Odyssey Petroleum Corp. (TSX-V: ODE)

       Odyssey Petroleum Corp. is a North American oil and gas exploration and production company listed on the TSX Venture Exchange (ticker symbol ODE) (Frankfurt: YQN) (US Listing: ODEFF.PK). The Company has come to our attention due, in part, to the exceptional opportunity afforded shareholders as ODE.V increases production/cash flow and gears up to take what is believed to be one of the largest known unexploited deep reserves found onshore in a single location in southeast North America into production. Odyssey's Pelahatchie field in Mississippi has significant reserves at 14,000ft - 17,000ft where seismic surveys indicate 40 to 50 million barrels of oil trapped in productive formations.

Since inception in August 2005 Odyssey Petroleum has grown revenues from $3.5M in year one to ~$12M in revenue in 2008 with ~$1.6M in profits. Despite the market downturn (last half of 2008 to the first quarter of 2009) Odyssey has managed to come through the first six months of 2009 in a break even position and with improving prices is coming back on track. Current production sits at ~400 barrels per day with plans to capitalize production increases over the next months to between 600 and 1000 through low risk development of work-overs with several re-entry case hole wells ready to increase production (see Sept. 29, 2009 release "Odyssey Petroleum Announces New Workover Plans"). This figure could also be augmented with new wells where geological data places several targets on the drawing board at 12,500ft. A 12,500ft well can be drilled at a cost of between $1M - $1.5M and can be expected to yield 500,000 - 1M barrels of oil. In Odyssey's case such drilling is 'low risk' as if it turns out the geological data proves to be incorrect Odyssey has multi-stacked pay zones in these targeted wells which allows them to simply complete up-hole should deeper targets be missed, so they don't end up with a dry hole situation. Production wise Odyssey can be relatively stable; ODE.V has only spent a nominal ~$10M in development since inception to stabilize production in the ~400 barrel/day range and is now poised to ramp production higher. The bulk of the company's ~$44M expenditures to date have been spent on acquisition of properties from a variety of companies that owned pieces of their fields to the point where Odyssey now possesses 5 fields (4,500+ acres) in Mississippi with deep reserves predominantly on their majority owned Pelahatchie field which has an estimated 50,000,000 (BOE) that when tapped will dramatically transform ODE.V. -- with the capitalization and implementation of their two phased plan Odyssey has a good shot of taking the company to that next level.

The next level

A move to drill deep and realize potential of large reserves will transform ODE.V 

Odyssey Petroleum Corp. possesses large reserves at depth with estimated proven and probable reserves of 50,000,000 (BOE). Seismic surveys combined with geological and drilling data indicate 40 to 50 million barrels of oil at their majority owned Pelahatchie field. Odyssey has yet to tap this known ocean of oil and is setting up to take the company to major production. 3D imaging of the first targets should be completed by the end of Q1 2010 and will set ODE.V up to drill and produce multiple wells drilled to ~17,000ft. Each deep well will cost approximately ~USD$5M to drill yet is expected to yield 500 to 1000+ barrels of oil a day for 20+ years; 4,000,000 barrels of oil and 4B cubic feet of gas from each well.

In an industry where it is normal to pay $8 to $18 per barrel for proven reserves, then incur development costs, shareholders can expect Odessey to take their reserves into production at a cost of between $1 - $2 per barrel.

Odyssey has extensive reserve studies completed by Fletcher Lewis of Oklahoma as well as over 30 years of drilling, production and geological data and historical information. The future income potential of the known oil & gas at depth categorized as 'proven & probable' at current market prices is well in excess of USD$3,000,000,000.00, plus secondary and tertiary methods employed later could probably double the amount of reserves recovered.

