Damon Neaves – Managing Director & CEO, Pura Vida Energy, Australia
Damon Neaves, founding director and shareholder of Pura Vida Energy, an Australian-based African oil explorer with current offshore operations in Morocco, Gabon, and Madagascar, provides us with an update on the latest developments in their three main assets, and the junior’s key milestones and strategy to further expand the exploration frontier in Africa.
Could you present Pura Vida Energy to our readers and provide us with an update on the recent developments that have occurred at the company’s flagship asset in offshore Morocco?
Pura Vida Energy is an Australian-based African oil explorer with a portfolio of high quality assets, and current offshore operations in Morocco, Gabon, and Madagascar. The company was founded and listed on the ASX in 2012, while our flagship asset and the central part of our portfolio is our 23% share in the Mazagan permit, 100km offshore Morocco.
Regarding this permit, we have a farm-in agreement with Freeport-McMoRan Oil & Gas, the operator of the project, to fund a two-well program. In 2015, our first exploration well, the $150-milion MZ-1, was thus drilled through the three-prognosed Jurassic fans and the well has reached a final depth of 6,150 meters Sub Sea True Vertical Depth (SSTVD) within Triassic aged sediments. Disappointingly, no commercial oil shows have been encountered by this high-risk well drilled in a frontier area. We are still working on the post-well evaluation that will then be leveraged when considering the drilling of our second well, while, in such a frontier area, each new well drilled significantly contributes to strengthening our understanding of the geological structure of the block. A first well always stands as a learning experience and was a significant accomplishment for a junior.
This is an 8,717 km2 permit and we still have a lot of work to do to unlock the potential of the block following a disappointing result in our first well.
Looking at Pura Vida’s other assets, what is your current strategy for the 1,210 km2-large Nkembe block in Gabon, for which Pura Vida holds a significant 100% interest and is the operator?
We are in the lucky position to be the sole owner of this promising asset, even if Pura Vida’s interest is subject to the right of the State of Gabon to participate in any development for up to a 20% interest under the Production Sharing Contract. The Nkembe block in Gabon is very different from our frontier Moroccan asset: it is located within an area with proven resources, and the oil and gas industry has been thriving for over 50 years in the country. The Gabon Basin contains extensive production from reservoirs above the salt layer and recent discoveries also show extension of pre-salt play throughout Gabon, and we will target both of these plays. Furthermore, the proximity of existing infrastructure such as Total’s producing field should tremendously help us to commercialize any discovery.
Our strategy for this block is to work-out the 3D data that we have collected for the block and to find a farm-in partner to fund future exploration, including drilling. Obviously, finding the right partner in these challenging times is particularly tricky, as exploration investment in general has been largely cut over the past months.
Nevertheless, the current context has nurtured a certain resurgence of interest in more conventional assets such as our Nkembe block, characterized by large-scale resources and long production lifetime. Furthermore, this type of conventional field can also be considered more robust and resilient to economic and price cycles, as they boast between 15 and 20 years of production lifetime- while some unconventional fields have a productive life of only a few months.
We deeply believe in the potential of the block located within an area where extensive production activities have occurred over the past years, and we are hopeful to secure a farm-in partnership in the upcoming months with a reliable partner with a successful track record.
What have been the most recent developments regarding the Ambilobe block in offshore Madagascar?
The 3D seismic program for this 17,650 km2 block was been completed in May 2015 and we are still processing and interpreting the data. We are extremely pleased by the quality of the 3D data and we will start the farmout process on the block over the course of this year.
In this frontier area, promising gas resources have notably been identified, and while Northern Mozambique and Tanzania have concentrated most of the industry’s scrutiny, Madagascar has been to a certain extent left behind – probably because of the uncertain political situation in the country over the past few years. Nevertheless, the situation has tremendously changed: political stability is back and democracy has been restored, and this positive context is already bolstering a recent recovery in investment in the country.
In this regard, what is your strategy for mitigating the political risk in the countries you are engaged in?
