www.blackrockoilandgasplc.co.uk
www.vsaresources.com
www.oilbarrel.com
Presentation from Thursday 6th July 06 can be seen on oilbarrel !


Monterey appraisal well suspended pending Wintershall evaluation. 1/12/06
BLR and Kappa in dispute.
BLR to meet with Kappa within next two weeks 1/12/06

Mostly buy-side activity the last few days, although it's having little effect on the SP. Big spread persists, although it seems most trades are well within spread. I'm wondering if there's a stock overhang after the price-slide of the last few months.

Am i reading the interims correct, it seems like the company is trying to get the gas/oil out of the ground rather than look for more. this in turn should produce a flow of cash and hopefully a rise in the SP. Please would someone correct me if i have got this horribly wrong
Alex

Alex,

the co is going to be producing from Arce as of May (WE HOPE!), according to announcement made by Ivan Burgess (see other recent posts). Exploration drilling will hopefully commence in the near future on Alhucema block which is though to be highly prospective. Other drilling is also planned for various sites.

So basically we should be seeing first commercial production within a couple of months, plus exploration will continue, hopefully producing new resources. I would say this is an ideal situation.

If the Arce project's first four wells are as successful as has been intimated (i.e. producing a minimum of 150 bbl/day each) then BLR will continue, with its 50% JV partner Kappa, in drilling up to 30 wells at the site. My arithmetic suggests that that adds up to quite a lot of oil.

Arce alone gives me confidence that from the current SP, BLR could turn into a multi-bagger. Adding in future success in the rest of the E&P portfolio could see this turn into quite a stunning earner. At present I think the shares have been oversold and ignored, so could be due a sharp re-rating. Whether this will happen soon or whether we will have to wait until BLR posts a profitable set of results is a matter of pure speculation.

All IMO DYOR. etc, but between you, me and Bruce Rowan, I think we could be onto something.

Again, if you haven't yet seen it, read the WH Ireland broker's report on the company website (I posted the link a few days ago), as this gives a very clear picture of the company's prospects. It still feels like a bit of a risky play, but in a balanced portfolio I think it's one worth following up.

Hope this helps.
ST.

Alex,

Sorry, I hadn't realised the interims were out today and I wish to add to and revise some of the comments I made in my previous post. I am encouraged further by the following comments in the chairman's statement:

>> The Baul Oil Field located in the southern part of Las Quinchas association
block is also being investigated. That well was in oil production during the
1960's but was shut-in because of the then low oil price. If in good condition,
the Joint Venture will recomplete one of the wells drilled into the field and
establish test production from that well. Alternatively, a further well may be
drilled into the Baul Oil Field.

Closer to home and during the summer months the Company plans to participate in
its first North Sea well. The Operator, Wintershall, will drill an appraisal
well into Monterey Gas Field. The discovery well drilled by ARCO intersected a
185 foot gas column and the field is estimated to contain a 165 BCF of
recoverable gas. Black Rock has a 15% equity share in this venture. If
successful, it is planned to sub-sea-complete and the gas will piped to the
nearby Markham Gas Field and from there to the Netherlands.

These projects have the potential to transform Black Rock. <<

That is excellent news about Baul, as this is another producing field. If the existing, shut-in well can be re-opened and production begun without resorting to drilling a further well, then that will represent a low-cost access to a further significant production increase.

Monterey also seems to be very exciting; at US$4.00 per thousand cubic feet of gas, BLR's share in the field would be worth $99 million/56 million in total. Again, that kind of amount of turnover spread out over a number of years will make a huge difference to BLR's SP.

The statements (particularly a brief RNS from AFX) do imply that BLR will be concentrating on production rather than exploration in the near term. There is no mention of Alhucema in the interims. I agree with your conclusion, Alex, and would actually welcome this in the case of Black Rock as they deperately need to go cashflow positive and stop diluting themselves by constantly issuing new shares. I've said before that I see this one coming up a winner even if they are forced to increase the number of shares in issue to one billion, but I'm sure we'd all be a lot happier if they can avoid that.

So thanks, Alex, for pointing that out, and good luck if you're thinking of getting on board.

