Global Energy Development Share Discussion Threads

[lowflow] 04/2/2012 16:04

Dugganjoe are you writing abouth GED?

GED is the operator of all its Colombian blocks. The only block they dont operate is Block 95, which is operated by Gran Tierra.
Cash flow from GED Llanos operation is very strong and goes immediately to GED bank account.

[dugganjoe] 04/2/2012 15:34

problem is it has only 8% to 20% of its asset and these are no longer under its control >

[lowflow] 04/2/2012 15:28

The end game for the main shareholder is probably to sell the company but I think they want to get at least two of the big projects to work (Bocachico, Bolivar and Block 95). This would mean that it is more a 2013 event. But with the catalysts which are in the pipeline for 2012 I am still a very happy shareholder. From March we should have at least one big catalyst per month until end of Q3. And we shouldn't forget the read across news (Shell testing shale oil next to Bolivar block, Ecopetrol is drilling their first Middle Magdalena Shale oil prospect, Canacol testing heavy oil filed next to Bocachico, Talisman and Pacific Rubiales drilling in the connecting block to block 95).

Stock still at 2.9x 2012 P/E on current production.

[goosegreen] 04/2/2012 09:02

Nils214

You can have mine for £9.99
please send your cheque to
..........
..........
Payable in cash.

Many thanks

Jon

[nils214] 03/2/2012 16:05

lowflow, thanks for those comments. Must admit I had never really considered it as a possibility until the initial open offer which was obviously not an attemot to take ove th co. as it was below the prevailing sp, and then most recently with the share price drifting down I was considering that they could come in with say 123/130pps bid to take the rest of the shares. Personally I think 10 quid a share would be cheap!!

[philo124] 03/2/2012 11:41

Thanks all.

[lowflow] 03/2/2012 11:08

Btw, Steve Voss and Anna Williams will be in London next week for marketing to new investors.

[lowflow] 03/2/2012 11:05

I think today announcement is encouraging. There is no new news but it is positive to hear that they will use Baker Hughes or Weatherford instead of using some local operator who has never developed shale assets.

--------------------------------------------------------------------------

BOLIVAR PROJECT - CATALINA #1 SIMITI FORMATION UPDATE



Global Energy Development PLC, the Latin America focused petroleum
exploitation, development and production company (AIM: GED) with operations in Colombia and Peru, is pleased to announce it has retained a third-party firm to review the Catalina #1 well log, core data, mud-log information and other
geochemical data and to recommend specific fracturing intervals with
particular fluids and fracturing design for the re-entering of the Catalina #1 well within the Simiti formation. The third-party firm, Discovery GeoServices Corporation headed by Mike Lewis, will also estimate the expected initial rates of oil, natural gas and natural gas liquids. The evaluation project, as described above, has commenced and is expected to be completed by the end of March 2012.



Following completion of this evaluation, the Company will evaluate technical proposals from BakerHughes Pressure Pumping Division (Colombia), Weatherford Colombia and one other service provider for the design and planning of the Simiti frac stimulation project.

[lowflow] 03/2/2012 10:56

Nils214,

I think its unlikely that GED main shareholder would bid on the company, because if they were to bid on the company it wouldn't make any sense to put out new information about the Bocachico and Bolivar block and try to create some expectations. I also think its very unlikely that they would sell the company to a third party for a low price, because there has been potential bidders for the company in the past (2006/2007) and at that point the main shareholder didn't think the bid price was high enough. And I also think the company is in a much better position compared to were its was in 2006/2007.
I think its more likely that they will sell parts of one of the development assets (Bolivar, Bocachico or Block 95) when they finalize the current testing/development they are doing on each of these assets.

[nils214] 03/2/2012 08:05

thanks to both Hugo and Lowflow for very well researched and interesting posts on an others=wise generally desert island of a bb!! I was previously singing GED's praises but it seems nobody wants to listen. Also the recent acquisition of a substantial shareholding, putting the 'concert party' in a very (too?) strong position may put off some investors.

