Wednesday, September 19, 2012 2:36:28 PM
PetroFrontier / Statoil /Heritage Oil PLC
Note: PetroFrontier (PFC.V / PFRRF ) did a private placement that was oversubcribed. Insiders and Heritage Oil PLC picked up the bulk of the private placement. Statoil is on the ground in Australia getting ready to frack three wells with JV partner PetroFrontier. Statoil is using all their knowledge from Bakken on this play.
The good news is that Heritage must be close to 20% ownership of PFC. That means they should keep Statoil honest should their be success followed by buyout offer. Heritage may be ultimate bidder topping Statoil. Time will tell.
Regarding the private placement the insiders more than tripled their ownership. At 12/31/11 Jespersen only owned 28,700 shares --He purchased 115,385 shares abd received 115,385 warratnts Rae owned 135,000 He purchase 384,615 shares and received same in warrants Buckee owned 484,000 and purchased additional 769,231 shares and received same warrants
McGoldrick owned 185,000 at 12/31/2011 and purchased 200,000 shares and received like warrants. He previously purchased 100,000 in open market on June 28, 2012 at $ .72 to $.77
Buckee is former CEO and President of Talisman Energy. Retired in 2007. McGoldrick retired from Jennings Capital in 2006.
See all the increases in insiders ownership in Petrofrontier here
http://www.canadianinsider.com/node/7?ticker=PFC
Heritage Oil PLC purchased additional 2.3 million shares and received 2.3 million warrants in the PetroFrontier private placement
So they increased their position by over 50% !!
See all the increases in insiders ownership in Petrofrontier here
http://www.canadianinsider.com/node/7?ticker=PFC
12/31/2011 15.4% Heritage Oil PLC 8,832,000 shares 13.8%
On July 14, 2011 Heritage Oil (HOC TSX), an international independent upstream exploration and production company , prior to start-up drilling by PetroFrontier, announced in a press release that they had acquired 10.4% interest in PetroFrontier via public market purchase (paid over $ 2.50 share).
http://www.heritageoilplc.com/
http://www.heritageoilplc.com/pdf/Heritage_Oil_April_post_2011_results.pdf
Resource Stock Update V18 # 8.1
Australian Bakken PetroFrontier, PFC / STATOIL July 10, 2012
Ron Struthers 505 Cummer Ave Apt 311 Toronto Ont. M2K 2L8
Yearly subscription $225 cdn /year or US$225
The Oil Stock to own- No doubt you have heard how the large shale finds, like Marcelus in North America are discovering huge quantities of gas and oil and in fact it has changed the Nat Gas market in North America. I found a company that has discovered a new shale 3 times richer than the ones in North America. And this little company owns the whole shale. This little company could easily make a profound change to the world oil market. In fact a major oil company has already bought 14% of this company on the open market and one of the most famous investors in the world (George Soros) has also bought up over 6% on the open market.
They have drilled 2 wells, the 2nd called MacIntyre-2H reached a total measured depth of 1,916 metres and stayed within the primary target zone, the Lower Arthur Creek hot shale Formation, for approximately 1,080 metres, recording positive hydrocarbon indications along the entire length of the horizontal section.
A multistage open-hole completion string will now be placed in the well before the drilling rig moves on to drill the third horizontal well, Owen-3. Thereafter, a fracture stimulation program is expected to be carried out at each of Baldwin-2Hst1, MacIntyre-2H and Owen-3H.
This is the biggest opportunity I have seen in oil&gas since Ultra Petroleum where we made up to 9800%, no not a misprint, with stock splits $0.50 to about $50.
I have been following this play for about 4 years and am making you aware of PetroFrontier now
because all the right pieces have fallen into place, including the lowest, best buy in the stock price.
They are drilling the 3rd well, with a frac on all 3 wells to follow next, so the big results on whether a discovery is proven is yet to come, doing 3 wells improves the odds of success. At least one well should work, probably two and good odds for all three.
This is an enormous play, they have an average 87.1% interest in 14 million acres so bringing in a senior partner with deep pockets was key, so 2 weeks ago was announced that StatOil will spend $50 million and commit to an additional $80 million to earn an initial 25% and up to $210 million to earn 65%.
StatOil is an expert in shale oil&gas plays with significant participaton in 3 of the major North
American shales, Marcellus, Eagle Ford and Bakken. They know good shale prospects when they see them so this is a big vote of confidence for PetroFrontier.
http://www.statoil.com/en/OurOperations/ExplorationProd/ShaleGas/Pages/Where.aspx
Some excerpts from an article by EnergyNewsPremium.net
“TSX-listed PetroFrontier Corporation and Statoil announced this week the Norwegian energy giant would spend up to $US210 million to earn a 65% interest in six PetroFrontier permits over half of the southern Georgina Basin.
It’s the biggest farm-in deal yet involving a big international company over unconventional targets in Australia.
Statoil has committed to spend more than Hess, Mitsubishi and ConocoPhillips in their respective farm-ins by a wide margin.
The deal proves Statoil is a believer in the liquids-rich potential of the Georgina Basin, highlighted in a Ryder Scott report released by PetroFrontier in late 2010.
Ryder Scott found PetroFrontier’s four granted permits had strong similarities to the Bakken oil shale in North America. It estimated potential recoverable oil (P50 case) of 1.1 billion barrels from conventional targets and a whopping 26.4 billion barrels from shale oil horizons.
