Oilex Energy (OEX:AU) has assets in the Canning basin in Australia, Cambay field in India and Timor Sea, Indonesia, and more recently moved into the Canning Basin, Australia. However for the past couple of years the entire focus of the company and its investors has been on its operation in the Cambay field in Gujarat, India. The company has 45 percent stake in the project and the remaining stake is held by Gujarat State Petroleum Corporation (GSPC).
This location is ideal in terms of the proximity to the gas grid which is the most sophisticated network in India. Also the project is a mere 300Km from Mumbai and many other high consumption areas. The management has acted on capital requirements by having a capital funding in March 2014 for the development of this field. The company raised $6.8m through the placement of new shares. It has also obtained further funding options via a $11m Equity Financing Facility from Darwin Strategic Limited for further contingency.
Following a technical well failure at Cambay’s 76-H well, Oilex have moved slowly and carefully to ensure minimal risk in their follow up 77-H well, with the aim to prove commercial flows and proof of concept. Testing it still underway with a number of technical hold-ups along the way. However, unexpected high oil flows have been encountered, along with the expected gas flows. With the flaring of gas and flowing of light oil in the pivotal Cambay 77H well there is a major possibility of high returns from this field. The company’s shares have had a bullish trend and have risen significantly in the past quarter in anticipation of successful operation in the Cambay field.
Figure 1 : Oilex Energy Share Price Movement over 12 months.
The oil recovered during the initial operation is currently transported to nearby refinery for sale. The price of this oil is similar to Bonny Light Crude – the Nigerian ‘high grade’ benchmark. The gas produced in the same operation is flared to maintain the safety level within the well. The oil has an average API of 48.3 degrees which varies from a high of 50.1 to a low of 43.6. See below the sampling of the oil taken from the Cambay 77H well.
Figure 2 : Oilex Oil Samples
We eagerly await completed flow back results on the Cambay 77-H well, from which further development plans will be derived. This is potentially a company making asset and as such, success here could see large gains in the shareprice.
As briefly mentioned at the start of this article, the company has diversified its assets which were very India centric earlier. Currently it has 11,400 Km2 under SPA-0055 where they are searching for the possibility of oil and liquids rich gas. It is 100% equity holder and operator of the field. It also holds 100% equity in STP-EPA-0106 located in the north-western Australia in the Canning basin. Interest in the Canning Basin appear to be increasing with recent success offshore and growing demand for gas in the Asia region. We expect to see Oilex attempting to farm-out holdings in these two permits in order to reduce risk and fund exploration.
Disclaimer: The owners/writers for YourWealthWatch directly hold shares in Oilex Energy.