Africa And Kurdistan Show Great Oil/Gas Potential

The Energy Report:

Let's start with Kurdistan, Lionel. It's one of the hottest countries in the world for oil and gas exploration, especially in terms of production share contracts. A few prescient firms, such as Kosmos Energy Ltd. (KOS:NYSE) and Tullow Oil. Both are exploring along the West African transform margin, which is quite a prospective area. Kosmos, in particular, has a lot of value potential.

TER: In the context of recent share price corrections, what are the prospects for junior firms working in Africa to raise working capital?

LT: There was a drastic share price correction related to dry wells and exploration misses at potentially very high-impact wells. Some share prices have been impacted quite a bit. But in terms of raising working capital, the market still has an appetite for good exploration and production stories. Companies like Afren have been successful at raising debt and equity. A lot of debt has also been raised by firms that have acquired development assets in Nigeria. Gulf Keystone recently raised $300 million of convertible debt. Ophir has raised equity successfully a number of times in the past 18 months.

Obviously, the IPO market has been a bit quiet in the past few months. But a number of other companies have raised equity or are talking about raising equity to continue successful exploration and appraisal programs. Nevertheless, investors remain very cautious—more so than in the boom years, understandably.

TER: Do you have any thoughts about competition between Chinese interests in Africa and the more Western-oriented interests?

LT: Chinese companies tend to take a different view on the way they value opportunities. A Western company looks at an investment on a purely financial basis. State-supported Asian companies have more of a strategic angle regarding the premium they are prepared to pay for accessing production and reserves, which are higher than some other oil companies would consider.

TER: It sounds like now is a pretty good time for investors to get some bargains.

LT: I agree. The next 10 years will be quite exciting in terms of exploration and discoveries across Africa. There is still large, unexplored acreage remaining and some really good opportunities in the market right now.

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TER: Thanks for your time.

LT: My pleasure.

Lionel Therond is the head of oil and gas research at Standard Bank. His 25 years of experience in this global sector combines upstream oil and gas industry and fund management expertise. Therond joined Standard Bank from Fox-Davies Capital, where he headed oil and gas sector coverage. Prior to that, he worked for JPMorgan Asset Management. Therond began his career at Royal Dutch Shell Plc as a geoscientist.

DISCLOSURE:
1) Peter Byrne of The Energy Report conducted this interview. He personally and/or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Energy Report: WesternZagros Resources Ltd.
3) Lionel Therond: I personally own shares of the following companies mentioned in this interview: None. I personally and/or my family am paid by the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this story.