The news coming from this company just seems to get better and better at present. I don't want to sound like I'm getting too carried away, but currently my biggest worry about Black Rock shares is that I haven't bought enough of them!

i bought in y/day at the expense of my bgf shares[formerly part of my long term hold] and was just wondering if this was a good move. as usual my timing is impeccable [sold bgf at a small loss only to find that they have gone up and with the big spread on blr my money is further down] but hey thats life. if only i could get my crystal ball to work....
Alex
ps. was top heavy in chp and halved my holding, got my timing right[just] and now debating whether to go back into chp at a lower sp or increase in blr. hmm decisions decisions
pps. with hindsight i should have kept bgf and sold chp y/day . doh!
i will learn the hard way

I know what you mean - I cashed in a load of SBE on Monday and bought some BLVN on the assumption that it's undervalued, only to find that nobody seems to agree with me (yet!). Still, I was able to get a good chunk of BLR recently as well, plus my long-held NOP is doing the biz nicely. But it's BLR I'd pick as having the most potential at this point in time. IMO/DYOR of course.

Glad you're on board this one though - am expecting a few others to join us in the course of time!! Bruce Rowan (of Starvest) reputedly doesn't muck around and if he believes in a stock then I certainly consider it worthy of my attention.

st, I met Dr John Cubitt the Technical Director at Master Investor 2006 and was highly impressed. This share is now on my watch list. As soon as I have free cash I'm buying in. What impressed me most was the drive for production to fund further opportunities already under licence. There is some very sweet light crude in their holdings and they will be going after that in the near future. Steaming plant on track for May 06. The only downside would be the number of shares in issue. The future looks bright, well done for getting in early.

Nice one, Silvermede - thanks.

You are right about the number of shares in issue being a potential drag, particularly as they will have to issue a few more to fund them through to decent cashflow, HOWEVER at the current SP, which appears to me to be very much undervalued, and given the co's excellent prospects, I'm convinced you can still come out a winner on this even if the number of shares in issue goes to one billion, as I have argued in previous posts.

Interim better than expected, will be in in the next few days

BTW - since we're on the subject of BLR issuing more stock . . .

It has been said already that BLR will have to issue more shares to pay for current development work, but no indication has been given of when the placing is likely to be. Given that Arce is expected to go into production next month, I get the feeling that Mr. Burgess is going to first announce initial production and production rates with perhaps a bit of a fanfare, let it sink in with the press and the market and then make the move to place stock when the SP has gone a bit higher, thus reducing the dilution. It's just a thought, but makes a lot of sense.

I hope this is what he has in mind, because on the strength of Arce's initial 4 wells producing 300 bbl/day net to Black Rock, WH Ireland reckon that BLR could take home 1.45 million profits in one year - something which, if the PR angle is managed correctly, could see a dramatic re-rating of the stock even before the co presents financial reports. (UPDATE) Like doubling the SP, preferably.

WDIK/IMHO, etc.

soul traders - 31 Mar 2006 09:35 - 202 of 209 ----30 wells at ARCE

Hesitate to pour cool water but balance of opinion over on ADVFN is that 30 wells may be required in the eventthat the steaming is LESS successful than hoped and that 150bopd is NOT achieved.

Dr John Cubitt the Technical Director said that steaming is common practice in Columbia to extract better rates of thicker Crude (API 14 or 16?). Steam and leave to soak and then start to extract after a week or so. (June 06?) Either way, if they can generate enough cash to pay for extraction of Light Sweet Crude in existing licences then we're definately on to a winner. WDIK/DYOR. :-)

diydave,

I think you have made a valid point, but would draw your attention to this quote from the WH Ireland Report:

>> The smaller Arce field is a different matter. It is assessed at 5mb recoverable using cyclic steam injection. It was discovered by Texas Petroleum in 1984 and has had three wells drilled on it. The oil is heavy at 13 degrees API and Arce 2 flowed at up to 60 barrels a day (b/d), but generally stabilised at around 30 b/d. The third well, drilled recently by Kappa and Black Rock, produced results which were on the face of it rather ambiguous but also suggested a flow of 30b/d. The companies are evaluating a pilot steam injection project which would put the field into production in a matter of months, although there has been no definite decision announced yet. It appears that the Arce 1 well would be used to inject steam while production could come from wells 2 and 3. Two further wells would probably follow.

The production wells would be the familiar nodding donkeys. Cyclic steamflooding typically increases production rates five or tenfold compared with the unstimulated well test results. Let us assume only a fivefold increase. This would mean 30 x 5 = 150b/d from each well. If there are four producing wells, 600 b/d altogether, half of which would be for Black Rocks account. The oil would presently sell for about $25 a barrel net of costs, meaning that by mid 2006 the company could be generating $7500 /day of cash flow, equivalent to 4000 a day or an annual 1.45m per year - significant in the context of a 7m company.

