Quant Research Group   

April 14, 2018   01:15 EST     

Market Advisory  - Coverage initiated: Sunset Pacific Petroleum Ltd. (TSX-V: SPK) - Near-term share price target: C$1/share

 

Shares Issued 73,936,936, Market cap $3,327,000 trading at $0.045

 

Corporate & Technical Report

Based on new understanding of the opportunity (the full potential, as understood by Dr. Gharbi, ex Royal Dutch Shell plc Technical Manager), of which was not previously in the public realm, we have initiated coverage. A technical overview of Sunset Pacific Petroleum's Ben Khedechef (A.K.A. Beni Khedache, and formerly known as El Hamra) 3,972 km2 onshore block in Central Tunisia, working under an updated fault model, reveals the block is in fact now considered among one of the most coveted blocks in Tunisia with a mean reserve potential of >1 Billion Barrels Oil in place (source: page 5 of attached technical overview), and significantly more according to the model, to be proven up with exploration, along the production trends "Triassic Play: In addition to 5 billion BOE Hassi Berkine type TAGI (braided fluvial channels sourcing from SE Algeria). The Beni Khedache block has potential in reservoirs equivalent to the Northern Ghadames "TAGI" which contains 25 billion BOE in several Algerian fields."

 

We know interest is high in Sunset Pacific Petroleum's Ben Khedechef bock as it is immediately proximal Mazariane Energy's ordovician discovery well of 4,300 bopd, 13.4 million standard cubic feet per day gas, which prompted the Carlyle Group to invest $US500 million.

 

Since the awarding of the Ben Khedechef block to Sunset Pacific Petroleum Ltd. the Company has essentially gone dark; no website. bare minimal filings, and minimally nurturing old prospects (letting others do the heavy lifting). There also appears to have been an attempt to scrub the history of the Company's digital presence. Additionally, our research has uncovered previous attempts by inquisitive entities asking about the alleged existence of a technical report by Shell on Sunset Pacific's Ben Khedechef bock, however the Company's answer was to deny there was, and they were 'technically' correct as the report was in fact by "ex"-Shell geologist Dr. Gharbi -- not Shell itself. A copy of the report has come into our possession (see http://quantresearch.net/SPKcorporateANDtechnicalJuly24-2016.pdf ) -- and by default we have made it public. Readers are cautioned that NI standards for reports prohibit the reliance on information unless it is filed by the Company in accordance with rules. Shareholders might want to press the Company for comment.

 

There appears reason for investors to at least add TSK-V:SPK to their watch list and consider a long position here. For existing shareholders, in light of the analysis in the technical report, it makes no sense for shares of TSX-V:SPK to be offered out on the ask under 50 cents, and once news of exploration on the claim begins the stock could climb nearer $2/share. The stock could easily trade well over $1/share on speculation in the interim.

 

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Company Background:

 

Sunset Pacific Petroleum Ltd. is a natural resource company incorporated in 1981 and since 2005 has been engaged in the exploration ,development and production of oil and natural gas. A review of most recent MD&A on SEDAR filings (SEDAR URL here) shows the Company having disclosed its 'Business Description' is as follows:

 

The Company is a junior resource exploration company engaged in the acquisition, exploration, and development of natural resource properties (primarily oil and gas). The Company’s only sources of revenue are royalties from Bougie Trutch and Trutch East royalty interests and the Company does not operate any producing resource properties at this time. The Company’s business is presently focused on the evaluation of various oil and gas properties and concessions in the Middle East (Oman) and in North Africa (Tunisia). The Company intends to explore and develop prospective resource plays, which then provide the economic platform to pursue the deeper more unconventional formations that have significant upside potential. The Company has been awarded the Ben Khedechef concession in Tunisia (previously named El Hamra) subject to certain conditions. (Please see “Proposed Transaction”).The final details will be reviewed by the Government of Tunisia Etap/DGE and the Company’s representatives in Tunisia in the coming weeks.

 

The 'Proposed Transaction' section of the MD&A is as follows:

 

On June 2, 2014 the Company announced that it has signed a memorandum of understanding ("MOU") with IMI and COTIF SICAR (investment arm of the CARTE group) both headquartered in Tunisia. The MOU outlines an equal partnership between the parties in evaluating and acquiring several near term production and high impact exploration projects in the Middle East and North Africa ("MENA") region.

 
The IMI-EAG group, established in 1974 and headquartered in Tunisia has over 60 companies throughout the world including the USA, Canada, the Philippines, Thailand, Maylasia, Papua New Guinea, Algeria, Morocco, Egypt, Chad, Cameroon, Angola, Qatar, Bahrain, Dubai, Abu Dhabi and Saudi Arabia. IMI-EAG is a global leader in technical assistance and has been committed to offering the world-class oil and gas construction services in the fields of mechanics, electricity, civil works, and field development from commissioning to start-up and operations to maintenance. Currently, IMI-EAG has more than 400 core employees and up to 1500 skilled engineering and trades contractors at any given time, adhering to the highest standards of quality, transparency and international qualifications.

 
CARTE (C.A.R.T.E - Compagnie d'Assurances et de Réassurances Tuniso-Européenne ) was founded in 1976 by BNP (now BNP Paribas) and DOGHRI Group and in partnership with FGM and Préservatrice. In 1986, under the leadership of its current CEO , Mr. Hassine Doghri, the DOGHRI Group in partnership with Mutual of Le Mans took control CARTE. Today, with over 35 years of experience, CARTE is a leader in the Tunisian insurance sector. Mr. Doghri has served as the honorary general consul for the Norwegian consulate in Tunis since 1982 Tunisian British Chamber of Commerce since 2010. CARTE holds strategic partnerships with both local and foreign partners, investing in various sectors.

