Monday, March 27, 2006

Chevron Speaks At Last, But Like The Sphinx, Says Little

Finally, Chevron the Sphinx has spoken, and the news is good but the information only tantalizing. A company official says Chevron has completed testing a well in Block 1 - apparently just 15 miles from ERHC/Sinopec's Block 2 of the Nigeria-Sao Tome and Principe Joint Development Zone - but would provide no specifics.

The few-and-far-betweeen words were nonetheless welcome, even if they could not be directly quoted by CBS MarketWatch, which dragged them out of the multinational giant.

MarketWatch did convince a "senior equity analyst" at one brokerage to go out on a limb and characterize the "billion barrels" that The Business last week said was found.

"That's a significant find," she boldly said.

Here is the received wisdom of the ages, and another reiteration of the article in The Business on Friday:

Chevron testing promising Africa well

By Jasmina Kelemen, MarketWatch
Last Update: 6:59 PM ET Mar 27, 2006

HOUSTON (MarketWatch), 6:40pm, 03/27/2006 -- Chevron Corp. said Monday it has completed its first exploration well off Western Africa's coast in a discovery that's reported to have as much as 1 billion barrels worth of oil and gas.

A Chevron (CVX) official said the company is evaluating the results of the drilling, completed on March 15. The official declined to give specifics about the well, other than to say it's in waters of Sao Tome and Principe, a tiny archipelago nation near the equator in the Gulf of Guinea.

But initial geological studies of the well suggest there are around 1 billion barrels of recoverable reserves, according to a weekend report in The Business, a British newspaper, citing unnamed sources.

If the billion barrel mark holds true, it would put the discovery on par with the entire holdings of some large exploration and production companies, said Aliza Fan, senior equity analyst at John S. Herold.

"That's a significant size," Fan said.

Even if the well found a thick column of oil, discoveries typically require several more wells to delineate the size of the field and its commercial potential.

For Chevron, a major discovery would come at a time when the San Ramon, Calif.-based company is struggling to expand its reserves. Its oil and gas holdings stood at 9 billion barrels of oil equivalent at the end of 2005.

Chevron acquired rights to explore the island nation's waters in October 2004 and began drilling Obo-1, the location of the well, last January.

It now has a 51% stake in the site, with Exxon Mobil (XOM), holding 40% and the rest owned by Dangote Energy Equity Resources, a jointly owned Nigerian-British driller.

On Wall Street, Chevron shares were among the Amex Oil Index's ($XOI) top advancers on Monday, rising 1.1% to $58.21. Exxon (XOM) added 0.2% to $61.29.

A former Portuguese colony, Sao Tome and Principe is eyeing its territorial waters in the oil-rich Gulf of Guinea as a way to transform its agrarian economy. It sold its first production licenses in 2004.

Ronald Gold, vice president of Petroleum Industry Research Foundation, said that while the Obo-1 discovery appears to be significant, it doesn't represent a big impact in market terms.

"When Prudhoe Bay was found [in Alaska], it was announced at 8 billion ... so 1 billion barrels is very nice but it's not going to change the world oil supply," said Gold.

The JDZ Block-1 is located approximately 190 miles north of the city of Sao Tome and approximately 125 miles from the city of Port Harcourt in Nigeria.

Jasmina Kelemen is a MarketWatch reporter based in Houston.

It's also been a good day for ERHC On The Move statistics. This site draws more visitors whenever folks consider making an investment in ERHC. Once again, our placement as the second result in Google for "erhc" is reaping readers:

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Last Hour 66
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