The same pressures are at work in the Canadian oil patch. Earlier this month, TSX Venture-quoted Petromanas Energy agreed to buy micro-cap Gallic Energy in an all-paper deal worth C$10 million. The deal values each Gallic share at C$0.07, a premium of 11 per cent. For Calgary-headquartered Petromanas, which has a market cap of C$120 million, the deal provides a cost-effective way to diversify its portfolio outside Albania, where it has three PSCs and has bagged Shell as farm-in partner, while Gallic’s projects in France will have access to the solid balance sheet of the bigger company.
Gallic’s acreage in the Aquitaine Basin of southwest France does complement the Petromanas portfolio; both are onshore and lie in proven petroleum producing basins. But Gallic is targeting bypassed gas pay while Petromanas is searching for gold in oil-rich but under-explored Albania. Glenn McNamara, CEO of Petromanas, said his company’s subsurface expertise would be a “very good fit” for Gallic’s naturally fractured carbonate assets in France.
After a strong start to 2012, Gallic has had a difficult year. Progress on its permits in France has been slower than hoped, with only one of a three-well prorgamme actually drilled so far. That well was a re-entry of a 1960s hole drilled by a forerunner of French oil giant Total and the plan was to target potentially bypassed pay that could add up to a very material 248 BCF. The Ossun well on the Ger Permit was initially spudded in January with a workover rig but this plan was abandoned after the company needed to bring in a conventional rig to handle obstructions in the existing casing and sidetrack the well. The well was then successfully drilled to a depth of just over 3,000 metres but in May the recompletion of the 200 metre thick Upper Cretaceous limestone was suspended.
With Ossun on hold until the next well, Hagolle-2 on the Ledeuix Permit, is completed, the share price wilted. Hagolle-2 will be a 250 metre offset to the Hagolle-1 well that was drilled in 1985 by Esso, encountering strong mud gas shows. The company hopes that natural fractures in a thick Upper Cretaceous limestone section will ensure commercial flow rates and it plans to apply the lessons from this well to the Ossun well. But with Hagolle-2 still awaiting the regulatory greenlight, this well may not get drilled until the end of this year or even early 2013.
It means investors have been left adrift for the best part of 2012 with none of the drillbit-led news they anticipated at the start of the year from what looked to be a relatively low cost, low risk drilling programme. This is part of the rollercoaster of the oil and gas business – but it can quickly sap the financial resources of small companies.
With Petromanas in the driving seat, the hope will be these wells get drilled and the gas that has lain dormant for so many decades is monetised. This is a region with a rich history of production: the Aquitaine Basin has yielded multi-TCF discoveries – such as the nearby 8 TCF Laq gas field, discovered in the 1950s, and the 2 TCF Meillon field - but has been under-explored in recent years. Previous operators focused on the deeper Jurassic targets, bypassing pay in the Eocene to Lower Cretaceous conventional reservoirs. This has created opportunities for modern explorers to access this by-passed pay.
With strong gas prices and very attractive fiscal terms, Petromanas has every incentive to push Gallic’s project forwards to deliver near-term production and revenues from its new acquisition. At just C$10 million, this could prove to have been an absolute bargain
as quoted from the PMI board
ouch we got bought for nothing