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

Great posting found on the iii website


Petrel Resources Summary
29th June 2004


Petrel concentrates on the Iraqi oil opportunity: the development of existing oil fields as well as the exploration and development of new areas in cooperation with the proper Iraqi authorities.

Accelerating activity

Our work continued uninterrupted through recent challenges. We were in Baghdad shortly before the war. Our Iraqi staff remained in place during the conflict. We were the first foreign company to return to Baghdad soon after the war. Petrel was the first company to return to the Ministry copies of their data which had been destroyed. I have been to Baghdad nine times since January 2003, most recently in May 2004. I and other Petrel staff have spent time in the western desert, visited the oilfields under tender in the north and centre of the country and travelled extensively building relationships with people throughout Iraq. We are deeply entrenched in, and fully committed to Iraq, notwithstanding current challenges.

Why Iraq?

Iraq is critical to the worlds energy future. Iraq is the second largest oil province worldwide, with 115 billion barrels of proven reserves and up to 300 billion barrels of possible reserves. The industry suffered from severe under-investment during the past 24 years. Post-war production collapsed to less than 2 million barrels daily, despite the lifting of United Nations sanctions, but may rise to 9 million barrels within a decade. This will require extensive international investment and transfer of technology. Typical Iraqi operating costs are about $1 per barrel. Oil finding costs have typically been the same.

Consumers need Iraqi oil. Iraq needs to sell oil. Friendly foreign companies are needed to help develop Iraqs proven reserves.

Short term chaos, long term opportunity

Oil combines economics, science and politics together with sometimes hypocrisy and even blood. The shortcomings of recent international policy are apparent in the high oil price, and worries over supply reliability - apart from the human costs of sanctions, war and terrorism. The major oil exporters and location of oil reserves, Saudi Arabia, is under pressure.

It doesnt have to be this way. Though they disagree about many things, Iraqi officials are wholeheartedly committed to the lawful development of their oil resources. The task is too gigantic to achieve without huge foreign investment in capital, technology and people. Many excellent Iraqi officials have been purged or left the country. Uncertainty works against investment. No major western oil company is now active in Iraq. Contractors like Halliburton and Bechtel work on military contracts and are effectively part of the Coalition military. Recent excesses have exacerbated tensions and complicate the lives of Coalition nationals.

So far such concerns have had little impact on Petrel. We are blessed with excellent apolitical technical people in our staff and at the Ministry of Oil. This was true before, during and after the war. We returned to Baghdad as quickly as we could and are working more vigorously since.

The end of sanctions has opened up the oil opportunity. Yet the oil majors are standing off: Shells representative is based in Dubai and has not visited Iraq since 2002. ChevronTexacos representative turns out to be an ex-Army officer on secondment from a mercenary firm. This isnt the best way of dealing with current realities on the ground.

For legal reasons, immediate developments will be as contractor to the Ministry of Oil - the legitimate and recognized authority. Ongoing negotiations and technical work are justified in their own right but also driven by the expectation that an elected Iraqi government will permit transition of such contracts to risk-sharing arrangements, whereby Petrel could earn a percentage of new oil discovered.

Meanwhile Petrel advances its programme to explore and develop Block 6 in the Iraqi western desert. Petrel signed an exploration and development contract with the Iraqi Ministry of Oil in March 2002 (subject to Presidential signature). We believe that the proper authorities stand over their commitments.


Petrel has encountered no hostility

Petrel has been warmly received by Iraqi people of all sects, political views and positions. We have no enemies, no non-commercial agenda and will continue to work irrespective of how current developments pan out. We do not know what the ultimate political arrangements will be, nor does it matter to us as partners and investors.
The international gentlemans understanding was that the UN emissary would select a provisional government of professional technocrats, credible because free of undue influence. They would be acceptable both domestically and internationally. Some intelligent appointments were made, particularly the oil minister: a respected positive-thinker from the old technocracy. He immediately restored proper tendering procedures, securing funding for oil development projects and promoted competent managers, shunting political appointees aside.
Recent economic appointments are positive. The interim governments political appointments are transitory. We work closely with professional technocrats and managers in the Iraqi Ministry of Oil and international partners.

In particular, the Ministrys State Company for Oil Projects (SCOP) and Oil Exploration Company have encouraged, guided and helped us throughout the past year. Without their professional direction and support our work in recent months would have been more difficult and dangerous. We are finalising arrangements for joint training arrangements in Iraq and elsewhere over the coming months and look forward to working closely with the Ministry on the many exciting projects they are determined to bring to early development. International analysts under-estimate the skills, patriotism and commitment of Iraqi public servants. We have close relationships of friendship and trust throughout the industry and entrust our efforts and safety to their guidance. Life is sometimes hazardous for civilians in Iraq, but neither employees nor consultants have experienced unwelcome attention because of their work with Petrel. So far we have experienced no insuperable problems and enjoy consistent courtesy and hospitality throughout Iraq. The difficulties experienced by military contractors have not impacted us materially.

