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City cheers Columbus Energy’s Suriname entry

“This [agreement] gives the company significant flexibility in terms of the pace of development,” says broker VSA.

Columbus Energy Resources PLC - City cheers Columbus Energy’s Suriname entry
Columbus is heading into Suriname to develop known discoveries

The City reacted positively to Columbus Energy Resources PLC’s (LON:CERP) entry to a new project Suriname which comes with known discoveries.

Columbus has been brought into the Weg Naar Zee Block by state oil firm Staatsolie.

The Weg Naar Zee (WNZ) project area spans some 900 square kilometres and includes both discovered resources and remaining exploration potential.

It is host to some 24mln barrels of discovered resources.

READ: Columbus Energy lands appraisal and development project

Shares advanced nearly 9%, trading at 4.3p, in Friday’s early deals and broker VSA Capital repeated a ‘buy’ recommendation.

With a target price of 21.6p, VSA’s view pitches very substantial potential for upside to the current price.

At WNZ a number of discrete oil-bearing sand bodies have been found over an scattered and intermittent timeline. Historic exploration took place in 1968, between 1989 and 1991, then more recently between 2007 and 2013.

Phased development of already discovered resources

Columbus is committing to appraisal and development work, via phased programmes.

“The first phase of exploration which lasts for up to three years requires CERP to spend US$250k as a minimum work obligation covering G&G studies and an extended well test on at least two stratigraphic oil bearing units,” VSA analyst Oliver O’Donnell said in a note.

“Subject to the results of these tests CERP then have the option to progress to phase two and three which again have low MWO costs but will focus on 2D seismic and further wells.

“This gives the company significant flexibility in terms of the pace of development.”

O’Donnell added: “The key advantage, in our view, is that the low MWO cost in each phase of exploration and the length of time for each phase will enable the company to advance development and appraisal at its own pace while the profit sharing and marketing agreements appear to be unrestrictive and CERP will be able to benefit from successful development of the fields.”

In Phase 1, slated to span three years, the company will conduct studies which will include historic well data along with a detailed reservoir evaluation. Extended well testing is also slated, for at least two of the known oil zones.

The company highlighted that it intends to submit a development plan for the zone that it deems commercial as soon as possible. Columbus noted that the reservoirs may be suited to enhanced oil recovery techniques deployed in Trinidad.

Phase 2 and Phase 3 are optional in the agreement with Staatsolie, with minimum work obligations comprising 100 kilometres of seismic and three new exploration wells in the former and five new exploration wells in the latter.

There’s no upfront cost or payment attached to the agreement.

Columbus brings experience

“Staatsolie have been seeking partners with experience in onshore field developments with secondary and tertiary recovery experience to commercialise the discovered oil resources,” said Leo Koot, Columbus executive chairman.

“Columbus's experience in Trinidad will perfectly complement the existing Staatsolie oilfield production operation experience in Suriname.”

He added: “For Columbus, WNZ is a low cost, low risk entry into a block with an estimated 24mmbbl STOIIP in a proven hydrocarbon province, close to existing infrastructure.

“Provided the results from the extended well tests are as expected, the Company intends to fast track the development of the WNZ oil discoveries."

VSA’s O’Donnell highlighted: “The background of CERP’s management has been key to winning the tender and aside from his technical credentials, as a Dutchman, Leo Koot, has been at a significant advantage against competing bids for the block given that Suriname is a former Dutch colony where Dutch is the official language.

“Furthermore, CERP’s Trinidad management team have previous on the ground operational experience in Suriname, which is another positive and highlights, in our view, why CERP has been able to gain a foothold in the region alongside more established players.”

Important step in the longer-term strategy

“We believe that today’s announcement represents an important step for CERP as it executes on its longer-term strategy,” O’Donnell added.

“The announcement demonstrates how this management team is genuinely capable of executing on the ambitious strategy it has laid out with exposure to a region which has gained genuine global attention from the oil and gas sector.

“We look forward to further updates in relation to the geology and technical understanding of the asset which will enable us to incorporate Suriname into our valuation.”

Quick facts: Columbus Energy Resources PLC

Price: 1.95 GBX

Market: AIM
Market Cap: £17.9 m


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