Egypt has long been known as a dominant force in the oil and gas market, with production of roughly 682,904.14 barrels per day (bopd) of oil that puts companies such as TAG Oil (TSXV:TAO) in a prime position to capitalize on this growing market.
Case in point, the Vancouver-based oil and gas exploration company is in the process of executing Egypt’s largest frack on the Badr Oil Field (“BED-1”) in the Western Desert.
TAG Oil is in the middle of drilling the first horizontal well on the Badr Oil Field, the BED4-T100 (“T100”) well, whose Abu Roash “F” (“ARF”) formation in the BED-1 field is estimated to potentially host more than 500 million barrels of oil initially in place[1].
As the company looks to achieve the largest frack on Egypt’s BED-1 Field, TAG Oil will also untether a unique investment potential in the space.
The Egypt focus
In an interview with The Market Online, TAG Oil CEO Toby Pierce explained that one of the biggest reasons the company has a focus in Egypt is because of Abby Badwi, the company’s Executive Chairman and director.
Pierce said Badwi is Egyptian-born and raised and has had four successful exits, two of which have been in Egypt. “We’re hoping [TAG Oil] will be the fifth company sale,” Pierce said.
As for what gives the company a leg up in the space, the company signed a Petroleum Services Agreement with Badr Petroleum company (“BPCO”) in 2022 to develop the ARF formation in BED-1 that spans a 107-square-kilometre concession in Egypt’s Western Desert. BPCO is a wholly owned subsidiary of Egyptian General Petroleum Corp.
Pierce explained the company is drilling an unconventional ARF reservoir, which is similar to the Eagle Ford Shale play in Texas. Notably, the Eagle Ford formation produces more than 1.2 million bopd, which is more than double what is produced in all of Europe.
Putting it simply, what can be produced at BED-1 is nothing short of significant because of the potential to unlock a large amount of production within the region.
“[Eagle Ford and BED-1 are] very similar in all attributes, and that’s what gave [TAG Oil] the confidence to go after this source rock in Egypt,” Pierce told The Market Online, adding that no one else in Egypt is doing what the company is doing.
Unleashing Egypt’s largest frack on the Badr Oil Field (BED-1)
Egypt has a vast and diverse economy that spans from oil and gas, mining and agriculture to the Suez Canal, tourism, and textiles – all of which are major contributors to the country’s economy.
In terms of oil and gas, Egypt is a net exporter of natural gas and produces roughly 700,000 bopd.
Within the country, BED-1 was discovered by Shell back in 1982 and produced roughly 90 million barrels of light oil over a 30-year period from a region above the ARF.
By 2012, BPCO had taken over control of BED-1. Current production is roughly 5,000 bopd, while the field has a 25,000-barrel processing facility.
TAG Oil entered into the Petroleum Services Agreement in the BED-1 field in October 2022 and is currently in a Phase 1 evaluation period.
The company revealed in February that it completed re-drilling from the intermediate cased section of the T100 well in BED-1, landing the casing liner in the ARF carbonate reservoir zone, and reaching a measured depth of 3,238 meters in the ARF.
Pierce explained that the company had previously undertaken the successful re-entry of the BED 1-7 vertical well back in May 2023, by conducting a fracture stimulation in the ARF formation.
“The significance of that was that [the company] proved that the rock would take a frack of that nature in our horizontal well,” he said. “While companies such as Apache (NASDAQ:APA) and others have undertaken smaller fracks in Egypt, nobody’s ever done more than about 10 stages total.”
Putting that into perspective, Pierce added that the company is planning to do roughly 25 to 35 stages in its portal of fracking.
Getting to this stage, however, didn’t come without its setbacks.
“Through November and December, we had a couple of different well issues. The rig was causing us issues and that culminated with the well to bottom and collapse,” Pierce told The Market Online.
He explained the company then took a pause and made some changes, including bringing in new drilling staff, changing the MUD system, and making repairs to the rig so the company could begin drilling again.
“It’s probably a very good testament to how the technical team responded to the challenge and overcame it,” Pierce said.
Catalysts for TAG Oil
Now that the company has commenced drilling the T100 horizontal pay zone section, it is expected to take roughly three weeks to complete drilling the horizontal section and run the completion technology.
