenced drilling operations on Nov. 18, 2011, and the results in early 2012 indicated a cumulative gross oil pay of 430 feet from 19 oil sands and one gas sand. This discovery fueled the share price yielding more than 100% during the last six months.
The company, so far, seems to have avoided most of Shell's problems and has been doing well lately. Mart has no debt, it has good cash flow and it initiated a dividend recently which reflects the company's positive view of the sustainability of cash flow from its Nigerian operations.
However, Mart may not be immune to Nigeria's problems. The company is in the process of building an alternative, second pipeline, partially to circumvent disruptions in the original pipeline. Mart is dependent on a single field and (for now) a single pipeline. Any disruption of either will quickly drop Mart's share price.
5) WesternZagros Resources: It is a Canadian oil and gas company which trades at the Toronto Venture stock exchange (WZR.V) and the U.S. stock exchange (WZGRF). The company holds a 40% working interest in two Production Sharing Contracts (PSC) with the Kurdistan Regional Government (KRG) in the Kurdistan Region of Iraq.
The Garmian contract area (1,780 square km) is operated by WesternZagros. The Kurdamir contract area (340 square km) is operated by Talisman (TLM) with a 40% working interest. The KRG holds a 20% working interest in both PSCs. The remaining 40% third-party participant interest in the Garmian PSC is held by the Russian Gazprom Neft.
In March 2012, the first drill stem test on the Kurdamir-2 well resulted in a major oil discovery in the Oligocene interval of the Kurdamir structure. The well was then drilled to a total depth of 4,000 meters in June 2012. This event propelled the share price, giving a return of 100%, which remains relatively unchanged.
However the recent results from Kurdamir-2 exploration well on the Shiranish Formation exhibited non-commercial flow rates in this location. In addition, the latest results from the Eocene reservoir which is a secondary target in Kurdamir-2, resulted in the flow of light, 45 degree API oil at sub-commercial flow rates.
WesternZagros is still a speculative play which is in the exploration phase. Its land is not a de-risked land and its reserves are still prospective -- they are not proven and probable. So any further rise from the current elevated levels has a very high risk.