CFO of Taipan Resources Reveals All
Vancouver, BC / June 25, 2014 / Joel Dumaresq, CFO and Director of Taipan Resources (TSX-V:TPN) is a veteran merchant banker with a specialty in Mergers and Acquisitions. Mr. Dumaresq recently sat down for an exclusive interview with Financial Press to discuss oil and gas opportunities in Africa.
FP: This morning Africa Oil announced a "basin opening" gas discovery at the Sala-1 well in Kenya, close to Taipan's property. According to Taipan's website, the Company's risked assets may be worth six times its current market cap of $41 million.
Dumaresq: Africa Oil's news confirms that there are hydrocarbons in the Anza Basin. We are confident that we can succeed and create wealth for investors in Kenya. These are sizable targets and any of the wells we plan to drill in 2014 or 2015 have the potential to transform the Company. When Africa Oil made its first discovery in the Lokichar Basin of Kenya, the stock jumped from a $200M market cap to well over $1B.
FP: Taipan's CEO Max Birley has drilled many wells all over the world and we understand he has an excellent success ratio.
Dumaresq: Max is a significant de-risking factor, in my opinion. His success factor in finding hydrocarbons is over 50% – excellent by industry standards – and he knows what he is doing, and he believes in Taipan. He has used a large portion of his salary over the past two years to purchase shares in this company.
FP: The investment upside of TPN isn't hard to grasp. But let's not dance around. On June 15th, 2014 terror attacks by Somali extremists on Kenya's coast left 65 people dead. Can you provide background and context for these attacks and how it affects Taipan operationally?
Dumaresq: Sure, background first. In 2011 there were some raids from the south of Somalia into Kenya. The perpetrators came down into Lamu, took some tourists hostage, transported them back into Somalia, and demanded a ransom.
FP: And what was the Kenyans' response?
Dumaresq: The Kenyan military, in a joint operation with the Somali military, created a security zone inside Somalia so people couldn't just wander down into Kenya randomly and take prisoners. Radical Islamic factions in Somalia decided that they were going to use that as a lightning rod in their opposition to their own government in Somalia.
FP: So this latest incursion is a rallying cry for their interests?
Dumaresq: Apparently, and let's be honest. In Kenya you've got large borders that are difficult to guard – not because of anything the Kenyan government's doing wrong, but just because of the lack of resources. Kenya and Somalia have migrant populations that roam around following wild stock, so it's difficult to police and to know who belongs and who doesn't.
FP: How does this affect Taipan on the ground?
Dumaresq: It doesn't. The Kenyan government recognizes the importance to its future, and is not going to allow anyone to interfere with the development of the petroleum industry. When we work on our blocks in Kenya we have large security details. Typically two to three hundred people on the seismic crew, and more than 100 staff doing security. That's factored into our cost of doing business. In Block 2B, we're planning to drill a well late in 2014. In Texas that well might cost $2 million. In Pakistan, where they also have security issues, it might be $10 – $13 million. For us in Kenya, it may cost as much as $25 million and a significant portion of that is for security. So, bigger upfront costs for a much bigger reward.
FP: Are you using locals or bringing in an outside force?
Dumaresq: We work closely with the locals because they know who belongs there and who doesn't. Block 1 is an open expanse of terrain with limited habitation. Block 2B is also sparsely settled. So this would not presumably be a high priority target for a terrorist. I want to stress, our security protocols are precautionary. We've had no problems and have enjoyed strong cooperation from local officials.
FP: So there is no change to Taipan operationally?
FP: Can you provide an update on Block1 and Block2B?
Dumaresq: When we acquired Lion, we inherited challenges on both blocks. For a number of reasons, we chose to temporarily suspend our joint venture payments to our partner Afren on Block 1 while we focused our attention and resources elsewhere.
FP: So you turned your attention to Block2B?
Dumaresq: Exactly, on Block 2B, we completed 440 kilometers of seismic survey, and an airborne gravity survey, and got back in full compliance with the terms of the production-sharing contract or PSC with the Kenyan government. Then we farmed out our acreage to Premier Oil and secured a commitment for the first well on Block 2B.
FP: And what happened with Block1?
Dumaresq: Recently, we reconciled with Afren, paid them close to $4 million as our portion of the work program for the past 18 months, and earned back our 20% interest. We currently anticipate Afren drilling one and possibly two wells in 2015. The cost of each well will be approximately $30 million, so our share is about $6 million for each well on Block 1.
FP: So you are currently funded for both wells?
Dumaresq: Correct, Premier Oil is paying for this first well on Block 2B. We've farmed out an additional 15% to Tower Resources who just paid us $4.5 million, along with the $6 million financing that we completed a couple months back. That funds us for the first of two wells in Block 1 in 2015, and we're financed for our well in Block 2B in November or December 2014.
FP: Afren has recently handed over a significant amount of seismic data on Block 1.
Dumaresq: Yes, and we immediately began an NI 51-101 independent evaluation report via a specialist company out of the UK. Pending the results of this report, we anticipate new estimates of prospective resources on Block1 within the next month. Of course, we will be releasing that news to the market.
FP: Africa Oil is drilling the Sala well about 65km away from Block 2B; how does that affect you?
Dumaresq: Africa Oil has drilled into a similar structure to what we are planning to drill later this year with our Badada prospect in Block 2B. The AOI June 24 news states that Africa Oil encountered three zones of interest over 1,000 metres, with the upper interval testing at 6 million cubic feet per day of dry gas. They also indicated they had oil shows in the well. Although no guarantee of success for Badada, the presence of substantial hydrocarbons in Sala is a very good indicator for us.
FP: So you are still bullish on Kenya?
Dumaresq: Listen, the Kenyan government knows exactly what is at stake. You've got a young, burgeoning industry that has the potential to significantly upgrade the wealth of the nation and its civilians. Kenya is on the cusp of becoming a big new petroleum province, and they recognize what that means to them. As pipelines begin to get developed, over the next three, four, five years, security issues will be paramount to their bottom line.
FP: Thank you for your time.
Dumaresq: My pleasure.
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SOURCE: Taipan Resources