Oil and gas exploration firm Forum Energy Plc of the UK, an indirect subsidiary of Philex Mining Corporation, may need to get a new investor to help it raise $3 billion needed to bring the gas-rich Sampaguita field in the Reed Bank Basin into commercial production.

This is based on the findings of Edison Investment Research Ltd. which was commissioned by Forum Energy to conduct a research report.

Considered Europe’s leading investment research company, Edison’s team of more than 50 includes over 30 analysts supported by a department of supervisory analysts, editors and assistants.
Edison compared the oil and gas potential of the Sampaguita gas field to that of the Malampaya gas field in northwest Palawan.

It said the Sampaguita field under service contract 79 (formerly GSEC 101), is estimated to hold 3.5 trillion cubic feet (tcf) of gas in place while the Malampaya gas field contains around 3 tcf of gas and 40 million barrels of recoverable oil reserves.

"The Malampaya consortium, which includes Shell, has already recovered the $4.5 billion investment since the field became operational in 2001...This would suggest a $3 billion price tag for a resource similar to Sampaguita with all the infrastructure in place," Edison said.

It said Forum Energy will likely spend about $10 million for a 3D seismic to affirm the potential of the Sampaguita gas field and is expected to drill two to three appraisal wells at a cost of $30 million per well in the next 36 months.

"Forum is faced with a funding gap and need to raise equity or opt for a farm-in partner to finance its appraisal programme on Sampaguita," Edison said.

However, it said that Forum's funding risks are significantly mitigated by its current shareholder structure. Philex currently owns 65 percent of Forum. Philex is controlled by First Pacific Company, which last year generated $3.9 billion of sales and $335 million of operating profit.

"First Pacific provides Philex access to a strong balance sheet, suggesting that funding risks are significantly mitigated," it said.

Edison said the Sampaguita discovery is a "potentially value-changing asset" and adds a significant value to Forum Energy's entire oil and gas portfolio.

"Were the appraisal programme to prove up the GIP (gas in place) estimate, we would expect the size of the field to attract the attention of larger players. In the context of the UK sector of the North Sea, a 3 trillion cubic feet find would be one of the largest finds in the last 25 years. Similar to Malampaya, such a find would be the foundations of an LNG (liquefied natural gas) project," Edison Investment said.