Well well well radioreactivewhale (RAW), a very difficult question for me (probably most others as well)
But, let's look at some of the facts as I see them.
Nyuni Block (Key 20.0%) KILIWANI NORTH GAS DISCOVERY - On 7 April 2010, the Company announced the results of an independent assessment that estimated a mean, contingent in-place gas resource of 40 BCF at Kiliwani North. The gas discovery has a potential in-place upside of 60 BCF and is expected to have a high recovery factor. The Kiliwani North #1 well tested gas at a rate of 40 MMcfd in June 2008.
KEY paid about $5M (30%) of original drilling costs and issued 2 million vendor shares to Aminex - which it appears Aminex promptly sold off in the good old days when the shares in KEY were worth a bit - for 20% of Nyuni.
KEY Directors are not happy chappies atm because of the frustratingly slow pace of commercialization of the Kiliwani North #1 gas discovery, your mate Orca (the other radioactivewhale) has been polluting the KEY water by tying up all of the potential customers for local gas with their producing Songo Songo field.
RAK have 'racked' KEY and another well has been approved by the Nyuni Joint Venture which KEY would have to fork out $$ they do not have.
4BCF is probably not enough to tempt Orca to purchase 20% of the Nyuni prospect so, selling Nyuni may not be an option. Depending on the agreement, KEY may be able to walk away and not cough up for the new well.
My estimated NPV for Nyuni is zilch, zero, nothing! KEY has blown their $5M.
Songo Songo West is another kettle of fish...
Orca has mapped and evaluated the Songo Songo West (SSW) prospect adjacent to the Songo Songo Field and is in the early stages of planning to drill and test the prospect in Q3 2011. The part Orca is planning to drill is about 2.5Km west of their producing field and within their existing boundary and has nothing to do with West Songo Songo (WSS - a bit confusing the similar names; had me stuffed for a while and had me jumping from report to report to get it right) that Key holds 50.0% via its subsidiary Funguo Petroleum Pty Ltd and is operator.
The block was awarded in about June 2008, to my reckoning, with a 2 well programme in first 3 years, the 2nd well contingent on success of first well. Approx 235 km of 2D seismic undertaken in 2005 is available to SSW JV and 2 large structures already identified from the pre 2005 seismic.
Now! here's the interesting part to me, Orca, in their web site - under EXPLORATION has presented the following - and I'll cut/paste the bloody lot for some Sunday reading by the blog pundits as it contains some pretty exciting stuff that can spill over to KEY...here we go:
Orca has mapped and evaluated the Songo Songo West (SSW) prospect adjacent to the Songo Songo Field and is in the early stages of planning to drill and test the prospect in Q3 2011. OK, OK, I'm repeating some of this stuff - but, read on...
The prospect lies approximately 2.5 kilometres west of the main field and is mapped on seismic as having closure on an elongate north-south oriented tilted fault block trap. As with the Songo Songo main field, two reservoirs are envisaged to be present within the SSW prospect the Neocomian and the Cenomanian, although the primary exploration potential lies within the Neocomian interval. SSW lies entirely within the Companys Discovery Blocks.
McDaniel & Associates conducted an independent assessment of natural gas resources in the SSW prospect in September 2008. The prospect is interpreted by McDaniel to be low risk with a 52% chance of success in the Neocomian and 35% in the Cenomanian. McDaniel assessed the P50, unrisked recoverable resources in SSW at 450 Bcf and the mean, unrisked recoverable resources at 551 Bcf. Managements unrisked mean GIIP for the Songo Songo West prospect of 810 Bcf compares with the McDaniel combined Neocomian and Cenomanian unrisked mean GIIP of 740 Bcf.
Songo Songo West represents a major potential source of reserves upside in the Songo Songo area.
Orca Exploration is planning to drill an initial exploration well towards the south of the SSW structure. If it is successful and can flow at commercial rates, it is likely to be tied back to the manifold in front of the existing processing plant and flowed for a period to prove up the long term deliverability of gas.
Following this confirmation, it is likely that an appraisal well will be drilled into the northern extent of the mapped structure to get a better understanding of the aerial extent of the reservoir and the recoverable reserves. The final field development decision would then be taken, but is likely to involve a significant expansion of the existing facilities.
Songo Songo West is located in water depths of approximately 18 35m and will require a jack-up drilling rig to explore the prospect.
Rig availability is a key focus in well planning, and Orca is actively engaged with other operators in East Africa who have a requirement for a jack-up rig to drill in shallow water along a similar timeframe.
Righto, back to my synopsis of the area, did you see the POS? a 52% chance of success in the Neocomian and 35% in the Cenomanian - why drill? just turn on the tap lol - but these figures are rarely, if ever heard from the likes of McDaniel & Associates who have their backsides on the line, and, look at the volumes...lovely!
Why do I like what I see? Well, the prospect carries on over the boundary into the West Songo Songo prospect and goes for a long, long way (not that I can interpret the seismic, I have to rely on the lads at KEY mapping of their area).
A lot of blue sky in WSS that has to be worth a fair bit...how much??? It has to be worth a fair bit to Orca (even to keep opposition out of their cabbage patch).
If I was Ken & Co, I'd be waiting for Orca to drill before selling and let the vultures in then...not now.
That's enough bs from me in answer to your question RAW - in short - I don't know; but I reckon it is worth more than the current mc by a long way.
KEY Price at posting:
5.0¢ Sentiment: LT Buy Disclosure: Not Held
(20min delay)
