Houston-based Greenfields Petroleum acquires interests in undeveloped oil and gas fields overseas. Following the collapse of the Soviet Union, Azerbaijan offered up its best oil and gas projects to international companies. GNF now has an 80% stake in the impressive Bahar Project. It is a very good address, home to billion-barrel oil and multi-trillion cubic feet gas projects proved up by neighbours including BP and Total.
A program of recompletions & workovers has allowed production to increase substantially and operating costs to be significantly reduced. Production is now going to be boosted further through waterfloods on the Gum Deniz oil field and development drilling of the Bahar NKP gas horizons which were both highly successful in Soviet times.
Lots of technical work has been going on behind the scenes by Greenfield’s backer Vitol. Reading between the lines, many opportunities seemed to have been ruled out of the reserves at this stage by GLJ. Once these opportunities are de-risked, a lot could be added to reserves in the future.
Seismic has revealed this large-scale opportunity. A good analog exists in AOC’s successful 2015 Hovsan 1870 well which produced 16 mmcf and 640bcpd. Internal estimates suggest the potential to test 86 mmboe.
Discounting forecast cash flows from just the program of recompletions and workovers at a very conservative rate gives a target price of C$0.59. We update coverage of GNF and retain our Conviction Buy stance.