The President and COO of Odyssey Petroleum Corp. Whitney J. Pansano was contacted by Energy Market Watch Journal in conducting research for this article. Whitney Pansano explained how advanced technology is instrumental in achieving near term production goals,  has brought about a change in economics for deeper drilling, and will also allow financing of deeper targets going forward on an individual bases "Odyssey is very successfully using case hole technology to be able to go into holes already drilled. Odyssey has a number of holes they haven't gotten to yet just because of lack of money, I have 15 re-entries of case hole wells already on the drawing board -- some of the oil zones that were over looked years ago when the wells were drilled are now plainly visible to us; it's just like an x-ray machine, in the 1960s you would need a 20ft zone for it to show effects on a log - now the logs are so good that you can almost read inch by inch. So many of your 4 and 5 foot zones that were passed up in the 60s we see now and a lot of those are very productive; 5 feet carrying over 100 acres may give you 100,000+ barrels of oil, that might not sound like much but you'll probably spend well under $100K (plus another $100K in a new pumping unit and related equipment) in getting that zone and you are looking at a return of $8,000,000 on a well that might have been abandoned 15 years ago. So increasing near term production to 600 or 1000 barrels per day with minimal capital is easily within reach." Whitney Pansano also pointed out that on new drilling the undertakings are still 'low risk' in nature because the oil they are drilling for is already found "this is strictly development of known oil & gas deposits and easily provable."

Change valuation from 'proven undeveloped' to 'proven producing'

On a 50,000,000 barrel reserve which Odyssey Petroleum Corp. now possesses, if it were given a 'proven developed producing' type reserve evaluation using accepted valuation metrics then it would be appropriate to attribute $12-14 per barrel in the ground (potentially resulting in a valuation of ~$500M). It is evident that a significant upside share price revaluation is in store for ODE.V shareholders as Energy Market Watch Journal has confirmed with Joe DeVries, Chief Executive Officer & Director of Odyssey Petroleum Corp. that the company is being capitalized to implement a two phased plan to take the Company to a self sustaining rapid production growth position. In light of the serious and imminent nature of this capitalization of the company to accomplish its goals it is not unreasonable for shares of ODE.V on a forward discounted bases trade and gravitate significantly higher in the interim.

Energy Market Watch Journal queried Joe DeVries the Chief Executive Officer & Director of Odyssey Petroleum Corp. on how commodity price changes have affected Odyssey's strategic plan, Joe DeVries said "The company initially had a strategy that if prices had held above USD$85/barrel oil, which is what most people had predicted, we we're on track to cash flow the company to a debt free status with the intention of then going out to the markets for further financing." Given what happened in the markets mid last year this was not achievable. Joe DeVries explained what arrangements have been made now to capitalize the Company to achieve near term production goals and complete 3D imaging of the first deep reserve targets that will take Odyssey to that 'next level'; "We are going to look to increase our production to over 600 barrels per day which we can achieve through the anticipated funding that we are looking at of ~$7.5M on a consolidated debt bases, this will have convertibility, it will allow us to reverse our balance sheet to where our long term debt would sit between $7M and call it $8M against our long term assets of somewhere around $46M which is acceptable." This will allow ODE.V to save $130K/month that was being used to service principle and interest payments that was amortizing ~$2M worth of debt -- ODE.V has an easy ability to finance and support interest only on $7.5M which would clean up the balance sheet, increase their ownership, bring production up to over 600 barrels and facilitate its goal to tackle deep reserves taking Odyssey to the next level; "The other thing we are looking to prior to the end of the first quarter of 2010 is to do the new 3D seismic for the deep resources and after that take the geological data we have plus the new 3D seismic and either through an equity financing on a better understanding or a JV or a debt package – look to drill to 17,500ft and validate the deep reserves – it’s the big winner for the shareholders – it’s the big winner for the company overall and in those cases you would be blowing that 1000 barrels production target number out of the water because 3 three of those deep wells would in effect give us 2000 barrels per day on their own. So that number doesn’t become relevant anymore – albeit that capital prospect for those three wells with drill costs coming down it will still probably be to complete them all somewhere in the $20M range. But we believe that is financeable on the basis of proven undeveloped reserves with new 3D seismic and based on today’s prices and if you look at lets say 600 barrels per day average out of those three your capex return (on the $20M) would be $14M within 9 months after operating. [Note: These wells are expected to produce for 20+ years] The triangulation of development of those reserves – our goal would be to do that mid-late next year and the first drilling of that would give a valuation based on ‘proven and producing.’"

