Rose Rising

This blog will be in two parts, the first part is the summary of my direct liaising with Rose Petroleum, the second are my thoughts going forward. I feel its really important not to get the two confused as I don’t want to be seen misquoting. Something I’ve learnt in the past.

Rose has a considerable asset in the US and the US is a strong market for Shale exploration companies, is there any plans or long term strategy to float on a $ exchange ? i.e OTC etc “This is under consideration”

Rose confirms its Q3 intentions. “Rose plans to commence the Mancos drill programme in Q3, with completion in H1 2015. We plan to commence testing the vertical shut in well in the Paradox also in Q3 but will not be going horizontal until 3D seismic is available.”

How exactly will the paradox drill work, whats the plan with this drill. “This will very much depend on the 3D results. Fidelity, which operate directly south of us in the Paradox have some wells producing from vertical wells only and some have 2,000ft laterals. They use the 3D to target areas of high natural fracturing. If they don’t hit them vertically then they go lateral until they do. This can be 100ft, or 2,000 ft.”

What strategy do Rose have for the two resources “A number of industry partners have shown a good deal of interest in this opportunity as well, so we’ll probably bring in an industry partner for a portion of it,”

“For Mancos….finding and development costs less than US$17 a barrel”

“For Paradox…experiencing on a single zone completion, again we get over 100% rate of return and less than US$20 a barrel finding cost”

“Essentially we’ve raised enough money at this point to get us into production and then at that point if we need any additional capital, it will certainly be very easy to raise once we’ve already established production”

Thoughts.

http://www.bloomberg.com/news/2014-06-27/magnum-hunter-turns-891-million-in-debt-into-138-gains.html

As per the link I’ve used previously, a US listing for ROSE is critical in my opinion to see Rose rise from the 100-120mcap player potential to the 400m+. Rose have confirmed to me that they are actively considering such a listing. If this were to happen it would make Rose available to the largest market for shale exploration companies, a market which is very hot at the moment. We have seen a few pointers to ROSE courting this market over the last few weeks, not least the recent main story on a prominent US oil and gas e-magazine this week. This will provide explosive growth to the tightly held shares in the UK and it is purely my opinion but I see an announcement on this within the next 3-4 weeks.

Mancos is not going to be a single exploration drill. The plan seems to be a campaign (or programme as described by them) over 6-9 months. The BOD clearly talk about wells and not well. My understanding is that a vertical well will be drilled and tested with the hope of 300-1000bopd flows, using 2D, a horizontal drill will be completed through adjacent naturally fracked source rock to increase oil flow. A fall back solution of real-time pumping might be needed, but isn’t anticipated in the short or near medium term.

The vertical testing of the already drilled paradox hole will be equally interesting, with possible oil shows, we might get a figured of BOPD from possible pumping. ROSE are being very cagey about this hole and I have a feeling that a surprise is very likely from it, even before the lateral component is factored in….More news to follow when I get it.

3D should take place across paradox with several well defined areas. The initial area around the existing hole, should be completed fairly quickly. It will then be used to guide lateral lengths to natural fracturing again.

The BOD are confident bordering on outright expectant re oil production from paradox, this again reinforces my view that the existing hole is already known to be a good one, but that lateral drilling is needed to confirm it in the 1000bopd category.

One of the aspects I like most about ROSE is the simplistic strategy its deploying. Its essentially copying Fidelity. Back in 2012 Fidelity noticed some success with a new technique in this area. The technique was simply to drill a vertical hole, if oil shows are found, but nothing flowing naturally, to simply use 3D high def to examine the ground to find a natural fracture that it can tap into. They will target 3 or 4 natural  fracturing zones along a line and simply drill until they get the desired flow….With this fidelity have reached 20,000 bopd with each new hole, almost guaranteeing 1000bopd…. Hence why they have a MCAP well in excess of 1Bn.

Rose are simply copying this, just a few miles down the road in the same geology. They have even employed the same GEO consultants that helped define this strategy. Bit of a no brainer really.

Coupled with all this we have a low barrel exploration cost and the BOD being pretty adamant that it will not need money until production (notice no uncertainty at all that production will happen).

We have strong news flow still of Mancos drilling and the program planned their over the next 6-9 months. We have 3D and associated results, we have paradox and the simple vertical testing and then plans for horizontal testing. We have a significant and large JV to be announced(IMO) which could well be fidelity for a parcel of land, probably in Mancos as both companies would benefit if they can replicate the drill strategy in that geo-location. We have further possible licence buys planned for the next 10 weeks. We have also IMO an explosive  US listing.

What more do you want !