The new deal with Statoil locks in a big budget to test this potential, and quickly. For PetroFrontier, headed by former ExxonMobil geologist Paul Bennett, it has been a hugely successful exercise in adding value.”
Total investment by 2016 will be 230 million by Statoil and PFC.
By that time, I am convinced this will be a huge discovery, based on preliminary data Ryder Scoot estimates at 26.1 billion barrel potential.
Strong balance sheet $18 million cash
PetroFrontier TSXV:PFC Recent Price $0.77
52 week trading range $0.67 to $4.24
Shares Outstanding 64 million
Management 6.2%
Institutions about 63% Including:
George Soros Fund 6.2%, Epic Capital 10.6%
Heritage Oil TSX: HOC 14.1%
There are 5.7 million options at an average of 1.87, most above $2.00 with 1.2 million at 1.00 to 1.20 and just 220,000 at 0.25
Highlights
87% average W.I. In 14.1 Million gross acres in Georgina Basin, Australia
• EP 103/104 = 100% W.I.
• EP 127/128 = 75% W.I.
• EPA 252/213 = 100% W.I.
Geologically analogous to North America Shale plays, and shallow depth 600 – 1,200 meters utilizing horizontal drilling and multistage frac technology
Unconventional Oil Rich Zone
• 13 old wells identified with prospective oil rich zones
• PetroFrontier is first to horizontally drill and multi-stage frac in the Northern Territory,
Australia
Conventional Carbonate Zones
• Live oil shows identified in 11 wells, some with high background gas
• Untested potential bypassed oil pay zones identified in several old “dry holes”
Oil Resource 26.4 BBbl Ryder Scott evaluation in Nov 2010
• Biggest play risk is technical and economic (engineering)
Almost ¼ billion exploration phase by a major (expert in shale) StatOil where PetroFrontier is carried so no share dilution. Strong financial position with an expert management team.
Company/Property
PetroFrontier is an oil and gas company exploring for both conventional and unconventional onshore petroleum and natural gas in the Northern Territory, Australia. PetroFrontier is one of the first companies to undertake extensive exploration in the Southern Georgina Basin.
Founded in 2009, the first two years of operations concentrated on amassing a large land position, which currently sits at 14.1 million acres with an 87.1% working interest within four exploration permits. A drilling program commenced in late 2011 targeting significant unconventional hydrocarbon potential.
Headquartered in Calgary, Alberta, Canada, PetroFrontier employs a highly experienced management team and Board of Director with expertise in international oil and natural gas exploration and development.
Australia’s 30 on-shore drilling rigs are dwarfed by a fleet of more than 800 rigs in Canada. The bulk of petroleum spending in OZ is directed offshore leaving only 13% for onshore exploration. Australia is an LNG exporter but imports 55% of its domestic oil demand.
Onshore Australia is a bit of what Canada was like in the 1960s; huge tracts of unexplored land in hydrocarbon-prone basins. The Southern Georgina Basin is one of Australia's last virtually unexplored onshore sedimentary basins encompassing 100,000 square km and nearly 25 million acres, with the potential for multi-billion barrel accumulations. It is under-explored because of the massive shift to offshore hydrocarbon exploration some 40 years ago, its vast and remote deserts, land access issues and until recently, limited access to infrastructure and petroleum services.
PetroFrontier has four onshore EPs granted by the government of Northern Territory, which are
situated over what is believed to be the most prospective part of the basin. Very few wells have been drilled within the entire Southern Georgina Basin making the basin virtually unexplored by North American standards. Within and in the vicinity of PetroFrontier's four EPs and two EPAs a total of only twenty nine wells have been drilled, including twinned wells. The existence of giant oil and gas fields in Neoproterozoic/Cambrian rocks in Russia (Siberia) and in the Middle East (Oman), with recoverable oil reserves in the billions of barrels, has resulted in renewed exploration interest in other similar aged basins throughout the world. Also the great technical advances and widespread success in horizontal drilling and multistage fracture stimulation of unconventional oil shale plays in North America has made international "Hot Shale" zones, like the Arthur Creek found in the Southern Georgina Basin, valuable exploration prospects. The Southern Georgina Basin, onshore Australia, hosts high quality source beds and potential conventional and unconventional reservoir rocks.
Management of the Corporation believes that this basin is one of the most prospective onshore basins in Australia with potential for both very large conventional and unconventional oil and gas deposits.
PetroFrontier has a massive contiguous land position in the Southern Georgina Basin and access to potentially significant oil and gas reserves at relatively low exploration and drilling costs. To identify prospects, PetroFrontier is applying world-class geophysical techniques and seismic data under the guidance of experienced North American and Australian exploration experts.
Exploration is centered on leading edge drilling technologies. PetroFrontier is the first company in Australia to use unconventional horizontal drilling and open hole multi-stage facture stimulation techniques, both of which have unlocked tremendous production volumes from unconventional plays in North America.
Drilling start-up in 2011; Next Steps in 2012
PetroFrontier initiated its drilling campaign in August, 2011 with the drilling of one horizontal well
(Baldwin-2Hst1)and the recent completion of one other (MacIntyre-2). The third horizontal well is planned for the 3rd quarter of 2012 and should spud any day now. An independent open hole fracture stimulation program will be conducted on all three horizontal wells, and these operations should be completed by the end of the 3rd quarter 2012. This program will primarily test for economic flow rates from the unconventional Arthur Creek "Hot Shale" zone through horizontal drilling and multistage frac completions.