New Development: ODE.V enters agreement to take twelve wells operational without expenditure of its own funds

See November 4, 2009 release “Odyssey Petroleum Enters Into Agreement for Financing the Recompletion of Twelve Non-Producing Wells”:

Odyssey has entered into an agreement with Southeastern Oil and Gas, LLC ("Southeastern"), which provides for an estimated US$4,000,000 expenditures to be made on twelve mutually selected non producing, closed in wells on ODE's properties in Mississippi. Under the terms of the contract, Southeastern has agreed to spend 100% of the funds necessary to re-enter, evaluate, and if warranted, do the necessary remedial work to recomplete and equip the wells for production. An estimated US$250,000 to $400,000 will be required per well in order to drill out plugs where in place, complete cementing remedial work, run cased hole logs, perforate, test, and equip the wells with new pumping units and production tubing. Upon completion of each well to the tanks, Odyssey will retain a 12.5% overriding royalty interest (free of any cost) until such time that Southeastern has recouped 100% of its risked capital per well. After 100% payout, Odyssey may elect, at its own option, to convert the overriding royalty interest to 33 1/3% working interest in each well. Additionally, Southeastern will pay Odyssey US$25,000 upon the commencement of each well.

Regional Geology and History of Pelahatchie

Mississippi is the 14th largest oil producing state in the USA with consistently 18M to at least 20M barrels of production per year. The principal regional producer that most investors in the market place would be familiar with is Denbury Resource Corp.
 
Within Odyssey’s Mississippi holdings exists what is believed to be one of the largest known, yet unexploited onshore deep reserves of oil in a southeastern North America. Odyssey’s oil fields are located within Mississippi’s interior salt basin and contains multiple productive zones 7,500 ft to 17,000 ft subsurface. This oil was formed in a marine environment by the seas carrying very rich nutrients of animal and plant life and continually encroaching on the continent throughout millions of years. The sea would rise and deposit mud over the rich nutrients then recede and repeat the action eventually forming stacked zones built up over millions of years. Over time the organic matter was cooked out and turned to oil under 12,000+ft of overburden at great heat -- to this day the heat at 12,000ft is ~300 degrees F. The oil migrates until it reaches a trap, such as the salt domes or salt ridges under these fields. Because the salt is in a plastic-like state, overburden has created uplifts with the salt and these uplifts have formed traps that caught this oil. In early exploration, in the 1940s and 50s, early explorers like Shell and others used gravity sensors as a technique to detect the gravity pull over salt features -- it shows up as less dense than the rest of the earth. So a very early technique in Mississippi was for the oil companies geologists to travel up and down the highways using these gravity meters and home in on a number of salt features – in fact if you look at a map of Mississippi that would explain why wells are drilled in one location and yet there wasn’t anything drilled in 100 miles but yet they hit oil 100 miles away, it wasn’t ‘seismic’, the earliest exploration techniques were gravity meters and it turned out to be very successful. Odyssey’s features are salt features and they are multi stacked pay zones where unlike other areas in the world where you drill a well geologists are often aiming for one or two zones, Odyssey is aiming for 20 or more and if they miss 10 of them they don’t worry as they’re still not going to have a dry hole.
 
