GLV, Our 2023 Energy Pick of the Year, Gets Another Renowned Oil & Gas Expert
Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 40,500,000 GLV shares and 6,750,000 GLV options at the time of publishing this article. The Company has been engaged by GLV to share our commentary on the progress of our Investment in GLV over time. 20M shares and 5M options are escrowed for 2 years and subject to final approval.
Building a team that has delivered in the past.
It is one of the most important parts to any early stage exploration company.
Today our 2023 Energy Pick of the Year, Global Oil & Gas (ASX:GLV), appointed a new Strategic Advisor who was personally involved in some of the biggest Oil & Gas discoveries of the last two decades - Dr Alan Stein.
Dr. Stein is a renowned Oil & Gas exploration expert - perhaps best known for spearheading a string of major discoveries off the coast of Equatorial Guinea and Tanzania as a Managing Director of LSE listed Ophir Energy that IPOed at a market cap of ~£1 billion.
Combined, these discoveries were in excess of 18 trillion cubic feet of natural gas.
Dr Stein's appointment comes off the back of IVZ’s Scott Macmillan agreeing to join the GLV board two weeks ago.
We think GLV’s recent appointments bode well for our Investment in GLV which acquired a new project a few months ago.
A GIANT offshore oil & gas exploration block in Peru.
GLV has 4,858km2 of prospective licences.
The project is surrounded by historical hydrocarbon discoveries with numerous excellent leads.
And GLV is building the team to get it done.
Dr. Alan Stein is a specialist in frontier offshore drilling projects, and we hope he can ultimately help take our 2023 Energy Pick of the Year through to a discovery.
Why is this appointment so important for GLV?
GLV is at a very early stage.
The next 12-24 months is all about desktop studies on historical data to identify key drill targets and shop around a “data room” to promote and fund a drill campaign.
Having people that have done this before is key to GLV’s success in the medium term.
Dr. Alan Stein has the knowledge and experience to help GLV interpret, package and ultimately use its data to identify key drill targets that will hopefully gather the interest of major farm-in partners to fund.
So there’s now been three key appointments in a short frame of time - Invictus Energy’s Scott Macmillan and corporate lawyer Matt Ireland joined earlier this month, and now Dr. Alan Stein is on the GLV team.
Scott and Matt joined at the same time.
GLV’s new Non Executive Director is Matt Ireland, who is a partner at Steinepreis Paganin, a leading corporate law firm.
We expect him to help guide potential joint venture agreements, farm-in transactions, and capital raisings for GLV.
Ireland has over 10 years’ previous experience at Allens in the M&A/Capital Markets team of a major national law firm in Sydney and Perth - and has been personally involved in billions of dollars of major corporate transactions.
Meanwhile, Scott Macmillan’s Invictus is currently in a trading halt pending release of further drill results - last week IVZ declared a basin opening Discovery in Zimbabwe - so GLV’s new Non Executive Director Scott Macmillan comes in with strong form.
And GLV’s ability to secure Dr Stein’s services through today’s agreement with his company Havoc Services adds a new layer of expertise to GLV’s bid to make a major discovery in Peru.
Things are shaping up nicely at this early stage for our GLV Investment and we think getting the right personnel involved is key when it comes to chasing big offshore discoveries like the one GLV is going after.
With that type of outcome in mind, this is our GLV Big Bet:
Our Big Bet for GLV:
“GLV defines a multi-billion barrel prospective resource and sees its market cap re-rate by 20x prior to drilling”.
NOTE: our “Big Bet” is what we HOPE the ultimate success scenario looks like for this particular Investment over the long term (3+ years). There is a lot of work to be done, many risks involved - just some of which we list in our GLV Investment Memo. Success will require a significant amount of luck. There is no guarantee that our Big Bet will ever come true.
Here’s a quick summary of what Dr. Stein will bring to GLV...
Putting the team together - Dr. Alan Stein appointed as Strategic advisor
GLV announced today the appointment of Havoc Services - we see this as a real coup for the company and endorsement of GLV’s move into Peru.
And as a result, one of Havoc’s founding partners, Dr. Alan Stein will now be working as a Strategic Advisor to GLV.
