The punters piled into junior oil explorer FAR Limited (FAR) in a big way yesterday, driving its shares up 60% at one stage after a consortium, it is a part of, reported what could be a large oil discovery offshore Senegal in West Africa.
FAR shares surged to a high of 15.7c, before easing back to end up 30% on the day at 13c – it’s priced at an ideal level for day traders and they made hay yesterday with around 200 million shares traded (another delight for day traders).
UK oil independent, Cairn Energy and US major ConocoPhillips, are the major partners in the FAN-1 well which was reported to have struck a gross payzone of 500 metres around 100 kilometres offshore of Senegal.
Cairn said in a statement the FAN-1 exploration well in the Sangomar Deep block, offshore Senegal, has a mean gross oil-in-place estimate of around 950 million barrels, of which Cairn’s share is 40%. Depending on the quality of the rocks in the area where the oil is located, around a third of that might be recovered.
A further well is planned for next year.
FAR YTD – Punters pile into FAR on Senegal offshore oil discovery
Some oil analysts though warn that the quality of the oil where the reservoir is located off the west African coast is variable, with some recently discovered finds unable to be exploited in full because of this variable quality.
In its statement, Cairn said, “The well, located in 1,427 metres (m) water depth and approximately 100 kilometres offshore in the Sangomar Deep block, has reached a Target Depth (TD) of 4,927 metres (m) and was targeting multiple stacked deepwater fans. Preliminary analysis indicates: 29m of net oil bearing reservoir in Cretaceous sandstones. No water contact was encountered in a gross oil bearing interval of more than 500m. Distinct oils types ranging from 28° API up to 41° API indicated so far from a number of oil samples recovered to surface.”
That means the oil types recovered range from relatively medium (28 API, to light at 41 API (a measurement of the oil’s heaviness compared to water). Light oils contain more products such as petrol and kerosene (jet fuel). Heavier oils contain more products such as diesel, bunker and fuel oils.
Cairn said the size of possible estimates of the resource in place range from 250 million barrels up to 950 million – with a speculative maximum of 2.5 billion.
"As stated prior to the commencement of operations there are no plans for immediate well testing. Further evaluation will now be required to calibrate the well with the existing 3D seismic in order to determine future plans and optimal follow up locations to determine the extent of the discovered resource.
"Once operations are completed on the FAN-1 well, the rig will move to complete the second well, SNE-1 where the top hole has been drilled pending re-entry. This Shelf Edge Prospect targeting a dual objective in 1,100m water depth is in the Sangomar Deep block,“ Cairn said.
Cairn has a 40% working interest in three blocks offshore Senegal (Sangomar Deep, Sangomar Offshore and Rusifique), ConocoPhillips has 35%, FAR Ltd 15% and Petrosen, the national oil company of Senegal, 10%.
In a statement issued in Australia yesterday, FAR managing director Cathy Norman described the find as potentially “transformational” for the company.
“Confirmation of a proven hydrocarbon system materially upgrades the potential of the multiple deep fan and shelf edge prospects that FAR has identified in the blocks.
"We have encountered a very substantial oil bearing interval which has potential to be a significant stand-alone development," Norman said.
Simon Thomson, Cairn Energy’s CEO said in the company’s statement, “The oil discovered in the FAN-1 prospect is an important event for Senegal and the joint venture
“We have encountered a very substantial oil bearing interval which may have significant potential as a standalone discovery.
“Furthermore, this result materially upgrades the prospectivity of the block with a proven petroleum system and a number of deep fan and shelf prospects established."
He added: “Work is already underway with the joint venture partners to determine follow-up activity which is targeted for 2015 onwards.”