Pelahatchie was discovered in the early 60’s. American Petrofina (Fina Oil Company today) made the first discovery well at around 9800 ft (they drilled to 11,000). First wildcatting was performed and then they homed in and found where the oil was. Odyssey’s President and COO, Whitney Pansano, had the privilege of working with a Harold Karges, a geologist who came out of Shell then later became an independent geologist in this Mississippi area. Harold Karges was directly involved in all of the history of Pelahatchie and many other fields in Mississippi, he was V.P. for Love Petroleum which took leases in the field as a result of American Petrofina’s discovery and did some offset wells. Later Shell Oil Company came in and took a farm-in (the rights to go deeper) out on the deeper rights below 11,000ft as a result of seismic surveys that they had run in the Pelahatchie area. Shell was operating a major Smackover gas field about 30 miles from Pelahatchie and was looking to expand their deposits of gas. Harold Karges gave them the farm out and Harold even believed in it enough after looking at the seismic to participate privately as an individual in the drilling of wells that went to 17,900 ft. Shell had a plant and all the facilities to not only produce the gas but to extract the sulphur from it, there was a huge sulphur market at the time. When shell drilled their well they not only hit a huge gas deposit in Pelahatchie field, which is still there, but in going deeper they hit a horizon called the Norphelt formation zone that turned out to contain sweet crude and sweet gas (in other words it has no H2S, sulphur in it) it was the first discovery of that zone ever. Shell completed a couple of wells in it and it was billed at the time in all of the geological publications as ‘Mississippi Giant’. The wells produced (Whitney Pansano still has the daily production records) at 2,300 and 2,400 barrels of oil a day and over 2M cubic feet of gas. They drilled four wells to confirm the size of the discovery reservoir. One of the wells was junked in the process, it had mechanical trouble, two wells were completed as producers, and one well turned out to be at the edge of the reservoir and they didn’t try to produce it. But they saw the size.
 
It was the first time anyone had ever tried to produce this formation and Shell had production problems having to do with salt build up in the flow lines, they produced about 700,000 barrels of oil and stopped due to the technological impasse of salt build up. They were unaware at the time of the technological fix to the problem and left what reserve studies and seismic activity now indicate to be ~40 million - 50 million barrels of oil in this one zone. Fletcher Lewis conservatively gave reserve reports of ~32M barrels of oil and 32B cubic feet of gas too. Within a few years Shell lost their leases and Whitney Pansano was involved 20-some years ago in getting them from Shell. Other operators subsequently learned how to produce the zone, the particular problems they had then were solved and are now routinely handled; when you complete a well you also install a dilution string so that you can circulate some fresh water down at the bottom and keep the salt dissolved and go ahead and produce your oil, a technique very successfully employed now in the Norphlet zone, one of the major producing zones.

Overview of Odyssey Petroleum's five oil & gas fields in Mississippi

Pelahatchie Field, Rankin County, Mississippi - Rankin County

• Potential future revenue of $2.9 billion

• Proven and probable reserves – 50,000,000 (BOE)

• Multiple productive zones 7500 ft to 17,000 ft. subsurface and 4,300 acres

• Most infrastructure in place, eight wells producing

• Acquisition/development cost under $2 per barrel

Pelahatchie Field is located in central Mississippi, 20 miles east of Jackson, Mississippi. The Field was discovered in 1962 by an American company with production from the Mooringsport sand at 9,800’. Production was eventually established in fourteen additional Lower Cretaceous zones to 11,300’. Questionable drilling and production techniques by several independent operators combined with a lack of salt water disposal facilities, low oil prices and competing lease positions resulted in moderate production in the 1960s in the Cretaceous zones. In more recent years, operators have gone back into the Field and re-established production in many bypassed zones accumulating another 1,000,000 barrels of oil in these relatively shallow pay zones. This new drilling has extended the known limits of the productive area both to the north and south. Available data now indicates that the field covers approximately 5,000 acres of productive area and is over one mile wide and 2 miles long.
 
In a report dated March 1996, Harold Karges, the geologist who spent much of his career studying and participating in the development of Pelahatchie Field, estimated that there were almost 3,000,000 barrels of oil yet to be recovered in the shallow Lower Cretaceous zones to 12,000 ft subsurface in addition to the considerable deeper reserves. However, since that time with the new drilling having expanded the field limits, Odyssey now believes 5,000,000 barrels is a more valid estimate of oil reserves to be ultimately recovered from the Lower Cretaceous zones. Karges noted that 44 zones in the interval between 5,000’ and 12,800’ have had oil or gas shows or have had established production in the field. Many of the previously unsubstantiated potentially productive zones have not yet been tested.

