By Andrew Hobbs
WITH a farm-out process underway and fundraising activity continuing apace, Larus Energy chief executive Ash Mangano is predicting a bright future for the company.
“We feel like we’ve come a long way since April last year and we’re very much looking forward to the next 12 months ahead,” he told PNG Resources in an interview.
“It’s just a feeling of excitement for the company – in this market it’s rare to have that feeling.”
Larus Energy is the owner and operator of Petroleum Prospecting Licence (PPL) 326, which covers 1.67 million hectares onshore and offshore Papua New Guinea, south and east of Port Moresby.
The project area has been held by Larus since it was set up in 2009, with the company investigating a series of anticlines in and around the Torres basin.
Since it was founded, Larus has carried out a series of tests to derisk them, pursuing leads defined by data recovered in a series of studies.
The tests verified an unrisked resource of 13.5 trillion cubic feet (TCF) of gas at the company’s Sunday prospect and another 13 TCF at the Vekwala prospect.
“After initially seeing these on the Sunday prospect, the company continued to run seismic over those prospects and leads, de-risking them to the point where they are now – which is one in ten and is as good as it essentially gets as a frontier field,” he said.
“In the last five or six years [we’ve] gone from the oil and gas world thinking that this is moose pasture or no prospectivity in the PPL 326 region, or more broadly south east PNG, to, given the interest in the farm-out process, the oil and gas exploration world genuinely considering this as a new basin and potentially a massive hydrocarbon province,” Mr Mangano said.
The company has since identified about 44 prospects and leads, he said, though only eight have been confirmed by a third party to date.
Nonetheless, after running three seismic surveys of its own, most recently the 800 line kilometre Paluma 2D seismic survey which was completed in April, Larus is now confortable that either the Vekwala or Sunday prospects were drillable.
Mr Mangano said the company would have liked to have drilled a well by now, but had been unable to do so for reasons he said were out of his control.
“The Government and Department of Petroleum have been understanding and knowledgeable on that front and assisted us with reshaping the work program that is suitable to that area,” he said.
“That’s not always putting hard deadlines on people and tough work commitments – saying drill a well in the next six months because the reality is that people won’t be able to do that.”
“They’ve understood what is required from a corporate and technical perspective and worked with us to get to where we are, which is a huge factor,” he said.
Mr Mangano praised the stability and efficiency of the PNG government in helping the company to grow.
“I think it reflects very well on the people in place, the processes in place and the general stability of their department of petroleum and energy and the ministry on the whole,” he said.
“I certainly think PNG is not only ‘open for business’ but I think the stability is there to give investors or energy companies the confidence to put money into investing in those assets.”
At present, Larus is in the process of applying for a new work permit over the PPL 326 following completion of a six-year licence, with approval expected in August.
“During that period exploration work will continue and the focus won’t be so much on geology and geophysical, it will be more on drilling.”
“We’re looking to drill as many wells as we can in the next five year period,” he said.
“To execute that we’re looking at bringing in an industry partner through this farm out process which will provide not only industry expertise but also support on the funding side of things,” he said.
The Larus data room is currently open, with potential farminees carrying out geological, geophysical, and commercial due diligence in line with farm-in procedures and schedules.
Larus expects to be able to update shareholders more fully in the third quarter.
“Being a completely new basin, with PPL 326 capturing essentially all of the sweet spot, there aren’t too many opportunities like that around the Asia Pacific or globally, we feel,” Mr Mangano said.
“Secondly to that there aren’t any near term work commitments – so we need to be looking to drill a well by at least the third year in our extension period, which is August 2018,” he said.
“[This] means the companies can get in now and not have a 30 million dollar commitment in the next six months.”
The company had also successfully completed a placement to shareholders, which Mr Mangano said was well received.
The placement was designed to fund the Paluma seismic survey, which in turn confirmed the location of various prospects within the permit, he said.
In applying for a new, five-year permit over the same area, Larus will have to surrender roughly 50 per cent of the current block – with the Paluma survey helping to identify which parts needed to go.
“It really firmed up that the prospectivity is a sweet spot in the middle, onshore and offshore, we feel, and we’re comfortable relinquishing 50%, and we won’t be giving away any significant prospects or leads,” he said.
“We’ve only run seismic offshore at this point so all of our prospects and leads are offshore, however we’re confident that there’s an equivalent set and an equivalent size of prospects and leads onshore.”
“That offers the flexibility for a partner coming in as to whether they’d like to develop onshore or offshore… If it does go onshore there’ll obviously need to be seismic run onshore to define those prospects and leads as a drillable prospect.”
Mr Mangano said he was looking forward to the company’s annual general meeting in August, though he added that he was doubtful there would be any news related to the planned farm-in at this stage.
He was, however, pleased with shareholder support for the placement, given the challenges in the oil and gas sector at present.
“In my opinion now is the time to invest in good assets in oil and gas, as they’re essentially going at a significantly discounted rate to what they would be in more balanced oil price markets,” he said.
“I think investors acknowledge that as well and are somewhat double downing on their investment given the discount of what the company’s operating at, at this point in time from a capital raising perspective.”
Nonetheless, the company would be careful with any cash raised through these capital raisings, he said.
“The last thing I would want to do is pick up average assets or average investments that are costly to the shareholders in terms of dilution,” he said.
“In my personal opinion I would rather do nothing and leave shareholders with the fantastic exposure to PPL 326 that they have at this point in time, than acquire low grade assets for the sake of empire building.”