Evidence builds for CND’s big offshore gas play in Peru

Today, our 2023 Energy Pick of the Year Condor Energy (ASX: CND) updated the market on the improving prospectivity of its large Peruvian oil & gas project.

CND owns 80% of its huge 4,858km2 TEA which is an exploration license that allows CND to do low cost desktop studies on three parts of its project.

This is definitely a good sign, and we think it further builds the case for an eventual drilling program at CND’s project.

So far it looks like CND is working with three potential targets, as it refines its approach.

Here’s our quick explanation of CND’s announcement today:

• Three potential targets - so far, CND has been homing in on three potential targets: the Raya, Bonito and Piedra Redonda prospects. Raya and Bonito are large features of the Zorritos formation which lies below the Heath Formation. While the Piedra Redonda prospect is connected to the Mancora Formation.

We’ve now got more news on these three targets, with another “multiple stacked targets” style play emerging - in particular at the Bonito prospect.

We like to see multiple stacked targets, because at simple level, increases the likelihood of a discovery being made as there are multiple “shots on goal” in the same drilling event:

GLV - Multiple Stacked Targets At The Bonito Prospect

We’ve marked up the images below to show our interpretation of today’s announcement:

As visible in the above images, the potential sources of oil lie above the potential sources of gas above the source rock.

(Source)

Today’s announcement relates to the Raya and Bonito prospects.

• CND is getting closer to identifying targets for drilling - CND has identified potential “source rocks” in the Heath Formation which is a subsurface geological structure at the project. The Heath formation has been defined as “oil mature” meaning that there are conditions favourable for the production of gas hydrocarbons:

(Source)

• Analysis of historical data is helping - Below is a key passage from today’s announcement:

“Based on analysis of surface outcrops, cuttings and core samples from previous wells published by

Perupetro (the Peruvian national oil regulator), there are numerous potential source rock intervals in the Tumbes Basin.”

For context, CND project in the Tumbes Basin off the coast of Peru has already seen a large historical discovery in the 1980s that previously flowed gas for 60 days:

GLV announces details of historical gas discovery - and it has already flowed…

And more recently in mid-May, CND saw energy supermajor $253BN capped TotalEnergies signed three offshore exploration agreements next to CND’s project in offshore Peru:

Oil & Gas Supermajor TotalEnergies picks up ground next to CND

What’s next for CND?

In the near term we expect to hear more from CND about its three targets as it looks to complete the minimum work program for the TEA:

This includes reprocessing of 3D seismic data.

Below is a representation of how we look at oil and gas drilling events, as part of our Investment Plan:

It’s important to note that increased excitement/interest shown on our chart below does NOT necessarily correlate to share price increases, which depends on many other factors and broader market conditions

Our long term CND Big Bet:

“CND 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 CND Investment Memo. Success will require a significant amount of luck. There is no guarantee that our Big Bet will ever come true.