Controlling Land Position
PetroFrontier has an average working interest of 87.1% in 14.1 mm gross acres of land in what
management believes to be the most prospective hydrocarbon region of the Southern Georgina Basin.
The hydrocarbon window within these lands ranges from oil mature to gas mature. These lands cover four Exploration Permits: EP 103, EP 104, EP 127 and EP 128. The permits are relatively close to oil and gas markets and infrastructure with a gas pipeline to the north coast, rail connections north and south and public roads to a refinery at Alice Springs.
When they frac these wells in the 3rd qtr. and if successful PetroFrontier will simply have a massive discovery on their hands, the large land position is like owning an entire shale
formation in North America and those have created $billion on market valuation for N American oil&gas companies
The stock has potential to go up in value between 10 and 100 times
MANAGEMENT
PFC has a very high profile and experienced management team, including a couple of top ExxonMobil people former CEO of Talisman Energy, Husky Oil and much more, see below
Paul J. Bennett, President, CEO & Director has been the with PetroFrontier since its formation on February 6, 2009. Mr. Bennett has over 39 years of experience in geoscience, mining and oil and gas exploration, development and producing. Prior to joining PetroFrontier, he held executive and senior management positions with ExxonMobil in the United States, the United Kingdom and Canada. In these roles, he supervised technical, geological and geophysical teams in the Gulf of Mexico, the North Sea, Western Canada, Newfoundland and Nova Scotia. He is a Director of Uranium Participation Corp. and Armistice Resources Corp.
Mr. Bennett holds an Honours Bachelor of Science degree in geology and a Master of Science degree in Geology both from the University of Toronto. He is a member of the Alberta Association of Professional Engineers, Geologists and Geophysicists (APEGGA).
Earl Scott Chief Operating Officer is the newest member of the senior management team. Mr. Scott brings extensive knowledge of drilling, completions, production operations, project management and facilities through 25 years of experience in the oil and gas industry. From 2010 until present, Mr. Scott was a consultant employed as Vice President, Operations for Red Rock Energy and Kurdistan Project Manager for Western Zagros, both in Calgary, Alberta. Prior to 2010, Mr. Scott held various roles including Vice President, Engineering and Operations with BG Canada Exploration Inc and as a technical consultant to ExxonMobil Canada based in Calgary, Alberta. Mr. Scott has held a range of increasingly progressive technical leadership roles in Malaysia, France, Venezuela, Ecuador and Canada with companies such as Exxon, Schlumberger, AEC International and BG Group. Mr. Scott is
a professional engineer and has a Bachelor of Science degree in Mechanical Engineering from the University of Calgary.
Shane J. Kozak Chief Financial Officer, V.P. Finance & Corporate Secretary Mr. Kozak has held senior finance positions with both public and private companies including Rodinia Oil Corp., Keyera Facilities Income Fund, Win Energy Corporation and Severo Energy Corp. Mr. Kozak holds a Bachelor of Commerce degree from the University of Calgary and is a member of the Institute of Chartered Accountants of Alberta.
Robert J. Iverach, Q.C., ICD.D has been the Chairman of the Board and a Director of PetroFrontier since its incorporation. Mr. Iverach is also the Chairman of the Board of Rodinia Oil Corp., a Director of Veresen Inc. and Counsel with the law firm Burstall Winger LLP. Previously Mr. Iverach was a founding partner of the tax law firm Felesky Flynn LLP, where he practiced for 27 years before retiring in 2005. Mr. Iverach holds a Bachelor of Arts degree from the University of Calgary, a Bachelor of Laws degree from the University of Alberta and a Master of Laws degree from the London School of Economics. He is currently an Examiner for the Institute of Corporate Directors.
Dr. James W. Buckee has been a Director of PetroFrontier since its formation on February 6, 2009. Before joining PetroFrontier, Dr. Buckee served as the President and Chief Executive Officer of Talisman Energy (formerly BP Canada Inc.), a position he held for 15 years before retiring in October 2007. Prior to his executive tenure with Talisman, Dr. Buckee held several international petroleum engineering positions with BP Oil, Shell International and Burma Oil. Dr. Buckee holds a Bachelor of Science degree in Physics from the University of Western Australia and a doctorate in Astrophysics from Oxford University.
Kent Jespersen has been a Director of PetroFrontier since its formation on February 6, 2009. He currently serves as Chair and Chief Executive Officer of La Jolla Resources International Ltd. Before joining AEC, Mr. Jespersen also brings to PetroFrontier generous board experience and is currently Chairman of Orvana Minerals and a Director of TransAlta and Canelson Drilling. Before joining PetroFrontier, Mr. Jespersen served as the President of Foothills Pipelines Ltd. and later NOVA Gas International Ltd., where he led the non-regulated energy services business (including energy trading and marketing) and all international activities. Previously, Mr. Jespersen held senior management positions with Husky Oil Ltd.
Martin P. McGoldrick has been a Director at PetroFrontier since its formation on February 6, 2009. With over 30 years of experience in oil and gas investment banking and international oil and gas exploration and development, Mr. McGoldrick has held various senior management positions within the energy industry, including senior roles with Bow Valley Industries Ltd. and TransAlta Corporation. Prior to joining PetroFrontier, he served as Senior Vice President and Director, Investment Banking of Jennings Capital Inc., until his retirement in July 2006. Mr. McGoldrick graduated with a Bachelor of Electrical Engineering degree from the College of Dublin, Ireland and holds a Master of Business Administration with a specialization in Finance from the University of Calgary. He is a member of the Association of Professional Engineers, Geologists and Geophysicists of Alberta (APEGGA).
