Natural gas is one of the strongest bull markets in the world today, with prices rising more than 100% year-to-date, and nearly 200% in the last year:
Natural Gas (One Year)
Global energy shortages and the need for cleaner burning energy creates a special role for natural gas within the green energy transition. Natural gas produces 50% less CO2 than coal and 30% less than oil. Large integrated natural gas producers are generating record profits and the outlook for the energy sector looks stronger than ever.
The closest ally of the United States in South America, Colombia, is committed to reducing CO2 emissions by 20% by 2050 to meet its Paris Agreement CO2 target. Natural gas will be an important part of Colombia’s CO2 emissions reductions and the country has already seen its natural gas consumption grow by more than 40% in the last decade:
Considering the growing consumption of natural gas throughout Latin America, continued supply deficits, and strong market pricing, it seems like an opportune time to build a natural gas producer in Colombia.
NG Energy International (TSX-V:GASX, OTC:GASXF), a Colombia focused natural gas exploration and near term production company, has had a busy year as it advances its Maria Conchita field towards production. At Maria Conchita, GASX has built a gas processing facility and gas pipeline connecting to the TGI Main Pipeline that transports the gas throughout Colombia. NG Energy expects the start-up period to commence in early June with initial gas production coming from the Aruchara-1 well. In order to not stress the well, gas will begin flowing at 3.5 million cubic feet of gas per day and the company will aim to ramp up to gas production of 16mmscfd (million standard cubic feet of gas per day). The company signed a temporary contract and received pre-payment for 15 days of production at the starting flow rate of 3.5mmsfd. For just 15 days of production, the company received $US 277,368. This gives a very good look at what Maria Conchita is capable of as production is ramped up towards the target of 16mmscfd. Once the initial contract period ends in December, GASX will look to renegotiate pricing based upon natural gas market conditions at that time.
Maria Conchita gives GASX a solid revenue platform to build from. However, it is the significant exploration upside at Sinu-9 that is most enticing from an investment standpoint. The first well being drilled at Sinu-9, Magico 1, is being drilled to a depth of 8,000 feet in three phases using a 1,500 hp hydraulic rig. GASX has identified at least three intervals of interest and plans to test each of them during the drilling program.
GASX believes that each of the three zones at Magico could flow up to 15 mmscfd. The main area of interest at the Magico-1 well is the Cienaga de Oro sandstone reservoir (CDO). In June of last year, Canacol drilled the Aguas Vivas 1 in the CDO and encountered 412 feet of true vertical gas pay. Aguas Vivas 1 tested at 35.5mmscfd. The upside at the Magico 1 well for GASX is enormous and this is just the first of many wells to be drilled at the 311,353 acre exploration property. In September of 2021 GASX received environmental approval from ANLA to drill 22 wells at Sinu-9.
In addition to Natural Gas, the company announced lite crude oil prospects of over 200,000Mbbls back in March of this year. The company expects to make headway on the lite crude oil prospects later this year. With an ongoing energy crisis this represents another huge catalyst for the company.
Today’s US$120 million market cap for GASX appears to be rather modest when one fully appreciates the revenue potential at Maria Conchita and Sinu-9. Additionally, GASX is well funded with more than $20 million in cash after recently completing a C$17 million financing.
Three key events for GASX will occur in the month of June:
- The Start of production from Maria Conchita, and production ramp up towards 16mmscfd.
- Results from the Magico-1 well including the size of pay zones and test flow rates (by end of June).
- Results from the June 18th Colombia Presidential Election runoff between Rodolfo Hernandez (right wing) and Gustavo Petro (leftist). Hernandez is a multi-millionaire businessman who is running on an anti-corruption platform. He is a right-wing populist businessman who is seen as a Trump type of personality in Colombia. 3rd place finisher Federico Gutierrez (Fico), who received nearly 24% of the votes, has thrown his support behind Hernandez which means that more than 50% of the votes in the first round support the right wing pro-business candidate.
With a Hernandez victory in two weeks and exploration success at Magico-1 the month of June could be a memorable one for GASX shareholders.
Disclosure: Author owns GASX.V shares at the time of publishing this article and may choose to buy or sell at any time without notice.
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