Caspian Energy Share Discussion Threads

[rupe1958] 21/5/2007 21:06

I spoke to someone well informed about CEK today and clarified a few things that I hadn't understood.
(1)CEK's share of gross production is 75%. Production is now 1400 bpd, so CEK's share is 1050 bpd
(2)Gross sale price of CEK's production is around $40, and net receipts pb after taxes, etc. are around $22. So CEK's current daily income is c.$23,000, or just over $2m per quarter. Roughly breakeven. But this income goes straight back to Aral to fund the drilling programmme.
(3)EZ 303. They believe the upper section, K1, is commercial, but testing due to take place in next few weeks and RNS will follow.
(4)Current P1+P2 is 11m. A commmercial 303 upper section may raise this by 5m, and a successful shallow well programe at Baktigaryn (beginning now) would obviously take them higher.
The Baktigarin programme sounds similar to VOG's at Kermekol - 1 well per 6 weeks, hoping to agregrate 500 per well. Also like VOG, they seem to have been over-ambitious in starting on the deep expensive class 2 wells, and should instead have started on the shallow wells, to get some cashflow going.
(5)CEK believe their NAV is around CAN$ 1.20.

The optimistic view of the next year is that reserves rise to 20mb and production rises to 4000 bpd. That takes CEK's quarterly income to $6.5m and profitability (as I understand the situation).

Pessimistic view is that if they aren't successful in 303 or Baktigaryn they will be bought at a fire-sale price.

I will wait for the results on 303/k1, and if that is unsuccessful I will sell.

[thepinkpanther] 16/5/2007 19:01

so u just topped up 302,000 shares, if u have u will be doing well!

[drewz] 16/5/2007 17:27

Yes, I have been continuing to accumulate.

[thepinkpanther] 16/5/2007 16:39

seems someone purchased 302,000 shares this am...............a lot of lolly

[bearbulls] 16/5/2007 10:45

these are now cheap and a recovery back to 50p is in progress.

[thepinkpanther] 15/5/2007 09:22

these seem to appear cheap! just an opinion

DYOR.

[cleo1601] 11/5/2007 19:50

thanks for your research Rupe. Fool that I am I added another 5k at 33.5 today. We'll see, but my gut stays positive on this! (better all sell soonish then)

[rupe1958] 11/5/2007 16:25

Q1 expenses were circa $1.9m (I assume that is US$). Ths includes circa half a million for employee stock compensation, but also a foreign curreny gain, because the $ has been falling, presumably.

Let's assume that Q2 expenses will be slightly higher - say $2m.

If Q2 income is circa $3.75m this leaves, before tax, a 1.75m profit.

But what is the tax take? Difficult question.

This document:

Ernst & Young - Kazakh oil tax regime

suggests that post-breakeven tax could be as high as 80%. Pre-breakeven the situation is less clear. The export royalty is 33%.
I will e-mail CEK and ask what the current net value p/b is to them, post-tax,
and at what point they reach breakeven.

[sranmal] 11/5/2007 12:29

I need to do more research to work out what their breakeven production level is. It should be possible to work out. We know their quarterly operating costs, interest costs and transport costs, but I don't know what the tax levels are. I'll find this out. I agree that this it's importannt to establish the breakeven point on production.

When I was in these last year, IIRC they were producing about 2,500 bopd (may have been net, but may have been gross!), and they struggled to turn in a profit, hence, one of the reasons I sold.

I based my investment decision on the Nelson Resources model - a number of fields in the region circa 100-200 mmbbls each, producing 5-20,000 bopd. However, they seemed to drill wells a lot quicker and more successfully than this lot, and had more rigs on the go at the same time.

CEK's acreage could be very prospective in the right hands, but those aren't CEK's IMO.

[rupe1958] 11/5/2007 11:19

Sranmal:
"And how much of that is profit after taking off taxes, export duties, opex, etc?"

I need to do more research to work out what their breakeven production level is. It should be possible to work out. We know their quarterly operating costs, interest costs and transport costs, but I don't know what the tax levels are. I'll find this out. I agree that this it's importannt to establish the breakeven point on production.

Re good news on 302 and 303. I'm encouraged by the coments of the poster Goemean (?) from the stockhouse board, pasted here by Tinvan a few days ago. Sounds like the upper levels of 303 are going to be commercial. I'm less clear on the situation with 302.

I think they had a very unlucky year in 2006, but the licence area is prospective and their luck could be about to turn.

[sranmal] 11/5/2007 10:48

Total CEK share approx 700 bpd, being sold at export prices (approx US$ 60 pb)
Total gross income to CEK = 700 x 60 = $42,000 pd
Q2 gross income should be 90 x 42 = $3,780,000, a jump of approx 10x

And how much of that is profit after taking off taxes, export duties, opex, etc?

CEK have a minimum bopd below which they seem unable to make substantial profits due to these factors, hence why the share price is where it is.

Also there should bee good news in the next quarter re testing of EZ 302 AND 303

Given the drilling record to date, why do you think that?

