Meridian Petroleum PLC : Onwards into 2007/2008

Don't know if this has already been posted, article from proactive investors dated 7th December. Have been skipping alot of posts recently due to some of the crazy idiots on this thread!!!



Meridian Petroleum, a favourite with the private investors, has focused on small production in the USA and hence revenues in a balanced manner, developing numerous small prospects to gradually develop the company. Developments in the USA can have attractive economics given the regional gas price and the general availability of gas infrastructure. Looking forward, 2007 could be a transforming year for the company as a number of its key projects move towards drilling/development.

Meridian’s track record on AIM is slightly chequered, with the Emery Hudson well having limited success with some suspended production. The area covered by Emery Hudson was thought to be about 100 acres giving good potential upside on any exploration success. Unfortunately the Emery Hudson step out well encountered a tight porosity limestone reservoir and only minimal gas shows which was a body blow to the company and shareholders alike. All is not lost however, a re-entry well is underway and could allow Emery Hudson to move back into production in the near term.

Shareholder enthusiasm for the stock has not abated however, with many punters hoping the Calvin Project in Louisiana could be a company maker. The Calvin 36-1 well which targeted a shallow formation was declared a commercial success in January this year and reached a total depth of 8,512ft. Flow rates of up to 1mmcfd were recorded from a 25/64inch choke. Calvin 36-1 is expected to be completed in the near term and will then undergo production testing.

Yet it is the deeper and considerably larger targets at Calvin that would bring substantial material impact to the company. MRP have recently announced a 50/50 JV with Ensight - a regional oil and gas company who will take the role of operator for the deep gas drilling program in 2007 which is expected to drill 2 or 3 development wells – a crucial deal in order to drive development of Calvin whilst hedging risk for shareholders. An independent evaluation report in July from Scott Pickford attributed gas in-place reserves of 222bcf to the field so there is lot to play for here.

MRP also holds a 10% NRI interest in the Victory 21 producing well in Mason County Michigan. The well was producing at 250,000cfpd from an upper formation, however, the well was deepened to 4,394ft in April and an additional 31ft of potential net pay was identified. Flow is increasing with de-watering which could see rates rise to 1mcfpd.

Not stopping there MRP began a land leasing programme in May in the Black Warrior Basin, Alabama from which to develop a pilot development project on a CBM (coal bed methane) play. Scott Pickford estimates 420bcf potential gas in place and Meridian intends to develop a 5 well pilot program in 2007 with target production 250,000cfpd per well. Developing CBM plays takes a long time with low initial flow rates, but offer steady cash flow and a good return on investment in the longer term – so patience will be required.

Skipping to the other side of the Pacific Ocean, Meridian holds a number of blocks in Australia. The main initial prospect is the Dolores prospect in the Arrowie Basin, South Australia. Dolores is located just 40 kilometers from the existing Moomba - Adelaide pipeline. The Company has carried out geophysical work on the seismic lines over the prospect using direct hydrocarbon (DHI) indicator. The results of MRP’s analysis showed several amplitude anomalies that may represent hydrocarbon presence – enough to warrant a test well in early 2007. As result of the AVO analysis Scott Pickford assigned a total gas in place for the Dolores prospect as a possible 547bcf of gas in place, with a chance of success as 1 in 5.

Meridian Petroleum has oodles of projects and field development opportunities, some of these prospects may seem insignificant in size to most oil and gas producers, but when you take into consideration the size of MRP and the cumulative effect of these small reserves and production they start to add up. MRP has had mixed drilling success, but has added slowly but surely to its production and eventually its reserves position.

One thing that is limiting MRP at present is the lack of substantial production or cash on hand, but there is scope to grow production through drilling multiple low cost wells – however further funding is likely to meet Meridians drilling ambitions for 2007. MRP has the potential to grow very quickly and some of the projects have the ability to transform the company if successful….2007 will be a crucial year.