Re Re Chiapas Blocks.
ROE has not spent $60 to 70 million on the Chiapas or the Amititlan blocks.
Amititlan
The total Exploration and development costs on Amititlan , which includes the re working of some wells has been about $45 million of which ROE was responsible for and paid 25% of this total amount or the sum of about $11.25 million. Pemex paid nothing on this as it is a service contract. For that amount, ROE and its partners drilled 17 wells in the Chincontepec formation and while we do not know the results, we do know that all 17 wells have been brought into production. Also, for that sum of money, ROE and its partners drilled and cored the Upper Jurassic well which is still waiting completion and this completion of course will not take place until after the contract migrates.
Chiapas.
Chiapas has been a pure gift to ROE. This gift has provided a netback to ROE of about $ 9.0 million over the past three years. The service work, the preparation to drill costs, and every day maintenance has cost, on average, about $250,000 per quarter, with a net back cash return to ROE, after paying all royalties of about $750,000 per quarter or a total of $9.0 million.
In addition to being paid this amount ROE has gained vast amounts of knowledge and experience in operating a producing oil company in Mexico.
ROE, under its contract, is to drill 4 exploration wells on the three properties. The average royalty for these four wells will be about 68.5% the Government will receive about 68.5% of the oil or oil revenue from any new production and ROE will receive about 31.5%.
On its website, ROE has stated they expect to obtain production of about 5,000 BOE per day from these four wells when they are drilled. ( I have not been able to access the corporate presentation for a few days, is any one else having the same problem.) The costs for each well will be about $3.0 million for a total cost of around $12 million. If ROE gets the 5,000 BOPD or even BOEPD then the wells will have a payback of under 90 days, and will have a netback to ROE after royalties of about $2.4- 2.7 million per month, which would provide sufficient money to drill about 1 new shale well every 90 days.
These wells, if completed at the level ROE has stated on the website, would likely push the share price of ROE into the 40 to 50 cent range.
So ROE will drill these wells, and it is a big plus for the Company for them to drill them and drill them soon. From my understanding, the work on the Amititlan block is taking up most of the time of the team and even though ROE has financing lined up for the Chiapas drill program, and it has 2 or 3 ways of doing the financing, I think they will be able to get a better deal with respect to all financings once the contract on Amititlan migrates. They have until December of 2020 to complete this program.