[rupe1958] 11/5/2007 10:41

Have just seen that CEK puboished their Q1 figures yesterday and that explains the big sell-off.
Q1 revenue was only $358,000
Cash down from $17m to $5.5m following heavy capital expenses

However, I think there's good reason to think that the Q2 figures will be alot better.

Current production:
EZ 301 is producing 980 bpd (CEK share 50%)
EZ 213 is producing 430 bpd (CEK share 50%)

Total CEK share approx 700 bpd, being sold at export prices (approx US$ 60 pb)

Total gross income to CEK = 700 x 60 = $42,000 pd

Q2 gross income should be 90 x 42 = $3,780,000, a jump of approx 10x

Also there should bee good news in the next quarter re testing of EZ 302 AND 303, and of the shallow wells at Baktygaryn

On the negative side, they may have to raise more cash on poor terms
But the market cap,undiluted, is £27m and CEK has p1/p2 of circa 20mb, so the NAV is comfortably higher than the mcap, and cash flow is improving.
So I'm going to hold on.

[hercy] 10/5/2007 23:02

oh well finished 20.78% down. get ready to for mark down in the morning

[hercy] 10/5/2007 20:25

down 15% tonight on tsx :-(

[rupe1958] 10/5/2007 16:52

Oh dear. Definitely not a good idea. Yopped up at $0.79. Now $0.69 and falling like a stone.
I think it will stabilise in the mid-60's, and then recover over the next few months as positive news comes through.

[rupe1958] 09/5/2007 08:52

Tinvan - thanks for your very helpful posts. It's good to hear that CEK are getting export prices for 1400 bpd. That's useful cashflow.
Also, it looks like 303 is going to be commercial from the upper intervals.
And the shallow wells are now being drilled at Baktigaryn.

There's a reasonable chance that this time next year CEK will be producing 5000 bpd for export, and will have raised its p1/p2 reserves figure to more like 75 million barrels. That should be a company worth more like $200m-$300 rather than the current $80m ish.

The fall in the share price definitely looks like an over-reaction. On first reading it gives the impression that EZ 303 is a duster. But from Tinvan's post it seems likely that it isn't.

At $0.8 it's back below my average purchase price, and I'll add some more.

[cleo1601] 08/5/2007 16:23

Great stuff Tinvan

GD
Any chance of a translation for the peasants?

[tinvan] 08/5/2007 13:13

And more from geomean. (I can't say I understand all this, but perhaps others here will and can let us all know what they think.):




Nobody knows if the upper part of 303 will do anything.
Bryan said that they already perforated and acidized the area. He said the logs showed hydrocarbons and "less water" there.

So it's a matter of installing the plug, and seeing if they can get it swabbed out so it can flow and be tested.

Regardless, with the 3D seismic now done for Baktygaryn, the cash flow, 1400 BOPD of current production, 15MM cash on hand at YE, the planned re-entry in EZ 216, and the start of drilling in the shallow Triassic at Baktygaryn scheduled soon [269 Million C3 barrels], CEK seems incredibly cheap to me.

If they ever get 303 swabbed out or 302 reacidized and the two wells successfully tested, then they've proved up oil over a very substantial area.

Heck, the cash is worth almost $0.15 per share. 1400 BOPD x 30,000 is worth 42MM or about $0.41 per share. And that doesn't include any 1p or 2p reserves for flowing wells 301, 213, or 214.

At Friday's prices, you get the prospectivity of 50% wi on 726MM C3 barrels and all the seismic for less than $0.08 cents per barrel.

Seems like a bargain to me.



According to McDaniel's reserve report, when CEK says KT-1 it is actually referring to the KT2-1 zone.
"Carboniferous KT-2-1 Zone The KT-2-1 zone (KT-1 in Caspian Energy's classification) comprises the Kashirski and Vereyski formations of Carboniferous age. The KT-2-1 is separated from the underlying
KT-2-2 zone by a tight and shaley carbonate interval approximately 100 feet thick." pg 6 or pg 14 of 35 of the pdf available at the Caspian website.

So I was correct in noting that the CM2VR 'object III" the most prolific zone per TMY's PR's, is part of the zone being isolated and to be tested yet in well 303. [However, McDaniel said the KT2-1 zone were 'tight' in EZ-310 and EZ-213].

McDaniel calculated the net present after tax value of the proved plus probable reserves associated with just wells EZ 301 and EZ 213 using the year end $25 field price and a 15% recovery factor [i.e. no water flood] at 39MM USD [pg 19 of 35].

By comparison, both S. Alibek and Alibekmola's recovery factors are at 30% using projected waterflooding.

Moreover, both are currently getting export prices which are about twice what McDaniel used in it's calculations.

Total 1P reserves were for the two wells were 7MM and 2p was 11MM bbls.

That 39MM reserve value is worth at least 4X 39MM to anybody who has a nearby processing facility,an export license, and waterflood plans.

Just the reserves on those two wells themselves are worth more to a neighbor than the entire current market value of the company

[cleo1601] 08/5/2007 13:13

Tinvan
No I'm not selling a single share here and meant I should give up looking at them! of course I don't have the strength of will to do that...

