(Disclosure: The following represents my opinions only. I am not receiving any compensation for writing this article, nor does Hydra Capital have any business relationship with companies mentioned in this post. I am long VLE.TO)
New Slide Deck Sheds First Light on Banarli Potential
This weekend I noticed that Valeura had published an updated corporate presentation to its website. On its own, that's typically not worthy of discussion, but this slide deck included the first look at the results of the new 3D seismic survey on the company's 100%-owned Banarli block. Five different play types were highlighted and maps were given at two horizons, the Osmancik and Mezardere, which illustrated the stacked potential of future drill targets. As a reminder, the drilling of the first of those targets, Bati Gurgen-1, is already underway and should be completed in about two weeks. If successful, pipeline tie-ins are expected to be quick and inexpensive.
The new presentation is linked here:
I've clipped a few images from the new presentation below:
1) Osmancik Targets (conventional reservoir, analogous to the on-trend Gurgen discovery). Here VLE has mapped three parallel fault trends. Bati Gurgen-1 and Yayli-1 are on trend with the producing Gurgen field and are being drilled back-to-back in the current drill program. The Aydinkkoy and Muratli prospects to the north are along separate faults, closer to the basin centre. Gas migration would be expected to be from the top of the map area (north and deeper) to the bottom of the map area (south and shallower).
2) Mezardere Targets (conventional/unconventional reservoir not unlike the Montney of Western Canada). The Mezardere has proven to be productive in the JV lands to the south and typically requires fracture stimulation. I believe the Mezardere play could be quite material for VLE as there is the potential for both structural and structural-stratigraphic trapping, and the formation is areally extensive. The Mezardere consists of slope channel and fan sands. Between the two maps, the stacked nature of the Osmancik/Mezardere potential is apparent. Yayli and Bati Gurgen are both stacked targets.
3) Basin Centred Gas Accumulation Play (aka BCGA, the holy grail of unconventional gas plays). While this map is not new, the chart in the bottom right clearly shows that there appears to be a regional pressure seal around 2,700 metres depth. Below this level, pressure gradients are pretty convincingly indicative of an over-pressured regime, which is one of the requirements for a successful BCGA. A commercially successful BCGA play on Europe's doorstep would be a highly sought after and extremely valuable resource. VLE's Banarli licences are located in the centre of the map area, containing most of the purple-coloured area, which denotes the basin centre… the potential pressure seal area is denoted by the red dashed line. I believe that the potential of the BCGA play would likely be measured in the TCF (trillion cubic feet) range and a successful test within the Banarli concession would likely mean a windfall for VLE investors. Discussions regarding the farm-out and/or testing of this play are ongoing.
Summing it Up
All in all, there is nothing mind-blowing in the new presentation, but it's definitely nice to see some initial mapping from the new 3D survey that shows what the Gurgen trend looks like as it extends onto 100% VLE lands. Between now and year-end VLE expects to have drilled two wells that could make for a very interesting 2016 and beyond. If either of the newly-mapped Yayli or Bati Gurgen targets prove to be discoveries, they each appear to have the potential to boost VLE's production meaningfully with additional development wells if the productivity of the nearby Gurgen wells is any indication. As always, time will tell, but VLE has over $11 million of positive working capital, no debt, and mid-$40/boe netbacks… now all it needs is a little luck with the drill bit.