On 31 December 2018, Doriemus PLC (ASX: DOR) announced that they had signed a binding agreement with Rey Resources Limited (ASX: REY) to obtain a 50% interest (plus operatorship) over the 5,058km² Western Australia onshore petroleum exploration permit block EP487. The statement by the Executive Chairman of Doriemus, David Lenigas mentioned that the first thing they want to do is get a consultant to look at how to incorporate the Fishbones Stimulation Technology.
The Fishbones Stimulation Technology reportedly can help generate more profits and create efficient oil flow. In the very tight crude oil industry, any edge to allow efficient oil flow and make more money would be fantastic.
Fishbones is a provider of unique technology that has defined a new level of precision and efficiency in reservoir stimulation.
Using a short pumping operation, numerous titanium tubes are extended from the mother bore to create long channels, delivering significantly improved reservoir productivity.
Fishbones, like no other stimulation system available today, guarantees connectivity with your reservoir precisely where planned with the optimal use of valuable resources.
The Inventor
Fishbones Stimulation Technology was invented by Rune Freyer, a serial entrepreneur that holds many patents and patent applications. His vision was to deliver a shift change in completion method that creates vertical connectivity in the reservoir without the infrastructure, environmental impact and complexity of traditional fracturing treatments. Rune was the inventor, manager and owner of the successful Easywell company (swellpackers) until 2005, and is the Fishbones, principal shareholder.
Reasons To Choose Fishbones
Increase productivity by connecting the well to the reservoir with up to 300 laterals.
Accelerate production by integrating stimulation in your drilling program.
Avoid water or unwanted gas by predictable penetration and location of the laterals.
Simplify logistics by using rig pumps and significantly fewer fluids.
Accelerate progress by avoiding cementing, perforating, cleanouts, running frac strings and other operations.
Reduce HSE exposure by reducing the number of operations and working hours. Reduce the environmental impact by reducing emissions and by using fewer fluids.
Avoid flow back and disposal of fluid from hydraulic fracturing.
Effective reservoir conductivity may be low due to layering or faulting. The layers or faults can be penetrated and drained by Fishbones with the mother bore not even penetrating the faults.
Different intervals have different pressures and can be hard to effectively hydraulically stimulate. Fishbones allows you to stimulate zones with different pressure regimes.
The Project
The Derby Block occurs north of the Fitzroy Blocks and overlies the major road infrastructure in the region. It abuts the northern flank of the Fitzroy Trough and is considered prospective for both conventional oil on this northern flank as well as for significant accumulations of gas in the Laurel regional gas accumulation.
REY currently holds a 100% interest in petroleum exploration permit EP487. The block is considered to be predominantly a Wet Laurel Basin Centred Gas play (“BCG”), which is regionally extensive throughout the Canning Basin, with major companies such as Mitsubishi and Buru Energy also having operations further along trend in the area. Existing infrastructure in the area is extensive due to the activities at Mitsubishi’s Valhalla and Asgard gas field operations.
Oil Pricing
In recent times, the price of oil has had a battering, and it seems that the start of 2019 has not made too much noise. This morning as I write, US Oil is at $45.44 which is slightly down from a recent high of about $47.
Remember that the low $42 was around Christmas time 2018. All the recent news that I am hearing and reading seem to be indicating a run back up to $70 per barrel.
The oil industry is similar to the iron ore miners in regards to the rush to be efficient in production. Efficient oil flow is critical in a pricing market such as what we are observing now.
I remember the time when iron ore took a battering in 2009 with low prices and companies such as Rio Tinto started working on reducing production costs. Now, the iron ore miners are travelling comfortably with the cost of production in the low $20 per tonne (so I am told). I read that some of the oil producers are currently producing at $15/barrel to overcome the low oil pricing.
I am suspecting that with all the depressing oil pricing, the use of the Fishbones Stimulation Technology will be helping those marginal wells to make more profits and have more efficient oil flow.
How is the Industry?