Thank you for copying that very informative and encouraging post. I'm no techie but can get a sense of what it's about. Back to the waiting game then.

Good to see you here as I've felt quite lonely sometimes in the past few months. There seems to be little or no interest in this in the UK so very few trades and very few posts.

[tinvan] 08/5/2007 12:48

Does this mean you are getting out, Cleo, or simply not going to visit this BB for 2 years???
Obviously the bad news was the indication that well 303 may be a duster. The most informed (but also the most hopeful) poster over on the stockhouse board is one "geomean". This is what he had to say on Friday:




I called Brian Korney, the CFO, after the PR, to try to understand precisely what reservoir formation was being isolated.
I must admit that you should never talk to a finance guy if you want technical data.

And Brian admitted he was kinda guessing as he didn't know what terminology TMY uses [so I could compare] or the precise formation names used during and carried over from the Soviet era so I could refer to the logs and CEK's website presentations.
[I have have copies of a key old Soviet log- well A-29 and CEK uses this Ssoviet nomenclature in labeling it's seismic cross sections in its powerpoint presentations on the website]

Brian said that the PR came in this AM for issuance from KAZ and he hadn't talked with the folks there.

Brian said the logs were better in the higher pay intervals and show both hydrocarbons and less water than the lower intervals.

In order to evaluate precisely what are they are targeting, one must understand the intervals in the reservoir.

As TMY notes in its latest 10K:

"The South Alibek Field was first identified by an Alibekmola Field delineation well, known as Alibekmola 29, drilled by a geological association of the Kazakhstan government. It was determined to be in a separate fault block adjacent to the Alibekmola Field, and in 1996 produced flowing oil from several intervals in the Middle-Lower Carboniferous ("KT2") reservoirs during well testing....The KT1 and KT2 reservoirs were deposited throughout the Middle and Late Carboniferous periods and into the Early Permian as a basin-wide and massive carbonate platform ... The identified net thickness of the oil bearing reservoir averages approximately 200 feet for both the KT1 and KT2....

The KT2 reservoir is a series of massive stacked platform carbonates, subdivided into five stratigraphically defined zones, totaling more than 3,000 feet thick, with the top at approximately 10,500 feet in depth. The shallower KT1 is subdivided into three zones: the lowest zone is a series of massive stacked platform carbonates and the shallower zones are more characteristic of the back-stepping progradational nature of the carbonate platform ... The top of the KT1 reservoir is at a depth of approximately 7,000 feet, and is about 2,300 feet thick." pg 13-14

CEK in the January PR said that they had encountered 70 meters of pay in the middle carboniferous reservoir.

Hence, CEK is plugging the lower parts of the middle carboniferous layer.

CEK will isolate and swab what the CEK PR called upper intervals. ["Preparations are being made to isolate the lower KT-2 perforations and then to test the upper intervals."]

CEK appears to now be targeting what TMY calls the 'most prolific'part of it's field, the 'object III' layer [cm2vr layer on CEK's presentation and in the A-29 well log].

CEK is taking an approximate 3.5 KM step out with well 303. It should take great care in evaluating the well.

If it is productive, then they would have proved up and appraised a substantial areal addition to the reservoir.

[Well 303 is down on the south and west side of the reservoir. You can check that by looking at the seismic and the topology in the presentations on the website.]

Insofar as having water in the lowest interval, other soviet era wells existing in the field were drilled that deep, and isolated that interval with concrete plugs, before perforating and producing from higher intervals. This is also shown on the CEK investor presentation.

So while some may be tired at 'rationalizing', it is helpful to examine the data and the records to understand exactly what CEK is up to and then handicap the situation.

Significantly, we should hear about TMY's lateral into this most prolific CM2VR layer before we hear on testing in the upper part of well 303, i.e from TMY well SA-5H once it's CTU acid job is complete.

As I've been saying, given the similarity between the reservoirs, CEK should await the results on TMY's laterals before deciding on the optimun workover/completion methods for E. Zhag.

That's precisely what they are doing. Finishing 303, targeting Baktygaryn shallow targets in the next 60 days, and using it's large cash horde and cash flow [15mm cash at YE] wisely.

[cleo1601] 08/5/2007 11:55

drewz
All the best if you do. I did it quite a lot already! However, I must say, I do not think there was much in the way of averaging down in general here because the volume has been pathetic throughout the long slide.

Cannot quite see why the market reaction is so negative (but, again, volume small so effect distorted?). Probably just the good old pendulum swing - too far down on delays; too far up on expectation; too far down on disappointment, etc. Perhaps I'll come back in 2 years

[drewz] 08/5/2007 10:54

I might buy a few more though, whilst it is beaten down. For the long term.

[cleo1601] 08/5/2007 08:27

Yes, illiquidity seems to be the real problem here - unless of course it's the wild swings to the upside on little buying on good days! i guess we'll just go back to waiting for some more good days. Nobody seems interested in selling UKside at these prices. I certainly am not.

[hiddendepths] 08/5/2007 08:16

Well, it doesn't look too bad to me. Maybe the higher water cut was a bit of a surprise. And maybe some knew in advance about the restoration of production and are now closing their positions....