 
On November 3, 2014 the Copmpany announced that it had signed a memorandum of understanding with Hoqool Petroleum International WLL Co., based in Manama, Kingdom of Bahrain. The MOU outlines an equal partnership between the parties in evaluating and acquiring near-term production and high-impact exploration projects in the Middle East and North Africa region.

 
Hoqool Petroleum International is an independent oil and gas exploration and production company, incorporated and headquartered in the Kingdom of Bahrain. The founding management team comprises senior energy executives from the national oil companies of Bahrain and Saudi Arabia, who are experienced and well recognized, both locally and internationally, covering the upstream sector of oil and gas, with more than 175 years of combined experience. The company was established in 2010 and represents a consortium of three Arabian Gulf firms that have long years of experience in the most prolific and richest petroleum system in the world. The core business of Hoqool is the development of energy resources; its activities include exploration and development of oil and gas fields.

 
The Company has now applied for two open exploration permits with the Tunisien Direction Generale de l'Energie. The first open permit was applied for on July 31, 2014, where the company has partnered on an equal basis with two established Tunisian companies, namely IMI and COTIF-SICAR (investment arm of the CARTE group). The second open permit was applied for on Oct. 30, 2014, where the company will partner with Bahrainbased oil company, Hoqool Petroleum International WLL Co. Both open permits meet the company's criteria of near-term production potential, with good seismic quality and previously drilled wells along with nearby proven production. The Company is now waiting for the Tunisian government on final approvals for both permits.

 
On March 23, 2015 the Company announced that it has entered into a non-binding letter of intent (“LOI”) to acquire a 56.25% participating interest in an existing exploration and production sharing agreement for an onshore block in The Sultanate of Oman (the “Oman Block”), with the current block holder owning an 18.75% participating interest and the Sultanate of Oman owning the remaining 25% participating interest in the property. (As required under the terms of the exploration and sharing agreement, the Oman government is carried in the exploration phase.) Sunset will be the operator of the Oman Block. Pursuant to the terms of the LOI, Sunset will pay the current block holder US$100,000 within 30 days after signing the LOI. A finder’s fee may be payable with respect to this transaction. The parties are now working to finalize the necessary formal agreements as soon as practicable.

 
On February 23, 2016, The Company announced that it has signed a conditional agreement to acquire an oil and gas concession in Oman subject to certain conditions being met over the course of the next two months. The Company has paid the vendor a lock-up fee of US$50,000. The parties are conducting final due diligence negotiating and finalizing an operating agreement which they expect to complete by the end of May 2016. As at the date of this report, this agreement has not been finalized.

 
On May 9, 2016, The Company announced that is has been awarded the Ben Khedechef concession in Tunisia (previously named El Hamra). The final details will be reviewed by the Government of Tunisia Etap/DGE and the Company’s representatives in Tunisia.

 
On April 26, 2017 the Company announced that it has signed an agreement to farm out a fifty (50%) percent working interest in its interest in a hydro-carbon Concession in Tunisia. The conditions of the Agreement call for Sunset to receive approval from the government of Tunisia for this Agreement. The Agreement also calls for Sunset to receive all government approvals to proceed to a work program on the concession. The farmee will provide A SWIFT coded Letter of Credit for the sum of Five Million United States (USD $5,000,000) Dollars with the term of five years, that must be approved by the government of Tunisia’s confirming bank. Pursuant to the Agreement, the farmee will pay: (a) to Sunset the sum of Two Million United States (USD $2,000,000) Dollars in sunk cost on or before thirty (30) days after the execution of the Agreement. (b) the sum of One Million United States (USD $1,000,000) Dollars toward the administrative and operational costs of the Concession and (c) fifty (50%) percent of any additional cost related to the Concession. The Company will provide further disclosure of this transaction including the name of the farmee when all conditions by all parties have been met. This Agreement is subject to regulatory and government approvals where required.

 
On May 25, 2017 The Company announced that it has renegotiated the agreement with its farmout partner for a 50-per-cent working interest in its interest in a hydrocarbon concession in Tunisia. The conditions of the agreement call for Sunset to receive approval from the government of Tunisia for this agreement.  The agreement also calls for Sunset to receive all government approvals to proceed to a work program on the concession. The farmee will provide a Swift-coded letter of credit for the sum of $5-million (U.S.) with the term of five years, that must be approved by the government of Tunisia's confirming bank. Pursuant to the agreement, the farmee will pay:
• To Sunset the sum of $2-million (U.S.) in sunk cost on or before 60 days after Sunset has received all approvals from the government of Tunisia;
• The sum of $1-million (U.S.) toward the administrative and operational costs of the concession after Sunset has received all approvals from the government of Tunisia;
• 50 per cent of any additional cost related to the concession.
Sunset will provide further disclosure of this transaction, including the name of the farmee, when all conditions by all parties have been met. This agreement is subject to regulatory and government approvals, where required.

 

Geoff Glenn,

Chief Market Strategist

Quant Research Group - QuantResearch.net

 

Disclaimer: The above information is opinion only. Content herein is not a solicitation to buy or sell any securities mentioned. See full disclaimer and terms of use here.

 

 

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