Tuesday, 11 December 2012 09:00 AM
“We believe the potential exists for significant share price appreciation once Taipan secures a farm-out partner,” stated the report, “and we see significant additional upside if a carried exploration campaign results in a new pool discovery.”
Mackie Research Capital is a 90-year-old fully integrated national investment dealer with 350 employees. The privately owned company provides capital market and wealth management services to private clients, institutions and growth companies.
Taipan is an Africa-focused oil and gas exploration company with interests in 9.7 million acres (3.5 million net acres) of exploration acreage in Block 1 (20%) and Block 2B (100%) located onshore Kenya.
Kenya has become a hot spot for oil exploration since March, 2012 when Tullow Oil (TLW-LSE) and Africa Oil (AOI-TSX) announced that the jointly drilled Ngamia-1 well hit 100 meters of net play.
Subsequent to that discovery, Africa Oil’s value increased 600% to $2.5 billion.
Exxon Mobile (XOM-NYSE), BG Group (BG-LSE), Marathon (MRO-NYSE) and Apache (APA-NYSE) are all currently operating in East Africa, lured by low drilling costs.
Short Term Catalysts:
· Results from nearby Paipai exploration well (December, 2012)
· Definitive farm-out agreement at Block 2B (January, 2013)
· Results from nearby Kinyonga exploration well (mid-2013)
· Exploration drilling on Block 2B (late 2013)
· Exploration drilling Block 1 early (2014)
“Block 1 and Block 2B hold a combined net un-risked prospective resource of 530 million barrels of oil,” states Mackie Research, “With recent nearby drilling successes, subsequent to the initial resource estimate, and with the acquisition of new seismic data, we expect the prospective resource estimate will increase substantially.”
Taipan is currently in discussions with several companies that are considering farming into Block 2B. Management anticipates that an agreement will be finalised in Q4, 2012.
“We expect the farm-out terms will include compensation for Taipan’s back costs, funding of additional seismic, and a carry on the cost of drilling and testing of future exploration wells,” States Mackie Research, “Taipan plans to retain a 50% interest in Block 2B, which will expose investors to substantial upside in the event of a discovery.”
Taipan CEO Maxwell Birley has held senior positions with Marathon, Premier and Oil Search, and played a key role in the discovery over 1.75 billion barrels of oil. With operating experience in Equatorial Guinea, India, Pakistan and Yemen - Mr. Birley is now living full time in Kenya.
“Taipan’s recent proprietary technical work is demonstrating that the Anza Basin is likely to be one of the largest Tertiary-age rift-basins of the East African Rift system which contains multi-billion barrel oil discoveries,” stated Birley, “Based on gravity, magnetic and seismic data we believe that the ‘sweet spot’ of the Anza Basin is located on Block 2B.”
BLOCK 2B Overview:
· Similar to Ngamia-1
· Trend extends from Block 9
· Oil & gas shows in Hothori 1 well
· 387 million barrels potential
· 100% working interest
· 7807 km2 in Anza basin
· 17 prospective leads
· Farm-out agreement expected Q4, 2012
Comparing Taipan to other juniors in the region, Mackie values TPN’s prospective resources at $1.02/ share (risked) and $3.02 (unrisked).
“With drilling success and the conversion of prospective resources into contingent reserves, we see a potential Blue-sky value of Taipan of $3.95/fd share on a risked basis and $12.95/fd share un-risked,” states the report.
Kenya is now ranked as the top place for onshore oil exploration with industry estimates of 20 billion barrels-plus of oil equivalent potential. Exploration drilling in the region is accelerating with at least 10 high impact exploration wells planned for 2013.
Taipan is currently trading at .35, with 74 million shares outstanding and a market capitalisation of $26.5 million.