Concerning this latter point, does anybody think that we could be subject to a very low t/o bid which would be fully supported by the present majority shareholders and we pi's would not be able to do anything about it? This is my main concern with GED.

Comments/thoughts appreciated

[philo124] 01/2/2012 12:59

Thank you lowflow for investing your time in posting; very helpful.

[kramch] 01/2/2012 10:42

The management have a recent history of disappointments, so I think the market is waiting for some actual positive results before any rerating.
They have made a big thing of applying CHOPS and it now looks as if they need more technical help, which may get expensive, and whether it will work is uncertain.
But Harken seem to have taken a more active interest in their investment now.

I hold (patiently), K.

[yellow_snow] 01/2/2012 10:02

Cheers for that lowflow, very nice summary of the prospects. Interesting to see the support from Harken via the financing too.

[lowflow] 31/1/2012 22:00

I have done a bit of research on GED and I have to say it looks very
interesting. First, I think we have a lot of valuation support at the
current level. Assuming that production in 2012 from current producing
field would be 1725 bopd gross in average, this is based on 1% / month
decline rate which the company have guided for. Assuming that oil price
would stay at current level (Brent $110, WTI $100). Production cost would
increase with 6% and admin cost with 10%. In this case GED EPS for 2012
would be £0.34, which would mean that the stock is trading at 2.91x P/E
and giving no value for the non-producing asset and also assuming no
production from the Torcaz-5 well or any production from the Bolivar
block. The cash flow would be enough to repay the convertible bond, cover
a £10m capital expenditure program and build £6m cash reserve.

Then we have the potential upside from the non-producing asset: Bocachico,
Bolivar, Block 95 and increased production from Alcaravan.

Bocachico – Torcaz-5 project: I think the implementation of CHOPS on the
Torcaz field looks promising but it also have its challenges. CHOPS should
work if they manage to get enough sand production which will increase the
permeability in the reservoir. Company has stated that the Torcaz-5 well
did have sand problem when it was drilled in 1998 but they haven't said
how much sand was generated. In old fillings from Harken in the end of the
90s they are writing about the sand and asphalting problem in Torcaz-5. If
CHOPS would be successful and they manage to get 400 bopd flow rate, it
would be a big step in monetizing the Bocachico block. If the first well
is successful I think they will drill a new well to test the CHOPS
technology instead of immediately implementing CHOPS on Torcaz 2 & 3, the
reason why I think they would prefer to drill a new well is because if
that well is successful it would be more helpful to prove the concept but
it would also give them one more well to define the Torcaz formation and
with the 3D seismic data they collected in 2011 they should be able to
place a new well in a better location compared to the historical wells.
In a more negative scenario where CHOPS wouldn't be commercial I think it
could be possible to develop Torcaz field with cold horizontal well. The
reason why I think so is because they have already drilled three wells
which all flowed 500 bopd initially so there is clearly some energy in the
reservoir and because the porosity is only 19.5% it shouldn't be a problem
to do horizontal well because the risk for cavity should be limited.
Secondly the reservoir temperature is 150 F which should clearly help the
oil to flow in horizontal development. The capex required to develop the
field with horizontal wells will clearly be higher compared to a vertical
CHOPS development so it makes sense that they are trying this technology
first. As you may have seen over the years GED is one of the most cheap E&P companies when it comes to spending money on development and therefore they are first trying to use the existing wells. The Torcaz field is estimated to hold 75m bbl, and if CHOPS or
horizontal cold production would be possible to monetize this reserves it
could obviously create significant value for the GED shareholders. The
Bocachico block 2P reserves would be worth at least $15/bbl if it is
possible to develop the field with CHOPS or horizontal wells.

