TPL Massive potential from Zengas on II board In light of Coves valuation re its offshore, undeveloped Mozambique gas and also Max Petroleums sole operations in Kazahksatn, i've updated my post 826 on 14th Feb 2012 from the old thread.
Also worth remembering not to solely be focussed imo just on Tajikistan deep plays as we are overlooking the major and potentially huge potential already evident in both of Tethys Kazakhstan and Uzbekistan production AND exploration interests.
Tethys (TPL) -
Q2 Production end June 2011 was 5566 boepd.
Q3 Production end Sept 2011 increased to 6111 boepd.
Revenues to end Quarter 3 Sept 2011 was $15.5m. (Should be circa $20.5m+ full 12 months 2011 and growing significantly ).
In reference to above
KAZHAKSTAN -
Doris oil production commenced at 1500 bopd on 8/8/2011 (mid Q3) with production facilities opened and then reported on 30/12/2011 at an average of 1860 bopd for December. By end of February 2012 this is expected to be at circa 4,000 bopd (and room exists for 12,000 bopd as it's being expanded for the end of the year).
The gas production from Kyzloi & Akkulka via the state of the art booster station into Bukhara - Urals pipeline (first of its kind) is currently producing 23 mmcf/day (about 3,850 boe/day). The company already has and owns it's 56km long connecting pipeline from the fields.
Quote - "The system is designed for 77 mmcf/day" - so therefore there is room for over a 3 fold production increase via our pipeline to circa 12,000 boepd.
2P gross reserves are 63.5 bcf and a further resource of 157 bcf - so overall there is room for production at a 3 TIMES production increase (12,000 boepd) for approx 9 - 10 years, plus there is significant upside in undrilled anomalies and 11 new discoveries testing commercial gas have already been made. The system is capable of producing circa 12,000 boe/day. The potential game changer is next year when the Chinese pipleline plans to open and Tethys see the potential for a 5 - 7 times uplift in gas prices from China. So not only a potential 5-7 uplift in gas prices but also a potential 3 times PRODUCTION increase as well. The future reward implications for the company on this gas project alone is huge (The same potential exists via the new currently being built Uzbek gas pipeline to China and why i feel Tethys are already signing MOUs for further Uzbek assets and acerage) !
TAJIKISTAN -
Beshtentak BST20 workover well came on at 533 bopd in Q4 (20/10/11) but since reduced as interfering with production from another nearby producer - being remedied.
2 further Beshtentak wells identified for workovers away from existing producers which they beleive hold bypassed oil and gas (prospective resources on the field of 11.7 mmbo and 16.1 bcf (total 14.3 mmboe).
Oil production via the new handling facilities for the Kazak Doris field was estimated to reach circa 4,000 bopd this month.
With production in Q3 being 6111 boepd there's around 2,000 bopd new potential oil to come online via Doris imminently so could see a jump to over 8,000 boepd production in total - so around 5,000 bls a day should be oil..
Beshtentak (Tajikistan) BST20 producer 38 API, if remedied could add minimal to 530 bopd (over 450 b/d net).
2 further workover canditates there in due course - so in total perhaps 8- 9,000+ boepd range from all of above if successful. RNS 2nd Dec 2011 states "further workovers and new well planned."
Doris Oil Handling facilities being upgraded to 12,000 bopd later this year = potential for possible new additional 8,000 bopd to the above estimate of 8-9000+ boepd. Could we be north of 16,000 boepd this year end ?
So what we are WAITING on and WORK IN HAND -
Tajikistan -
East Olimtoi 36 api oil discovery. Waiting on a coiled tubing unit from Kazakstan - should be here next month - stimulate main Alaiz zone and 2 further zones.
Persea well already drilled - Possible 50m gross zone of hydrocarbons similar zone to East Olimtoi. Testing later this year.
New seismic currently being acquired to enable drilling of a potential giant/super giant deep structure this year with Tethys own 400 ton Telesto deep drilling rig capable of 7000m+ (1 of 5 drilling rigs owned by the company).
2 further Beshtentak oil field workover wells and one potential new well.
Kazakstan -
Update on Doris oil field production (4,000 bopd expected).
Kalypso field wildcat well already drilled to 4128 mts - Logs indicate potential gross pay of 100m in 2 Jurassic horizons - to be acidised and fracced.
Uzbekistan -
18/11/2011 - MOU to obtain 2 new Production contracts - 'one' for the Chegara group of oil fields and 'one' for the West Kruk field. ***'Significant potential for oil in the short term***'. Timetable to May 1st 2012 - so just 2 and a half months for possible news.
1/2/2012 - MOU for new exploration blocks - similar charecteristics to Doris discovery on Kazakhstan side. Basin described as highly prolific for oil & gas and rapidly developing. "Significant potential exists in both exploration and discovered deposits".
Definitely potential for significant growth and a major jump in production and revenues and imo makes current valuation extremely cheap and over looked with plenty of newsflow in the pipeline.
Plus we own 5 drilling rigs and associated equipment that has it's own intrinsic value.
Tethys market cap at 45p = £128.7m (debt under $10m and revenues should exceed $20.5m full year). Revenues should progressively move up with Kazak oil production ramping up.
