The Smallcap Oil & Gas round up.

Another busy week in the Smallcaps Oil & Gas Underverse. Petroceltic’s merger with Melrose hasn’t gone down too well today. Still waiting for NTOG to release an RNS and Petroneft are on the bounce. Good news came from Kea Petroleum & Madagascar bounced up a few pips. Still under the radar remains Wessex’s potential as the second drill in French Guiana comes closer to a result.

Caza Oil & Gas : CAZA

Said that drilling has commenced on the Company’s Copperline Bone Spring Prospect in Lea County, New Mexico.  The Caza Ridge 14 State #3H horizontal well commenced drilling on August 11, 2012, and is the initial test well at Copperline. The well will be drilled to a total vertical depth of approximately 11,500 feet with a total measured depth of approximately 15,730 feet.  The primary target is the 3rd Bone Spring Sand at a vertical depth of approximately 11,315 feet subsurface with potential secondary targets in the Delaware, Lower Brushy Canyon, Avalon Shale, and 1st and 2nd Bone Spring Sands. Caza has a 57.5% working interest before pay-out (approximate 45.0% net revenue interest) and a 68.125% working interest after pay-out (approximate 53.3% net revenue interest) in the Caza Ridge 14 State #3H well.

Desire Petroleum : DES

The “oil to water” exploration company yesterday released the findings of a recently completed competent person’s report update on the Elaine & Isobel prospects prepared by Senergy (GB) Limited. This CPR update covers the interpretation results from the 2010/2011 merged 3D seismic data over the Elaine and Isobel prospects.  A CPR covering the full prospect inventory from the merged 3D seismic data will be available in Q4 2012.  The Elaine and Isobel prospects are located wholly within the PL004a licence in which Desire has a 92.5% interest. The “Highlights” Best case un-risked prospective recoverable oil resources net to Desire are estimated to be 312 MMstb…The Elaine and Isobel fans are developed in the southeast of the basin within the basal part of the F sequence and are similar to the Sea Lion fans further north…The seismic expression indicates a thick, sand-prone interval inter-bedded with mature oil source rock and combined structural/stratigraphic traps mapped on the down-thrown side of the basin-bounding fault system…The volumetric assessment of the total Elaine and Isobel prospect area indicates gross prospective resources which are comparable with the size of the Sea Lion field and with a geological chance of success of 30%. The question is do you trust this company?

Empyrean Energy : EME

Announced that it has satisfied all conditions precedent and completed the first draw-down of an amount totaling US$229,791.46 from its term debt facility with Macquarie Bank. The facility is a 3 year term debt facility for up to US$50 million to support its participation in the development of the Sugarloaf Project, an Eagle Ford Shale Condensate and Gas development project in onshore Texas, USA. Empyrean has granted 30,000,000 options to Macquarie. The first 15,000,000 options have an exercise price of 8p and the second 15,000,000 options have an exercise price of 10p. The options have an expiry date of 19 July 2016.

Enegi Oil : ENEG

The independent oil and gas company, announces that it has been granted a 5 year renewal over an area, in Production Lease 2002-01 (‘PL2002-01’),  that incorporates the producing PAP#1 ST#3 well and the surrounding area. This award follows extensive discussions between the Department of Natural Resources of the Provincial Government of Newfoundland and Labrador and the Company regarding a renewal to PL2002-01 which, under the terms of the lease, expired on 12 August 2012.

Europa Oil & Gas : EOG

Released a moderately positive trading and operations update together with a warning that investors should expect write-offs amounting to £6 million on its Romanian assets and a failed UK well when the company’s full year results are published in mid-October. The company said that it has achieved a significant improvement in full year UK production and revenues for the twelve months ending 31 July 2012 from its three producing assets in the UK, all located onshore in the East Midlands: West Firsby (100%); Crosby Warren (100%); and the Whisby 4 well (65%). Full year revenue up 34% to £5.1 million (2011: £3.8 million) helped by a higher oil price and a 19% growth in oil volumes to 72,360 barrels (2011: 60,956 barrels). The average daily production was 200 barrels of oil equivalent per day (2011: 169 boepd) in line with management expectations. Europa also disclosed that drilling at either Wressle or Broughton prospects in the UK now expected to commence in Q1 2013. Both the Wressle and Broughton prospects in PEDL 180 and 182 are operated by Egdon Resources (LON:EDR) who will determine the exact timing of the spud date.

