Oryx Petroleum Corp. (OXC), Canada’s newest publicly traded oil explorer, is looking forward to venture in the Iraqi Kurdistan market.
In the third quarter, Oryx plans to drill a well at its Banan site, which may have the same type of reserves to its Demir Dagh discovery in the semi-autonomous region of Iraq, Chief Executive Officer Michael Ebsary, 52, said.
In an interview, Ebsary stated, “The fact that it looks like it could be a joined-up structure is that much more exciting and could mean we have one of the most significant structures in Kurdistan.” He further added, “We go after a large accumulation of reserves in one location. That is what does attract big players who can pay big checks.”
Oryx – the company is based on Calgary, with offices in Geneva, has 7 exploration licenses, covering 10,602 square kilometers focused on Africa and Middle East. The Demir Dagh discovery holds 160 million barrels of proved and probable reserves and 200 million of contingent resources, according to Ebsary.
The company expects to produce about 10,000 barrels of oil per day in the first half of 2014, rising to about 30,000 barrels by the end of 2014 and 100,000 in two to three years, Ebsary said.
The Example of Addax
Oryx was spun out by Addax & Oryx Group Ltd. in an initial public offering in May that raised C$250 million ($239 million), 29 percent less than planned, to fund expansion in Iraq and Africa. Closely held AOG, established by Swiss-based billionaire Jean Claude R Gandur in 1987, owns about 80 percent of Oryx, according to data compiled by Bloomberg. AOG sold Addax Petroleum Corp to China’s Sinopec Group for C$8.3 billion in 2009.
Though, the wager on Kurdistan has not been convincing to the investors yet. Shares of the company have fallen 4.7 percent since the initial public offering on May 9 at C$15, after marketing the stock at between C$20 and C$23 apiece. That’s compared with a 2.2 percent decline for the Standard & Poor’s/Toronto Stock Exchange Composite Index in that period. The shares fell 0.3 percent to C$14.26 at 10:21 a.m. today in Toronto.
John Stephenson, a Toronto-based fund manager with First Asset Investment Management Inc. who helps manage C$2.7 billion and doesn’t own Oryx shares, said, “Generally it’s very difficult to make an investment in these smaller oil producers now because of issues like demand and the overall macro picture.”
The Political Risks
Stephenson pointed out that if political risks have been taken under consideration, it is quite a risk for the firm to invest in Iraq. However, according to the data of IMF, it has been revealed that in 2013, the country will reach 9 percent economic growth and in 2014, the country will register 8.5 percent economic growth.
The company is also considering a listing in the London Stock Exchange by the end of the next year. “The Hawler block in Kurdistan underpins the valuation of this company,” said Gerry Donnelly, an analyst at FirstEnergy Capital in London, in a phone interview. “Oryx comes with a track record of having delivered in what were perceived maybe six or 10 years ago as some of the more riskier jurisdictions of the international oil and gas industry.”
Ebsary is not worried by the stock performances and he remarked that the investors are coing for the more successful oil producers presently. The stock is rated “buy” by four of the five analysts covering it, with one recommending investors hold the shares, which have the potential to rise 42 percent in the next 12 months, according to the consensus target price of C$20.30.
“Oil and gas investors are a bit scared at the moment,” he said. “They are not looking for opportunities like us which have huge growth opportunities.”
Crude is more likely to climb to between $120 and $150 per barrel than decline to $50 in the next five years, bolstering the company’s plans for rapid expansion in the region, said Ebsary. Brent, the global benchmark, rose 32 cents to $108.15 a barrel on the London-based ICE Futures Europe exchange.
“There’s been a lot of talk about shale oil and other forms of energy and a lot of people are thinking and betting a little bit on a lower oil price.” he added.
“For Turkey to go down this road and accept crude coming from Kurdistan against the wishes of a sovereign nation, could be a little bit tricky,” said FirstEnergy’s Donnelly. The company also needs Iraq and Kurdistan to reach an agreement on oil transport, he said.
The pipeline project is an important one both politically and financially for the Iraqi region, Kurdistan. This pipeline will help the region to export its own oil under its own control. Baghdad is not happy on this project, which is natural but Turkey and Kurdistan are seeing prospects both of them.
Selling Oryx at some point is a “strong possibility,” Ebsary said, adding the company doesn’t have a specific strategy to become a takeover candidate. “AOG has no plans to sell Oryx Petroleum at this point,” Karen Saddler, a Geneva-based spokeswoman for AOG, said in an e-mail today.