This Pure Play Oil Junior In Mexico’s ‘Super Basin’ Could Be The Next Energy Success Story
IFRTF Is The First Mover In The New Mexican Oil Space, And Early Investors Should Take A Closer Look At This Investment Opportunity!
In December 2013, Mexico’s 76 year oil monopoly and the ban of foreign and independent company operations in its oil and gas industry ended, leading to a massive denationalization and reform effort; as well as a commensurate opportunity for the right companies. The oil and gas potential in Mexico is immense.
But when Mexico held its first oil and gas block bidding round at the end of 2015, one micro-cap company swooped in on the established competition, winning one of the coveted 25 oil development blocks. It was a major upset.
That company was International Frontier Resources, which through its 50-50 JV company Tonalli Energia, was awarded a block known as ‘Tecolutla’ in the eastern coastal state of Veracruz. Right after making its presence known in the new Mexican oil scene, here’s why this micro-cap company is poised to be a big winner in this space.
6 Reasons Why International Frontier Resources Is A Future Winner In The Mexican Oil Space
Grupo Idesa’s history in Mexico dates all the way back to 1956 and is a giant in the domestic petrochemical industry. In its main product lines, Grupo Idesa is one of the country’s largest producer with a 32% market share and serving 60% of the market. Its 50-50 partnership with IFR demonstrates the confidence that it has in the smaller company’s expertise and capabilities.
According to IHS Markit, the global leader in providing industry research and information, the Tampico-Misantla may be one of just 24 global ‘super basins’. IHS believes that the basin still has at least 5.2 billion boe in conventional resources remaining, plus substantial unconventional potential.
As IHS Markit puts it in a report “The Tampico-Misantla Basin has been producing oil since the early 1920s and it has all of the super basin characteristics. In many ways, it may well mirror America's model super basin -- the ever-resilient Permian Basin.”
In other words, the Tampico-Misantla Basin is a rare and valuable resource, IFR has its project placed at the right address to be one of the first companies to develop onshore oil production and grow its footprint
At its peak in 1972, the Tecolutla block was producing 900 barrels a day, but that was 45 years ago. Back then 3D seismic technologies, as well as the various conventional recovery techniques in use today were nonexistent.
Their expert technical team has since reevaluated the field using existing well control and 3D seismic technologies. The pay zones are thick and the pressure is good as it was back in the ’70s. Work-overs can be done on the old wells, bringing them back on stream, as well as numerous wells.
Oil production from Tecolutla has yet to be optimized.
With modern horizontal drilling methods and work-overs, the team believes that they can yield daily production results that far exceed the historical peak production levels of 900 barrels per day as well as significantly increase recoverable reserves. Considering the potential of the Tampico-Misantla ‘Super Basin’ (an estimated 5.2 billion boe in just conventional), the upside is HUGE.
The Tecolutla block is only the beginning for IFR and its joint venture company Tonalli Energia. It has been actively bidding on production blocks, with the latest being Mexico’s second onshore bid round in July 2017. It placed four bids and came in second on one block and third on two other blocks. Multiple new onshore bid rounds are expected in 2018, and Tonalli expects to be an aggressive bidder. PEMEX is also offering over 150 farm-out opportunities which open up further expansion potential.
Given its expertise and good standings in the bids, it is only a matter of time before it wins additional blocks. And as it does, you can be sure that the market will be paying attention.
One of the reasons that make Mexico so attractive for oil investment is its low cost of production. The average development cost per barrel is $23 and in many areas the price is even lower, at around $10 to $20. IFR estimates that operational costs will come in at under $10 per barrel and in this oil price environment near $60, excellent profit could be possible. IFR’s expert technical team also has a proven track record of significantly reducing costs (by as much as 60%!).
Here are some highlights of what this world class technical team was able to achieve at one of their past projects in Canada. Not only were there big cost reductions, but greatly improved operational efficiency as well. When these kinds of efficiency improvements are coupled with a low production cost, you have the recipe for a highly efficient and low cost project.
The company has a veteran team who has worked around the world in North and Latin America, the Middle East, Africa and Asia. The seasoned board includes a former CFO and Director of the Mexican state oil company PEMEX, further lending credibility to the expertise of their management team.
As you read this, the company has already obtained approval from the Mexican energy regulator for its evaluation and development plan for the block. IFR is in the late stage of receiving final approval for their drilling permit, after which there will be a clear path towards their first potential well and beginning work-overs of this proven field.
Currently, International Frontier Resources (TSX-V: IFR, OTC: IFRTF) is trading at a market cap of $23 million at a price of $0.19. As the company moves rapidly towards potentially becoming the next producing oil well.