Petrel was pre-qualified and encouraged to tender for three existing oilfields, each with dozens of shut-in wells and over a billion barrels of proven reserves. The Iraqi Ministry of Oils cash funding for the first stages of these projects is already in place; this covers necessary expenditure during 2004 and well into 2005. The remainder of the funding is expected to be released from frozen UN accounts in due course. In the absence of a recognised government the contracts awarded will be cash contracts.

Given the size of the opportunity and resources needed, we hope and expect that agreements concluded may evolve, in the course of the roughly three year development time, into risk-sharing contracts. Such hydrocarbon law reforms must take into account the sensitivities of oil and foreign investment given historical Iraqi experiences. Soon after the 2003 conflict there was some lobbying by US corporations and officials for reforms to bring Iraq into line with current Texan practice. This would permit international oil groups to book reserves on their balance sheets. Petrel does not believe that such measures will be democratically acceptable in Iraq or elsewhere in the Middle East. We would welcome such terms but expect that the future model is more likely to reflect Iraqi aspirations and traditions.

The most likely outcome is for implementation of the Iraqi Model Contract developed during the 1990s; this is the basis of the agreement Petrel concluded with the Oil Exploration Company of the Ministry of Oil in March 2002 for the exploration and development of Western Desert block 6. The contract envisages an Internal Rate of Return of circa 20%. In addition there is a bonus arrangement which may increase the IRR up to a ceiling of approximately 40%. The international contractor recovers cost oil after which oil is available for profit. A portion of the extra barrels added to reserves by the contractor is available to the contractor at a specified discount for a prescribed period. These terms adequately reflect the risks and uncertainties of the business and offer fair incentives to international investors.


Petrel is backed by a world class team of partners and suppliers

In submitting tender proposals for the first of three oil field development projects to the Ministry, we are working with, among others,
Hanover Group on major oil & gas processing equipment;
Another household name has proposed to supply rotating equipment and pump units;
Weatherford (part of Halliburton) on oil & gas processing equipment;
Enereco on design of degassing stations, central treatment facilities and interface engineering;
Solar Turbines (part of Caterpillar Group) for Turbines and Packages for Power Generation and Gas Compression Units;
Pegasus Engineering for specialist pipeline design engineering;
Tarpon Energy Services for integrated systems Fire & Gas and Communications systems;
Nessco on telecommunications;
as well as our in-house project management partner, Oilfield Development Resources.
These partners offer the best engineering practice and technology available worldwide. Our Iraqi representative, Mahmoud Ahmed, is highly regarded throughout the industry. He formerly ran the North Oil Company of the Iraqi state-owned petroleum industry and is one of the most successful drillers worldwide, with some of the worlds premier fields among his discoveries.

Exploration of Block 6, western desert

We push on with our work, though sensitive to the delicate security situation in the area. Petrel has concluded a joint venture with the Jordanian Natural Resources Authority that has allowed us access to the Jordanian part of the western desert for geological sampling as well as access to the extensive NRA database of well core and other priceless samples.

Soon after June 2003, we gained access for the first time to extensive databanks that had previously been confidential to state departments of the Iraqi government: large scale maps including geological maps and detailed back-up became available from the Iraqi Geological Survey. We integrated this with the existing data available from the Baghdad Ministry of Oil, as well as interpreted Landsat and other satellite imagery as well as regional data we had collected from Syria, Jordan and Saudi Arabia. Much of the necessary preparatory work on structural analysis is now largely completed, enabling the development of a regional structural framework. Though much of this detailed work is sensitive, it has generally enhanced the prospectivity of Block 6 and surrounding areas. In particular we believe that the target levels may be oil-prone.

There are few more promising frontier areas anywhere than the Iraqi western desert.

David Horgan
Managing Director
Petrel Resources plc

good research elrico,where did you unearth all this info?
dexter

again from iii website, just a rumour but an interesting one

From another bb...

"Just had an e-mail from Horgan who said he expects news of contracts imminently and hostilities at this stage will not delay this part of the process"

Just a rumour but thought it worth passing on.
And a little late interest today including 140k + BUY @ 39p.

"good research elrico,where did you unearth all this info?"

