WTI $81.28 +97c, Brent $84.86 +86c, Diff -$2.58 -11c, NG $5.41 -28c, UKNG 212.32p -43.7p

Oil price

Nothing changes so it seems, even poor GDP numbers from China of 4.9%, which arrived along with lower industrial activity and crude imports in September couldn’t shake the bulls off their path. My existing hypothesis remains, not only is the 4th quarter tight but even tighter than the experts had expected pushing everything else into insignificance.

A glimmer and that is all it is, is that the US continues to  add to the rig count which should in due course add to domestic production increases. Baker Hughes data shows that overall rigs last week were up 10 to 543 units with oil up 12 to 445, this is an increase of 100 rigs in the last six months, surely some sign of optimism when gasoline prices are still a dollar higher than a year ago.

Finally it is worth noting the moves that Ineos, led by Jim Ratcliffe is on the move in the hydrogen market, it has announced c.$2bn worth of investment in the green hydrogen market in Europe and in an article in yesterday’s Sunday Telegraph extolls its virtues and hope for the British Government to ‘get out of the blocks’.

IGas Energy

IGas has announced that it has agreed a Heads of Terms with Iona, an investor with a long track record of successfully investing in UK renewable energy projects. Under the HoT, IGas and Iona will jointly develop utility scale solar farms in the UK, initially leveraging the strong landowner relationships that IGas has through its long history of onshore oil and gas operations.

The first, of what is expected to be several similar scale projects, will be situated in southern England and will be 25-40MW in size.  IGas will contribute its planning and infrastructure expertise, whilst Iona will provide non-recourse project finance.  During the development phase, costs will be shared and throughout the project lifecycle, IGas and Iona will each own 50% of the project. 

Commenting Stephen Bowler, IGas CEO, said:

“We are delighted to sign this agreement with Iona.  This is another example of how we can leverage the Group’s existing operational expertise as the UK’s largest onshore operator and use our existing business platform to play an important role in the UK’s transition to net zero. 

We are keen to develop our relationship with Iona and other partners as we seek to maximise value using existing assets and skillsets within the business.”

Nick Ross, Director of Iona Capital, added: 

“Given our focus on renewable and environmental investments in the UK over many years, the PV solar sector is a natural area for us.  We are very pleased to enter into this partnership with IGas, given their extensive experience of energy project development in the UK.”

This is another green move by IGas in which they are continuing to leverage their years of landowner relationships and infrastructure which includes grid connections and in other JV’s, well expertise. I’m not sure that these projects are yet in the IGas price, management are picking up momentum in areas such as geothermal and hydrogen in addition to ones like that announced today, surely in due course green investors will become aware that IGas might be a vehicle. (See piece above about Ineos on the move in green hydrogen)

SDX Energy

SDX has announced the spudding of the MSD-21 infill development well on the Meseda field. This well is the first, in a fully funded, 12 well development campaign on the Meseda and Rabul oil fields in the West Gharib concession, Egyptian Eastern Desert. The development drilling campaign is aimed at growing production from current rates of c. 2,400bbl/d to c. 3,500 – 4,000bbl/d by early 2023.

 

The MSD-21 infill development well on the Meseda Field (SDX:50% working interest) spudded on 16 October and is targeting the Asl Formation reservoir at approximately 3,200ftTVDSS. It is estimated that the well will take around four weeks to drill, complete and tie-in to the existing infrastructure. MSD-21, with an expected gross cost to drill and tie in of US$0.9-US$1.0 million, is anticipated to come on-line and produce at around gross 300bbl/d, which would have an immediate effect on Group cashflow and result in a payback period of less than one year at current oil prices. The Company expects to update the market on its result in mid-November.

 Mark Reid, CEO of SDX, commented:

“In today’s higher oil price environment, I am excited to announce the spudding of the first well in a 12 well infill development campaign on our West Gharib oil fields in Egypt.  With H1 2021 netback of US$33/bbl at US$65/bbl Brent, West Gharib is currently a very high margin asset in our portfolio and the MSD-21, and subsequent wells, will boost the production and cashflow from these fields in the coming months.  I look forward to updating the market further as the campaign progresses.”

It is good to see SDX back in business with the drill bit and as Mark Reid says in an area where very high margins are to be had. The shares have not recovered from the duster at HA-1X in August which is pretty hard on the company and whilst this well has to come in to get back on track at Meseda I think it is now worth taking another look at SDX if this delivers.