Bolivar: GED is looking to test the shale oil/NGL/gas potential in the Simiti
formation. The previous operator of Bolivar, Harken (now main shareholder
in GED), drilled four wells on the block in 1997-1999. They targeted the
Rosa Blanca and Lower La Luna formation. Two of the wells was very
successful the Catalina-1 and Olivo-1 well which had initial flow rates of
7073 bopd+11500mcf and 10800 bopd. The flow rate declined quickly but they
still managed to produce sizable volume of oil and gas. At the time the
wells was not commercial because of low oil price and the step decline
rate. Today, its apparent that this block is some sort of shale oil/liquid
field and with the technology which has been developed in North America it
is very likely that this block can be develop with very good return. The
characteristic of the geology in the block is very similar to the geology
in the Eagle Ford which is one of the most prolific shale oil and gas
plays in North America.
What is more interesting about the Bolivar block and its location is the
interest this area has attracted from top shale companies the last 24
months. Immediately to the north of the Bolivar block you have the VMM-1
block which Lewis Energy has signed up. Lewis Energy is a private E&P
company from San Antonio. Lewis Energy was the company which discovered
the Eagle Ford play and now they are looking for a similar play next to
GED Bolivar block. Southwest of GED Bolivar block Shell has quietly
acquired and farmed into three large blocks. Shell has been very discreet
about their entry to the North Middle Magdalena area but some of their
partners in their blocks has said that they are going to test the shale
oil and NGL potential in this area. Shell is in the process of drilling
the first wells and within the next four month they are targeting to have
completed three exploration wells on these blocks. Shell has policy of not
entering to new area unless they have the potential of producing at least
40-50k bopd. Over the next 3 months I would guess that one of Shell
partner will announce the result of the initial wells and this could
clearly give some idea about the potential in the Bolivar block.
In 2011 GED acquired new 3D seismic data on the Bolivar block, with the
new data it should be possible to much better to place the next well they
are going to drill on the block. If GED managed to achieve a similar flow
rate on the Simiti well they are targeting to drill in Q2 it would de-risk
the play a lot but it would also give substantial cash flow to GED in the
very short term. GED has already booked 25m bbl of oil in the Rosa Blanca
and Lower La Luna formation and they are estimating that the Simiti
formation could hold up to 125m bbl of oil/gas/NGL.

Block 95: I am surprised that investor following GED is not more excited
by the Block 95 option. After read everything Gran Tierra (GED partner in
the block) have written about the block its difficult not to get excited.
In their presentation for 2012 it is highlighted as their most important
prospect in Peru and one of their most important prospect in their whole
portfolio and this is a +$1bn company. The previous operator Amoc made a
discovery on the block in 1974, the well flowed 807 bopd and they
estimated the size of the reserves to ~20m bbl. After Gran Tierra have
evaluated the previous work done on the block, they have stated that the
structure probably holds 40-60m bbl (excluding the deepest formations).
Gran Tierra will drill the first well in early Q3 and the result of the
well should be out in September time. Gran Tierra have also said that they
will keep the rig on the block after the first well so they can drill up
to three appraisal wells. What is more interesting is that Block 95 is the
medium size field in Peru which is closest to be put in production
and the country real need to add new productions. The fiscal terms for
Block 95 is very attractive and at the current oil price the netback would
be $40/bbl which would mean that a 2P bbl is worth around $20. Assuming
that Gran Tierra can manage to prove up 40m bbl in 2012, it would mean
that GED would have 16m 2P proved up which are very close to be in
production. GED may not have the financial capacity to support a
development and in this case I would think that Gran Tierra or one of the
other large operator in Peru would be looking to buy their stake
(Talisman, Pacific Rubiales, Pluspetrol, ConocoPhillips). GED wouldn't get
full value but if they would get 50% of fair value ($20/2P) it would still
be $160m or £2.84/share (290% of the current share price) and this could be 10 months away. Both Talisman
and Pacific Rubiales has block next to Block 95 so for them it could be a
clear advantage to have a stake in Block 95 when they are exploring their
other block in the same basin.

