Chariot Focuses on Namibia

Chariot Oil & Gas will focus its energy for the rest of the year on "safe and cost-effective drilling operations in Namibia and to build and mature the portfolio to deliver further funded drilling inventory," CEO Larry Bottomley will tell the annual general meeting July 24, it said in a stock exchange announcement that day. There would be no material news.

AIM-listed Chariot has secured the Ocean Rig Poseidon to drill Prospect S in Q4 2018, independently estimated with a gross mean prospective resource of 459mn barrels and a probability of geologic success of 29%. This is one of five new structural prospects (S, T, U, V and W), ranging from 283 - 459mn bbls in gross mean prospective resources, and the well has the potential to de-risk a portfolio in excess of 2bn barrels of gross mean prospective resources. Chariot will also continue to screen the market for potential value-accretive opportunities such as the back-in option Chariot has secured with Anglo-Dutch Shell on Block C-19 in Mauritania.

Analysts at Cantor Fitzgerald said the option could be on the basis of paying 20% to acquire 10% and "on the face of it, this is a good deal in that it would add another opportunity to the Chariot portfolio. However, in reality we would question whether the company actually has the ability to fund such a deal, given that most of its cash has been staked on the Prospect S wildcat exploration well to be drilled later this year. Whether investors would be willing to fund further wildcat exploration is the big question that management will face even if Prospect S is a success, given the large amount of appraisal and development funding that would be required."  

Chariot said the Rabat Deep 1 well in Morocco was unsuccessful but it was carried out at zero cost following farm-outs to both Woodside and Eni. It added that it has proven key play components for the targets in Chariot's neighbouring permits in Mohammedia and Kenitra.

Chariot said it has maintained focus on financial discipline, ending 2017 with $15.2mn in cash, well in excess of its commitments, and raised $16.5mn net post-period which funds the company's share of the drilling of Prospect S. Overhead costs remained tightly controlled, while the management has been successful in leveraging the overall industry downturn to negotiate favourable seismic and rig rates, thus allowing for counter-cyclical investment in the portfolio.