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Puckett Field, Rankin & Smith Counties, Mississippi - Rankin & Smith Counties

• Potential future revenue of $200 million

• 25 well oil and gas field, 14 wells currently producing

• Estimated future recovery: five million barrels of oil and five million cubic feet of gas, 38 producing zones

• Blue sky potential – new deeper drilling can add significant additional reserves 

Odyssey operates 24 oil and gas wells and one saltwater disposal well in Puckett Field. The field is located about twenty miles southeast of Jackson, Mississippi (figure 1). Discovered in the early 1960s with the aid of early seismic and gravity surveys, Puckett Field produces from a series of Cretaceous age sands, inclusive of the Mooringsport, Paluxy, Fredericksburg, Washita and Tuscaloosa. The Puckett Field is an asymmetrical anticlinal feature situated on a salt feature with estimates of original oil in place of 40 million barrels of oil in the developed formations. The Field is also characterized as a graben with two 450’ faults trending east-west.
 
Cumulative production to date has been approximately nine million barrels of oil and eight billion cubic feet of gas. The reservoir drive mechanism for most of the sands is a mixture of solution gas, gas cap expansion, and water drive. Produced crude varies from 28 to 40 gravity, and is mostly sweet but occasionally sour.
 
Since purchasing the Field in 2005, Odyssey has been actively engaged in a program of re-entering wells drilled in prior years and re-completing to either new zones or back into zones not completely depleted. The Company has been successful in significantly increasing field production.

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The Verba Field, Mississippi

• 12 wells, including seven which are presently fully-equipped oil wells producing 3600 – 4400 barrels per month, and three orphan wells with added potential

• Two operational salt water disposal wells and mineral leasehold rights to the majority of the known productive limits extending over approx. 1,500 gross acres

• Located 50 miles from the Company’s core operations, Verba produced 2M barrels of oil from eight formations

Odyssey owns majority working interest in the Verba Field located in Jasper County, east central Mississippi, not far from Laurel, a thriving oil service center. The Verba Field is ideally situated within 50 miles of the Company’s core operations at Puckett, Mississippi.
 
According to production records maintained by the Mississippi Oil & Gas Board, up to December 2003, the Verba Field produced over two million barrels of oil from fifteen to twenty producing wells located on eight formations. Odyssey purchased this field over three years ago and to date it has been averaging $80,000 to $180,000 in gross revenue per month.
 
The Verba Field consists of 12 wells, including seven which are presently fully equipped oil wells producing a combined 3,600 – 4,400 barrels per month, and three orphan wells which have the potential to be re-worked for more production. The interests also include two operational salt water disposal wells and mineral leasehold rights to the majority of the known productive limits of the Field extending over approximately 1,500 gross acres to all depths.
 
The company recently re-entered three orphan wells using new sophisticated cased hole evaluation logs and found considerable undrained reserves. These wells are now in production.
 
With the purchase of the Verba Field, the Company now owns a majority interest in five oil fields in Mississippi, all of which have existing production in addition to many developmental opportunities.

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Barber Creek Field, Scott County, Mississippi

• Smackover Formation includes three productive wells

• 1.2M barrels of oil have been produced in the past

• Report estimates 2.6M barrels of recoverable oil

• Geology indicates a new well can be drilled in a superior position to the three producing wells, and should recover appreciable new oil reserves

• Comprising approximately 850 acres, Barber Creek Field is located 35 miles east of Jackson, Mississippi, only 12 miles north of the Company’s core operations

 Odyssey owns a 100% working interest in the Barber Creek Field located in Scott County, Mississippi, being the Company’s fifth acquisition of producing properties for the year 2005.
 
Barber Creek Field was discovered in 1964 with the drilling of the Pan American USA – Rubie Bell No. 1 well. Eventually eight wells were drilled which defined the productive Smackover Formation structure at a depth of approximately 14,500 ft. Three wells were productive, all of which are included in this purchase.

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Morton Field, Mississippi - New Acquisition (September 2, 2009)

IMPORTANT NOTE: Energy Market Watch Journal notes the exceptional shrewdness ODE.V management deserves credit for in negotiating this acquisition; essentially Odyssey received ~$4M worth of assets for $3M to be paid out of production secured by those assets, no interest, no penalties, and no fees.