Ithaca Energy : IAE

Released some news this week on operations at the Hurricane appraisal well, 29/10b-8, which lies within the Company’s Greater Stella Area in the UK sector of the Central North Sea are now proceeding to a Drill Stem Test. The well has been drilled to a total measured depth of 10,779 feet to appraise hydrocarbon bearing sands in the eastern lobe of the Hurricane structural closure, logs indicate that the well has encountered hydrocarbons (possibly liquid rich gas) in both the Rogaland and Andrew sands. Pressure and fluid sampling has been undertaken across both reservoir sand intervals. An initial DST will be conducted over the Andrew sand interval. An update will be issued when the DST results from the Andrew formation become available.

Kea Petroleum : KEA

Released a good set of production testing results this week. During the initial clean up flow period of four days, the well achieved oil flow rates up to 290 barrels of oil per day and gas flow rates up to 2.2 million cubic feet per day, despite being choked back to limit drawdown to ensure no formation damage. No formation water was produced during the flow period. The first shipment of oil from the Puka field was dispatched to market on 8 August 2012. Well production was temporarily halted until yesterday, Thursday 16 August 2012, to establish initial pressure build up.  The main flow period will then commence for a period of up to 30 days. It is anticipated that the flow rates from the main flow period will be higher than the controlled rates recorded during clean up. The current test programme calls for a flow period up to 30 days followed by a build up period of up to 60 days. The exact timing of the test will be determined by analysis of the flow and build up data recorded during the test.

Leni Gas & Oil : LENI

Confirmed that approval has been received from the Minister for Resources and Rural Affairs, in Malta for the assignment of the 10 percent interest in the Area 4 Petroleum Sharing Agreement held by Leni Gas and Oil Investments Limited, a subsidiary of LGO, to Phoenicia Energy Company Limited, a subsidiary of Mediterranean Oil and Gas plc. The transaction previously announced on the 1st August 2012 has now completed.

Lochard Energy : LHD

Announced that 2 million unlisted options exercisable at 16.5p have lapsed without exercise in July 2012.

Magnolia Petroleum : MAGP

It’s getting busy at MAGP as the company announced its participation in a well targeting the proven Mississippi Lime formation, Oklahoma, in which the Company has a 25% working interest and a 18.75% net revenue interest. This represents Magnolia’s largest interest in a non-operated well to date and is in line with its expansion strategy to significantly build production and revenues. The Prucha 1-23MH horizontal well is targeting the Mississippi Lime Formation and is operated by Devon Energy Production Company a leading independent energy company. Magnolia acquired its interest in Prucha via a farm-in at no cost to the Company and was included in the acquisition of leases as announced on 11 June 2012. Total drill costs are estimated at US$4,277,500 with the Company’s 25% working interest in the well estimated at US$1,069,375. Prucha has already been drilled and is currently waiting completion. The participation in Prucha is in line with the Company’s stated strategy to rapidly grow production and revenues by significantly increasing both the average size of its net revenue interests and the number of producing wells in proven hydrocarbon formations.

Max Petroleum : MAX

The oil and gas exploration and production company focused on Kazakhstan, released a short epistle today. Stating that MAX has commenced drilling the BCHW-1 exploration well on the Baichonas West prospect on Block E using Zhanros Drilling’s ZJ-20 rig. Total depth of the well will be approximately 1,400 metres. The Baichonas West prospect is a four-way anticline targeting unrisked mean resources of 10 million barrels of oil in Jurassic and Triassic reservoirs.

