Assam Company ASSAMCO (500024) BUY nd HOLD
indexed
now the scrip is Rs. 19.40
Assam Company is a member of the U.K. based Duncan Macneill Group
having interest in Tea and Road Transportation & oil and gas field.
Assam Company has demerged the Oil & Natural Gas Division and is
operating under the name and style of Assam Oil & Natural Gas
Limited. The company plans to merge its subsidiary Namburnadi Tea
Company (NTCL) with the parent company.It has around 19 tea
plantations spread over more than 15000 hectares which is valued at
300-350 crore
However it is pursuing its E&P activities in Oil & Gas Sector under
the co itself (Assam Company Limited (ACL) ) in the following blocks
in Assam and Assam-Arakan Basin in association with Canoro Resources
Limited, Calgary, Canada (CRL) CRL is the Operator under PSC.
ACL’s share
(a) Amguri - Developed Block 40%
(b) AA-ON/7 - Exploratory Block 35%
The Company also operates three Marginal Fields under service
contracts from ONGC. These fields are operated by ACL independently.
ACL Share on Oil
Laxmijan - Discovered Block 38%
Barsilla - 35%
Bihubar 35%
In respect of Gas, the Company has 70% share.
Assam Company had back in Nov 2006 announced the successful raising of
U$ 46 million (Rs 210 cr) through zero coupon unsecured foreign
currency convertible bonds (FCCBs). The bonds, having tenure of five
to seven years, will be convertible into equity shares at Rs 28.75.
According to the company, the funds raised through FCCBs would be
invested for exploration and development of Amguri and AA-ON/7
oilfields in Assam. The company holds non-operating interests in both
the blocks.
Now the company had bought back FCCB worth14.2 million ( 31%of
outstanding) The Company's outstanding FCCBs due 2011 as 29 12 2009
stands at USD 31.8 million.
The shareholding pattern of the company is as follows
Type Ref Nos %of Tot
Promoter Holding 1 143071476 46.19
Foreign Inst Investors 2 65853591 21.26
Body corporate 25028971 8.08
Insurance Companies 3 8550914 2.76
General public 4 67256011 21.71
309760963 100.00
Major Shareholder each reference is detailed below
Type Ref Nos %of Tot
Assam Oil Company Ltd. 1 119088048 38.45
Lotus Global Invest Ltd 2 27000000 8.72
Mavi Invest Fund Ltd 2 11511952 3.72
Invest-India Mauritius Ltd 2 27000000 8.72
Lic of India 3 6443490 2.08
Reliance Capital 4 6000000 1.94
Amguri Block is located in Assam and covers 52.75 Sq.Km. is a
Developed Block and has potential of 2P recoverable resources. Reserve
Assessment Report as of March, 2008 pertaining to the wells already
drilled and assigning few more new wells in the same zone. The report
has indicated 2P reserve of oil condensate and gas at 10.547 million
Boe which indicates significant upside in reserve potential. However,
this reserve figure does not cover the entire field of Amguri ‘
Amguri 11 only the top most zone is being produced though oil and gas
has been discovered in three zones. The timing for placing the
additional two zones on production will be decided after finalisation
of depletion plan and installation of appropriate facilities. With
this the production will further increase matching with the total
potential. The gas reservoir has been found to be of retrograde gas
condensate reservoir. The consortium has planned for a cryogenic plant
for stripping the gas and produce condensate and LPG (Propane and
Butane) and then sell lean gas. This process will increase the revenue
substantially.
The Drilling Plan
The company with its consortium partner after completion of current
Appraisal Wells drilling programme will submit a Comprehensive
Development Plan for the Amguri Block as a whole to DGH. About 12
wells including 2 Tipam Wells and 2 Work Over Wells have been planned
and deployed two Rigs.
Quality of Oil
The quality of the crude oil being produced from this Block is
superior to “Bonny Light” crude which is the identified benchmark
evaluation for Indian crude oil for international price and has been
certified by Indian Oil Corporation. The consortium gets premium US$
4-5 per bbl over Bonny Light Crude due to its superior quality.
Current production & Development Plan in progress
Well 6, 10B and 11 are producing about 550 bbls of oil and 1,90,000m3
of gas per day, which is about 1700 boe per day. The production will
further enhance once adequate facilities are created and further wells
are drilled.
The consortium is in the process of drawing up a full scale
Development Plan for submission to DGH seeking its approval so that
the consortium can enhance the production level from 2008-09 at a
significant level. With this intention in view, it is decided by the
consortium to drilling of twelve wells in the budget of 2008-09 with
an investment of over US$ 64 million. While presenting the budget of
2008-09, CRL, the Operator, had also projected net revenue projection
of over US$ 60 million (after direct operating expenses). With full
production from all the twelve wells, the revenue generation will see
a significant quantum jump.
In this Block, the company has a participation interest of 40%
During the year 2008, four wells were drilled out of which one well
was drilled at a Tipan formation having significant
deposit of natural gas. The construction of sales gas flow line was
completed in Q3, 2008 to service local markets.
The well is planned to be connected to the gas re-injection flow lines
for compression support to the pool by early 2010. Plans are on to
embark upon another cycle of drilling activities as part of the Amguri
overall Development Plan.
Amguri is a very complex Block having multiple pools of reserves of
oil and gas.
A Gas Compression Project has also been undertaken to augment the
production of oil and condensate from the existing level.
The key project for 2009 will be the production and commissioning of
the condensate recovery and gas reinjection
facility at Amguri to change the mix of production between oil and gas
besides increase in production.
AA-ONN-2005/1 - Assam-Arakan Basin has been awarded against NELP-VII
with ONGC and Oil India Ltd as partners. ONGC being the Operator has
already initiated various minimum work programs that will be completed
during 2009....
