| Tue 19 Apr 2005, 10:04 | | Exxoteq expects to deliver on Algoa |
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Exxoteq expects to deliver on Algoa
April 19, 2005
By Ingrid Salgado
Exxoteq expected to start drilling for oil in the Algoa Basin, off the Eastern Cape, in the first quarter of 2006, chief executive Gavin Zietsman said yesterday.
This follows a R35 million equity injection announced last month by the oil exploration company, which has failed to deliver any oil since its 2003 listing on the JSE Securities Exchange.
Zietsman said the company would initially produce between 300 and 600 barrels of oil a day from the first well, subject to a host of geological factors such as flow rates. Production could increase if further investment resulted in more wells being sunk.
`As soon as we have a producing well, the project becomes bankable. Then, depending on recoverable reserves, numerous funding sources immediately become available,` Zietsman said.
According to Exxoteq`s listing prospectus, the Algoa field has about 3.8 million barrels of recoverable reserves.
The project, said Zietsman, would be viable as long as oil prices remained above $27 (R169) a barrel. The first well was expected to cost about R30 million.
The oil would be sold to local refineries at import-parity prices, with transport options via both road and sea from the Eastern Cape. Most of the preparation for the project had been completed, including approval by the department of minerals and energy.
`One of the biggest management concerns is not only that no oil has been produced to date, but also that no revenue has been produced to date. Very high on our priority list will be initiatives and opportunities that will result in a revenue stream for the company,` Zietsman said.
The project was made possible after Inyanga, a consortium of black investors, bought 26 percent of Sequence Oil & Gas, the Exxoteq subsidiary that holds the rights to the Algoa concession, as well as 32 percent of the holding company.
Exxoteq was suspended from the JSE last year after its auditors said it was trading without reasonable expectations of meeting liabilities. This came after the sudden death of former chairman Prem Sawney before he had secured financing for Algoa.
Zietsman said an audit was being conducted and would be finalised by mid-May. Thereafter, Exxoteq would apply to the JSE to lift its suspension and simultaneously release a circular to shareholders giving details of several African projects that were in the pipeline.
Exxoteq was in talks with at least four companies regarding various upstream and downstream activities, in addition to opportunities in Angola, he said.
`The Angolan authorities have made public statements that they are looking for smaller niche companies to exploit their marginal fields, which is one of the reasons I`m comfortable with Exxoteq`s position,` Zietsman said.
The group had no aspirations to venture into refining activities in SA, Zietsman said. However, in partnership with its parent company, Exxoteq US, it was in talks to get involved in a downstream refining facility elsewhere on the continent.