Donald J. Rae has been a Director of PetroFrontier since August 24, 2010. Mr. Rae has more than 30 years of diversified experience in the oil and gas industry. He is currently the President and Chief Officer of Coral Hill Energy Ltd., a private corporation and prior to that he was the President and Chief Executive Officer of Wave Energy Ltd. (purchased by Crescent Point Energy Corp. in October 2009) and Senior Vice President, Exploration of Penn West Petroleum Ltd. Mr. Rae was instrumental in the utilization of the Packers Plus multi-stage frac'ing technology in the lower Shaunavon (Saskatchewan, Canada) while at Wave Energy, well before that technology was being applied in the Bakken.
The Statoil farm-in agreement
Statoil Australia Oil & Gas AS, a wholly owned subsidiary of Statoil ASA of Norway, Statoil and
PetroFrontier will each contribute $25-million (U.S.) to PetroFrontier's current 2012/2013 phase 1 exploration program. PetroFrontier is being credited with exploration expenditures already incurred in 2012. Upon completion of phase 1, Statoil may elect to commit to phase 2 or withdraw completely whereupon Statoil will have earned no working interest in the lands.
Upon committing to phase 2, Statoil must pay $25-million (U.S.) to PetroFrontier and commit to spend 80 per cent of the next $100-million (U.S.) in the phase 2 program. Only at that time will Statoil have earned a 25-per-cent interest in PetroFrontier's acreage. In summary, to complete phase 2, Statoil must spend $50-million (U.S.) and commit to spend an additional $80-million (U.S.) to earn an initial 25-per-cent interest in the lands.
During phase 2, which is scheduled to occur during calendar years 2014 and 2015, PetroFrontier's $20-million (U.S.) exploration contribution will be financed out of the $25-million (U.S.) paid to it by Statoil. Furthermore, if Statoil elects to proceed with phase 3, which is expected to occur during calendar 2016 and beyond, PetroFrontier will not be required to contribute any additional funds until Statoil has spent the next $80-million (U.S.). Since PetroFrontier's net exploration costs to the end of phase 3 will only be $20-million (U.S.) (during which time Statoil's commitment will be $210-million (U.S.)), PetroFrontier will not require additional equity financing to meet its obligations under the farm-in agreement to the end of phase 3.
Statoil's involvement validates PetroFrontier's understanding of the exploration potential of the
Southern Georgina basin, and will allow PetroFrontier to more rapidly explore and develop its
exceptionally large acreage position of over 14 million acres. Statoil brings exceptional technical
capabilities, being currently heavily involved in North American unconventional resource plays such as the Bakken, Marcellus and Eagle Ford plays.
"With success, the full value of this farm-in agreement will be captured and we are committed, in
partnership with PetroFrontier, to realizing the potential of the Southern Georgina basin. We look forward to the possibilities," said Vidar Skjaeveland, Statoil's vice-president, new ventures.
Financial
Previous financing in 2010 was $58M at $2.00 per share. As mentioned above PFC is completely carried through this exploration/development program and has approx. $18 million cash and no debt.
Summary
PFC has just spudded the 3rd well, Owen-3 that will test the unconventional potential of the primary target zone, the Lower Arthur Creek hot shale, in the Toko synclinal area. Owen-3 will be drilled to an estimated depth of 1,280 metres, through the Lower Arthur Creek hot shale formation and core/log the well before deviated horizontally for approximately 1,000 metres into the primary target zone.
Drilling of Owen-3 is expected to take four to five weeks.
Fracture stimulation update
Following the drilling of Owen-3H, PetroFrontier intends to conduct a 10-stage fracture stimulation program at each of its three wells in the following order: MacIntyre-2H, Baldwin-2Hst1 and Owen-3H.
In order to maximize operational efficiencies, the wells will then be flow tested in the reverse order. PetroFrontier can flow test all of these wells, which is expected to occur over the next few months and prior to the onset of the local Australian wet season.
So we are at the point where the rubber meets the road and over the next few months we will know if this turns into a major new shale discovery.
There is good gas infrastructure nearby but oil infrastructure will need some development. Remember that Australia imports about 50% of their oil and if this shale proves up we will likely see a major rush and area play into these Australian shales. It will be huge news in the oil industry and PetroFrontie would be the darling of this play.
T
hat's where I see the potential of PFC as another Ultra Petroleum, hundreds of wells could be drilledinto their properties.
There is a good chance that PFC will be bought out before all the development but if they hit here.
PetroFrontier TSXV:PFC Recent Price $0.75
Just after I hit the send button on my report, I seen the news that the $15 million bought deal financing was canceled. I don't think this changes things much at all. I think we seen a knee jerk reaction sell off in the stock down about 10 to 15 cents, but short term nothing has changed. It did provide us a good buying opportunity.
PFC is financed for this year and exploration program so we will still see the results of the 3 wells and whether there is a discovery or not. It might be a blessing that they do not finance now. If they wait for results and they are good and by then markets will have likely improved they may be able to finance at higher prices.
The risk is they run into difficulties or delays and may have to finance under more difficult conditions.
Simply one never knows, that is the name of the game in exploration, but I do think the odds of
success are very good with this one. I don't think canceling of the finance had anything to do about the due diligence or prospect of PFCbut is more likely a function of the weak financial markets now. Perhaps MacQuarie figured they couldeasily raise this money and found out they could not?
