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Ophir Energy (LSE:OPHR) did it again.
The FTSE 250 constituent has drilled another gas discovery giving the company confidence it will be able to export liquified natural gas (LNG) from its assets in Equatorial Gunea, east of Africa.
Ophir’s Chief Executive, Nick Cooper, issued the statement himself, following the 1 trillion cubic feet (tcf) of recoverable gas from the Fortuna West-1 well out of the 1.5 tcf mean in place announced today, which has exceeded pre-drill estimates.
Fortuna West well is the last of Ophir’s three-well programme for 2012 at its 80% controlled Block R off the coast of the East African state. The well was designed as an appraisal well following the discovery back in 2008.
Block R now has about 3 tcf of gas or about 500 million barrels of oil equivalent (mmboe), a four-folds increase from the 697 billion cubic feet (bcf) (116mmboe) pre-drill estimates, according to the company.
According to Mr. Cooper, a follow up exploration and appraisal programme wil have to be put in place next year in order to develop the discovery in the advanced stage.
Fear of Revocation
That should have been good news and the shares were expected to have gained a few pence. But it was not the case. On the contrary, shares of were down 4.8%, equivalent to 31 pence, and Ophir stocks were valued at £6.10 per share at 9:50 AM GMT.
The drop was not because the gas discovery did not meet market expectations, as was the case the last time it announced its sixth gas discovery in Tanzania.
What triggered the drop may probably be yesterday’s move by Tanzania’s Energy Minister to conduct a review of all contracts with oil exploration companies in line with the East African nation’s move of overhauling the country’s energy policy, which may result to revocation of licences.
Ophir holds one of the 26 production sharing agreements to be reviewed and decided by November this year to be conducted by the government-controlled Tanzania Petroleum Development Corporation (TPDC).
The licence includes three blocks encompassing over 20,000 square kilometres of offshore acreage as well as another onshore-offshore acreage covering 7,500 square kilometres.
To date, Ophir has already estimated about 7 trillion cubic feet of gas from its three blocks, after drilling six wells in total since the company acquired the licence in 2005.
According to the report published by Reuters on Sunday, 16th September, some PSA are shoddy and needed to be revoked, quoting Energy and Minerals Minister Sospeter Muhongo.
A look at Ophir’s contract revealed that the Tanzanian Government has back in rights of 12% exercisable at any time in Block 1 of Ophir’s licence. Moreover, the said government has back-in right of 15% in Blocks 3 and 4.
Ophir, which used to own the licence for a 100% stake, is now holding 40% following a joint venture with BG International. The licence is now on its first extension.
In Equatorial Guinea, Ophir controls 80% of the joint venture and the other 20% is held by GE Petrol . The licence covers nearly 1,700 square kilometres.