This is Dr. Alan Stein:
Again, Dr. Stein is a renowned Oil & Gas exploration expert - perhaps best known for spearheading a string of major discoveries off the coast of Equatorial Guinea and Tanzania as a Managing Director of LSE listed Ophir Energy that IPOed at a market cap £1 billion.
Combined, these discoveries were in excess of 18 trillion cubic feet of natural gas.
There were some big transactions at Ophir too - Ophir sold its 20% stake in its Tanzanian assets for ~US$1.2 billion to Pavilion Energy in 2014.
Along with other Havoc team members - Dr Richard Higgins and Mark Sofield - Dr Stein will now be pouring over historical data in order to progress the project.
Havoc are specialists at delivering successful frontier offshore projects - and we think GLV’s project in Peru fits squarely in their wheelhouse.
All together, the Havoc team have discovered more than 2 billion barrels of oil equivalent and raised US$1BN in funds - so we think they could have the necessary contacts to help GLV raise capital as the company’s drilling gets closer.
Dr Stein said in today’s announcement:
"We are delighted to be working with GLV and Jaguar on the Tumbes TEA project. This is a prolific basin with many discoveries and yet only one exploration well has been drilled with the benefit of modern 3D seismic data. Around 60% of the TEA area is covered by high quality 3D seismic giving GLV a huge advantage in being able to understand the petroleum system. In our recent experience in Namibia, it was the integration of previous exploration wells and modern 3D seismic that led us to identify the exploration potential of the Orange Basin back in 2018 which has subsequently become a global exploration hotspot with a number of high-profile multibillion barrel discoveries recently made. We intend to follow a similar approach in the highly promising Tumbes TEA.”
Namibia is currently one of the hottest jurisdictions for Oil & Gas exploration right now - and we’re hoping Dr Stein can do it again, this time in Peru with GLV.
What’s next for GLV?
The project already has ~17,935km 2D and 3,878km2 of 3D seismic data.
The next 12-24 months for GLV is all about gathering and interpreting data to find high-priority drill targets.
This is why today’s appointment is so critical for GLV, as Havoc Services will help the company navigate its data pack and advise as to next steps.
The ultimate goal is to build a prospective resource and identify high priority drill targets that GLV can drill into at a later point in time.
GLV has already locked in a two year work program with the regulators as follows:
- First 12 months: Reprocess ~1,000km^2 of 3D seismic data and run amplitude versus offset studies.
- Second 12 months: Geological/Geophysical studies (interpreting all the 3D seismic and geological data). Finalise a catalogue of leads and put together a final report.
At the end of the two year program GLV will be in a position where it has a data room set up with a list of potential drill targets and the technical studies behind them.
This will hopefully give them enough information to potentially shop around for farm-in partners for the drill.
Although this seems like a long way away, it is part of our Investment Strategy for oil & gas exploration to Invest this early in a project.
Our Oil and Gas Investment Strategy is to:
- Invest early, as the company is in the early exploration work stage.
- Increase our investment, as the company de-risks the project through permitting, geophysics and target generation.
- Top Slice, if the share price runs in anticipation of the drill results
- Free Carry, into the drill results while still maintaining a large position to be leveraged for a positive drilling outcome
- Evaluate our position post-drilling results
Re-cap: Why we made GLV our 2023 Energy Pick of the Year
The 10 key reasons we Invested in GLV:
- Connection to IVZ - IVZ’s Managing Director Scott Macmillan has agreed to join the GLV board. We have had success backing Scott before - our Initial Entry Price for IVZ was ~3.5c, and the company has traded as high as ~41c per share. We are Investing in GLV at a similar stage to when we first Invested in IVZ.
- Giant block - 4,858km2 with a portfolio of leads and prospects that can be followed up.
- Project has existing 2D & 3D seismic data - 17,935km2 2D seismic data and ~3,878km2 of 3D seismic data. As well as ‘well control’ and ‘geological’ data. This data would cost tens of millions of dollars if it were to be done again. GLV benefits from all of the old work done on the project.