If the pilot project is successful, full development of the field using continuous steamflooding and many more wells could double the reserves and get output up to maybe 3000b/d in due course. It is possible that the market did not see the significance of the recent Arce well because the well flowed more water than oil and the flow rate was low. <<

Quite a lot of activity today, all of a sudden, most of it sales. SP off 0.1p. My broker quotes 1.38p to buy. End of financial year playing a role, or is there something blowing in the wind?

Fair comment soul. But the schedule has already slipped somewhat. Lets hope it happens before cash demands for the North Sea become apparent... which looks increasingly unlikely.
p.s. don't forget WHI are BLR's own broker! For another, more recent, perspective see http://www.proactiveinvestors.com/registered/articles/article.asp?BLR. You have to register but its free, easy and carries no baggage.

Very useful information, diydave - thanks very much! I hadn't used Proactive before so I'm doubly pleased you posted the info.

I realise that the schedule has slipped, but this is a fact of life with natural resources companies. Cash burn and stock dilution are more of an issue; these you have to factor in when projecting the co's profitability in a range of likely scenarios - I tend to reckon with at least 800 million shares ultimately being in issue (compared with 430 millon today), to give some kind of cushion.

I agree that the specific mention of the 30 wells in Proactive's article relates to the possibility of steam flooding not working at Arce. That said, if steam flooding is successful, the co will drill a number of other wells (which if 3000 bbl/day are produced at 150 bbl/well, will still add up to 20 wells). It is worth noting that the figure of 150 bbl/well/day is the more conservative of a bracketed set of estimates, so that there is possibly further upside to be gained if the steaming is successful, but which cannot be counted in when assessing the project's economic viability.

Will BLR hit its target of being in production in May? I'm hopeful that when you get down to a two-month time-frame, these things can be predicted with reasonable certainty (barring disasters!). Maybe that's just my youthful optimism!! As I've said before, I think that the announcement of oil finally coming out of the ground - at least, if steaming is successful - ought to provide the SP with the lift it has needed and make fundraising just that bit less painful in the future. I don't think they'll be able to avoid placing more stock altogether this year, unless they are able to do some kind of debt deal. The possibility of BLR offering a lender a cut of early Arce production or simply discounted oil in return for cash-up-front has crossed my mind and I wonder what the likelihood is of the company being able to raise funds in this fashion. I imagine a higher production rate as a result of the steaming might increase the likelihood of a loan on favourable terms.

Proactive's detailed discussion of some of the other plays impressed me, and reminded me that the reason I keep coming back to this stock is that it just has so much to offer provided that the company meets with a modicum of success. The next few weeks could be quite exciting!!

It's good to get some balanced and informed viewpoints on all of this; I hope you don't think I'm being too relentlessly bullish! Please keep them coming!

In again at 1.36p, increasing my holding by two-thirds. Roll on, May!!

Its your money, Soul. Be as bullish as you like!! At the moment, I'm balanced on a pole. More BLR, more SEY or a punt on SER which sounds so tempting but has done so for a long time. Can't afford to risk all three!

Glad you mentioned SER, Dave. I nearly posted something last night but withdrew it. The gist of what I wanted to say was that there seems to so much more substance and less speculation when you look at BLR. I haven't read the SER threads elsewhere, but on this BB the talk always seems to be about chart technicalities and whether the fact that the CEO is now taking his coffee black is a screaming buy signal. When I look at co's like BLR, NOP, VOG, I can't see what all the fuss is about with SER. I think there's as much upside and a lot less risk to be had elsewhere. Maybe I just have a blind spot here, but I feel I know what I'm getting myself into with BLR and the rest.

SEY is probably a good grower. I haven't looked into it all that deeply as I've been concentrated on other things, but the trendline seems encouraging. It's a bit of a biggie when mentioned in the same breath as BLR and SER, though!

There we go, rant over!! What I'm hoping for over the coming weeks is a big jump on VOG, after which I may channel some of my takings into another chunk of BLR. Perhaps I'll spend some time examining SER a little more closely, though, too. And I'd be interested to hear what you settle on in the end.

The main attraction with SER seems to be that they are already producing in a small way, profitably, no debt, not looking to raise funds yet looking for new pastures. My problem is whether they can do anything significantly big to be significant... and yet the sp has already been up over 70% this year... you just have to buy them in 100's of '000's to get a significant holding and there don't appear to be too many sellers available to the PI.
Again, some useful info on proactive site.
Sorry to bore true BLRers!