Oil minnow Madagascar Oil (MOIL:AIM) is up 90.5% at 10p as a development plan on its Tsimiroro heavy oil project is sanctioned by the Malagasy authorities who grant an initial 25-year licence with potential to extend this to 50 years. This news first broke at Shares investor evening last night, with CEO Robert Estill handing delegates a ‘world exclusive’ (see our upcoming events here).
In the short-term this is significant because it will allow the company to sell the 100,000 barrels of crude it has stored up during a pilot steam flood operation on the field in the domestic market. Longer term it also paves the way for the group to fully develop a contingent resource estimated at 1.7 billion barrels by independent consultant Netherland Sewell back in 2011.
The initial phase of work is expected to deliver production of 6,000 to 10,000 barrels of oil per day (bopd) by 2018 with the second phase projected to yield between 25,000 and 50,000 bopd by 2022. Appointed in January chief executive Robert Estill has direct experience of steam flood operations – having managed the world's largest steam flood operation Duri in Indonesia for four years. Steam flood involves injecting steam generated at the surface into a reservoir to enable heavy oil to more easily flow toward producing wells.
Having secured approval for its plan the company now needs funding to execute on it and 'active discussions' with strategic partners are likely to accelerate on today's news. The company also hints it is considering another fundraise following on from the $20 million placing conducted in September 2014.
It has been a long road for Madagascar – in the RNS it highlights 11 years of exploration activity leading up to this milestone – and shareholders have also had to be patient. The firm had an inauspicious start to life as a public company, its shares suspended in December 2010 less than three weeks after its IPO as a previous government looked to seize its assets. The stock still remains a long way south of its 95p issue price.