Nido Petroleum-On The Verge of Something Big
May
26
Written by:
5/26/2010 8:01 PM
Nido Petroleum Ltd (ASX-NDO) a small oil producer with large acreage in the highly prospective Palawan Basin in the Philippines is on the verge of producing results which the company believes will be transformational. Flow results from their Tindalo 1 well are imminent with potential to significantly increase cash flow for the company, but more importantly success at Tindalo will minimise Nido's reliance on a farm out of it's company making Gindarra targets.
Tindalo 1 in Service Contract 54A is targeting between 7000 and 15000 bopd of which NDO holds a 40% interest. Success will potentially triple Nido's production and add significantly to Nido's cash flow which at its current market capitalisation, should put upward pressure on share prices. Recoverable oil is estimated at 5.1mmbbl but risk still remains on the flow rates and how long the well will flow at economic rates. Further to Tindalo 1, Nido has a number of shallow targets in SC54A that may offer further production increases, including Yakal 1, Nido 1X1 and Signal Head 2.
Nido currently earns revenue from it's 22.8% interest in the Galoc field. Galoc is another shallow water play which produced on average, approximately 9600 bopd for the year to date, underpinning the cash flow which has enabled Nido to move forward on turning Tindalo into a producing asset. Plans are being made to move onto phase two of the Galoc fields which could add significantly more to the coffers.
Nido's strategy appears to involve exploiting a number of shallow water targets (which they have significantly de-risked over a number of years) to bolster their cash flow and strengthen their balance sheet. Should Nido successfully implement this strategy, they can potentially drill what they believe is company making acreage in Service Contract 54B. The key drilling candidate is Gindarra with an estimated 1000 ooip. Nido currently have a 60% share of SC54B, allowing them to de-risk their exposure through a farm out, however as mentioned above, success in SC54A will put the bargaining chips deep into Nido's corner should they attempt to farm out Gindarra to a major oil company. There are four additional targets to be drilled after Gindarra offering huge upside if successful, however Gindarra offers the largest upside, is the most advanced and de-risked and will be the primary target for Nido.
With Tindalo flow results due imminently and the subsequent cash flow on successful completion enabling Nido to target Gindarra without the reliance on a farm out, potential returns for Nido shareholders make NDO a share to watch as their implementation strategy unfolds. Throwing a spanner in the works is ExxonMobil's recent find in the Philippines which brought major interest to the area. Keeping this in mind one certainly can't rule out the possibility of a takeover by a larger player. The current share price could provide a potential suitor with a cheap entry into the Philippines oil plays with de-risked acreage and producing assets.
All the above creates momentum for what are very exciting times for Nido Petroleum as management attempt to become a serious player in the Asian oil markets.
Disclaimer: At the time of publishing this blog, the Author was a shareholder of Nido Petroleum fully paid shares.
11 comment(s) so far...
Re: Nido Petroleum-On The Verge of Something Big
Nido today announced first oil shows from Tindalo 1. Flow and quality testing is to be completed, but it is a successful first towards production and a big increase in cash flow.
By David Press on
5/31/2010 7:54 AM
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Re: Nido Petroleum-On The Verge of Something Big
It was announced today that Morgan Stanley has taken a large position in Nido Petroleum, with a total holding of over 118m shares, giving them over 11% voting power. It would certainly appear that the big end of town are starting to take notice of this small cap oiler.
By David Press on
6/3/2010 6:38 PM
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Re: Nido Petroleum-On The Verge of Something Big
Nido was yesterday put into a trading halt pending an announcement. Positive flow results could see Nido's shares move north. NDO appears to be truly on the verge of something big.
By David Press on
6/5/2010 8:28 AM
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