In the company’s most recent update on February 21 the company stated that the horizontal pay zone section is expected to take up to approximately three weeks to complete, and Pierce noted that TAG Oil was roughly 100 metres into the horizontal drilling. Once all 1,000 metres are completed, the company will run a completion string and frackers in preparation for fracking.
The drilling rig well then will be moved off the well site, allowing TAG Oil to proceed with the hydraulic fracture stimulation of the ARF.
Moving forward, Pierce said catalysts that investors can look forward to will be news flow when the company expects to release flow test results out of the frack. TAG Oil is preparing for its second horizontal well expected to begin in late Q2 or early Q3 of this year.
“[TAG Oil] is also looking at acquiring additional acquisitions of acreage in and around its existing acreage in Egypt,” Pierce said.
The Management team
Toby Robert Pierce, CEO and Director
Toby Pierce is a natural resource executive with more than 25 years of experience in transactional and valuation deal sizes ranging up to $1.3 billion in valuation.
Pierce’s experience ranges from wellsite geology with Nexen and Burlington Resources, to director of oil and gas institutional research of Tristone Capital’s Calgary and London offices. Pierce has also acted as CEO and president of Crest Petroleum.
As a partner and oil and gas analyst for GMP Europe Securities LLP, Pierce covered a variety of oil and gas companies with market capitalizations ranging from $30 million to $15 billion and provided strategic advice and valuation expertise internally to the investment banking and sales partner.
Pierce is a graduate of the Rotman School of Management at the University of Toronto where he earned an MBA in finance and also holds a B.Sc. in earth sciences from the University of Victoria.
Suneel Gupta, Vice President and COO
Suneel Gupta is a senior executive in the international petroleum oil and gas industry with more than 30 years of experience and a successful track record of value creation in oil and gas.
Gupta previously joined Bankers Petroleum in July 2004 as a founder and held several key roles with the company, including president and CEO, executive VP and COO, VP production & operations, VP business development and general manager for Albania.
Gupta has been directly involved in growing the company from 500 bopd in 2004 to more than 22,000 bopd by 2014 and more than doubling booked reserves for the assets in Albania.
Before joining Bankers Petroleum, Gupta held senior positions with several petroleum companies where he was integral to the development of oil properties in international countries as well as in Canada, including Husky Energy Inc., Renaissance Energy Ltd., Pinnacle Resources Ltd., and Chevron Canada Resources Ltd.
Gupta holds a Bachelor and Master of Science in chemical engineering from the University of Calgary.
Abdel (Abby) Badwi, Executive Chairman
Abby Badwi is a geologist and petroleum industry executive with more than 40 years of international upstream experience, leading public and private energy companies with oil and gas assets in many international jurisdictions.
Over the course of his career, Badwi has completed several corporate mergers and numerous corporate and asset acquisitions and has a strong capital markets following in North America and Europe. Badwi has been a corporate board member of several public and private companies, including Verano Energy in Colombia and Arpetrol Corp. in Argentina; both companies were successfully sold in 2014 and 2016.
Badwi has also served as president and CEO of Kuwait Energy, which has operations in Egypt, Iraq and Oman, and successfully led the sale of the company in 2019. He has also been president and CEO of Bankers Petroleum, which has oil production operations in Albania, from 2008 to 2013. He was then vice chairman from 2013 until the company was sold in 2016. Badwi has also served as president, CEO and a director of Rally Energy from 2005 to 2007, a company with oil production in Egypt and natural gas in Pakistan, leading the company to its sale in 2007.
The Investment corner
As of the time of this writing, TAG Oil has a market cap of C$92.33 million, a share price of $0.48 and 184.66 million shares outstanding.
Given the company’s prime location in Egypt and that it is currently in the process of executing Egypt’s largest frack on the BED-1 field, TAG Oil has a promising future with massive potential for investors to potentially capitalize on.
TAG Oil also continues to evaluate new acquisitions and joint venture opportunities in Egypt and the broader Middle East and North Africa region, with the aim of expanding and identifying suitable additions to the company’s portfolio, which should also be enticing to investors.
With the company expecting to have steady news flow in the coming months and over the course of the year, TAG Oil just might be the oil play investors do not want to miss out on. As always, investors are encouraged to do their own due diligence before making any investment decisions.
[1] Estimate from independent resources evaluation of the ARF formation in BED-1, Western Desert, Egypt, dated November 21, 2022, prepared by independent qualified reserves evaluator RPS Energy Canada Ltd. with an effective date of March 31, 2022.
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