WTI $45.71 +80c, Brent $48.61 +75c, Diff -$2.90 -5c, NG $2.90 +12c

Oil price

Oil is up by more than three dollars this week for all the reasons outlined each day, to add to that list you can put further Middle East disruption as an explosion at a Saudi terminal on the Red Sea heightened tensions. The US jobless claims came in pretty much in line with expectations yesterday although the figures will likely worsen as the virus cases continue to rise.

The EIA inventory stats were also OK, crude drew a small amount, gasoline rose by 2.2m barrels and as expected at this time of the year distillates were very much in demand, drawing by 1.4m b’s. The Baker Hughes rig count was up 10 units overall to 320 and in oil also up 10 at 320 units, at $46 WTI that’s no surprise.

The oil markets in the US will be shut today and thin at best tomorrow, I wish all my American readers a very Happy Thanksgiving Day.

Jersey Oil & Gas 

JOG has announced that it is to acquire CIECO V+C which is currently owned by ITOCHU Corporation and Japan Oil, Gas and Metals National Corporation. The acquisition secures an additional 12% working interest in Licence P2170 Blocks 20/5b & 21/1d thereby providing JOG with 100% ownership and full control of Licence P2170, located within JOG’s Greater Buchan Area (GBA) development project, CIECO V&C’s sole portfolio asset is the Licence Interest.

The deal increases JOG’s ownership of the Verbier oil discovery, the majority of which sits within Licence P2170 and increases ownership of multiple high-impact exploration opportunities within Licence P2170, including three drill-ready prospects: Verbier Deep, Wengen and Cortina. In addition, it simplifies licence ownership ahead of the planned GBA farm-out process and CIECO V&C has approximately £15 million of tax losses which are expected to provide additional value to JOG following first oil.

The terms of the acquisition are simple, JOG is paying a completion payment of £150,000 in cash with further cash contingent payments of £1.5m upon OGA consent for the FDP of the Verbier discovery within Licence P2170 and another £1m ‘not later than one year after first oil from all or any part of the area which is the subject of the FDP. As expected the deal is subject to OGA approval as well as being contingent on ITOCHU acquiring JOGMEC’s shares in CIECO V&C ahead of completion, expected to coincide with the OGA process’.

Andrew Benitz, CEO of JOG, commented:

“The corporate acquisition of CIECO V&C completes 100% ownership of the final component of our GBA project that was not previously wholly owned by JOG and positions us perfectly ahead of completion of Concept Select and the planned launch of JOG’s wider GBA sales process. 

“This Acquisition increases JOG’s discovered resources, adds material value and exploration upside in addition to useful tax losses.

“We are grateful to the CIECO V&C team for the valuable contributions they have made during our partnership on Licence P2170, which led to the Verbier oil discovery in 2017 and we wish them well with their future endeavours.”

This is an eminently sensible piece of housekeeping from JOG, they are consolidating the last piece of the Buchan jigsaw puzzle ahead of concept selection and then the GBA sale process. Indeed the economics of the deal are seriously good, for £150,000 and the step payments, JOG get more oil and three material exploration prospects in addition to the £15m of tax losses (which may be conservative).

The manoeuvring by JOG in recent years has led them to a very strong position in one of the largest new developments in the Central North Sea and it is not far away from becoming a reality. The concept selection is at the final furlong and the company has advised that it will be concluded ‘in the near future’ which I take to mean 1Q 2021 and as for the farm-out process I see a similar timeline.

The GBA project has been meticulously put together and is in the last lap of the process, shareholders can expect an exciting time next year as this important part of UKCS history is recompleted proving that such a long term investment can be good for both the company and the country. JOG will have completed its journey in less than the 39 steps of John Buchan but will have a lasting prize for its verve and vison for which they deserve congratulations.

Genel Energy

Genel has announced first oil production from the Sarta field, less than 21 months after the acquisition of the stake was completed and where the company has a 30% WI. Production has begun at Sarta with first oil flowing from the Sarta-3 well into the Early Production Facility.

The Sarta-2 workover operation is on track to be completed in December and the well onstream from January. As previously stated, it is expected that a stable production level will be reached in Q1 2021.Preparations for the 2021 appraisal drilling campaign, which is targeting a material portion of the 250 MMbbls of contingent resources in the Jurassic, are ongoing.

Bill Higgs, Chief Executive of Genel, said:

“First oil at Sarta is an important strategic and operational milestone for Genel, not least given the challenges presented by COVID-19 in 2020. In that context, progressing Sarta to first oil has been a tremendous achievement and a testament to the alignment and co-operation of the field partners and contractors.

Already the only multi-licence producer in the Kurdistan Region of Iraq, the addition of Sarta further diversifies our production and cash flows. We look forward to the results of our well programme in 2021, which is designed to further appraise the potential of the field. This will enable us to work with Chevron to optimise the value of the asset in the years ahead.”

Genel deserves significant credit for Sarta coming on stream so quickly but its acquisition from Chevron in the first place was an inspired piece of management. The fact that the Sarta field has come on stream in very difficult international conditions is indeed to quote CEO Bill Higgs ‘a tremendous achievement’.

