Valeura Energy Inc T.VLE

RE: RE: Jennings Capital

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VALEURA ENERGY INC. (TSXV-VLE
.43); NOT RATED
Valeura Energy is a junior exploration company that has recently negotiated
a significant farm-in on several leases located in the Anatolian Basin in
southeast Turkey. Management is substantially the same team that
previously ran Verenex Energy Inc. and achieved 22% annual growth
between 2004 – 2009.
Valeura continues to pursue additional properties in the Anatolian Basin and
natural gas properties in the Thrace Basin in the northwest portion of Turkey.
The Company is also pursuing properties in South America, although it has
not yet been successful in acquiring anything. Valeura has 240 BOE/d of
production in western Canada, which provides about $1 million per year of
cash flow.
RECENT EVENTS – TURKISH FARM-IN:
?? On September 2, 2010, Valeura announced that it had entered into a
farm-in agreement with two Turkish companies (“AME-GYP”) under
which Valeura can earn various interests up to 50% in nine
leases/licences covering over 740,000 gross acres in Turkey. The earnin
occurs in two phases: Phase I requires the expenditure of
US$8.8 million by year end 2010, and Phase II requires an additional
US$8.8 million by the end of 2011. Expenditures may be made in any of
the properties/licences, but will earn for the group in aggregate.
?? Turkey has a very attractive fiscal regime, with royalties of 12.5% and
income tax of 20%. Assuming F&D costs of $10/Bbl, we believe heavy
oil reserves would be worth $8 - $10/Bbl, and light oil $20 - $25/Bbl.
PROPERTIES/PROJECTS
Kahta Oil Field (VLE 25% after Phase I, 50% after Phase II)
• Heavy oil pool in the Cretaceous Mardin carbonates. Despite the
low gravity (11º API), the oil viscosity is only 600 cp.
• The pool has been assessed as having OOIP between 50 –
80 MMBbl, of which only 4.8 MMBbl have been produced to date
(7.3% and 9.6% recovery factor).
• Increased recovery factor to 15% or more may be possible through
a combination of recompletions, infill drilling (including Hz drilling),
multi-stage frac’ing and other EOR techniques.
• Four satellite structures offsetting the main pool.
Karakilise Licences (VLE 25% after Phase I, 50% after Phase II)
• Three licences covering in aggregate nearly 304,000 acres (gross).
All three expire this year, but can be extended for three years by
establishing production from one well in each block. Operations are
currently underway to recomplete an existing well on Licence 2677,
and a new well will be spud imminently on Licence 2674. The third
licence (#2678) seems likely to expire, but it may be possible to reapply
for a new term under competitive bid.
Management & Directors
Jim McFarland CEO
Steve Bjornson CFO
Lyle Martinson VP Operations
Don Shephard VP Engineering
Abby Badwi Director
Bill Fanagan Chairman
Reserves & Resources
(MMBOE, 2P)
2P Reserves 0 .92
GREGORY CHORNOBOY, P. ENG, MBA
Senior Oil & Gas Analyst
[e-mail]
+1.403.292.9485
JAMES HUMEN, CA
Research Associate
[e-mail]
+1.403.292.9487
Company Statistics
Market Cap $85 MM
Basic Shares O/S 198.7 MM
Fully Diluted Shares O/S 236.9 MM
52-Week Range
.27 -
.95
Cash (09/30/10 act.) $25.1
LT Debt (09/30/10 act.)
.0
Working Capital (09/30/10 act.) $25.5
Enterprise Value $59.9
Major Shareholders
Management & Directors 15.5%
Valuation
EV/BOE/d $246,467
EV/BOE $64.86
Website & Contact Info
https://panwesternenergy.ca [phone]