Red Emperor confident on Puntland drilling

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LONDON (Reuters) – Red Emperor, an Australian-listed oil explorer which is due to also list on London’s junior AIM market on Thursday, said it was confident it would drill a well in Somalia’s semi-autonomous Puntland region this year, shrugging off concerns about security in the Horn of Africa.

The company is hoping that a London listing will enable it take advantage of local investor interest in companies exploring for oil in historically under-explored East Africa.

“The market over here has a really high appetite for the high-risk, high-return nature of this drilling programme,” Managing Director Greg Bandy said in an interview on Wednesday.

A number of other firms including BG Group and Tullow Oil to Premier Oil and Cove Energy, have acquired interests in licences in countries such as Kenya, Ethiopia and Tanzania in the past 12 months.
Red Emperor and its partners in the two Puntland licences, Canada’s Africa Oil and Range Resources, plan to drill a prospect of 300 million barrels of recoverable oil in the third quarter of 2011.

The well will be the first to be drilled in the area for 20 years, said Bandy, who is confident the drilling will go ahead despite a difficult security situation in Somalia– a country from where piracy has boomed amid a lack of effective central government.

“If it was really easy to drill a well in Puntland it would have been done before now. But we’re as close as we’ve ever been. It’s right at the finish line, we think,” Bandy said.

Red Emperor also has a stake in an exploration property in Georgia, the former Soviet state, where it will drill two wells this year.
The company, which is not planning to raise new funds when it lists on AIM, has $14 million of cash, enough to finance its share of the costs for two wells in Georgia and one in Puntland, but will need to raise more cash for further drilling in the Horn of Africa area, it said.

“When we’ve got a more definitive timetable on drilling in Puntland that’s probably the likely time when we will look to raise some money,” said Bandy.

The company is expected to have a market capitalisation of about 32 million pounds upon admission to AIM.