The Amguri condensate recovery and gas re-injection project is
expected to be commissioned by Q2 2010. Major equipment is expected to
arrive by mid-December at the port in Kolkata and cleared for land
shipment to Amguri. The Company recently received tenders for the
construction contract and is currently working with the contractor to
finalize the construction schedule. Site work is expected to commence
in December 2009. The gas recycling scheme required to maximize
recovery of condensate also ensures that optimal condensate volumes
can be produced with or without a local gas market as lean gas is re-
injected into the reservoir to maximize reservoir pressure and
recovery of condensate. The Company is also evaluating the feasibility
of installing an LPG train which would strip the butane and propane
from the natural gas stream for sale to the local markets....
Production of oil&gas (For details refer to DGHydrocarbon site)
Year Oil (000) Ton Gas(mm3)Total % to total]
2005-2006 1.70 4.41 6.11 5.15%
2006-2007 7.61 16.43 24.03 20.27%
2007-2008 9.09 22.36 31.45 26.52%
2008-2009 13.96 42.46 56.42 47.59%
Total 32.35 86.22 118.57
The production details since April 2009 is pending to be updated which
may have double considering the trend
The company has stated its reserve of OIL is 60 MMbbls
At US$ 5 profit a barrel after all cost for recovery of oil the
valuation for oil for the consortium is Rs 1380 crore.
The company has 40% share in consortium which put the value of OIL at
AMGURI alone at Rs. 552 crore
The company has 35% share in consortium which put the value of OIL at
AA-ON/7 which will work out to Rs. 644 crore
Which put the intrinsic value of OIL in Oil business at Rs 1196 crore
as against the Rs 600 crore market capitalisation at Rs 19
(the value of 229+617 bcf of GAS is not considered for valuation)
Assumption
First M in MMbbls means One Million
Second M in MMbbls means 1000 Barrel
A Barrel is roughly 158 ltrs of crude
Overseas Assets:
Austin Exploration Limited (AEL): - Assam Company Limited is in Joint
Venture with a Texas based company having assets in the US and South
Australia. AEL currently maintains working interest and net revenue
interests in five key oil and gas assets: two in Australia and three
in the U.S.A.
(i) PEL 105 (AUS) license is owned 100% by AEL. It covers an area of
437 Sq. Km. and is surrounded by producing oil and gas fields, some of
which are the largest in the Cooper Basin. There is a farm-in
agreement between AEL and Adelaide Energy, the official operator. A
noteworthy fault line was discovered in May 2008 and drilling is
expected to commence during 2009. The estimated possible reserves is
upto 6.2 billion cu. ft. of gas and 1.04 million barrels of oil
condensate.
(ii) PEL 73 (AUS) license covers an area of 625 Sq. Km. It underwent a
proprietary hydrocarbon study in September 2008 and the results have
been encouraging. AEL anticipates that drilling is possible during
2009. AEL maintains a 16.6667 working interest in this prospect
(iii) Polecat Creek (U.S.A.) was the first prospect drilled by the
Company in 2007. Production rates have increased but are currently
being maintained at lower levels until natural gas market prices reach
$7 to $8 per mcf. AEL maintains a 26.25% Net Revenue Interest in this
well.
(iv) Park City project (U.S.A.) encompasses approx. 8,000 acres in
Park City, Kentucky, U.S.A., with plans of further acquiring 25,000
acres. AEL maintains an undivided 75% working interest and 65.625% Net
Revenue Interest in every well it drills at Park City.
(v) The Moses Austin Project (U.S.A.) covers an area of 731.88 acres
and an additional 160 acres mineral lease was acquired in November
2008 within the same field. The Company is examining opportunities for
the acquisition of additional mineral rights and well locations.
SEZ
Gujarat Hydrocarbons and Power SEZ Limited (GHAPSL), a wholly owned
subsidiary of the company (formerly known as Gujarat Hydrocarbon &
Energy SEZ Limited) had taken possession of 276-18-13 HA land in GIDC
Vilayat-Vagra Industrial Estate in the Bharuch District in Gujarat for
setting up of a sector specific SEZ Hydrocarbon and related
activities. The Lease Deed for the land was executed between GIDC and
GHAPSL on 21st February 2008 and steps for `Topographic Survey` was
completed on 14th July 2008. GHAPSL also undertook steps for `Site
Clearance` and `Fencing` of the land acquired in the Lease Deed and
almost 10.5 km of `fencing` was completed during the year.
The Company has awarded contract for Rapid Environment Impact
Assessment (REIA) for obtaining Environmental Clearance (EC) from
Ministry of Environment & Forests (MoEF) and the work is on going. In
view of the Panchayat Road which bisects the land,
GHAPSL decided to set up two SEZs instead of earlier proposed one SEZ.
In this regard, it was decided to earmark the plot north of the
Panchayat Road for `Energy including New and Renewable Energy` (108
HA) and the plot south of the Panchayat Road for `Oil & Gas including
its Derivatives (Petrochemicals)` (140 HA). GHAPSL submitted
application to MoC&I on 10th October 2008 for conversion of the `In
principle` approval to `Formal approval`. GHAPSL is in discussion with
GIDC and Gujarat Maritime Board for acquisition of land towards the
proposed `port` related and `off shore rig fabrication / repair`
related activities...
PLEASE DO INDEPENDANT EVALUATION OF RISK AS WELL AS VALUATION OF
BUSINESS BEFORE INVESTING.
the increase in stock consequent to conversion of FCCB will increase
public holding
indexed
on 7.1.2010 the price is 23.85 up 27%