CND identifies extension to 575M barrel oil prospect

Our 2023 Energy Pick of The Year Condor Energy (ASX: CND) has just revealed a new target at its Raya prospect.

CND owns 80% of a 1 Trillion Cubic Feet (Tcf) discovered gas field and ~3BN barrels of undrilled prospective oil resources.

Today, CND identified a big new structure to the west of its Raya prospect (which on its own already has a ~575M barrel prospective resource).

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CND also confirmed the structure has “multiple stacked Class II and III Amplitude Versus Offset (AVO) anomalies”.

In oil and gas exploration AVO anomalies are good early signals that targets may have hydrocarbons.

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Learn about AVO’s here: Lesson 27: Amplitude vs Offset

The key takeaway for us was that the AVO’s came from a reservoir that has been proven in offshore Peru - the Zorritos formation.

Zorritos is one of the main producing reservoirs offshore in Peru in the Talara and Tumbes basins.

Talara and Tumbes basins have produced over ~1.6bn barrels historically.

There is the Barracuda oil discovery that was made in 1972 and the Delfin oil discovery made in 1973 (both of which sit inside CND’s acreage)...

AND there is the Corvina Field (excluded from CND’s block) which is currently producing oil.

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When it comes to offshore oil exploration, the bigger the size of a target the better.

Now anyone who is looking at CND’s project package will have two prospects - Raya and Raya West - that are in some ways correlated with one another.

So a well into Raya or directly into Raya West could de-risk the other.

Exactly what a big farm-in partner would be looking for when thinking about committing to funding a well on a block like CND’s.

CND has explicitly said before that it had commenced a “Farmout process” on its block “with multiple parties in (the) data room”. (source)

It’s hard to predict with so many different possibilities, but we think any of the following could be a big catalyst for CND’s share price:

1. CND deals out its gas asset - maybe some of the proceeds that come from this can go toward drilling an exploration well? Maybe CND gets a free carried interest in an asset that could generate revenues in a reasonable timeframe? Now with Promigas looking at the asset, this is more in play…
2. CND deals out oil exploration assets - Maybe CND gets a free carried interest in a well that would be fully funded by a farm-in partner. This means less dilution going into a big drilling event for existing shareholders…
3. Maybe a combination of the two? - CND could bring someone in that is interested in both…

Occidental, Total and Chevron are all active in offshore Peru and there have been big deals happen in this part of the world before.

Back in 2009, KNOC (South Korean National Oil Corporation) and Ecopetrol (Colombian National Oil Company) signed a deal worth US$900M for projects to the south of CND’s block.

(Source)

CND is also progressing its existing gas discovery - earlier this month CND signed a MOU with Promigas who supply 94% of the Peruvian market and 38% of the Columbian market - check out our coverage here.

Why we think CND is ready for a farm-out:

We think, CND is deal ready for two reasons:

1. We think the oil prospects are big enough to warrant drilling AND IF someone gets lucky and discovers something there are plenty of other leads that can be followed up over CND’s blocks.
2. Because a development scenario was considered for the gas asset back in 2006. Now with more demand for gas locally (in both Peru and Ecuador) as well as internationally, we think the chances someone relooks at that old development plan is much higher.

What’s next for CND?

• Volumetric analysis to calculate prospective resources for Raya West 🔄
• Data room ongoing for engagement with potential JV partners 🔄