Proactive Investors
Pura Vida looks to tap into Morocco’s potential
9:16 am by Ian Lyall
A minnow among these big fish is ASX-listed explorer Pura Vida (ASX:PVD), which is sitting on a 75 per cent share of the Mazagan Offshore Area
Morocco is fast becoming the go-to destination for oil exploration.
A benign political backdrop and a generous fiscal regime have made it a magnet for globally recognised names such as Shell (LON:RDSB) and Total right the way through to Tangiers Energy and Longreach at the other end of the spectrum.
The success of the Jubilee field off the coast of Ghana has also had an impact, with explorers such Tullow (LON:TLW), Kosmos and Anadarko heading north to Morocco in a bid to locate Africa’s next elephantine oil discovery.
A minnow among these big fish is ASX-listed explorer Pura Vida(ASX:PVD), which is sitting on a 75 per cent share of the Mazagan Offshore Area.
The other 25 per cent of the permit is owned by ONHYM, the state national oil company, which has a free carried interest through the exploration phase.
Mazagan covers almost 12,000 square kilometres and is due north of the Tarfaya offshore block owned by Tangiers Petroleum (LON:TPET), another Aussie company.
However, Pura Vida is several steps ahead of Tangiers in owning 3,500 square kilometres of 3D seismic and around 5,000 kilometres of 2D.
This story includes a Jubilee lookalike in the form of the Toubkal prospect with a potential mean 790 barrels of oil recoverable, according to an independent report compiled by RISC.
The recent resource upgrade to 2.4 billion barrels of recoverable oil from 825 million underlines the huge the potential of block, which consists of 11 leads and prospects.
“Once in a while in your career something like this comes up,” said managing director Damon Neaves.
“We believe in it. We have put our own money in it. If we can just get the market to give a value equating to something near our peers then it is 10 or 15 times our current market cap.”
RISC’s revised estimates focused on Lower Cretaceous prospects following technical work that assessed deeper water 2D seismic data.
Most of the potential resources to that point comprised the Miocene prospects whereas many of the company’s peers in the region have focused their efforts on the Lower Cretaceous.
That said, the Toubkal structure, identified early on in the game, remains the most likely target of the company’s first well.
Before this happens Pura Vida must first complete the reprocessing of the 3D seismic data, which is expected to be completed in September.
The plan then is to farm down its stake to a partner in return for a free carried interest on a one to three well programme.
At US$50 million per well, exploration isn’t cheap in this part of the world, which means Pura Vida will inevitably have to team up with a big brother that has very deep pockets.
So Neaves has a very definite idea of Pura Vida’s ideal partner: “It is likely to be a renowned African deepwater operator. We have been very selective about who we have shown the data to so far.”
A deal, which Neaves expects to be signed by the year-end, would also give an objective valuation of the company well in excess of its current market capitalisation.
A recent note from the UK broker N+1 Brewin Dolphin suggests the stock is worth 95 cents, a significant premium to the current price of 36 cents.
It points out that its closest comparator company, Tangiers, is trading at around US$1.50 a barrel of oil compared with Pura Vida’s 9 cents a barrel based on their respective risked prospective reources.
This glaring inconsistency stems from the fact that Pura Vida is new to the market (it listed in February) and therefore its story has not been as widely known and understood as that of Tangiers.
Of course this will change as the newsflow increases. “In aggregate, we believe there is potential for near-term, high impact events, including the recognition of additional resources following completion of the seismic reprocessing (currently underway), farm-out negotiations leading to securing funding for the drilling program and acquisitions,” said Brewin analyst Tracy Mackenzie.
Deals are on the company’s radar screen, with Pura Vida’s management sizing up potential targets in Africa, Neaves confirmed.
This may prompt the company to come back to the market to fund a purchase, and there have even been whispers of a London listing.
The Pura Vida managing director is tight lipped on this prospect of a UK IPO, though we know the company is fully funded for its current work commitments with A$5 million in the bank.
The group bought the Mazagan permit for A$3.5 million last October, and in doing so acquired some of the last remaining open acreage. This was quite a coup.
“Morocco needs to develop its oil industry, particularly its deepwater potential,” said Neaves.
“To do this they need to attract the big companies into the country. They saw us as having the technology and expertise to do this: the modern seismic reprocessing techniques in particular.”
“They saw us as a conduit to bringing in the big, deepwater operators to make the big investments required to pursue deepwater drilling.”
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