Africa Oil Corp (AOIFF)

[douginil]

Eco (Atlantic) Oil & Gas/ Tullow Oil- A home run first strike

From Malcy's Blog

https://www.malcysblog.com/2019/08/oil-price-predator-eco-tullow-reabold-union-jack-and-finally/

The partners have announced this morning that they have made a major oil discovery offshore Guyana at the Jethro-1 well. The well proves 55 metres of Net High Quality Pay on the Orinduik Block in the Lower Tertiary sandstone reservoir and confirms multiple prospects up-dip of recent discoveries notably by Exxon in the Stabroek Block.

This is a substantial discovery made more important by the high value nature of the barrels it will produce and in a stroke de-risks a lot if not all of the Orinduik Block. The fact that it way exceeded pre-drill estimates does credit to the high quality seismic and the development should be simply done with little appraisal and low cost wells. The Block has 2.5bn barrels of gross unrisked resources and with this find the valuation will be impacted for both these quoted companies, just think what might happen if the Cretaceous can be proved up? This field could be 20km² and with 55m of pay could be huge, those pre-drill estimates of 100m or even 200m might end up being conservative.

The Tullow conference call was extremely informative, with few worries about oil/gas mix and porosity and whilst the oil samples are on the way to the lab the way they flowed was clearly encouraging. With 90% net to gross and the oil/water contact plenty deep enough the partners really have hit the jackpot here. And remember that Total farmed-out to Qatar Petroleum before the result was known making both those parties, amongst many others, looking for a bigger piece of this latest oil hotspot…

The share price movements this morning have been, as expected, very positive but £250m on Tullow’s market cap and £1oom +on Eco’s is only part of the story. The rig moves off to drill the Joe prospect which whilst a separate play type can only have been materially de-risked by this result. For Eco it is a validation of their strategy and also for Tullow to whom this has been something big and will also go on to be a company changer. There is a long way to go yet for these companies but for Eco in particular it is a success of the most spectacular nature and at 124p the shares still have considerable upside from here.