Notes from the CCKazakhstan:
Doris:
- AKD06 Showed even better properties than AKD01. Performated in the top part, only 5m, to investigate if there was a gas cap. There is no gas.
-They did find oil in the carbonate (from the logs), but since they did not want to jeoparize anything with the cret sand which was the main target, they did not acidize the carb zone. It did not flow, but neither did the carb in AKD01 flow without acidation. Properties seemed better here as well compared to AKD-01, higher porosity.
-AKD06 has proven the stratigraphic trap concept, which is positive. Not clear to me if the ~90 mmbbl TPL has hinted at for Doris is encompasses AKD-06, or if there could be an additional upside.
-Additional apprasial wells will be drilled starting april next year (due to weather and cash). 2 to 4 wells needed to finalise the Doris apprasial program and apply for production license.
- Rail loading terminal should be completed early december. Current trucking operation is at peak. It is a 450km round/trip which takes 3-4 days. To rail loading terminal it is only 250km, on much better roads. This should mean better prices at well head (lower transport cost for buyer)
Kalypso:
- Waiting for test approval
Gas production:
- Not investing anything right now, due to low prices (~1 USD/mmbtu). Robson forsees 5x higher prices when Turkmen-China pipeline is completed in 2014.
Uzbekistan:
-Production is going steadily down, due to nature of the incremental contract.
-TPL is looking for new opportunities
Tajikistan:
- Beshtentak well produces around 500 boe/d, tie in to local sales. Prices around 60 USD/bbl. Will be looking at exporting to Afghanistan next year, better prices.
- Still having issues with EOL09 clean-up, Alai zone is damaged by heavy barite used to get the well under control when it kicked. Probably a combination of nitrogen lift and additional stimulation is needed to get the well to flow.
- Persea drilling ahead, results by the end of the month++
-Data gathering for farm-out of deeper pre-salt continues. Aim to drill a carried well by end 2012. Sound optimistic in my mind, but the Amu-Darya basin doesn't lack potential, that's for sure, google South Yolotan.
Corporate:
-There is enough money to cover expenses until Doris production increases to 4000 bbl/d. Production could go even higher, just a matter of getting more trucks.
-Capex will go down in Q4 and Q1.
-TPL is looking to roll the debt that matures in Jan and Feb. Not clear to me if this was just a wish or a real option.
Cash flow projection (my take)
-Assuming that the rail loading terminal is ready in December, and that average production for Dec is around 3000 bbl/d, should mean that TPL will go into black on operational cash flow (in Q3 this was -2 MUSD) I project it to be around +1 MUSD, also partly to higher prices (went from 22 to 28 USD at well head in Q3, and should increase further when production ramps up. My guess is 5 USD/bbl more)
-Also the Beshtentak well should net around 1 MUSD in the quarter.
-No guidance on CAPEX for Q4 was given, but after looking at the main posts in Q3 in the MD&A, I would say a 50% reduction is not unrealistic. It is only the operations in Tajik and the eventual well test on Kalypso that warrants capital, plus finalisation of the loading terminal. Hence, a reduction of around 6 MUSD from 13 MUSD should be possible.
Negative cash flow in Q3 was -15 MUSD, adding 3 MUSD extra from oil sales, and 6 MUSD from reduced CAPEX should leave TPL with a negative cash flow of -6 MUSD. This can be funded from existing cash of 17 MUSD.
Looking ahead into Q1 we should see additionally some 2-3 MUSD from Doris oil sales per month, potentially bringing us to cash flow positive territory.
-However, there has to be some kind of cash infusion next year if TPL wants to continue to appraise and explore, both in Kazakhstan and Tajik. Hopefully it will be done at a higher share price than what we see today, or some kind of asset based loan or a partial farm-out.
Best,
Darcy