If we look at Max Petroleum who operate ONLY in Kazakhstan -
MXP production average to Sept was 3500 bopd and had reached 5625 bopd at December so oil production almost mirrors Tethys oil production (once we get Tethys February update through the new facilities whilst excluding our seperate gas production). MXPs last reserve report (further awaited) was 13.3 mmbo P2 at the end of 30/11/11 presenation so in my view not any greater than TPL.
MXP market cap at yesterdays close of 14.5p (1.0117b Shares) = £147m.
At 30/11/11 MXP had borrowings (debts) of $27.6m and a remaining borrowing facility avaliable of $41m and cash of $3m - so overall about $24.5m of debt. They also have convertible bonds to repay which add a further $79.4m to the picture, so overall that adds $104m/£67m to MXPs valuation ie £67m + m/cap on shares of £147m = £214m versus Tethys at £128.7m less plus debt less cash = neutral = £128.7m valuation.
Mxp is valued at £85m more than Tethys which would be equal to a share price of 75p for Tethys (Tethys broker coverage indicated a valaution recently of 120p) - so i see Tethys very undervalued though we were 60p some months back on a lot less production and discoveries.
Tethys also has 2 further countries of operations with production, discoveries and massive exploration in addition to Kazakstan (which MXP dont have). It also has its own rigs which reduces drilling costs significantly which is further hidden underlying value for Tethys.
We've seen what an undeveloped deepwater gas find of circa 1.9 tcf mid case net to Cove has done for them - attracting a bid of £992m by Shell 3 days ago and a counter offer of £1120m by Thailands PTTEP yesterday in just 2.5 years (previously 20p placing on 18th Sept 2009 falling almost 20% to 17p and making yesterdays high of 243p - a 12 - 14 bagger in just 2.5 years).
While TPL has some way to go and i'm not buying on a possibility of a bid (i dont want it at all until value is outed) but we should look towards next year hence the early bird investing here. Think of that China-Kazak pipleline next year. Look also at the Kazak gas we already have - 2P gross reserves are 63.5 bcf and a further resource of 157 bcf plus significant upside in undrilled anomalies and 11 new discoveries already made and we already have a state of the art booster station, production to pipeline and potential to export to China next year- what happens if we end up with half or a similar gas reserve/resource to Cove from just Kazakhstan alone in that existing producing area, the 11 new discoveries and undrilled anomolaies (not to mention Uzbek or Tajik 'gas potential' plus a further Uzbek gas export line being built into China at the moment - all carrying 800,000 boepd combined capacity). If a Thai company can come to Africa for Coves gas - the potential for Tethys sitting on Chinas doorstep would be huge.
If we did hit something akin to non producing Coves net interest on a gas only basis our valuation could be 390p not to mention the oil potential which is there and we are already producing substantial oil as well as the take-up of PECs from additional new oil fields and exploration, hopefully yet to be ratified in Uzberkistan this year. I'm not saying it will happen valuation wise to Cove but it certainly has the potential to happen as Tethys already possess significant gas on Chinas doorstep. Yes there is risk but there is no point imo looking back with hindsight if you are not risk averse as the early bird investors in Cove and GKP experienced.
One only has to look at the Tajik and Uzbek areas where TPL are and see the multitude of multi billion & multi trillion cu-ft gas discoveries (including on trend 'super giant' fields), some right up to the boundary of TPLs Tajik PSC. 4 out of a further 130 prospects and leads on Tethys Tajik PSC already have oil, gas or a combination of both - so bodes well for possible further success in an area that is very under explored but showing excellent potential.
In my view we should not be solely focussed on the Tajik deep plays by the end of the year, but recognise the undeniable potential across all 3 regions where Tethys operates - Kazahkstan, Uzbeikistan and Tajikistan.
Disregarding Uzbekistan and even Tajikistan - we should remember the potential in Kazakhstan for Tethys similar to what drives Max Peroleum there.
From Tethys January 2012 presentation -
"UNIQUE OPERATIONS IN THREE CENTRAL ASIAN COUNTRIES".
"EXISTING OIL AND GAS PRODUCTION PLUS MASSIVE EXPLORATION UPSIDE."
POTENTIAL FOR BILLION BARREL DISCOVERIES.
Finally as regards Kazak domestic or export production and oil price barrel/revenue differentials.
Page 7 of MXPs January 2012 presentation shows - (after all production, transportation costs and all relevant taxes) -
Domestic oil sold at $55/b and $60/b gives a net back of $41.84/b and $46.71/b.
Export oil sold at $110/b and $120/b gives a net back of $49.85/b and $ 55.91/b.
Overall the average net back difference is just $8/b - $9.20/b better for export versus domestic so don't be put off by Tethys selling dometically for now.
At $90/b export versus $45/b domestic, the net back difference is just $5.90 per barrel.
Overall i see Tethys significantly underpinned by its existing assets, growing production and growing revenue generation. I bear this in mind on the comparrisons of both Cove and Gulf Keystone who had similar potential but without any production at all to achieve excellent valuation growth for early investors in just 2.5 and 3 years respectfully. (GKP domestic production of 1500 - 2000 bopd commenced Dec 2011).
As always, nothing risk free so dyor.