Kina Petroleum growing PNG oil & gas

Interviews

Transcription of Finance News Network Interview with Kina Petroleum Limited (ASX:KPL) CEO, Richard Schroder
 
Lelde Smits: Hello I’m Lelde Smits for the Finance News Network and joining me from ASX listed, but Papua New Guinea focused Kina Petroleum Limited (ASX:KPL) is its CEO, Richard Schroder. Richard welcome.

Richard Schroder: Thank you Lelde.

Lelde Smits: Could you start by introducing us to Kina Petroleum. What exactly do you do and where are your operations located?

Richard Schroder: Yes of course, we’re exclusively in Papua New Guinea. We have seven petroleum prospecting licences and two petroleum retention licences. The petroleum retention licences actually have four oil and gas fields within them, three are within PRL 21 and one is in PRL 38, the Pandora gas field. The exploration licences on the other hand, are very much larger. We currently have about 41,000 square kilometres under acreage, in a gross sense. And it’s those exploration licences, where we hope to find the very large oil and gas fields that we think are resident within those areas.

Lelde Smits: Now as you mentioned before, you have seven prospecting licences. Could you tell us a little more about them?

Richard Schroder: Those licences host some very large prospects. Within PPL 337 for instance, we have the Banam and the Raintree prospects, they are multi TCF (trillion cubic feet) gas potential. In PPL 338, we are offsetting one of the largest recent gas discoveries in Southeast Asia, right next to Antelope. And we can see extensions of discoveries in our neighbour’s block coming into PPL 338, and a well we’d like to see drilled there is Triceratops. And further to the west, we have PPL 437 and we have been drilling successfully. In our PRL, we’ve picked up acreage adjacent to PRL 21 and we hope to offset the recent discovery at Tingue, with the well in PPL 437 later this year/early next year.

Lelde Smits: Kina Petroleum also has numerous exploration drilling sites. How prospective is your intended drilling program?
 
Richard Schroder: Well I think it’s very prospective. I actually think the Banam anticline is the largest undrilled anticline, the largest undrilled prospect in fact, in PNG and we hope to drill that in July this year. Next to it we have the Raintree prospect, which is analogous to the Antelope discovery to the south and that’s a reef play that we hope to drill, again in the middle of this year. So they’re very exciting prospects and really could transform the Company.

Lelde Smits: What is the quality of oil you’ve discovered?

Richard Schroder: The oil is associated with the gas in PRL 21. We believe we have six to eight million barrels of oil net there, over and above about the 150 to 160 BCF (billion cubic feet) of gas. That oil is light sweet crude; it mixes well with most of the products that go into the refineries within the region, including the refinery in Port Moresby. And we hope to have that on production, hopefully by 2017.

Lelde Smits: Richard the Company also has gas discoveries that are not on development. What are your plans for them?

Richard Schroder: Well at the moment they’re stored in the ground. In PRL 21 where we have the three discoveries Tingu, Elevala and Ketu, we will cycle that gas initially, putting the gas back in the ground and taking the oil out. That production should start in 2017. But then later around 2019/20, hopefully through an aggregation process, we will get that gas on development as LNG (liquefied natural gas).

Lelde Smits: And looking ahead Richard, what are Kina Petroleum’s plans for future exploration?

Richard Schroder: Our future exploration as I outlined earlier, is to get our big prospects drilled. They are obviously Banam, Raintree, we want to see Triceratops drilled and we would like to advance our exploration in and around the Antelope area, which is the big breakthrough play in PNG. Beyond that, we want to build our reserve base around our existing discoveries in PRL 21. And we also want to start looking very closely at PRL 38, our recent acquisition where we have around 200 BCF of gas net. And we’re looking at floating LNG options for that. So in terms of trying to get our product out, we’re looking at innovative ways of getting the gas into the market. But we’re also hoping to build on the existing infrastructure and the discoveries, nearby our existing and future production.

Lelde Smits: Finally Richard, in your view is Kina Petroleum undervalued and why?

Richard Schroder: Yes I believe we are undervalued, partly due to market circumstances being in a bearish market for small oil and gas companies. We do have some near term production assets, they come on in 2017, but we’re not getting credit for that right at the moment. So we need to be out there drilling and I think that drilling activity will draw focus onto the Company. In the meantime, we will proceed with our development plans in PRL 21 and that will get some traction with the market in due course.
 
But rest assured, even on recent deals that have been done in PNG, with the gas in the ground we currently have, we should be valued at around $250-$280 million. Our current market capitalisation is nearer $85 million. So I think that answers the question.

Lelde Smits: Richard Schroder, thank you for the introduction to Kina Petroleum.

Richard Schroder: Thank you very much.

 
Ends