The tiny Irish stock on the brink of landing 'the first' post-sanction oil deal in Iraq. Ref 'Fleet Street Letter' 12-04-04..

There seems to be a little confusion on the board. The Hamrin and Khurmala projects are those that the Iraqi Oil Ministry said they would AWARD contracts by end November. The Subba and Luhais project was being treated separately with december bids (as I recall). So what does it mean?

It means that the two bids on which our main hopes hang are still alive. We don't know whether we are at a single tender stage or not; we hope and expect it is single tender because the known potential contenders have been ruled out. Why has the RNS been released now? I expect because of investor agitation, to give us some peace of mind and to give them peace away from constant badgering. Pretty sure it will have been cleared with the IOM. So far so good. Reasonably positive and certainly not negative apart from the fact that things are possibly running a little behind schedule.

The S and L project offer announcement is also pretty positive. It means that not all eggs are in one basket (as are PCI's currently). If PET win one or both of the first two tenders, they seem, in my view, less likely to win S and L. If they win neither, they could pick up S and L as a consolation prize (although I seem to recall it is the largest of the three). Most likely H and/or K.

I do accept though that the RNS is partly defensive; the purpose being to prevent a short-selling campaign on the share. It obviously succeeds in that. So, Beasties, it is good news to end the week. The share price should be more aggressive, at least for a while. You'll be happier going to see your Mum and will be spreading bonhomie - God bless you both!

Eric

As usual Eric a very good and thoughtful post.

Nice one Eric. Done a little bit of trimming meantime, with a view to replenish in a few days' time. Still have most of my holding tho. Consoling myself with NBR.

Here's a question;
Wasps; what's the point? Wouldn't the world be a better place without them?
Shorters; ditto!!
Oops, that's a question for the PCI board.....

If there are any others putting in tenders they would also have issued a RNS, have i read right?

They would if they were a listed company, not if they were a private funded company, we will just have to wait and see. sometime this month I feel, but not even going to try and guess a date.

aldwickk: Re your question...only if those companies were registered on the London Stock Exchange. PET may have competition for these deals from Oil Groups throughout the World. We think we know them all and over time through one source or another they have been eliminated, but we can't be sure we know them all. As an example I can't believe Haliburton have not tendered in some form or other. jgt

aldwick, great spot. if i may also be positive about the timing of the RNS, on monday... if you have the facility a T10 trade will take into account the 15th december date, could this mean they have flushed out the buyers for then and also shaken any other companies into posting anything indicating other runners for the same tenders. If none appear my xmas pressie money is coming out of the piggy bank shortly.....

watcher

johngtudor,
haliburton are one of PET`s partners for the tenders. a full list is in the annual report on PET`s website.
dexter

dexter01: Understood, but I was not sure if that prevented them from tendering on their own account?

jgt,
i would`nt have thought so, bearing in mind all the damning publicity they`ve had lately

dexter01: Well I think it may be time to buy some more then!! John

Just to remind you what it is all about. There are THREE tenders:
From Petrel Website.

Petrel is shortly due to submit tenders to develop three oil fields in Iraq - Kirkuk, Hamrin and Subba / Luhais:

The Kirkuk tender to develop the Khurmala dome will be submitted by the end of March. Kirkuk is in Kurdestan but it is not in the Kurdish autonomous areas. The populace is ethnically mixed and inter-group relations seem businesslike. This is a proposal to design, build and commission a 120,000 barrel of oil daily facility. We believe that this production target is not particularly challenging, and that there is substantial upside. The reserves are proven, but there is no surface engineering on this dome. These are cash contracts, though a future sovereign government may convert them to risk-sharing arrangements. There are substantial targets at depth. The geology of the area is well understood: there are multiple source rocks, excellent reservoirs and seals. Oil and gas seepages in the area were observed from ancient times. Topography is hilly


The tender to develop the similarly sized Hamrin field in central Iraq will be submitted by April 15th. These reserves are also proven. As with Khurmala, dozens of relatively shallow wells have proven up the reserves. These wells are capped and the field has never produced, but geological risk is negligible. No surface engineering is present. Hamrin is in a predominantly Sunni Arab region north west of Baghdad. There is substantial unemployment in the area and local citizens are keen to develop their resources.