Answer:

http://www.lemminginvestor.com

morning all,
just read the annual report that came this morning. the bit i find of interest is that they have a "large concession in north west sudan,and are early stages of looking at oil/gas projects in other middle east countries". i think that is every bit as exciting as the tenders in iraq, it shows that not all thier eggs are in one basket.
what does anyone else think?
dexter

morning all,
just read a bit on oilbarrel.com,might be of interest. just click on news search and put petrel in the box , sorry if thats teaching you tosuck eggs!!.
dexter

morning everybody
i am trying to get into your world and am reading this thread with interest. after reading the summary i have just one point.
is the fact that petrel have been in iraq since 1978 not a disadvantage. there is a large possibility that any new government would like to start with a clean slate so the chances of petrol resources getting the tenders are actually slim.
if any of you knowledgeable people have any tips or ideas in where to start i would much appreciate them
cheers

Hello geeboy30.

I understand what your saying but even if they dont get a tender they still have all the priceless research which for any company who wins a tender will surely want as they will not want to spend years of doing research when they can simply obtain from petrel (for a price of course). Either way I think the shares will go up but how much? We will all just have to wait and see! David Horgan apparantly appeared on CNCB the other morning. Did anybody see it? What did he have to say?

Good luck everybody.

write-up and profile of david horgan in todays sunday times, or timesonline.co.uk
dexter

What did it say about Petrel?

Found it!

July 04, 2004

Interview: Daire O'Brien: Slick operator aims to strike it lucky in Iraq
David Horgan is convinced that Petrel Resources can help improve the dismal record of Irish exploration companies





DAVID HORGAN, the chief executive of Petrel Resources, the AIM-listed Irish company with Iraqi oil interests, was a bit of a schoolboy rebel. Not, however, the petrol-bomb the staff room variety; more the intellectually curious variety or, as that translates in Irish, a smartarse.

It was a characteristic that took him, as a 16-year-old, on a scholarship to private school in Canada, followed by Cambridge and Harvard.

Now, as a protof John Teeling and veteran of the Irish exploration sector, he is reminiscing on a career driven by that strange drug that drives rational businessmen to throw everything at a hole in the ground.

My parents thought I would have clashed with the Christian Brothers so they sent me to Newpark (Comprehensive) which was quite progressive in those days, he says. I prospered in that environment but I needed a bit of structure.

Enter Pearson College, a west Canadian institution funded by a diverse group of international entrepreneurs, the most famous being Occidental Oil founder Armand Hammer.

Pearson College was set up to foster international understanding by putting children from all over the world in an open, free-thinking environment.

Hammer paid a visit that burnt itself on the young Horgans memory.

Well, he laughs, the first thing I remember is that he was an extremely small man who arrived with this very attractive private assistant. Four of us were chosen to speak to him and it was an epiphany. I had started out the conversation thinking about his assistant but ended up being fascinated by his life story. How he sold furs to the Red Army, traded diamonds with Nazis, met Stalin and Lenin. I remember saying to myself that this wasnt what I thought business was like.

Although by now, the mid-1970s, the business bug had bitten, Horgan chose law as his Cambridge degree. My mother wanted me to do medicine, so we compromised.

Despite a successful student career that included captaining the Cambridge Mooting team the legal debating society he found the law doddery.

Thats why I think lawyers tend to have a reputation for outrageous parties, he claims. Because their basic life is so boring.

When Horgan left Cambridge in 1982, he made a typical decision. Instead of applying for the middle-ranking jobs in boring institutions like the clearing banks, he went for the top-paying jobs with American investment banks and consulting firms.

Boston Consulting liked the look of his international education and made him a well-paid team member, flying hither and thither at the front of the plane, talking to stuffy old-school chief executives and being heard.

A few relatively happy years followed until the next step a Harvard MBA beckoned.

Another epiphany was registered here. Horgan realised that the entire senior business management thinking ethic was based on cutting through the crap and trying to make money.

He struggled with the course at first but soon cracked the system and enjoyed it thoroughly.

His experience of America made strong impressions. Not least of these was the realisation that American business people are often like fish out of water in foreign environments.

Absolutely. I remember one friend who was the essence of debonair chic in the US. I went to Moscow with him and was embarrassed.

At this point, he says, it became clear to him that it was difficult for Americans to work in ambiguous situations.

Now, as Petrel attempts to turn its relationships with Iraqi oil officials into money, Horgans comfort with this ambiguity will be tested to the full.

His presentation of Petrels competitive advantage or why you should buy his shares is analytical and tightly reasoned against a political backdrop that most people would find too hot to consider.

Oil combines economics, science and politics together with, sometimes, hypocrisy and even blood, he says. The shortcomings of recent international policy are apparent in the high oil price and worries over supply reliability apart from the human costs of sanctions, war and terrorism. The main oil exporters and location of oil reserves, Saudi Arabia, is under pressure.

It doesnt have to be this way. Though they disagree about many things, Iraqi officials are wholeheartedly committed to the lawful development of their oil resources. The task is too gigantic to achieve without huge foreign investment in capital, technology and people. Many excellent Iraqi officials have been purged or left the country. Uncertainty works against investment. No major western oil company is now active in Iraq. Contractors such as Halliburton and Bechtel work on military contracts and are effectively part of the coalition military. Recent excesses have exacerbated tensions and complicate the lives of coalition nationals.