Mediterranean Oil & Gas : MOG

Announced today that the Maltese Minister for Resources and Rural Affairs has approved the transfer of the 10% interest Leni Gas and Oil Investments Limited held in the Malta Offshore Area 4 PSC to Phoenicia Energy Company Limited, a 100% owned subsidiary of Mediterranean Oil & Gas Plc. Area 4 comprises four contiguous licence blocks in the southern part of the Maltese offshore adjacent to prospective acreage in Libya.  MOG is the operator of Area 4 and now holds 100% of the equity. The Company has recently completed key de-risking studies, including interpretation of the extensive long-offset 3D seismic survey over Area 4 acquired in late 2011.  The acreage contains a number of mature prospects that are analogous to proven plays in the Sirte Basin, as well as field analogues in Tunisia. MOG has identified a portfolio of mature prospects in the Lower Eocene/Paleocene sequence with reserves potential.  The top four prospects have combined un-risked potential oil in place of between 1 billion barrels (mean case) and 1.5 billion barrels (upside case).

Oilex : OEX

Announced that in respect of the pro-rata renounce-able entitlement offer announced on 2 August 2012, the following documents have now been dispatched to shareholders:…§ Prospectus dated 6 August 2012; and…§ Entitlement and Acceptance Form. A copy of these documents can be viewed by clicking on the Link 1   Link 2 Oilex also advises that the underwriter, Patersons Securities Limited, has now waived (and will not seek to rely upon) the termination clause of the underwriting agreement relating to the Company Sub-Underwriters’ compliance with their sub-underwriting obligations, as described in paragraph (q) of sub-section 5.1(c) of the Prospectus.

Petroceltic : PCI & Melrose Resources : MRS

Small Investors were up in arms this morning as PCI agreed to merge in a deal that values Melrose at £165 million and will see Petroceltic shareholders having 54% of the enlarged entity and Melrose shareholders 46%. The merger is expected to close in October, being classed as a reverse takeover under the AIM rules, existing Melrose shareholders will receive 17.6 new Petroceltic shares in exchange for each Melrose share. The merger values each Melrose share at 143.9p and represents a premium of approximately 6.2% to Melrose’s closing price of 135.5p last night. Melrose shareholders will also receive a special dividend of 4.7p per share. The enlarged group will have combined 2P reserves of 84 mmboe, 2C resources of 357 mmboe and unrisked prospective resources of 1,365 mmboe in the North Africa, Mediterranean and Black Sea regions, creating a regionally focused independent oil and gas company with significant scale. Melrose’s core producing fields are located in Egypt and Bulgaria and Melrose produced an average of 34,300 boepd in 2011. HSBC is to provide a new $300 million facility for a period of 18 months from the date the merger is effective to, amongst other things, refinance Melrose’s existing reserve based lending and subordinate facilities. Following the merger an active exploration drilling campaign is envisaged in the next 18 months with six exploration wells planned in the Kurdistan Region of Iraq, Italy, Romania, Bulgaria and Egypt. The wells in the Kurdistan Region of Iraq, Italy and Bulgaria are targeting in total an estimated 259 mmboe of unrisked prospective recoverable resources.