Also I did not disclose in my write up that I do currently own 20,000 shares of PFC.
Note: PetroFrontier (PFC.V / PFRRF ) did a private placement that was oversubcribed. Insiders and Heritage Oil PLC picked up the bulk of the private placement. Statoil is on the ground in Australia getting ready to frack three wells with JV partner PetroFrontier. Statoil is using all their knowledge from Bakken on this play.
The good news is that Heritage must be close to 20% ownership of PFC. That means they should keep Statoil honest should their be success followed by buyout offer. Heritage may be ultimate bidder topping Statoil. Time will tell.
Regarding the private placement the insiders more than tripled their ownership. At 12/31/11 Jespersen only owned 28,700 shares --He purchased 115,385 shares abd received 115,385 warratnts Rae owned 135,000 He purchase 384,615 shares and received same in warrants Buckee owned 484,000 and purchased additional 769,231 shares and received same warrants
McGoldrick owned 185,000 at 12/31/2011 and purchased 200,000 shares and received like warrants. He previously purchased 100,000 in open market on June 28, 2012 at $ .72 to $.77
Buckee is former CEO and President of Talisman Energy. Retired in 2007. McGoldrick retired from Jennings Capital in 2006.
See all the increases in insiders ownership in Petrofrontier here
http://www.canadianinsider.com/node/7?ticker=PFC
Heritage Oil PLC purchased additional 2.3 million shares and received 2.3 million warrants in the PetroFrontier private placement
So they increased their position by over 50% !!
See all the increases in insiders ownership in Petrofrontier here
http://www.canadianinsider.com/node/7?ticker=PFC
12/31/2011 15.4% Heritage Oil PLC 8,832,000 shares 13.8%
On July 14, 2011 Heritage Oil (HOC TSX), an international independent upstream exploration and production company , prior to start-up drilling by PetroFrontier, announced in a press release that they had acquired 10.4% interest in PetroFrontier via public market purchase (paid over $ 2.50 share).
http://www.heritageoilplc.com/
http://www.heritageoilplc.com/pdf/Heritage_Oil_April_post_2011_results.pdf
Resource Stock Update V18 # 8.1
Australian Bakken PetroFrontier, PFC / STATOIL July 10, 2012
Ron Struthers 505 Cummer Ave Apt 311 Toronto Ont. M2K 2L8
Yearly subscription $225 cdn /year or US$225
The Oil Stock to own- No doubt you have heard how the large shale finds, like Marcelus in North America are discovering huge quantities of gas and oil and in fact it has changed the Nat Gas market in North America. I found a company that has discovered a new shale 3 times richer than the ones in North America. And this little company owns the whole shale. This little company could easily make a profound change to the world oil market. In fact a major oil company has already bought 14% of this company on the open market and one of the most famous investors in the world (George Soros) has also bought up over 6% on the open market.
They have drilled 2 wells, the 2nd called MacIntyre-2H reached a total measured depth of 1,916 metres and stayed within the primary target zone, the Lower Arthur Creek hot shale Formation, for approximately 1,080 metres, recording positive hydrocarbon indications along the entire length of the horizontal section.
A multistage open-hole completion string will now be placed in the well before the drilling rig moves on to drill the third horizontal well, Owen-3. Thereafter, a fracture stimulation program is expected to be carried out at each of Baldwin-2Hst1, MacIntyre-2H and Owen-3H.
This is the biggest opportunity I have seen in oil&gas since Ultra Petroleum where we made up to 9800%, no not a misprint, with stock splits $0.50 to about $50.
I have been following this play for about 4 years and am making you aware of PetroFrontier now
because all the right pieces have fallen into place, including the lowest, best buy in the stock price.
They are drilling the 3rd well, with a frac on all 3 wells to follow next, so the big results on whether a discovery is proven is yet to come, doing 3 wells improves the odds of success. At least one well should work, probably two and good odds for all three.
This is an enormous play, they have an average 87.1% interest in 14 million acres so bringing in a senior partner with deep pockets was key, so 2 weeks ago was announced that StatOil will spend $50 million and commit to an additional $80 million to earn an initial 25% and up to $210 million to earn 65%.
StatOil is an expert in shale oil&gas plays with significant participaton in 3 of the major North
American shales, Marcellus, Eagle Ford and Bakken. They know good shale prospects when they see them so this is a big vote of confidence for PetroFrontier.
http://www.statoil.com/en/OurOperations/ExplorationProd/ShaleGas/Pages/Where.aspx
Some excerpts from an article by EnergyNewsPremium.net
“TSX-listed PetroFrontier Corporation and Statoil announced this week the Norwegian energy giant would spend up to $US210 million to earn a 65% interest in six PetroFrontier permits over half of the southern Georgina Basin.
It’s the biggest farm-in deal yet involving a big international company over unconventional targets in Australia.
Statoil has committed to spend more than Hess, Mitsubishi and ConocoPhillips in their respective farm-ins by a wide margin.
The deal proves Statoil is a believer in the liquids-rich potential of the Georgina Basin, highlighted in a Ryder Scott report released by PetroFrontier in late 2010.
Ryder Scott found PetroFrontier’s four granted permits had strong similarities to the Bakken oil shale in North America. It estimated potential recoverable oil (P50 case) of 1.1 billion barrels from conventional targets and a whopping 26.4 billion barrels from shale oil horizons.
The new deal with Statoil locks in a big budget to test this potential, and quickly. For PetroFrontier, headed by former ExxonMobil geologist Paul Bennett, it has been a hugely successful exercise in adding value.”
