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James Stafford

James Stafford

James Stafford is the Editor of Oilprice.com

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Kurdistan: Our Pick for the Next Big Buy Out

You might not have heard of Oryx (OXC), so if we’re treading on virgin territory here, we’ve got a good reason for doing so.

Earlier this month, Oryx—the upstream division of AOG, offered up 17% of its shares (16,700,000 common shares) on the Toronto Stock Exchange for C$15 per share) with gross proceeds of $250 million. The proceeds will allow Oryx to complete its exploration and appraisal plans through mid-next year, and they expect some serious results over the next 12 months.

The interesting part is who is behind Oryx … Swiss billionaire Jean Claude Gandur, who made his grand entrance onto the oil and gas scene in 2008 with the sale of Addax Petroleum to China’s Sinopec for $7.2 billion. Since then, he’s been out of the fossil fuels game—so Oryx is his re-entry ticket. Gandur owns 77% of Oryx through AOG.

Oryx is exploring in west Africa and Iraqi Kurdistan, and it’s this latter that we have a particular penchant for. It’s also this in which Gandur will excel as a pioneer of power brokering. And Kurdistan is a venue in which gatekeepers and power brokers will make or break you. Gandur makes his rounds like a world-class diplomat, so we like the potential for success here.

Oryx isn’t making any money yet, but it will, and that’s why we think now is the time to get in on this. It could very easily go the way of Addax, which was making about $300 million annually in net income when it was sold to Sinopec. Surely, Gandur is hoping to turn Oryx around in the same way and make his next fortune.

To ensure this, Gandur has dumped $700 million into Oryx, which has been busy buying up licenses and drilling wells. It’s sitting quite nicely in Kurdistan right now with a 100% focus on oil and 143 billion bbls of proven oil reserves.

Kurdistan Assets

•    65% interest in the Hawler license area (home of the Demir Dagh and Banan fields): total production potential for this block (according to Oryx, at least) is 300,00 bpd by 2018
•    Average well cost: $11.5 million
•    45% interest in Sindi Amedi exploration license area, operated by Perenco

Hawler Field

The Demir Dagh field is probably the biggest prospect in this block. It alone could be producing over 210,000 bpd by 2015. It’s been expensive to develop, but Gandur isn’t blinking. Oryx has already put out $50 million on a single well here and the entire field will cost over $1 billion to fully develop (with infrastructure in place), but it’s estimated to hold around 500 million barrels and geologists say it’s likely to be a continuous play that connects to the Banan field, where Oryx will also be drilling later this year.

A recent significant discovery at Demir Dagh makes this the golden play for Oryx:

• 252 MMbbls 2P reserves (3P: 960 MMbbls)
• 307 MMbbls 2C resources (3C: 933 MMbbls)
• 49 MMbbls unrisked prospective resources

It has also identified 3 more prospects targeting light and heavy oil potential.

This year we should see 3 more exploration wells drill and one appraisal well in the Hawler license, with at least one and likely more appraisal wells next year. The first oil is expected in 2014, with peak rate of 105,000 bbl/d in 2017 from Demir Dagh.

Kurdistan Hawler Field

Other Assets

We’re not terribly excited about Oryx’s Wasit license area in Iraq because there’s too much political baggage here, but it’s got some other assets we’re watching closely, including in Nigeria, offshore Senegal and Guinea Bissau and Congo.

Financial Snapshot:

•    98.5 million shares outstanding
•    C$14.50/share
•    Cash on hand: $350
•    IPO cash $250
•    $900 million on assets

Looking Ahead …

What we really like here is how we see the future. Taking a history lesson from the build-up and profitable sale of Addax in 2008, it’s important to note where Oryx’s assets are situated. The Hawler block is near a number of concessions operated by some big players like Exxon Mobil, Chevron, Marathon Oil, Total DNO and Hess—all of whom will be closely eyeing Oryx’s development of its key assets in Kurdistan. Oryx will have any number of potential courters, and this is what it’s all about: Not FINDING oil and gas, but making money on the process of finding oil and gas.

See and excellent map of all the Kurdish oil and gas concessions here.)

We also like that Gandur—diplomat extraordinaire—will be able to navigate what is indeed a high-political risk venue. He has the right connections in place, and those connections are with the Kurdistan Democratic Party (KDP), which is the key power broker for Kurdistan’s oil and gas concessions, and the family of its leader, Masoud Barzani, also president of the Kurdistan Regional Government (KRG).

Gandur knows Kurdistan well. He partnered with Anglo-Turkish Genel Energy—the biggest producer and the key player in Kurdistan—more than half a decade ago.

And Oryx has definitely got enough cash to fast-track the development of its Kurdistan assets … and then the courting will begin, sooner than you think.

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