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Oil price

Oil is unchanged today but fell again at the end of last week, this was for Covid reasons as Germany continue to see many more cases particularly in the East but it was Austria that took the headlines by going into total lockdown and announcing compulsory vaccinations. This led to demonstrations across Europe against Government moves.

Prices fell again last week, Covid mainly to blame but also Japan joining the list of those who will draw down SPR”s, always dangerous as a short term attempt to control a commodity…


Kistos has announced that Borr Drilling’s Prospector-1 jack-up drilling rig has spudded the Q11-B appraisal well (Kistos 60%, Operator).

As previously announced, the Q11-B appraisal well is anticipated to take a minimum of 6 weeks to drill and test. Kistos intends to suspend the well for future use in a Q11-B development and has estimated 2C resources for this accumulation of between 67 – 155 Bcf net. These figures were independently audited by Sproule and will be refined following review of all the data from the forthcoming well.

Following on from last week’s update Kistos confirm that the Q11-B appraisal well has been spudded. It is perfectly possible that a  result could be in time as a Christmas gift for shareholders and provide an excellent springboard for the new year. KIST remains a nailed-on member of the Bucket List for next year. 


The Saturn Banks Project Phase 1 passed one million cumulative manhours worked in September 2021. Despite recent Covid-19 related challenges both offshore and onshore, the Company continues to target safe and reliable delivery of First Gas by the end of Q4 2021, subject to completion of the remaining onshore scope.

The Noble Hans Deul rig owner has progressed investigation and repair works of the rig leg at Dundee port to allow safe resumption of Phase 1 drilling. Repair operations have required equipment and personnel to be mobilised from the Middle East and Asia. The rig is expected to re-mobilise to Southwark by the first week of December, subject to weather, and Southwark First Gas remains on track for Q2 2022. All permits are in place to start Southwark drilling and the IOG drilling and subsurface teams have used the downtime to accelerate planning of the 2022 appraisal well campaign.

The UK NBP benchmark, like other global gas markets, has been exceptionally strong in 2021. Forward pricing remains substantially above the Company’s planning case, although volatility also remains high. Preparatory discussions are underway with relevant parties to start implementing a prudent, systematic gas hedging strategy by the end of Q1 2022.

Andrew Hockey, CEO of IOG, commented: 

“The offshore subsea and hook-up scopes for the Blythe and Elgood fields are now complete. We continue to work closely with Bacton terminal operator Perenco and an enlarged workforce to complete the reception facilities recommissioning and deliver First Gas in Q4, albeit this may be challenging.

Meanwhile, we expect the Noble Hans Deul rig to re-mobilise to Southwark in early December once it has been re-certified for safe operation, with Southwark First Gas still on track for Q2 2022.

Phase 1 looks set to capitalise on very strong gas prices whilst also providing timely new low carbon intensity UK domestic gas production. I would like to thank the whole IOG team and all our contractors for their continued dedication and hard work towards delivering a safe and reliable start-up which will be a major milestone for the company.”

Life has been very busy over at IOG in recent months and as they get closer to first gas Phase 1 is still on track. A huge programme of offshore work is now complete and that part of the process has been safely de-risked with all the pipelines between Bacton, Blythe and Elgood hooked up, dewatered and leak tested, while onshore a substantial team are putting in the shifts at Bacton in readiness for that moment.

The rig repairs are going pretty well  it looks like around two more weeks before sailaway from Dundee to Southwark to complete that job. Gas prices remain way over what was in the budget and with the offtake agreements with Gazprom and BP in place the company will look towards hedging policy in the new year. I personally don’t feel that investors want the company to be over-hedged but there must be a responsible policy in place. 

With only weeks expected to go until first gas, something that is not entirely in their control, it seems that investors can now be relaxed enough to know that the bulk of the work is done for Phase 1 and they can start to look ahead to the rest of the extended programme. 


Jersey Oil & Gas

Jersey Oil & Gas has announced certain changes to the composition of the Company’s board of directors, a senior management appointment and an update on its Greater Buchan Area (“GBA”) farm-out process.

With immediate effect, Non-Executive Director, Les Thomas has assumed the role of Non-Executive Chairman, replacing Marcus Stanton, who, having served as Non-Executive Chairman for the last six years, will remain on the Board as a Non-Executive Director and chair of the audit committee. Les has over 35 years’ experience in the oil and gas industry at Marathon Oil UK Limited and John Wood Group plc and, more recently, was Chief Executive Officer of Ithaca Energy from 2013 to 2020.