So far Petrel has managed to stay close to the oil. Apart from a period during the war, Petrel has continued to be active on the ground in Iraq. Horgan is the companys only non-Iraqi employee and even he felt safe enough to travel to the country last month.

So what exactly does Petrel have apart from hope, value and a decent contacts book? After all, the history of Irish exploration companies has been one of zero production, apart from acquisitions.

Horgan has heard this question many times and has a stock response.

Shares in companies such as Petrel, he says, create value with dreams. Often companies destroy shareholder value with marginal products. Its still possible to make 1,000 times your money and everyone who has followed me since 1989 (when he first hooked up with Teeling) has made serious money. Everyone who has had the sense to take profits when the shares rose has done well. I know people who have made a million from Petrel.

The company signed an exploration and development contract with the Iraqi ministry of oil in March 2002 covering specific projects. Horgan believes the proper authorities stand over their commitments.

He is more than willing to explain to anybody who will listen that Iraqi oil will make Irish people rich.

I am practically certain that Ireland regarded as a friendly country will get some stuff. Unless were all killed, well be part of it.

I am practically certain that Ireland regarded as a friendly country will get some stuff. Unless were all killed, well be part of it.

particulary like the above statement, have a good feeling that news is just around the corner, and topped up for what will hopefully be the last time at affordable prices for bulk buying

good luck to all pet holders it's gonna be an interesting ride

Thanks Tokyo. Ive topped up my holding today for the last time.Its now finger nail biting time!

Good luck all.

Wilbs

morning all,
i saw a snippet in a paper a few days ago that there was a possibility of a fourth tender up for grabs. i can`t remember where i saw it,all it said was there could be news soon of a fourth tender to develop iraq`s oilfields.does anyone konw anything about this ?.
also does anyone know about petrel`s involvement in sudan,there was a mention of it in their annual report?.
keep everthing crossed,
dexter

Evening all.(No im not a copper!) Anyone interested in petrel then check out the website link. I think you will find it very interesting. It involves a Mr Teeling and a Mr Horgan.

Please let me know wat you think.

wilbs.

http://www.panandeanresources.com/_theCompany/management.asp

Done a bit more research on petrel & pan andean. They both share the same 3 directors, same address & same phone number. Pan andean is debt free where petrel made a loss. Directors own 8% of pan andean. Should we own shares in both of these? Anybody know something?

Wilbs

BBC reporting Petrel have been short listed for it's three tenders. Deals should be known by the end of August.

http://news.bbc.co.uk/1/hi/business/3879839.stm

Share price has re-acted well to the news. 12% Up on today's low and still 40 mins to go.

cunningham

lovely bit of news thanks, hopefully you will be posting that they have won at least one of the tenders before the end of august


Tokyo

just read the article very interesting, things are looking up for Petrel

here is the article

Iraq oil deals 'by end of August'
The oil is there, but so are ongoing attacks on pipelines
Iraq's interim government is expected to award the first three post-war oil production contracts by the end of August, industry sources say.

Irish firm Petrel has confirmed it has put in bids for all three contracts on offer so far, making the final lists.

However, Shell told the BBC it had declined to enter the tendering process for at least the first of the three.

The big firms are said to be put off by the small size of the current deals, and the ongoing security situation.

Jim Finn, company secretary at Petrel, told BBC News Online it had submitted its three tenders between March and mid-May.


The scope and contract format are not compatible with our aspirations for long-term risk-reward contracts
Shell
"We have tendered and we are fairly confident," he said.

Although Mr Finn said the security situation was obviously not ideal, he said Petrel continued to have both a Baghdad office and people on the ground in Iraq.

Attacks

The first three Iraqi oil projects up for grabs are for developing the Khurmala Dome field in the north of the country, the Suba-Luhais field in the south, and the smaller Hamrin field, again in the north.

Shell said it was initially interested in taking on Khurmala Dome, but turned it down because it was not happy with the terms of the offer.

"We obtained a copy of the tender but the scope and contract format are not compatible with our aspirations for long-term risk-reward contracts," said a Shell spokesman.

A spokesman for BP said it has not made a bid for any of the first three contracts.

The Khurmala project is thought to call for investment of $100m (54m), Suba-Luhais $150m and Hamrin $80m.

Many other oilfield development projects are expected to be put out to tender in due course.

Iraq has the world's second biggest oil reserves after neighbouring Saudi Arabia but development has been held back by years of sanctions.

The interim Iraqi government wants to increase current production levels of about 2.5 million barrels a day to more than the pre-war level of 3 million barrels.

However, ongoing attacks on pipelines continues to hamper progress.