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Baron Oil (LON: BOIL) is an independent oil and gas exploration and production company which focuses on low to medium risk exploration prospects in areas that can be quickly and relatively cheaply developed and monetised. Since its formation and IPO in 2004, the company has expanded its involvement to three significant projects within South America, Asia and the UK.

The El Barco project in Peru

At this moment in time, Baron Oil still holds a 100% interest in onshore licence Block XXI in Peru. Following the acquisition of a grid of new 2D seismic data in 2015/16, the company has identified a new prospect close to the 1954 Minchales-1X well that encountered a small gas accumulation. Despite the COVID-19 restrictions in Peru, it continued to pursue efforts to drill the proposed 1,850 metre El Barco-3X well to test for low-risk gas in the Mancora Sands and higher-risk oil and gas in fractured basement.

The company has, however, recently unveiled plans to relinquish its licence in Peru and leave the country, stating it had been frustrated in its attempts to access the area in order to carry out operations. Chief executive Andy Yeo said that in contrast to its other projects, “Peru Block XXI has a materially smaller prospective resource with no certainty around pathways or timelines to drilling” which has led to the company’s decision to ultimately withdraw from the country.

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What other projects is Baron Oil involved In?

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Aside from Baron Oil’s El Barco project in Peru, the company also holds a 75% indirect interest in the Chuditch PSC which contains the Chuditch-1 gas discovery, drilled by Shell in 1998. The offshore project is located approximately 185 kilometres south of Timor-Leste, South-East Asia. This well was drilled in a total of 26 days for $8 million and encountered a 25 metre gas column in the Jurassic Plover formation on the flank of a faulted structure. Shell’s mapping of available seismic data suggests that the Chuditch area may contain large quantities of recoverable gas, which would facilitate significant growth in Baron Oil’s share price if realised.

In August 2021 Baron Oil executed a farming agreement which increased its interest from 15% to 32% in P2478, located just off the coast of Scotland. The P2478 licence contains the Dunrobin prospect which consists of large shallow rotated fault blocks which are mapped mostly on 3D seismic data including candidate direct hydrocarbon indicators. The prospect is believed to be one of the few remaining undrilled UK North Sea targets of the order of 100 MMBOE.

Baron Oil’s investment prospects

The most significant development to come out of Baron Oil in recent weeks is certainly its plans to exit the El Barco project in Peru. Although the announcement caused the company’s share price to fall, investors should be aware of the fact that Baron Oil is still involved in two highly successful projects that are set to bring operational and financial success in the coming quarters. Baron Oil’s share price currently stands at 0.078p but with the recent price volatility experienced by the stock, this could climb back up to the 0.12p level seen in the previous week.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Adel Ahmed

Adel Ahmed

Adel Ahmed is a reporter with The Armchair Trader based in London. He covers a broad range of financial markets and asset classes. He has completed the Bloomberg Markets Concepts course and is the President of the SOAS Investment Management Society.

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