Total investment by 2016 will be 230 million by Statoil and PFC.
By that time, I am convinced this will be a huge discovery, based on preliminary data Ryder Scoot estimates at 26.1 billion barrel potential.
Strong balance sheet $18 million cash
PetroFrontier TSXV:PFC Recent Price $0.77
52 week trading range $0.67 to $4.24
Shares Outstanding 64 million
Management 6.2%
Institutions about 63% Including:
George Soros Fund 6.2%, Epic Capital 10.6%
Heritage Oil TSX: HOC 14.1%
There are 5.7 million options at an average of 1.87, most above $2.00 with 1.2 million at 1.00 to 1.20 and just 220,000 at 0.25
Highlights
87% average W.I. In 14.1 Million gross acres in Georgina Basin, Australia
• EP 103/104 = 100% W.I.
• EP 127/128 = 75% W.I.
• EPA 252/213 = 100% W.I.
Geologically analogous to North America Shale plays, and shallow depth 600 – 1,200 meters utilizing horizontal drilling and multistage frac technology
Unconventional Oil Rich Zone
• 13 old wells identified with prospective oil rich zones
• PetroFrontier is first to horizontally drill and multi-stage frac in the Northern Territory,
Australia
Conventional Carbonate Zones
• Live oil shows identified in 11 wells, some with high background gas
• Untested potential bypassed oil pay zones identified in several old “dry holes”
Oil Resource 26.4 BBbl Ryder Scott evaluation in Nov 2010
• Biggest play risk is technical and economic (engineering)
Almost ¼ billion exploration phase by a major (expert in shale) StatOil where PetroFrontier is carried so no share dilution. Strong financial position with an expert management team.
Company/Property
PetroFrontier is an oil and gas company exploring for both conventional and unconventional onshore petroleum and natural gas in the Northern Territory, Australia. PetroFrontier is one of the first companies to undertake extensive exploration in the Southern Georgina Basin.
Founded in 2009, the first two years of operations concentrated on amassing a large land position, which currently sits at 14.1 million acres with an 87.1% working interest within four exploration permits. A drilling program commenced in late 2011 targeting significant unconventional hydrocarbon potential.
Headquartered in Calgary, Alberta, Canada, PetroFrontier employs a highly experienced management team and Board of Director with expertise in international oil and natural gas exploration and development.
Australia’s 30 on-shore drilling rigs are dwarfed by a fleet of more than 800 rigs in Canada. The bulk of petroleum spending in OZ is directed offshore leaving only 13% for onshore exploration. Australia is an LNG exporter but imports 55% of its domestic oil demand.
Onshore Australia is a bit of what Canada was like in the 1960s; huge tracts of unexplored land in hydrocarbon-prone basins. The Southern Georgina Basin is one of Australia's last virtually unexplored onshore sedimentary basins encompassing 100,000 square km and nearly 25 million acres, with the potential for multi-billion barrel accumulations. It is under-explored because of the massive shift to offshore hydrocarbon exploration some 40 years ago, its vast and remote deserts, land access issues and until recently, limited access to infrastructure and petroleum services.
PetroFrontier has four onshore EPs granted by the government of Northern Territory, which are
situated over what is believed to be the most prospective part of the basin. Very few wells have been drilled within the entire Southern Georgina Basin making the basin virtually unexplored by North American standards. Within and in the vicinity of PetroFrontier's four EPs and two EPAs a total of only twenty nine wells have been drilled, including twinned wells. The existence of giant oil and gas fields in Neoproterozoic/Cambrian rocks in Russia (Siberia) and in the Middle East (Oman), with recoverable oil reserves in the billions of barrels, has resulted in renewed exploration interest in other similar aged basins throughout the world. Also the great technical advances and widespread success in horizontal drilling and multistage fracture stimulation of unconventional oil shale plays in North America has made international "Hot Shale" zones, like the Arthur Creek found in the Southern Georgina Basin, valuable exploration prospects. The Southern Georgina Basin, onshore Australia, hosts high quality source beds and potential conventional and unconventional reservoir rocks.
Management of the Corporation believes that this basin is one of the most prospective onshore basins in Australia with potential for both very large conventional and unconventional oil and gas deposits.
PetroFrontier has a massive contiguous land position in the Southern Georgina Basin and access to potentially significant oil and gas reserves at relatively low exploration and drilling costs. To identify prospects, PetroFrontier is applying world-class geophysical techniques and seismic data under the guidance of experienced North American and Australian exploration experts.
Exploration is centered on leading edge drilling technologies. PetroFrontier is the first company in Australia to use unconventional horizontal drilling and open hole multi-stage facture stimulation techniques, both of which have unlocked tremendous production volumes from unconventional plays in North America.
Drilling start-up in 2011; Next Steps in 2012
PetroFrontier initiated its drilling campaign in August, 2011 with the drilling of one horizontal well
(Baldwin-2Hst1)and the recent completion of one other (MacIntyre-2). The third horizontal well is planned for the 3rd quarter of 2012 and should spud any day now. An independent open hole fracture stimulation program will be conducted on all three horizontal wells, and these operations should be completed by the end of the 3rd quarter 2012. This program will primarily test for economic flow rates from the unconventional Arthur Creek "Hot Shale" zone through horizontal drilling and multistage frac completions.
Controlling Land Position
PetroFrontier has an average working interest of 87.1% in 14.1 mm gross acres of land in what
management believes to be the most prospective hydrocarbon region of the Southern Georgina Basin.