Obviously, we pay the utmost attention to estimating the political and security risk when entering a new country, and as a matter of fact, we have been extremely selective so far when deciding in which countries we are to invest. We also strive to build strong and long-lasting relationships with these countries’ governments, which are also effectively our joint-venture partners in our projects. Besides Gabon, where the State has the right to participate in any development for up to a 20 percent interest under the Production Sharing Contract, the Moroccan government also holds a 25 percent interest in the Mazagan permit, while in Madagascar we also have a production share agreement.
However, countries’ governments are particularly interested in and supportive of our activities. In Morocco and Madagascar for instance, the governments are particularly keen to promote their domestic offshore exploration that still lags behind the levels displayed by many of their neighboring countries. In Morocco, this policy has so far been particularly successful, as a considerable number of exploration wells have been drilled in recent years. In Madagascar, exploration still stands at a less-advanced stage, but it displays promising grounds to embrace a bright future. Gabon is clearly a more mature market, where the long-standing relationship between the country’s economy and the industry dissipates most of the project development risks.
We also estimate that we have an important role to play to further develop the resources of these countries. In Morocco for instance, our joint-commitment with Freeport-McMoRan to the country represents a significant investment to develop the industry of an oil-dependent country, where a major oil discovery could be strategically and economically significant. In Gabon, the state government has been particularly receptive to our ambition to target both pre-salt and post-salt plays, whereas the offshore industry in the country has been historically focused on pre-salt activities – a decision that limits the type of technologies implemented in the country.
To what extent is being an Australia-based oil explorer advantageous to the development of your activities in Africa?
We hold both the required financial capital as well as the necessary technical expertise to fully develop Africa’s resources, and Western Australians have historically proven to be successful explorers, both in the mining and oil and gas sectors. Australian explorers in general and Pura Vida in particular have the appetite for risk that renders massive discoveries more likely, while the technical expertise we hold allows us better to control exploration costs and project timelines.
Our exploration Manager, Andrew Morrison, has over 25 years’ experience in the oil and gas industry, including 12 years with BHP Billiton. We always strive to apply the most efficient technologies available to all our projects. As one of the first movers to Morocco, for instance, we also hold the credibility and the experience to be among the better positioned to exploit the country’s resources. Most African resources remain largely untapped, and our ambition is to use Western-Australian technology and capital to develop these resources, in a mutually beneficial way.
Do you intend on pursuing further acquisitions in the years to come?
In these challenging times, the industry is particularly timorous when it comes to funding commitments, but, on the other hand, the costs of seismic and drilling services have dramatically decreased, which indisputably renders exploration activities more affordable. The current context is undoubtedly challenging, but it also abounds in opportunities. We will strive to remain creative and responsive to any new promising business opportunities that arise in Africa, and we already have an advanced idea of the specific areas where we would like to deepen our footprint in the upcoming years, both for offshore and onshore opportunities.
What will be your main objectives for the next five years?
We will hold true to our fundamental strategy: getting in early on affordable terms for early-stage exploration work – seismic data and interpretation – before finding the most appropriate drilling candidate and looking for independent or larger partners to fund the drilling phase. In this period of low prices, we may have to slightly ease off our historical aggressiveness, but as soon as the market recovers, we will undoubtedly return to our fundamental business approach.
In the meantime, we will progress with the 3-D analysis of our Ambilobe block in Madagascar, and we definitely want to take this block to the next phase. In Morocco, the second well is already funded through our two-well agreement with Freeport-McMoRan, and we will continue to look for a funding partner in Gabon. Obviously, as oil explorers, our main objective is to make a major oil discovery!
Coming from a corporate background, what initially attracted you to join the oil and gas industry?
I was a corporate lawyer by trade, but I have always been attracted by the oil and gas industry – and it is such a unique industry that I wouldn’t do anything else now. The technological level reached by our industry as well as the pace of technological innovation are absolutely dazzling, and it continues to push the boundaries of innovation all around the world – even in the most mature markets such as the Gulf of Mexico. Finally, the risk-reward equation probably reaches an unrivalled level in our industry. As managing director of Pura Vida, it is extremely exciting to be a part of such activities on a daily basis.