Shares up 36% on news of increased stocks in Europe
By Dan Healing, Calgary HeraldMarch 17, 2010 2:15 AM
I nvestors are bidding Calgarybased Bankers Petroleum Ltd. shares ever higher after the company posted a dramatic one-third boost this month in its proven heavy oil reserves in Albania.
"It's been a nice run, hasn't it?" chief executive Abby Badwi said, chuckling, in an interview Tuesday, when asked about the 36 per cent rise in share price so for in 2010.
Bankers fortunes have closely mirrored the oil price.
The stock reached $5.75 a share as oil prices climbed to record heights over $140 US per barrel in mid-2008, only to crash when oil plunged last winter, hitting 46 cents a share the day that West Texas Intermediate fell to $33.87.
On Tuesday, the stock closed at $8.46, down a penny.
The latest run-up was spurred when the company reported a yearend assessment that showed 93 million barrels of proved reserves, up 34 per cent; a 19 per cent increase in proved plus probable reserves to 214 million barrels; and a 36 per cent increase in proved plus probable plus possible reserves to 422 million barrels.
Most of the reserves are in the Patos Marinza oilfield. But there is an original oil in place estimate of six billion barrels, up from five billion, for both Patos Marinza and Kucova fields.
"The field has always had the potential of giving us more," said Badwi. "As we started to understand the field better and develop it with horizontal drilling and reactivation, we were able to demonstrate the field has a lot more reserves than has historically been assigned to it."
The company has become the largest oil producer in Albania, a former communist country located just north of Greece on the Adriatic Sea.
Analyst Terry Peters of Canaccord Adams said Tuesday that Bankers' share price fell with oil in 2008 because the drop in cash flow stopped the company in its tracks.
"They survived that and then got themselves back on track. They know what they're doing and have a very large resource base. . . . It's been quite a reversal of fortune in the last 12 months."
Peters rates the company a buy with a 12-month target price of $9.75. Christopher Brown of BMO Capital Markets has an outperform rating and a target of $9.50.
Both are close to a consensus survey; neither is as bullish as Rafi Khouri, an analyst with Raymond James in Calgary, who doubled his target price to $20 per share when Bankers gave its latest reserve report.
"When I was at $6, consensus was at $2. The stock's over $8 today," he explained. "What I do is I give them full value for their reserves using the Raymond James oil and gas price forecast . . . then give them (50 per cent) value for their third-party booked contingent resources."
The company's last reported production was 8,500 barrels of oil per day and it plans to boost that to 15,000 bpd this year, 24,000 bpd next year and 27,000 by 2012 -- although Brown thinks they'll beat those numbers.
Badwi said Bankers will drill 52 horizontal wells this year as part of a $150-million US capital spending plan, bringing the total to about 60, then carry on with an annual program of about 80 recompletions of existing wells and 50 to 70 new wells.
"This field has been on production for more than 60 years, operated by the national oil company with input from Chinese and Russians through the years," he said.
"The government has been very proactive to our efforts in the field and growing our production."
Bankers holds a 25-year licence with state-controlled Albpetrol Sh. A and the National Petroleum Agency of Albania, with the option to renew for additional five-year terms.
Another foreign company, Premier Oil of the United Kingdom, bowed out of Albania in 2002. When Bankers took over the oilfields in June 2004, production was just 600 bpd.
Canadian technology has been key to ramping up production, said Badwi, adding the job is far from over.
"Another stage of our development is going to be thermal (steam injection to enhance recovery) applications," Badwi said. "We intend to start a pilot in 2010, with the idea of having it on production in 2011 and have a thermal oil recovery program in 2012 and beyond."
The Albanian oil is found in sandstone with good permeability, similar if a bit deeper than the heavy oil of the Lloydminster area of eastern Alberta, he said.
Horizontal wells -- which are being drilled by Calgary services firm Phoenix Technology Income Fund -- cost about $1.2 million US each and recompletions are done for $350,000, he said.
Source:calgaryherald.com/
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