Graham Forbes has joined the Board as CFO with immediate effect. Graham is a Chartered Accountant with over 20 years’ experience in the oil and gas industry and was CFO of Ithaca Energy from 2010 to 2020. He qualified as a Chartered Accountant at PriceWaterhouseCoopers before moving to ExxonMobil, where for over five years he worked on a variety of operational and acquisition-based projects. In 2002, Graham joined First Oil Group where, as Finance Director and then Executive Director, he helped develop the business into the UK’s then largest privately owned E&P company. For the last 10 years he was CFO at Ithaca Energy, transforming the business through both organic developments and multiple acquisitions. He has extensive quoted company and corporate finance experience, having completed various debt and equity market offerings and the US$1.2 billion sale and subsequent delisting of Ithaca Energy.

In addition, Richard Smith has joined the Company’s executive team as Chief Commercial Officer. Richard has over 20 years’ experience in the oil and gas industry and wider energy sector, in various senior business development, commercial, corporate finance and strategy positions. He was previously Corporate Development Director at Ithaca Energy, where he spent 10 years working alongside Les and Graham to deliver its successful growth from being a small-cap E&P business into one of the largest independent UK North Sea oil and gas producers. Prior to joining Ithaca Energy, Richard spent eight years with TotalEnergies working in its UK North Sea business and at its head office in France. He commenced his career in the energy industry as a consultant at EA Technology, working on various financial and regulatory assignments associated with the liberalisation of the European electricity and gas industries.

Ron Lansdell and Vicary Gibbs have stepped down from the Board, having made valuable contributions to the Company’s growth during their time serving as COO and CFO respectively. The Company is particularly appreciative of Ron and Vicary’s collective efforts in bringing our core asset, the GBA development project, to its current level of maturity.

JOG has now reached a pivotal stage in the growth of its business and today’s appointments mark the next important phase in the Company’s development and delivery of its key strategic ambitions. Through successful portfolio management, delivery of development projects, accretive corporate and asset acquisitions, operational excellence and astute financial structuring, Les, Graham and Richard were collectively instrumental in leading Ithaca Energy from being a small-cap E&P business into one of the largest independent oil and gas producers in the UK North Sea and thereby delivered significant shareholder value. JOG’s strategy of building a full cycle upstream oil and gas business in the UK North Sea represents a parallel business model to what this team achieved so successfully at Ithaca Energy.

JOG has also provided an update regarding its ongoing GBA farm-out process as follows:

We remain actively engaged with multiple counterparties, with discussions focusing not only on our Preferred Development Concept but also around alternative concepts using existing third-party infrastructure

JOG has received expressions of interest from major infrastructure operators with respect to funding the proposed electrification of the GBA development and the potential regional collaboration opportunities that exist

JOG is advancing regional electrification collaboration efforts with various industry parties in the Outer Moray Firth. There is the exciting potential for an integrated solution on power supply stemming from planned future offshore wind projects. This follows the recent announcement from Crown Estate Scotland detailing its plans to launch a leasing process that will enable the provision of low carbon electricity to power oil and gas installations to decarbonise the sector

Potential collaboration with the owners of other oil discoveries in the vicinity of the GBA has also been accelerated to see if a wider joint development programme can be achieved

Marcus Stanton, former Non-Executive Chairman of Jersey Oil & Gas, commented:

“I am delighted to welcome Les as the new Chair of JOG and he has already brought a wealth of valuable expertise to the Board. I am also very pleased to welcome Graham and Richard to the executive team of the Company. Together, they have the hands-on experience and track record of leading large project developments and creating significant shareholder value, and possess the necessary expertise to successfully complete our GBA farm-out process and accelerate JOG’s growth plans.

“I would also like to take this opportunity to thank Ron and Vicary for their valuable contributions to the Company’s development, as we successfully transitioned from start-up to ownership of one of the most promising new developments in the UK North Sea. Together with the Board and the rest of the JOG team, I wish them all the best with their future endeavours.”

Andrew Benitz, CEO of Jersey Oil & Gas, commented:

“Les, Graham and Richard were instrumental in leading Ithaca Energy from being a small-cap E&P business into one of the largest independent UK North Sea oil and gas producers. I am delighted that we have been able to attract a team with such a successful track record and I very much look forward to working with them.

“Our GBA farm-out process continues and we are actively engaged with multiple counterparties. The macro environment has markedly improved since we began initial industry engagement and the scale and quality of the GBA asset base makes it an exciting growth opportunity.”

