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With the announcement last week that it was taking over the Iraqi assets of Sonoro Energy Iraq B.V., Blue Sky Energy Inc. (TSX-V: BSI) has positioned itself as the first junior energy company with exposure to Iraqi oil. Other juniors have been active in the semi-autonomous region of Kurdistan but Blue Sky’s deal is in the Iraqi homeland.
Up until a few weeks ago, the 24,000 square kilometer area covered by Sonoro as the designated operator and party to several license agreements with the Al-Salah ad Din Provincial Government of Iraq, was in the control of ISIS. The project itself was in a force majeure situation with work entirely suspended. ISIS has been driven out but the situation is still fluid with the Iraqi security forces only now able to assert its control.
Which goes a long way to explaining how Blue Sky was able to acquire over 5 billion barrels of near surface heavy oil for a “cash from production” cost of 4 million dollars or, approximately, $0.02 a barrel based on the first oil field expected reserves.
The Sonoro deal reflects the principals of Blue Sky’s long experience in Iraq and Middle East. “In 2004-2006 our group became active in Northern Iraq. We were doing deals, financings and conducting operations in the Kurdistan oil sector long before the majors came in. While we exited Kurdistan in 2011 the Sonoro deal is not our first project in the area” said Mr. Neil Said, Vice President.
That experience allows Blue Sky to take a realistic view of the risks associated with the asset it has acquired. “Right now the federal government is not fully in control but, every day, that control increases. We know we need to have the federal as well as the provincial government’s co-operation to drill and extract the oil. But we have these existing relationships from our earlier ventures. And, as importantly, the principals of the company have “on the ground” relationships in the region.” said Mr. Scott Moore, Director.
Cementing those relationships and ensuring the federal government’s support is the first task facing Blue Sky. It may take some time but from where the company sits that may be an advantage. “Right now oil prices are beginning to firm up because of the OPEC and Non OPEC production cuts,” said Mr. Neil Said “This is a good time to work with the federal and provincial governments and, as importantly, go over all the geological and field data we acquired in this deal.”
There is a lot of data. The area has been an active oil development exploration area since the late 1930’s and recently Sonoro invested over 15 million dollars worth of exploration and related work in the block it controls. “The previous owners did significant technical work and we have drill ready prospects identified.” Said Mr. Neil Said “We have a NI 51-101 Prospective Resource Report prepared by RPS Energy Canada Ltd. which discloses “Risked Prospective Resources in the Salah ad Din province are estimated on a gross recoverable oil basis to be approximately 5.2 billion barrels (P50), ranging between 1.7 billion barrels (P95) to 10.3 billion barrels (P5).” so we are certainly confident oil is there.”
As importantly, Blue Sky has a plan for its oil once its fields start producing. “This is near surface heavy and medium oil. Using topping plant technology which has been successfully deployed nearby in Kurdistan Region, we’d be able to do preliminary refining and create products for the local market which provides for early monetization on any investment. There is a large, local, market for those products which would mean we would not be reliant on pipelines or be forced to wait for delayed payments from government” said Mr. Said.
In the next six months, as calm returns to this part of Iraq, Blue Sky plans to engage with the federal and provincial governments, obtain required permits and develop its relationships with the local tribes. “This area needs jobs. It needs to rebuild. The oil we want to pump will create those jobs.” said Mr. Said, “For the next two quarters we’ll be concentrating on the administrative and bridge building side. This is the right time to engage. And we expect that the price of crude oil will stabilize and then increase over that period of time. As that oil price goes up so does the value of our asset.”
When it is time to drill, Blue Sky is confident it can find the rigs. “There are plenty of drilling rigs in Kurdistan which is not far away.” said Mr. Said. However, Blue Sky can afford to proceed carefully and with caution. The licences and permits it acquired from Sonoro have no carrying costs and payment to Sonoro only commences when production is achieved.
Overall, the Sonoro transaction has given Blue Sky significant exposure to a huge Iraqi oil reserve at a very low cost per barrel. “This is an outstanding value deal.” said Mr. Scott Moore, “This asset will only increase in value as stability returns to Iraq and the price of oil stabilizes and then increases. Right now we are the only junior oil pure Iraqi play and we expect some new investments and the market to begin to pay attention.
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Not all of Santa’s elves work at the North Pole, as one heartwarming video shows.
A group of big-hearted Best Buy employees recently came together to make one teen’s Christmas complete by chipping in to surprise him with a $300 video game console.
The employees at a store on Long Island in New York had noticed that every day for the last month, the same teenager came in to play their store’s display Wii U console, according to one of the now viral videos posted online.
Seeing an opportunity to spread love and cheer this holiday season, the workers banded together to purchase the game console for him, out of their own pockets.
“On behalf of all of us at Best Buy, we got you your very own Wii U so you don’t have to come here every day to play,” an employee presenting the gift tells the teen, who wasn’t identified on the videos.
The kid appears confused and lost for words.
“I’m being serious,” the employee insists. “For real. It’s for you. It will be your Christmas present, all right? Early Christmas present.”
A second video captured the teen standing up and shaking hands with the employee after accepting the toy with a smile.
Rahiem Storr, who posted one video on YouTube and identified himself as a Best Buy manager, said the Nintendo console came with the new “Super Smash Bros.” game.
“After purchasing the Wii U for him, they actually drove him home, where his parents were beyond welcoming,” Storr wrote with his video.
A second Best Buy employee, who posted a video on Instagram, added: “We’ve mentioned that whenever he is in the area, he is more than welcome to return to play if he’d like.”
The Huffington Post has reached out some who were involved in the generous act and will update this article with any replies.
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