BZP - from Jefferies (who has $22 target and buy rating)
Event
BPZ provided an operational review during its analyst day. 18XD well
successful oil producer despite challenges.
Key Points
• 18XD successful despite challenges...three zones tested at
5,300 boepd even with some damage to well. The best test came
from the second drillstem test (DST), which flowed 4,150 bopd from
a new sand. DST#1 also tested a new sand, but damage to the
wellbore limited flows to 500 bopd. Meanwhile, formation damage
held flows to 700 bopd in DST#3. Additional tests are currently
underway. If successful, production could increase another 2,000
bopd to up to 6,000 bopd, according to company estimates. The
well is expected to begin producing in mid-April.
• 20XD well next for Corvina...20XD, the next well planned at
Corvina, is set to spud following the completion of the 18XD well.
The 20XD will target the updip structure and further delineate the oil
potential in Corvina. If successful, the well could confirm as much
as 20 million barrels of additional oil potential on Corvina. The well
is expected to commence production in August. One more Corvina
well is scheduled for '08, the 17D. Plans are to spud the well this
summer.
• Oil production to resume in April...production from the 14D and
21XD wells expected to resume in mid-April. In Q2, production is
estimated to flow at ~6,000 bopd, 4,000 bopd from the 14D and
21XD and 2,000 bopd from the 18XD. The 20XD could add another
2,000 bopd later in the second half.
• IFC a key source of external funding...The International Finance
Corporation (IFC) has been a key source of funding for BPZ.
Recently, the proposed funding was doubled to $240 million from
$120 million. The decision on Tranche "A" is expected in April,
while the decision on Tranche "B" is anticipated in September.
Tranche "A" is anticipated to be approximately $35 million and
Tranche "B" is estimated at $115 million. Funds will be used for
development of the Corvina field and for the gas-to-power project,
respectively.
• Up next, drilling for oil on Albacora...refurbishing platform and
facilities. Costs of refurbishments estimated at $9 million. Initial
drilling plans currently being developed. First well expected to spud
in Q4. BPZ considering an exploration well prior to its plans to
rework 3 existing wells. First production in the field is expected in
Q2 '09.
• The Albacore field has estimated 3P potential of more than 160
million barrels. In addition, the Lower Zorritos remains to be tested
and is not included in the 3P reserve figure. However, BPZ would
likely seek a partner to pursue the deeper play.
• Review of Reserves...At December 31, 2007, proved reserves according to SEC guidelines were 11.9 mmboe, of
which 75% were proved undeveloped. Estimated pre-tax PV-10 was $609 million.
• According to more liberal but realistic SPE guidelines, proved reserves totaled ~18 mmboe, probable reserves ~ 38
mmboe and possibles ~ 4 mmboe. The reserves are based on data gathered from the four wells drilled to date.
• In February's SPE reserves, the 18XD well contributed about 6 mmboe to proved reserves. Proved reserves assume
a recovery factor of 18% and 3P reserves assume a 40% recovery factor. The oil pool covers an estimated 2,250
acres. Gas reserve report due out soon.
• Review of results to date...Since September 2006, 4 wells have been drilled on the Corvina structure. The first well
was the 21XD which tested at 5,900 bopd of oil and 60 mmcf/d of gas. The 14D well tested a cumulative 104 mmcf/d
of natural gas and 2,400 bopd of oil. BPZ commenced oil production from the CX11 platform on November 1, 2007 at
~4,000 bopd.