This is board strengthening on a substantial scale and this is not to say that those moving on now were not the very best during their time at JOG. This is now a different challenge and for this CEO Andrew Benitz has fallen on his feet as the opportunity to hire the almost complete ex-Ithaca team was not to be missed and I wish I had thought of it when Les Thomas joined earlier in the year! 

I know these guys very well from the Ithaca days and watched as they grew the company from small cap E&P company to a significant UK independent producer. I am certain that this is a master stroke by AB and will be rewarded as they now move to kick off the next stage of the GBA. 

With so much exciting news on GBA itself and given how much better the macro environment is since the project was conceived, the growth opportunity now looks significantly better than before, with a boosted management with experience in plays just like this the future looks decidedly bright. 

Zephyr Energy

Zephyr has announced that it has entered into a binding agreement to acquire further non-operated working
interests in currently producing and near-term production wells in the Williston Basin, North Dakota, USA.
The Directors of Zephyr believe that the Assets will be an ideal addition to Zephyr’s existing asset portfolio and that the cashflows generated from the Acquisition will enable the Company to proceed with, amongst other things, the fast-track development of its flagship Paradox project.

Zephyr has entered into a binding agreement with Kaiser Acquisition and Development – Sanish Nonop, LLC, a privately owned exploration and production company based in the USA to acquire a portfolio of non-operated working-interests in wells located in the same Williston Basin field as a number of Zephyr’s existing non-operated assets. The assets being acquired are operated by Whiting Petroleum Corporation, one of the largest and most experienced operators in the Williston Basin and which already serves as the operator of a number of Zephyr’s existing non-operated wells. The Acquisition has an effective date of 1 October 2021.

Under the terms of the Acquisition, which is expected to close by 22 December 2021, Zephyr will acquire working interests in 163 currently producing wells with approximately 871 barrels of oil equivalent per day net to the Assets being produced in September 2021.
In addition to the PDP wells, the Acquisition includes: 18 proved not producing and drilled but uncompleted wells, all of which have been drilled and are expected to come online in the coming months. When online, which is expected to be in 2022, the PNP and DUC wells are expected to increase net production of the Assets above 1,100 boepd; and 47 proved but undeveloped locations for future drilling demonstrating the long-term potential of the Assets.
The Assets are spread across 22 separate drilling pads in Mountrail County, North Dakota and are estimated, by the independent reserve consulting firm Sproule Incorporated, to hold a net 2.764 million barrels of oil equivalent of Proven Reserves. Consideration for the Acquisition, which is subject to various customary closing adjustments,
is US$36 million, of which US$3 million will be paid immediately as a non-refundable deposit.

Zephyr is currently evaluating a range of financing alternatives to fund the remainder of the consideration via structured debt, including alternatives which would be non-dilutive to equity holders. In the event the Acquisition is completely funded by debt, pro forma net debt as a multiple of 2022 forecast adjusted earnings before interest, tax, depreciation and amortisation for the Company post acquisition is expected to be approximately 1.6x, a level which the Board deems to be suitably conservative.

The Acquisition has robust economics which, along with Zephyr’s existing Williston Basin production assets, is expected to generate substantial low risk cashflow which can be redeployed into the Company’s growing Paradox Basin development. The Company estimates: The Acquisition cost equates to 2.1x the Assets’ 2022 forecasted EBITDA • Low operating expense of approximately US$13.91 per barrel of oil equivalent which provides high cash margins of over 75%, as forecasted over the next three years • When combined with Zephyr’s current Williston Basin assets, the Company’s pro forma non-operated portfolio is expected to generate approximately US$22.9 million of EBITDA in 2022 and US$19.3 million of free cash flow after expected capital expenditure, as forecast by the Board.

The Board estimates the post-tax net present value of the Acquisition is US$46.3 million, using Sproule’s pricing at a ten percent discount rate • Cashflows generated by the PDP wells acquired are expected to utilise the
Company’s historical tax losses of more than US$16 million.

