New Oil and Gas Exploration
New Oil & Gas Exploration activities in Kazakhstan
The Board decided to seek new oil & gas exploration opportunities and on 3 May 2007 announced its intention to focus on exploration and production activities in the Republic of Kazakhstan. Boasting one of the world’s highest growth rates, Kazakhstan’s Gross Domestic Product (GDP) has grown by 9% or more in each of the past six years and is now approximately $US 56 billion or about $US3,600 per capita. The extraction of oil, gas, metal and minerals has played a large part in this revival and in 2005 the country’s total oil production was c 450 million barrels, making it the second largest producer in the Commonwealth of Independent States (CIS), behind only Russia.
The business model that the Board supported was relatively straight forward. Current Kazakh transaction multiples for larger assets are approx $US10/barrel for proven and around $US7/barrel for proven and probable. The Company’s aim is to acquire assets at lower values than this and re-rate them to current western valuations. The Board believe that by gathering smaller fields and using one management team to oversee the development of a number of fields in parallel, JPR should be able to provide economies of scale and considerable upside to our shareholders. Coupled with this strategy, has come the appointment of Erkin Svanbayev, a Kazakh educated Engineer with an oil and gas background in Kazakhstan and extensive upstream and downstream experience as well as excellent credentials in the export of oil from Kazakhstan. Erkin is based in Almaty, the financial capital of Kazakhstan, and JPR has opened an office there with a small staff of five people.
During 2007, the Company identified several potential exploration permits and recruited experienced oil industry consultant Keith Martens to assist in their evaluation. Keith is a Canadian educated 30 year veteran of the oil & gas industry. He has worked with a number of Canadian and Australian organisations including Hudson’s Bay Oil & Gas, Marathon Petroleum, Santos, Tap Oil and most recently Bow Energy.
On 3 July 2007 the Company announced that it had signed a binding terms sheet with the vendors of the Sub Surface Rights on a permit in the Mangistau Basin in South West Kazakhstan. The permit (Block 31) is located in the Zhetybai-Uzen step where government records indicate 6 billion barrels of oil have already been produced. The two biggest oil fields are Uzen and Zhetybai which produce from both the Jurassic and the Triassic.
The permit, consisting of two blocks, covers an area of over 100 sq km and is located on trend with three existing producing oil fields which have potential reserves of 21-56 million barrels of oil (mmbbls). The Contract with the Ministry of Energy and Mineral Resources (MEMR) is for exploration to begin on the permit in 2007. The permit was finally acquired by Jupiter in June 2008.
The Permit has a six (6) year exploration period with the right to extend it twice for two (2) years for a total period of ten (10) years. The permit has been lightly explored with a regional 2D grid of 1970’s and 1980’s vintage seismic carried out by the old Soviet regime. Mapping of the top Triassic map suggests Middle Triassic tilted fault blocks traps similar to the Akkar N and NW Zhetybai oil fields. These traps include a potential field extension to Akkar N and at least two other substantial structures. Recent 3D along this same trend has revealed Middle Triassic traps which have already resulted in new field discoveries. An extension to Block 31 has now been granted by the Kazakh government and this extension has provided Jupiter with an additional 25 square kilometres of exploration acreage.
The shooting of 3D Seismic on the permit commenced in September 2008 and results of this work are expected to be known before the end of February 2009. It is the intention of the Board to drill at least one of the best prospects on the permit during 2009.
Concluding Remarks
The Board is delighted with the progress that has been made this year but recent global market instability has seen the Company share price retreat somewhat, which is disappointing in light of the progress that has been made. The Board is confident of a re rating in due course.
JPR is firmly committed to oil exploration and production in Kazakhstan and the future composition of the Board and management will continue to be refined to reflect this new focus. The Board believe that JPR is clearly focused and will work to improve shareholder value during the 2009 calendar year.
