Buy Hereward, Northern Petroleum and Black Rock Oil
Says Stewart Dalby of Oilbarrel.com
It is probably time to have another look at three AIM listed minnows; Northern Petroleum, Hereward Ventures and Black Rock & Oil and Gas. The three are soon to start drilling for oil on the Isle of Wight, southern England.
After what seemed an eternity waiting for land purchase and planning permission, the group has received planning permission for not one but two wells. Bouldner Copse-1 will follow on the heels of Sandhills-2 appraisal well.
Northern is the prime mover in these wells it has majority stakes in both and is the operator. Hereward is a mining group, which has ambitions to move into oil. It has a 10 per cent stake in Bouldner Copse-1 well and a 7.5 per cent stake in Sandhills-2. Black Rock, the Australian junior which is listed in London on AIM, has a 5 per cent free carried interest in Sandhills-2.
The group's first interest is the Sandhills-2 well which is near Cowes on the island. The wells will target the Greater Oolite formation. Oil was discovered here in 1982 by the BG operated Sandhills-1 well. BG did not test the well, however, because at that time the Oolite was not considered to be a viable reservoir in the area. Northern has developed a new interpretation of the Oolite, which has been verified by consultants.
Bouldner Copse-1 will also target the deeper Sherwood Sandstone formation, which hosts the prolific oil producing reservoir at BP's Wytch Farm complex on the mainland. The Great Oolite formation is a difficult limestone reservoir with often poor recovery rates. But even with a 10 to 20 per cent recovery rate there could be 15 million barrels recoverable. The Sherwood Sandstone has better recovery rates, and there could be 30 million barrels recoverable.
On present plans, Sandhills will only drill down to the Great Oolite although Northern is keen to persuade its partners to go deeper to the Sherwood Sandstone. Graham Heard exploration manager says, "This is a decision we will take at the time."
Northern's shares at 9 ¾ have enjoined a good rise in recent months. Hereward and Black Rock, however, have languished at 4¾p and 2p respectively. The point here is the relativity case. Only Northern has any production and that is small. Even a modest discovery would be company making for each of the three groups. One hundred million barrels would be nice, but the 15 million from the Great Oolite would still be company transforming.
Buy before drilling begins.
Stewart Dalby is the editor of oilbarrel.com - the definitive and free source of information on small oil companies. For more details click here.