When you review the news in regards to the oil and gas industry, it is business as usual. Industry people are telling me that they are still going about their business but are looking at projects that are more attractive to investors.
When you think about it, this makes perfect sense. I have been in the mineral exploration industry for the last 25+ years, and this is how the industry keeps chugging along. When the commodity price takes a turn for the worst, the participants of the industry keeps going. Things are tough currently, but there are a lot of talks of oil going back to the $70/barrel levels.
What’s The Good News?
Industry participants tell me that it is now increasingly harder to find oil. All the previous discoveries were easy targets. Exploration is getting expensive. All this talk sounds like supply is decreasing, but the big question is whether the increasing use of EV vehicles will make significant changes to the demand equation. In my opinion, this uncertainty is not a bad thing as this will move the price of oil up, for the short term anyway. Like all commodities, the cream of this industry has all been discovered.
The Fishbones Stimulation Technology will bring online a lot of projects that were previously not considered. Will this increase future supply? I think not. The real supply player will be the US shale oil players and many people are proposing that they will create an oversupply issue.
My call is that the shale oil players will affect supply over time. However, I don’t think it will change the oil price as the price will hang around the sub $100 range even with the Oil Shale players. I can’t see it going over the $100+ levels.
Corporate Information
REY
Market Capitalisation: 53M (12/2018)
Shares Outstanding: 212.4M (06/2018)
Top 20 Shareholding: 92.7% (2018)
DOR
Market Capitalisation: 4M (12/2018)
Shares Outstanding: 50.4M (06/2018)
Top 20 Shareholding: 57.9% (2017)
This announcement is exciting as DOR which is spending $1M to get 50% of the “production field” will add significant value to the share price. REY, on the other hand, is not going to have much action as its Top 20 shareholders own 92.7%. It appears to be a Chinese company, and if it is, I am sure that the entire 92.7% holding will be only shared with a handful of non-related entities. It will be tough for anyone to make shareholders get value with that holding percentage.
This issue is why I believe that the play is for DOR and with a market cap of 4M, this has to be a great buy. I had a look at the market depth, and the issue will be trying to get a meaningful amount of shares. DOR has a lot of upsides as the Executive Chairman is David Lenigas. David has had a lot of successful corporate activities and the most recent is that of Artemis Resources Limited (ASX: ARV). David is also the Executive Chairman of Artemis Resources Limited (ASX: ARV), Southern Hemisphere Mining Limited (ASX: SUH) and Clancy Exploration Limited (ASX: CLY). That is all that I know.
In terms of a “good buy”, I am tempted to go for a punt with DOR. I am currently not a shareholder, but I am going to be following this program. I have invested in one other oil and gas play, and that was Arc Energy in the early 2000s. That was a ride from 11c to $1.20. The story back then was a similar scenario. It was a new story to find oil in the Perth Basin (if I am correct). My “mentor” Geoff Donahue explained to me how the project was going to work and suggested I take a position.
That was the best decision.
Conclusion
Investors should start looking at these technological advances that can make previous sub-standard oil fields profitable. There will be many ASX listed companies such as Doriemus PLC that will benefit from such technology. Previously there was the fracking technology, but this is another advancement. In my opinion, this kind of companies using technology such as the Fishbone Stimulation Technology will make their shareholders very happy.
Currently, the ASX is very stagnant, especially within the small-cap resource/oil and gas sector. My thought is that investors should look out for parameters that are generally not on their lists of must-have in a company.
I am sure with the depressed oil price, those companies that are in the oil and gas sector will be looking for any edge they can find.
Whether DOR makes this venture work is all in a crystal ball at the moment, but the main point of this discussion is the introduction of the Fishbones Stimulation Technology.
Disclaimer
The information or opinions provided herein do not constitute investment advice, an offer or solicitation to subscribe for, purchase or sell the investment product(s) mentioned herein. It does not take into consideration, nor have any regard to your specific investment objectives, financial situation, risk profile, tax position and particular, or unique needs and constraints. Read full Disclaimer.
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