Givot Olam Oil Exploration Limited Partnership (TASE:GIVO.L) today notified the Tel Aviv Stock Exchange (TASE) that it found "significant quantities" of oil at its Meged 5 well in Rosh Ha'Ayin. The company cautioned that it could not precisely estimate the size of the find at this time.
Givot Olam said, "Yesterday between 10 and 11 pm, during drilling in the Mohila strata, more than 60% gas was measured in the drill mud, together with significant quantities of oil."
The company cautioned, "At this stage it is not possible to estimate the significance of these findings."
Dr. Michael Gardosh of the Geophysical Institute of Israel said that the Mohila strata was the target strata for all oil exploration wells in the area. "This is a Triassic structure about 230 million years old. It includes chalk, dolomite, and gypsum, and has the right conditions for oil reservoirs."
The drilling is continuing, and only when it is completed and all necessary tests are conducted, including electrical logs and production and processing tests, will it be possible to know whether the oil find is commercial.
Gardosh said, "The current indication is during the drilling and is very preliminary, and nothing can be known about the quantities of oil and whether it can be taken out. These things will have to become clearer through tests. Currently, I would call this a positive indication, but you can't establish more than that before all the drilling tests are completed."
At a presentation to investors in May, Givot Olam said that the Meged 5 well's target depth was 4,850 meters, and would cost $10.7 million. The company gave a 40% chance of finding oil.
In May, Givot Olam estimated the potential of oil at the Meged 5 well at 2.3 million barrels, and the potential of the field as a whole at 50-129 million barrels. This is a small field by global standards. However, at the current price of oil (about $77 per barrel), and assuming that the company will not revise these numbers, sales could range between $3.85 billion and $9.99 billion.
Leader Capital Markets analyst Yoav Burgan said, "This is only a preliminary and very optimistic announcement that portends good news, but some qualifications are in order. Until progress is made in the exploration, specifically the electricity logs and production tests, it is not possible to discern from the discovery the quality of the reservoir, its size, or feasibility of production. In contrast to the offshore natural gas discoveries at Tamar and Dalit, we have only the potential for the first significant continental discovery in Israel. As a result of this discovery, investors may begin to reconsider other oil exploration partnerships with licenses at other locations, such as the Zerah Oil And Gas Explorations LP (TASE: ZRAH) at the Dead Sea."
Givot Olam began drilling the Meged 5 well in June. The company has invested $50 million in the Meged wells since it obtained the exploration license in 1992. The wells faced technical problems, and drilling at the Meged 3 well was halted twice. Oil has been found at previous wells, but not in commercial quantities. The company went public in 1993.
Givot Olam's share rose 177% on the news to NIS 0.072.
Published by Globes [online], Israel business news - www.globes-online.com - on December 24, 2009
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