Carnarvon Petroleum Ltd (ASX: CVN) is an oil and gas exploration company with projects located offshore off the north-west coast of Western Australia and in the Timor Sea. Carnarvon has a market capitalisation of A$181 million.
Carnarvon main project of significant interest is the Dorado/Roc project (located 160 kms north of Port Hedland, Carnarvon’s 20% interest and Santos 80% interest).
What are the key points from Carnarvon’s quarterly activities report?
There a three key points of Carnarvon’s report. Firstly, the Dorado development planning and preparation work is progressing as planned. the work being undertaken is focused on preparations to commence the Front-End Engineering Design (FEED) phase. Secondly, Carnarvon’s has a strong cash balance, with A$118 million as at the end of the quarter. This means the Company is in a very good position to cover its 2020 expenditure and beyond. Finally, Carnarvon’s is still working to continue with securing potential partners interested in joining Carnarvon in the Buffalo project and assisting with its future funding.
What is the outlook for Carnarvon’s?
The main point of interest of Carnarvon is the Dorado project. On 8 October 2019, Carnarvon and Santos (STO) announced the results of the Caley flow test for Dorado-3. The test was very successful. It was reported that the Caley reservoir flow test exceeded 11,000 barrels of oil per day plus associated gas. Carnarvon notes that the potential flow rate is even higher, but the flow rate was limited by the capacity of the test equipment on the rig. This is a significant oil discovery. The test indicates very high potential flow rates of around 30,000 barrels per day from each production well in the Caley reservoir.
After the completion of the FEED phase, Carnarvon and Santos are expected to make a final investment decision, with a production target in late 2024 early 2025.
Carnarvon is a relatively small company compared with the major oil and gas companies such as BHP Group Ltd (BHP), STO and Woodside Petroleum Ltd (WPL). The Dorado discovery could allow Carnarvon to become an established oil and gas company with significant earnings.
Carnarvon’s other main project of interest is the Buffalo project (located in the Timor Sea, 100 per cent interest). The main update for this project is that the Buffalo project is moving from Australian to Timor-Leste jurisdiction. Following this development, Carnarvon’s management signed a Production Sharing Contract with the Government of Timor-Leste. Currently, Carnarvon does not have a partner for this project. However, Carnarvon’s management note they are actively pursuing to secure a partner to join the project.
What is the market reaction to quarterly activity report?
The market reaction to Carnarvon’s quarterly report is neutral. Carnarvon’s share price is unchanged and is currently trading at A0.16 cents. Carnarvon’s share price has not performed well this year, the share price is down around 62% over the year.
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
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