- Surrounded by multi billion barrel oil fields - GLV’s project is spread across Tumbes/Talara basin. Talara was responsible for ~1.6 billion barrels of historical production. Nearby oil fields are producing at rates of ~3,000 barrels of oil per day.
- Already has existing discoveries - GLV’s block has three confirmed discoveries already sitting inside it. The three discoveries that sit inside GLV’s block were also a part of a project-sell down by Canadian explorer BPZ Energy worth ~US$335M back in 2012.
- Existing processing infrastructure - GLV’s project sits ~70km to the north of the Talara oil refinery. The refinery has been processing oil from the Talara basin for decades.
- Farm-in deals in offshore Peru signed for up to US$900M - Offshore Peru has attracted big ticket farm-ins before. KNOC (South Korean National Oil Corporation) and Ecopetrol (Colombian National Oil Company) in 2009 signed a deal worth US$900M for projects to the south of GLV’s block.
- Low-cost work program - GLV’s Technical Evaluation Agreement (TEA) means it will be doing mostly desktop work (identifying and ranking drill targets) for an initial two year period. There is no large capital commitment for any exploration wells which gives GLV two years to rank its highest priority drill targets and put together big prospective resource numbers.
- Low market cap leverage to re-rate - At its current share price (1.6c per share) GLV has a market cap of $7.4M. GLV had $2.4M in cash at the end of the September quarter giving it an enterprise value of ~$5M.
- High-risk, high-reward - We have had success in the past with “swing for the fences” style oil & gas drilling, and we like that GLV fits this type of investment.
For a full recap, see our GLV 2023 Energy Pick of the Year note:
What we want to see GLV achieve
Objective #1: Reprocessing of 3D seismic data across the highest priority areas
As part of its first year work program, GLV plans to process 1,000km^2 of 2D seismic data. We want to see GLV pick the highest priority areas of its block for this reprocessing work.
🔄 Pick highest priority targets
🔲 Start reprocessing 3D seismic data
🔲 Results from the reprocessed data
Objective #2: Prospective/contingent resources for highest priority targets
After the seismic data is reprocessed, we want to see GLV put out prospective resource numbers for leads that haven't been drilled yet, and/or contingent resources for the leads that have been drilled in the past.
🔲 Prospective resource estimates
🔲 Contingent resource estimates
Objective #3: Progress funding for first exploration well
At the end of the two year Technical Evaluation Agreement (TEA) we want to see GLV either progress a farm-in deal to fund its first exploration well and/or go it alone if the company’s market cap is high enough to sole fund the well.
🔲 Prepare promoting data room
🔲 Signed non-binding farm out deal
🔲 Sign a binding farm out agreement for one well
🔲 Sole funding plan for first exploration well
What could go wrong?
The project is located in Peru which in the past has gone through periods of geopolitical instability. There is always a risk that geopolitical issues could lead to permitting issues. Any geopolitical instability in Peru is likely to impact GLV’s share price significantly.
GLV’s project is currently permitted under a Technical Evaluation Agreement (TEA) for a period of two years. Eventually before any drilling work can happen GLV will have to convert it into an exploration licence. There is always a risk that the licence doesn't get granted and GLV is left with no claim over the asset.
Long term, GLV’s project is leveraged to the price and demand for oil & gas. As the world looks to move away from fossil fuels, hydrocarbon projects may be phased out. This could hurt the future economics of any GLV oil and gas project.
GLV does not generate any revenues and so is reliant on raising capital to fund its exploration programs. If the markets are unwilling to finance GLV’s exploration programs the company may need to go slow on its operations or offer large discounts to its share price when raising capital.
If the broader market sells off, investors may shy away from high-risk investment opportunities like junior explorers. During market downturns, investors will look to pull capital away from the high risk investments. GLV is a junior explorer and may be impacted by these market wide sell offs.
Our GLV Investment Memo
In our GLV Investment Memo, you can find:
- GLV’s macro thematic
- Why we Invested in GLV
- Our GLV “Big Bet” - what we think the upside Investment case for GLV is
- The key objectives we want to see GLV achieve
- The key risks to our Investment thesis
- Our Investment Plan
tagsOIL AND GAS
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