To summarize the investment case:

- GEP trading at 2.91x 2012 earning
- No debt or financing issues
- Three potential company makers within 8 months, all of them financed with internal cash flow
o Bocachico, result in 3 months, upside +10x current share price (when full value is recognized)
o Bolivar, result in 5 months, upside +8x (when full value is recognized)
o Block 95, result in 8 months, upside +3-6x
- The company has never issued equities since it was listed in AIM in 2002
(most be a record for a E&P company on AIM, so no dilution of the upside.
- Significant insider buying in mid 2011

[foreverhoping] 30/1/2012 10:59

yes thanks for informative post Hugo. I must say I found the news today fairly negative, in that it suggests to me there could be big delays, and some potential problems which have arisen. its not surprising that there are challenges for GED using CHOPS for the first time, but the RNS just struck me as dressing up bad news. I hope im wrong, and we dont drift downwards too much

[hashertu] 30/1/2012 10:40

Thank you Hugo. That was useful information.
Your post was prescient given today's RNS.

[hugomaracuya] 28/1/2012 19:12

Not surprised the market isn't too impressed yet. Maybe when results start coming good it may improve. CHOPS isn't really all that they hope yet, for its still very much in its infancy. There are hopes that there are advances that can still be made, but still a few problems to be overcome.

It has been brought to its present stage of development in Colombia, mostly by Canadian companies, who have used the technology quite successfully in the oil shales in Canada. But they are finding its a little different down in Colombia.

The process involves pumping out the oil and sand together, and then separating the sand at the surface in vast containers at high temperatures when they can drain off the oil and water as it separates into different layers.

Problems are obviously to firstly get the pumps right, for sand is a notorious pump-killer and also well-killer, but the types of sand resistant pumps have to vary with the varying types and degree of sanding. The Middle Magdelena Valley is notorious for sand problems, and as we ourselves know, there is plenty of oil, but the host formations can be very unstable. Wells tend to clog up very quickly despite gravel packing and other preventative measures.

The principle is that as the oil with sand travels through the host rock toward the well bore and pump, the sand actually scours the little cracks, crevices and channels, so opening up the pathways which in turn, enables more oil to flow through these wider channels. It is often likened to creating little "worm holes" through the host rock, which is a very good illustration of the process. It is also seen as a type of "natural fraccing" which we would normally pay hundreds of thousands of dollars to achieve by speciallists, but here is done for free.

Now one of the problems which is yet to be overcome, is the clogging of the host rock at various distances from the well bore. It has, in a lot of cases, actually opened up the zones around the well bore very efficiently, but a little further from the well bore, has led to clogging in the surrounding areas further back. Other wells in different sites have had very much better results. So as we can see, there is much more to learn about the technology in different places, different types of host rock, with different sand types and attributes, and also the grades of oil and well pressures too, can play an important part in the results.

So its not the "magic bullet" yet, but there is hope that they can perfect this technology in our particular circumstances. Each individual case requires a different formula tailored to its own individuality.

[dugganjoe] 24/1/2012 16:20

yes, 80p and then 60p in that order. But of course if they have a dry well (and it cud happen) then 60p without a chance to bail out at 80p.

In that case abandon ship. Abandon hope. Or Hold tight and endure pain.

[wooster4] 24/1/2012 16:05

dugganjoe - so it won't go lower than 80p, but if it does hit 80p,it will hit 60p. Well that makes sense!

[philo124] 24/1/2012 13:22

That's one way of reading the chart. Another is to draw 2 parallel lines on the 2 year chart left to right.

[dugganjoe] 24/1/2012 12:46

yes, but looking at chart, if 80p goes then 60p cannot be ruled out

[philo124] 24/1/2012 12:38

That's reassuring!

[dugganjoe] 24/1/2012 12:36

wont go lower than 80p imho

[philo124] 24/1/2012 12:34

Have bought 50% more this am fwiw.