On September 2, 2009 Odyssey announced that it has reached an agreement with TransAmerican Energy Inc., pursuant to which TransAmerican has agreed to sell all of its Mississippi oil and gas assets to Odyssey (who is the operator of the Assets), in consideration for the assumption by the Company of $3,017,300 debt owing by TransAmerican to Trafalgar Capital Specialized Investment Fund, FIS.

Whitney has over 30 years experience managing both private and public oil and gas companies, and was the founder of several exploration, development and production independent Mississippi oil and gas companies, emphasizing primary operations on the Mississippi Interior Salt Basin. He is also a director of Altima Resources Ltd. (TSX-V ARH), an oil and gas exploration company. He was formerly in banking and finance as the President of a publicly traded regional Savings and Loan Company, and also the founder of a privately owned chain of mortgage finance companies operating in Louisiana, Mississippi, and Tennessee. Whitney Pansano is a member of America's Independent Petroleum Association of America and listed in the 2008 - 2209 membership directory.
  

Joe DeVries, Chief Executive Officer & Director
Joe has 20 plus years experience financing and administering public companies, including liaising with auditors and solicitors. He facilitates the building of shareholder equity value with development capital and has been instrumental in the reorganization and reactivation of Tier 2 TSX-Venture oil and gas issuers including Altima Resources Ltd. and TransAmerican Energy Inc. He is also a Director of Altima Resources Ltd.

  
Richard Switzer, P.Geo., Director
Richard is a professional geologist with 35 years oil and gas experience. A graduate in Geological Sciences, he began with Texaco as an exploration geologist and then moved to Amoco in Calgary, developing drilling prospects in the Grand Banks. He also worked for Skelly Oil and Mesa Petroleum and was a co-founder of Northstar Resources Ltd. and Exploration Manager for MCL Oil and Gas. He holds interests in producing oil and gas wells and is President of Altima Resources Ltd. Richard is a member of the American Association of Petroleum Geologists and the Alberta Association of Professional Geologists Geophysicists and Engineers.

Jurgen Wolf, Director
Jurgen Wolf owned and operated precast concrete factories in Calgary and Vancouver, and from 1982 to 2002 he operated and owned a commercial construction company. He was the President & Director of US Oil and Gas Resources Inc. (TSX-V USR), and was a Director of Flow Energy Inc., its wholly owned subsidiary until April 2002. Jurgen has been involved in public oil and gas companies for more than 15 years. He is currently a Director of TransAmerican Energy Inc. (TSX-V TAE) and a Director of Altima Resources Ltd. (TSX-V ARH).

Ali Al-Hazeem, MBA, BSc., Director
Ali received his MBA in financial studies from the University of Nottingham in the United Kingdon, and he holds a Bachelor of Science in International Business Administration from the American University in Switzerland. He is the Founder and Chairman of Amarium Commodities DMCC, a commodities brokerage and trading firm headquartered in Dubai (United Arab Emirates). Formally Mr. Al-Hazeem was a director of the Kuwait Clearing Company S.A.K., the Kuwait Real Estate Bank, and the Financial Group of Kuwait (Asset Management and Investment Banking Firm).

Richard Barnett, C.G.A., Chief Financial Officer, Secretary
Mr. Barnett has extensive corporate experience as a Chief Financial Officer, Controller, and Secretary with over 20 years of accounting experience serving both public and private corporations. His experience covers a wide range of companies producing oil & gas, resource & exploration, engineering, and research & development.
 
Mr. Barnett is a member of the Certified General Accountants of British Columbia. In order to stay abreast of new business procedures, he has taken extensive business and accounting courses in addition to regulatory courses and workshops. In addition to overseeing the accounting functions within the Company, Mr. Barnett’s responsibilities include managing the annual audit, budgeting, preparation of financial statements and management discussions & analyses.

For more information contact Odyssey Petroleum Corp. at: Ph (604)718.2800
 

E-mail: info@odysseypetroleum.com   Company's web site: www.odysseypetroleum.com

SEDAR Filings: URL