The hydrocarbon window within these lands ranges from oil mature to gas mature. These lands cover four Exploration Permits: EP 103, EP 104, EP 127 and EP 128. The permits are relatively close to oil and gas markets and infrastructure with a gas pipeline to the north coast, rail connections north and south and public roads to a refinery at Alice Springs.
When they frac these wells in the 3rd qtr. and if successful PetroFrontier will simply have a massive discovery on their hands, the large land position is like owning an entire shale
formation in North America and those have created $billion on market valuation for N American oil&gas companies
The stock has potential to go up in value between 10 and 100 times
MANAGEMENT
PFC has a very high profile and experienced management team, including a couple of top ExxonMobil people former CEO of Talisman Energy, Husky Oil and much more, see below
Paul J. Bennett, President, CEO & Director has been the with PetroFrontier since its formation on February 6, 2009. Mr. Bennett has over 39 years of experience in geoscience, mining and oil and gas exploration, development and producing. Prior to joining PetroFrontier, he held executive and senior management positions with ExxonMobil in the United States, the United Kingdom and Canada. In these roles, he supervised technical, geological and geophysical teams in the Gulf of Mexico, the North Sea, Western Canada, Newfoundland and Nova Scotia. He is a Director of Uranium Participation Corp. and Armistice Resources Corp.
Mr. Bennett holds an Honours Bachelor of Science degree in geology and a Master of Science degree in Geology both from the University of Toronto. He is a member of the Alberta Association of Professional Engineers, Geologists and Geophysicists (APEGGA).
Earl Scott Chief Operating Officer is the newest member of the senior management team. Mr. Scott brings extensive knowledge of drilling, completions, production operations, project management and facilities through 25 years of experience in the oil and gas industry. From 2010 until present, Mr. Scott was a consultant employed as Vice President, Operations for Red Rock Energy and Kurdistan Project Manager for Western Zagros, both in Calgary, Alberta. Prior to 2010, Mr. Scott held various roles including Vice President, Engineering and Operations with BG Canada Exploration Inc and as a technical consultant to ExxonMobil Canada based in Calgary, Alberta. Mr. Scott has held a range of increasingly progressive technical leadership roles in Malaysia, France, Venezuela, Ecuador and Canada with companies such as Exxon, Schlumberger, AEC International and BG Group. Mr. Scott is
a professional engineer and has a Bachelor of Science degree in Mechanical Engineering from the University of Calgary.
Shane J. Kozak Chief Financial Officer, V.P. Finance & Corporate Secretary Mr. Kozak has held senior finance positions with both public and private companies including Rodinia Oil Corp., Keyera Facilities Income Fund, Win Energy Corporation and Severo Energy Corp. Mr. Kozak holds a Bachelor of Commerce degree from the University of Calgary and is a member of the Institute of Chartered Accountants of Alberta.
Robert J. Iverach, Q.C., ICD.D has been the Chairman of the Board and a Director of PetroFrontier since its incorporation. Mr. Iverach is also the Chairman of the Board of Rodinia Oil Corp., a Director of Veresen Inc. and Counsel with the law firm Burstall Winger LLP. Previously Mr. Iverach was a founding partner of the tax law firm Felesky Flynn LLP, where he practiced for 27 years before retiring in 2005. Mr. Iverach holds a Bachelor of Arts degree from the University of Calgary, a Bachelor of Laws degree from the University of Alberta and a Master of Laws degree from the London School of Economics. He is currently an Examiner for the Institute of Corporate Directors.
Dr. James W. Buckee has been a Director of PetroFrontier since its formation on February 6, 2009. Before joining PetroFrontier, Dr. Buckee served as the President and Chief Executive Officer of Talisman Energy (formerly BP Canada Inc.), a position he held for 15 years before retiring in October 2007. Prior to his executive tenure with Talisman, Dr. Buckee held several international petroleum engineering positions with BP Oil, Shell International and Burma Oil. Dr. Buckee holds a Bachelor of Science degree in Physics from the University of Western Australia and a doctorate in Astrophysics from Oxford University.
Kent Jespersen has been a Director of PetroFrontier since its formation on February 6, 2009. He currently serves as Chair and Chief Executive Officer of La Jolla Resources International Ltd. Before joining AEC, Mr. Jespersen also brings to PetroFrontier generous board experience and is currently Chairman of Orvana Minerals and a Director of TransAlta and Canelson Drilling. Before joining PetroFrontier, Mr. Jespersen served as the President of Foothills Pipelines Ltd. and later NOVA Gas International Ltd., where he led the non-regulated energy services business (including energy trading and marketing) and all international activities. Previously, Mr. Jespersen held senior management positions with Husky Oil Ltd.
Martin P. McGoldrick has been a Director at PetroFrontier since its formation on February 6, 2009. With over 30 years of experience in oil and gas investment banking and international oil and gas exploration and development, Mr. McGoldrick has held various senior management positions within the energy industry, including senior roles with Bow Valley Industries Ltd. and TransAlta Corporation. Prior to joining PetroFrontier, he served as Senior Vice President and Director, Investment Banking of Jennings Capital Inc., until his retirement in July 2006. Mr. McGoldrick graduated with a Bachelor of Electrical Engineering degree from the College of Dublin, Ireland and holds a Master of Business Administration with a specialization in Finance from the University of Calgary. He is a member of the Association of Professional Engineers, Geologists and Geophysicists of Alberta (APEGGA).