PetroNeft Resources : PTR

Owner and operator of Licences 61 and 67, Tomsk Oblast, Russian Federation, provided an update on its operations this morning. Highlights: Drilling of new production wells commences at Arbuzovskoye…Two Lineynoye wells converted to water injectors for planned pressure support…Production stable at 2,000 bopd…Benefit of pressure support and new production wells anticipated over coming months. Drilling of the first of ten new production wells on the Arbuzovskoye oil field has commenced and is expected to come into production in September 2012. The drilling rig and necessary supplies to drill ten wells were moved to location during Q1 when winter roads were in place to handle the heavy loads. The Arbuzovskoye No. 1 well is currently producing 300 bopd (with negligible water production) through the recently constructed 10 km spur pipeline to the Lineynoye oil processing facilities. This rate is currently constrained by an electrical fault with the pump that is preventing it from operating at its optimum rate. The pump will be replaced in due course. Arbuzovskoye contains 2P reserves in excess of 13 million barrels of oil according to independent reserve auditors Ryder Scott and is the Company’s second production development. Total oil production, comprising both the Lineynoye and Arbuzovskoye oil fields, is currently steady at about 2,000 bopd. In July 2012, two Lineynoye producing wells were converted as planned into water injection wells to provide pressure support in the reservoir; we expect to recover the production lost from these two wells through improved rates in nearby producing wells over the coming months. Dennis Francis, Chief Executive Officer of PetroNeft Resources plc, commented: “We are delighted to have commenced drilling of the first of 10 planned new production wells at Arbuzovskoye where our existing well has demonstrated very encouraging production characteristics.  We will focus on developing Arbuzovskoye and seek to steadily build on our existing production profile and positive cash-flows throughout the remainder of the year.”

Premier Oil : PMO

The Chim Sao North West appraisal well, CS-3X, in Vietnam Block 12W has reached a total depth of 4,235 metres.  The well has been plugged and abandoned after encountering oil shows in the Middle Dua sands. The appraisal well was drilled to determine whether the Chim Sao North West discovery extended into a separate fault segment to the north.  The well targeted the Upper and Middle Dua sands. While 135 metres of sandstone reservoir were penetrated in the Upper Dua interval there was no indication of hydrocarbons.  In the Middle Dua interval 165 metres of sands were drilled, but only oil shows were encountered.

Roxi Petroleum : RXP

Issued some much needed good news this week. NK8 (previously designated as NK14) reached a total depth of 1378 metres on 14 July 2012. The well has now been tested at an interval between 1291 – 1296 meters using choke sizes ranging between 5-7mm. Using a 5mm choke oil flowed at the rate of 161 bopd; using a 6mm choke oil flowed at the rate of 197 bopd; and using a 7mm choke oil flowed at the rate of 251 bopd. Roxi therefore anticipates the aggregate gross production from these three wells alone to be at the rate of approximately 500 bopd. Roxi currently has a 34.22% interest in the Galaz field.

Tangiers Petroleum : TPET

Announced that it has received written confirmation from the National Offshore Petroleum Titles Administrator that the Company had been successful in its work program bid and has been granted Petroleum Exploration Permit NT/P83 (NT/P83). It is anticipated that NOPTA will cause a notification of the grant to be published in the next edition of the Commonwealth Gazette. NT/P83 (formerly Release Area NT P11-1) lies in the Arafura Sea to the north of Melville Island and the Coburg Peninsula of the Northern Territory and is approximately 100 kilometres north of Darwin, Australia. It comprises and area of approximately 15,000km2 and is in waters shallower than 200 m.

Victoria Oil & Gas : VOG

The first onshore gas and condensate producer in Cameroon supplying the industrial market in the city of Douala from its Logbaba field, reported good, but slower than anticipated, progress in connecting gas customers in Cameroon and will be re-phasing capital expenditure to preserve cash. Following completion of the Phase 1 pipeline to and around central Douala, VOG announced in July that continuous production had commenced. Currently there are four thermal customers connected with production of 1.0 mmscf/d with further sales in negotiation. Aggregate thermal gas sales of approximately 2.5 mmscf/d by December 2012 are anticipated. As gas is a new energy source in Cameroon there have been some implementation issues which has caused delays, but VOG are confident that these issues have now been resolved. VOG has decided to re-schedule the pipeline expansion to the west and east of central Douala until sufficient funding from a bank or financial institution is in place to fund the development and to minimise further equity funding. VOG released a “Letter to Shareholders” yesterday. An excellent read. Investors can read the full text of the letter by clicking this link.

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