The updated tender for the Subba and Luhais joint field development of 120,000 barrels daily will be submitted by May 15th. There is surface engineering in place here, but it has been extensively damaged in the 1980s Iranian war. At peak, these two fields produced approximately 80,000 barrels. We believe that the targeted production is undemanding and that there is substantial upside from shallow reservoirs. Seismic reveals additional substantial structures at greater depth. These fields are in a desert north west of Basra in southern Iraq. Topography is flat. The area is predominantly Shia Arab. There has been little trouble post-war, though banditry is an issue in the region. Though damaged, infrastructure is reasonable, terrain is flat and export terminals relatively close.

also, this what block 6 is all about,


WESTERN DESERT IRAQ: BLOCK 6 - EXPLORATION WORK

PRE-SEISMIC EXPLORATION PROGRAMME

Acting on the recommendations of leading international geological advisors, we developed the following work programme, the phase at which will be carried out in parallel, so that the company can carry out seismic acquisition during the coming winter season:

1. Field data collection

The Mesozoic section in western Iraq crops out north west of Block 6, and to a lesser extent on the Block itself. We need to examine, and get familiar with, this sequence and also collect samples. This work could be carried out in two stages. The first phase, subject to security considerations, would involve the immediate collection on Block 6 of suitable samples for micro-palaeontological, source and maturation analysis, to act as verification of the surface mapping and also to provide background control for the later drilling programme. A second phase of fieldwork, possibly in September, would collect additional samples and make a more detailed examination of potential reservoir and source rock sequences outside Block 6. GPS hand-held control would be required for the second phase of the operation. It is possible that we would require permission to carry out work outside Block 6 assistance from the Geological Survey would in any case be valuable.

The target Palaeozoic section is exposed in western Jordan and again, should be studied and samples collected.

2. Sample analysis

Prof. Geoff. Clayton in Trinity College Dublin and Prof. Ken Higgs at University College Cork have been involved in the project to establish palynological zonation for the Palaeozoic in Saudi Arabia. The company will make use of this Irish expertise to provide sample dating, TOC (Total Oil Content) and maturation data from the field samples.

The end product of the field and sample work is to have knowledge and confidence in the stratigraphic sequence which is in the subsurface in Block 6, and to have sufficient data to critically assess any play concepts from the point of view of source, seal, reservoir and timing of migration. The data will also provide control during the drilling phase.

3. Satellite interpretation.

Petrels current seismic interpretation has possible plays/leads controlled by major lineaments and folds. These structural controls are visible on remote sensing imagery and a structural interpretation and fracture analysis will assist the seismic interpretation. There is considerable expertise in Ireland for the processing and interpretation of these data. The end product would be in digital format for adding to other datasets on the base maps. It is essential at an early stage in the work to have available good digital format map bases. We could produce good bases from satellite data allied with existing topographic maps

4. Regional data collection

Through the Iraqi authorities we should acquire any additional useful wells, examining the critical sections if samples are available, and obtain copies of any logs etc. There are probably informative water wells in addition to the deeper petroleum exploration tests. Other wells from Saudi or Jordan should also be accessed. Any important logs can be scanned into digital format for future use.

Regional data points and any maps produced should all be on a standard regional base. There is a geological map of the region, together with many publications relating to the surface geology. All these data need to be synthesised into a single geological database. This will provide control for the second phase of field sampling, and also assist in the planning of the seismic programme and in interpretation of the seismic data.

5. Seismic interpretation

Petrel carried out an interpretation of the seismic data provided by the Iraqi authorities. However, more refined velocity information was provided at a later stage and these new data need to be applied to the interpretation to provide a second-generation suite of subsurface maps for Block 6, which will also incorporate the results arising from the satellite interpretation and the regional data set.

6. Seismic reprocessing

We can improve the quality of the older seismic data by reprocessing the tapes. The approach would be to reprocess a few trial lines first to judge the level of improvement, before reprocessing larger parts of the data. The Ministry of Oil quote 3325 km of data on Block 6 from 4 surveys in 1979-81 period, all from vibroseis. It could be that some of the surveys give better results than others, or that there are parts of the block, which we consider to be of lower interest. However, if the results are good and the per/km costs reasonable, then the recommendation is to reprocess much of the data. The cost of seismic reprocessing will depend on the state of the data presented to the contractor, and particularly whether the surveying data, shot-point & geophone location data are in digital or paper form.

The second-generation seismic maps would probably be sufficient for planning of the new seismic programme and for laying out the additional lines. The total seismic set, both newly acquired and reprocessed, could then be interpreted to provide the final prospect maps for drill site selection.