Donald J. Rae has been a Director of PetroFrontier since August 24, 2010. Mr. Rae has more than 30 years of diversified experience in the oil and gas industry. He is currently the President and Chief Officer of Coral Hill Energy Ltd., a private corporation and prior to that he was the President and Chief Executive Officer of Wave Energy Ltd. (purchased by Crescent Point Energy Corp. in October 2009) and Senior Vice President, Exploration of Penn West Petroleum Ltd. Mr. Rae was instrumental in the utilization of the Packers Plus multi-stage frac'ing technology in the lower Shaunavon (Saskatchewan, Canada) while at Wave Energy, well before that technology was being applied in the Bakken.
The Statoil farm-in agreement
Statoil Australia Oil & Gas AS, a wholly owned subsidiary of Statoil ASA of Norway, Statoil and
PetroFrontier will each contribute $25-million (U.S.) to PetroFrontier's current 2012/2013 phase 1 exploration program. PetroFrontier is being credited with exploration expenditures already incurred in 2012. Upon completion of phase 1, Statoil may elect to commit to phase 2 or withdraw completely whereupon Statoil will have earned no working interest in the lands.
Upon committing to phase 2, Statoil must pay $25-million (U.S.) to PetroFrontier and commit to spend 80 per cent of the next $100-million (U.S.) in the phase 2 program. Only at that time will Statoil have earned a 25-per-cent interest in PetroFrontier's acreage. In summary, to complete phase 2, Statoil must spend $50-million (U.S.) and commit to spend an additional $80-million (U.S.) to earn an initial 25-per-cent interest in the lands.
During phase 2, which is scheduled to occur during calendar years 2014 and 2015, PetroFrontier's $20-million (U.S.) exploration contribution will be financed out of the $25-million (U.S.) paid to it by Statoil. Furthermore, if Statoil elects to proceed with phase 3, which is expected to occur during calendar 2016 and beyond, PetroFrontier will not be required to contribute any additional funds until Statoil has spent the next $80-million (U.S.). Since PetroFrontier's net exploration costs to the end of phase 3 will only be $20-million (U.S.) (during which time Statoil's commitment will be $210-million (U.S.)), PetroFrontier will not require additional equity financing to meet its obligations under the farm-in agreement to the end of phase 3.
Statoil's involvement validates PetroFrontier's understanding of the exploration potential of the
Southern Georgina basin, and will allow PetroFrontier to more rapidly explore and develop its
exceptionally large acreage position of over 14 million acres. Statoil brings exceptional technical
capabilities, being currently heavily involved in North American unconventional resource plays such as the Bakken, Marcellus and Eagle Ford plays.
"With success, the full value of this farm-in agreement will be captured and we are committed, in
partnership with PetroFrontier, to realizing the potential of the Southern Georgina basin. We look forward to the possibilities," said Vidar Skjaeveland, Statoil's vice-president, new ventures.
Financial
Previous financing in 2010 was $58M at $2.00 per share. As mentioned above PFC is completely carried through this exploration/development program and has approx. $18 million cash and no debt.
Summary
PFC has just spudded the 3rd well, Owen-3 that will test the unconventional potential of the primary target zone, the Lower Arthur Creek hot shale, in the Toko synclinal area. Owen-3 will be drilled to an estimated depth of 1,280 metres, through the Lower Arthur Creek hot shale formation and core/log the well before deviated horizontally for approximately 1,000 metres into the primary target zone.
Drilling of Owen-3 is expected to take four to five weeks.
Fracture stimulation update
Following the drilling of Owen-3H, PetroFrontier intends to conduct a 10-stage fracture stimulation program at each of its three wells in the following order: MacIntyre-2H, Baldwin-2Hst1 and Owen-3H.
In order to maximize operational efficiencies, the wells will then be flow tested in the reverse order. PetroFrontier can flow test all of these wells, which is expected to occur over the next few months and prior to the onset of the local Australian wet season.
So we are at the point where the rubber meets the road and over the next few months we will know if this turns into a major new shale discovery.
There is good gas infrastructure nearby but oil infrastructure will need some development. Remember that Australia imports about 50% of their oil and if this shale proves up we will likely see a major rush and area play into these Australian shales. It will be huge news in the oil industry and PetroFrontie would be the darling of this play.
T
hat's where I see the potential of PFC as another Ultra Petroleum, hundreds of wells could be drilledinto their properties.
There is a good chance that PFC will be bought out before all the development but if they hit here.
PetroFrontier TSXV:PFC Recent Price $0.75
Just after I hit the send button on my report, I seen the news that the $15 million bought deal financing was canceled. I don't think this changes things much at all. I think we seen a knee jerk reaction sell off in the stock down about 10 to 15 cents, but short term nothing has changed. It did provide us a good buying opportunity.
PFC is financed for this year and exploration program so we will still see the results of the 3 wells and whether there is a discovery or not. It might be a blessing that they do not finance now. If they wait for results and they are good and by then markets will have likely improved they may be able to finance at higher prices.
The risk is they run into difficulties or delays and may have to finance under more difficult conditions.
Simply one never knows, that is the name of the game in exploration, but I do think the odds of
success are very good with this one. I don't think canceling of the finance had anything to do about the due diligence or prospect of PFCbut is more likely a function of the weak financial markets now. Perhaps MacQuarie figured they couldeasily raise this money and found out they could not?
Also I did not disclose in my write up that I do currently own 20,000 shares of PFC.
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