In Part 1 of our story on Turkey, contributing editor Jen Alic reviewed the country’s intriguing onshore and offshore oil potential. Today in Part 2, we’ll look at where the Big Prize lies:  the Dadas Shale—a huge unconventional shale play—and which Canadian-listed junior producers may be best positioned in this emerging play.- Keith

The Dadas Shale has the size and most potential to ignite both Turkey’s energy sector and the stocks of the North American listed juniors there. It’s a geological look-alike to the Woodford and Eagle Ford shales in the US.

This large shale is estimated to have more than 100 billion barrels of original oil in place (OOIP)—but nobody has produced large amounts of oil from it yet.

In southeast Turkey, Dallas/Istanbul-based TransAtlantic Petroleum Ltd. (TNP-TSX; TAT-NYSE) has come closest, recently announcing two 500 bopd horizontal wells in a conventional reservoir (think of the old-style oil pools vs. the new shale, tight oil) in the Mardin formation, above and below the Dadas shale.

TransAtlantic and Calgary-based partner Valeura Energy Inc. (VLE-TSX) also drilled a successful 150 bopd horizontal well in the same formation to the west at Gaziantep. These horizontals are firsts for Turkey.  That got everyone’s attention—that oil had to be sourced from a local rock.

TransAtlantic and Valeura and their partners have also found oil in a new play in southeast Turkey in the Bedinan formation which is just below the Dadas Shale but oil is also sourced from the Dadas. This is relatively tight oil but a recent frac by TransAtlantic in the Bedinan has shown that production rates can be significantly improved.

“In the last six month we started having success in the southeast oil plays,” says Chad Potter, VP Finance of TransAtlantic. “We’re coming at it from multi-play idea on each license; where there is stacked pay, all likely sourced from Dadas shale.”

‘Stacked pay’ is industry talk for several underground oil formations all on top of each other like blankets on a bed. This allows producers to drill off several horizontal wells at different depths from one surface location—lowering costs and making production more profitable. It’s what everyone is trying to do with shale plays in North America.

Potter said in a recent interview with Natural Gas Europe that investors understand that Dadas could be a big international shale discovery.

“Horizontal drilling and frac technology is changing the game in chasing oil in southeast Turkey,” said Jim McFarland, President and CEO of Valeura. “The Dadas Shale is a world-class source rock that has fed giant fields across the Middle East and North Africa.”

TransAtlantic, along with Calgary-based Anatolia Energy and Valeura, definitely need to reward shareholders. All three have had a spotty exploration record over the last two years, and all of their share prices have lost 75% of their value from two years ago. (To be fair, most junior international exploration stocks have done the same.)

TransAtlantic’s next important well, the Bahar-2H, has already spud and is targeting the Bedinan formation, directly below the Dadas shale and the company plans to complete the well with a multi-stage frac.

Anatolia Energy (AEE-TSXv) CFO Pat McGrath says their company is doing a production test into the Dadas shale in September, with what will likely be a two-stage vertical frack. They’re hoping for as much as 50 bopd per frack stage as a goal to shoot for.

Other operators are also into Dadas. Shell stepped back on to the scene in September 2012 in partnership with Turkey’s state-owned TPAO. Exxon Mobil is said to be seeking an opportunity in the Dadas.

Potter, McGrath and McFarland are keen to point out that the majors’ return to Dadas means that they were right to focus their investment here—even though the payout will be a while in coming.

“The greatest potential in Turkey is in the unconventional plays. Turkey is essentially in the same stage as the North American Basins were in 2002. These plays have completely changed the North American oil and gas sector,” McGrath says. “This is the only opportunity to make a large enough impact to reverse the declining oil production in Turkey. 

One thing holding back even more exploration in Turkey is lack of access to Turkey’s historical geological and production data. While Turkey has been exceptionally generous with foreign oil and gas companies—offering some of the “most attractive fiscal terms in the world,” says McGrath—it maintains a tight lease on data that could help unleash the shale bounty.

With all the other pieces in place, the main question for the industry right now, says McGrath, is “how and when we will be able to access the old producing fields, now held by the National Oil Company. These fields hold great potential for re-activation using unconventional technology. In the meantime, the national oil company just maintains marginal production through conventional wellbores.”

And this is what Transatlantic, Anatolia and Valeura are banking on. For all, there is a strong focus on the Dadas Shale and the Bedinan and Mardin formations. Both are in the southeast.

For Potter it’s essential to look at this from the “eye of the North American unconventional attitude.”

Do the markets agree? Well, not just yet. The markets are saying “prove that any of this works,” according to Potter.
But lately, each time they  unlock a bit of value they have unlocked a bit of the stock price, as the stock chart has started to turn positive.

Turkey’s BIG FIND is yet to happen. But the Dadas Shale gives the country its best chance at igniting a staking and production boom that could rival what’s happened in the United States in the last five years.

JUNIORS IN TURKEY–QUICK FACTS 

TRANSATLANTIC PETROLEUM LTD (TAT:AMEX) (TNP:TSX)

Shares Issued                                    368.7 million

Fully Diluted                                    370.2 million

Share Price                                       $0.89 (price at close Jan 29 13)
Market Cap                                       $328.143 million

Net CASH                                        $26.2 million

Enterprise Value                               $301.943 million
Production                                       4,630 bopd (as of Nov 12, 2012)
Price per flowing barrel                    $65,214Positives

Negatives

• Lot of shares out already
• Total net sales have declined slightly from Q2 to Q3

QUICK FACTS on VALEURA ENERGY INC (TSX: VLE)

Shares Issued                     57.9 million
Fully Diluted                     77.35 million
Share Price                        $1.00 (price at close Jan 29 2013)
Market Cap                       $57.9 million
Net CASH                         $29 million (at September 30, 2012 proforma after October capital raise)
Enterprise Value                $28.9 million
Production                         1,140 BOE/d (as of Sept 30, 2012)
Price per flowing barrel    $26,219

Positives

QUICK FACTS on ANATOLIA ENERGY CORP. (TSX.V:AEE) (PINK-BEEHF)Shares Issued:                     131.06 million
Fully Diluted:                      243.99 million
Share Price:                         $0.05 (as of close Jan. 29, 2013)
Market Cap:                         $12.2 million
Net CASH:                          $4.5 million
Enterprise Value:                 $7.7 millionPositives