Hi everyone,

Thanks to everyone for sharing your thoughts and in particular your research, I know how much time it can take up. I've been tracking PET for a couple of months, and this BB, and not sure if anything has been posted re the potential value of contracts that PET is tendering for, but thought these recent comparatives from "hydrocarbon-technology.com" might be useful, I wondered what the investment would be for a 120,000 bpd facility, well according to this site... http://www.hydrocarbons-technology.com/projects/qeshm/


Good luck to all.
Steve

Hi all.

Found this on Irish Independant

http://www.unison.ie/irish_independent/stories.php3?ca=184&si=1299039&issue_id=11777



Petrel shares soar on Iraq move

Saturday December 4th 2004


SHARES in exploration group Petrel soared yesterday after it said it has finalised its tender for two huge oil concessions in Iraq.

In trading on the AIM market in London, Petrel shares surged by 22p before easing back to close up 15.5p, or almost 18pc, at 104.43p.

A brief statement from the group, chaired by Dr John Teeling, said the group had finalised "all outstanding matters on the tenders for the Hamrin and Khurmal projects in Iraq and awaits a decision". The deadline for submission of the final commercial offer on the Subba and Luhais project is December 15, it said.

The two applications centre on the Khurmala Dome in the north and the Hamrin field, both capable of producing about 120,000 barrels per day and which will cost about $250m each to bring on stream. If successful, Petrel would be given a contract to develop one or even both of the fields.

The contract would allow for the recovery of its costs, together with a profit margin, and would run for something like five years. After that, Petrel would have to hope the Iraqis would award it a 'rollover' contract to continue working the field.

Pat Boyle



Irish Independent



wilbs

wilbs very interesting post which i personally find more optomistically worded than the RNS from Friday. Re my earlier posts Friday I feel like if pressed they may still be able to say more as i find the breaking of silence a significant event. What does anyone else think??- especially you Tokyo....have you rung your mate at PET lately?perhaps he can talk now?

willfagg - afraid I don't have a mate inside PET, unless you are joking about my e-mails to DH, which by the way DH if you are reading this I'm very happy to become penpals, I'll tell you all about my company if you tell me all about yours, LOL, but seriously as for DH giving you any more info, they have released an RNS, I think we should be grateful for that, now is the time to just sit back and wait. Lets allow DH & JT to go on with their day jobs.

Tokyo

An interesting point from the Irish Independent article concerns the nature of the contract, i.e. cost plus profit margin. This doesn't seem to tie in with the idea of risk sharing which I believe has arisen late in the day. $250M doesn't sound an awful lot for setting up a field. If we say 135M (obviously in euros I would have thought) and 15% profit margin we have 20K gross profit much of which should come through to the bottom line. There would need to be a fund-raising exercise. If, which seems unlikely, all the money is raised by PET, then existing holdings will be diluted. Following the SEY (and YOO) models this could well be a placing but at a price which takes the assured revenue into account. The calculation must be an iterative process. But lets guess a result and say the price goes to 3, that would be a cap. of 175K. Raise 135K (development cost only) by placing 50M shares at 2.70. Total shares = 108M. Suppose first year completes development and operations goes into second year. Then revenue per share in year 1 is about 145p; gross profit is about 22p per share; pbt, say, is 20p per share; pe ratio is 15. Certainly not too high! Thus the assumption of a share price of 3 is reasonable and may be over-cautious. That is for one field; don't see why 2 fields shouldn't double the result.

The oil specialists will, no doubt, have much more sophisticated ways of doing the sums. One underlying assumption is that the operational years revenue and cost profile are similar; the actual oil revenue going to the Iraqi government. Another assumption is that the other players are not sharing the risk but rather providing services at cost.

I remember Tokyo looking for a bid success price of 3 which is supported by this calculation. Some previous workings seemed to assume that the oil revenues would flow through PET; this model seems more likely. This is just back of the envelope stuff, but how do others see it? Have these Irish Independent figures been seen before? Would they quote them if they didn't have substantiation? The fact that actual figures are quoted increases my own confidence level. Probability up from 75% to 80%! TUT?

Eric

Hi all.

Just got back from christmas shopping in Norwich. What Fun I had!!

Has anyone else seen anything in the press today? Maybe the sunday papers will carry some news. Theres not alot else anyone can say on this till an RNS. This is worse tahn christmas shopping!.

wilbs

wilbs,
went there the other day, b*****d to park!!