Now I am as optimistic if not more than the next man but when visiting the site 13 months ago it took a lot of inspiration by the home team to imagine it producing first oil by now. But the fact that it has been delivered on time is a tribute to all concerned and It is worth noting that there is plenty more to come from this potentially huge asset…

Genel continues to honour its pledges to increase production, diversify its offering and build the business whilst at the same time keeping a solid balance sheet and pay shareholders a meaningful dividend into the bargain. Definitely in the front of my thoughts for the upcoming Bucket List…

Egdon Resources

Egdon has announced a Wressle (30%, operated interest) development update, The site reconfiguration works have been completed and the installation of surface facilities is currently ongoing at the Wressle site. To date, the storage tanks and inspection gantry have been installed and work is advanced in respect of the electrical and control system installation.

Delivery of all remaining equipment is expected to be completed during December with progress on site described as ‘decent’ and the delay will be modest with first oil expected to be at the end of January 2021. This appears to be sensible with certain bits of kit being delayed and leaving Egdon at the mercy of the ‘festive shutdown’.

At the same time Egdon has announced that it has secured a £1,000,000 loan facility from its partner in Wressle, Union Jack Oil on commercial terms viz; an 18 month term with the principal sum payable at end of the term or in part or in full at any earlier time at the borrowers discretion.

Interest accrues on a daily basis on the outstanding loan amount at an interest rate of 11% per annum and is payable quarterly commencing on the earlier of the quarter following first production or on April 2021 and  is secured against an unencumbered 25% interest in the Wressle Project (PEDL180, and PEDL182), including the Wressle development project and associated infrastructure.

It is clear that Egdon are fighting on a number of fronts and have found themselves needing some financial help from partner UJO who have obliged, a no-brainer given the common asset base. I see no reason to panic about EDR as they have plenty in the locker but it won’t go unnoticed that it is they who have had to go cap in hand to the now much bigger UJO…

Union Jack Oil

Union Jack, as 40% economic interest holder in Wressle has also announced the above details from operator Egdon, a delay but modest and entirely manageable.

The second part of the EDR statement concerns a £1m loan that they have received from Union Jack which will help bring Wressle to first oil next quarter. Union Jack are no fools and are definitely not a charity, they know what they are doing and the boot is now definitely on the other foot.

In another development today UJO announce that  ‘Mr Joseph O`Farrell, Executive Director,  today purchased 19,300,000 ordinary shares of 0.025p each in Union Jack (“Ordinary Shares”) at a price of 0.130p each. David Bramhill, Executive Chairman, also today purchased 19,400,000 Ordinary Shares at a price of 0.129p each’.

Directors buying shares for cash is always a good sign and this is no exception, whilst helping out Egdon and following recent raises showing confidence in the company they are also exuding faith in the current drilling at West Newton.

Given so much interesting corporate and financial activity in recent months I am growing increasingly confident in Union Jack with its well funded portfolio of assets that should provide substantial returns in the short and medium term.

President Energy

President announces the workover and testing of the shallow Centenario interval in the old shut-in well, LB-1 was a follow-on from the successful newly drilled well LB-1001 where gas freely and continuously flowed to surface in commercial quantities during test at choke sizes ranging from 4mm to 16mm.

This provides the potential to materially increase production by performing artificial stimulation and represents the first time any hydrocarbons have been tested and flowed by President from this previously undrained Centenario interval within its concession areas.

The commercial production of the shallow Centenario opens up the potential to cost effectively drill this prevalent shallow interval elsewhere in the Company’s licences and Centenario formation will make a positive addition to President’s end of year reserves (no reserves of any category currently booked for the formation) and the well will be placed on production before the year end.

Peter Levine, Chairman, commented
“This is an encouraging result, whilst in the context of our growing Group production, the expected pre-year end initial production can be said to be more incremental than material, the testing success has a potential impact of somewhat greater significance.
“Taking into account the now proven producibility of the reservoir, the shallow depth thereby meaning modest costs for drilling new wells, the potential to materially upscale production levels by artificial stimulation and in particular the prevalence of this Centenario interval over areas in our Concessions, it is a potentially new play opener in at least Las Bases and perhaps others of our Rio Negro fields.

“Accordingly, this result following on from the two successful drilled wells in the last two months, demonstrates the continued potential for organic growth in our onshore short cycle, high return conventional oil and gas assets as well as the maturing capability of our teams in handling multiple work streams simultaneously.
“Step by step may seem a trite expression but it underlines the clear and obvious positive rate of climb that President is achieving in its business.”

President continues to develop its excellent acreage in Argentina and this is no exception. At some stage the market must take into account the significant drilling success from President and how much that must feed through to the market valuation.

And finally…

In the Champions League the Noisy Neighbours went to Olympiakos and won 0-1 whilst Liverpool lost 0-2 at home to Atalanta.

In tonight’s Boropa Cup the Gooners visit Molde, Sporting Braga host the Foxes, Spurs entertain Ludogorets, Celtic go to Sparta Prague and Rangers host Benfica.