Colin Harrington, Chief Executive of Zephyr, said:

“The Acquisition announced today is another landmark deal for Zephyr and will further transform the Company by adding a significant, low-decline, low-risk, high margin production base – with both near and long-term upside exposure into a further 65 wells, thirteen of which have already been drilled and are expected to be online soon. “The Assets are located in the same core Williston Basin field as many of our existing non-operated wells and will be a significant complement to our current non-operated portfolio.
“As we outlined to Shareholders in January 2021, our goal for the year was to establish production and positive cash flow for the Company either through our existing portfolio, via acquisition, or through a combination of both. Assuming we complete the Acquisition by the end of the year, we will end 2021 having outperformed even my most optimistic expectations, having grown a considerable non-operated portfolio during the year and having achieved a huge milestone with first production from our Paradox project, where production testing data from the State 16-2LN-CC well remains highly encouraging.
“Upon closing, the Acquisition is expected to more than double Zephyr’s non-operated production levels and related cashflow over the next twelve months. The Acquisition will provide Zephyr with significantly more resources with which to accelerate the development of its Paradox Basin project. This year, cashflows generated by our existing non-operated portfolio have already been utilised on our Paradox project, have enabled us to acquire additional leases, and have allowed us to acquire further non-operated assets with production coming online shortly. We are firm in our intention to continue with this successful strategy as we position the Company for further growth and increased
“In addition, in line with our previously stated commitment, we intend to ensure that all hydrocarbons
produced from the Acquisition, net to Zephyr, will have a “net-zero” operational carbon impact while
under our ownership. This will be achieved largely through our programme of purchasing Verified
Emission Reduction credits to mitigate all Scope 1 carbon emissions.
“The Acquisition assets are situated in a prime location in the Sanish Field in the Williston Basin and
all wells are operated by Whiting, a top basin producer already serving as operator of a number of our
existing wells. I look forward to further developing our relationship with Whiting as we grow our asset
base in the Williston Basin.
“I would like to extend a sincere thank you to our Shareholders and Board members who participated
in the bridge loan funding which enabled us to proceed with the Acquisition. The funding, secured on
highly favourable terms, and with no dilutive equity component, demonstrates the faith that these
parties have in both the Company and the Acquisition. I am also highly encouraged by our discussions
to date with a diverse range of potential lenders in respect of the remainder of our Acquisition funding.
“It’s important to note that, to date, Zephyr has delivered multiple acquisitions and significant
progress on its Paradox asset without utilising any debt, as the Board did not consider appraisal and
development assets to have a suitable risk profile for leveraging at the time. However, the Acquisition
assets have a long production history and have reached a lower decline phase. Combined with
appropriate hedging and with our success in delivering production from our existing non-operated
portfolio, the result means we believe we can now safely utilise conservative levels of leverage.
“In conclusion, I’d like to reiterate that we are operating in particularly exciting and unusual times –
times which simultaneously offer strengthening commodity prices as well potential to complete
opportunistic acquisitions at highly compelling valuations. Zephyr’s Board has unanimously agreed to
be aggressive in these times in order to fortify our ability to deliver an accelerated development
schedule on our Paradox asset, which in turn is expected to position the Company for significant long term growth. The value already delivered from this year’s progress now means that additional growth
has the potential to be delivered with minimal dilution to Shareholders.
“We will be providing regular updates as we progress through this transformational period in both our
operated and non-operated portfolio – and in the meantime, we will continue to operate in line with
our core values of being responsible stewards of both our investors’ capital and of the environment
in which we work.”

With so much detail above both from the RNS and the CEO’s comment there is little I can add but what I can say is that this is yet another fantastic deal which, as I write, hasn’t pushed the share price up by anything like as much as I had expected. 

In one fell swoop Zephyr has landed a significant low decline production package, excellent exposure to 18 DUCs and a further 40 PUD locations I expect to be drilled up in medium term.  The locations are completely interspersed/intermingled with current Williston wells, and all are operated by Whiting.  They are an ideal fit, and will provide much more fire power from which Zephyr can accelerate the Paradox without further dilution.

The deal will more than double existing production and more than double cash flows for the next year.  And given the PDP value already created since the initial DUCs have come on line (none of which were funded by debt), they have sufficient value from which to conservatively lever up the asset (1.6x debt/ebitda) and fund the deal without dilution.  

Zephyr are acquiring these assets remarkably cheaply, 2.1x forecast EBITDA with considerable upside and add to that the low opex of below $14/bbl gives excellent cash flow margins, what’s not to like. Zephyr management are as I have always said are exceptional and this deal propels the company further upwards, only last week I described the company as a ‘landmark’ company and that the share price should continue to increase substantially, my views have only got stronger as a result of this deal. 

Pharos Energy

Pharos has announced a return to drilling in its El Fayum Concession in Egypt, with the commencement of an interim three-well development programme. Operations have now commenced on the first well, in a three-well back-to-back development drilling programme, using the ECDC-2 Drilling Rig.

This first well is targeting the oil-bearing sandstones of the Abu Roash ‘G’ and Upper Bahariya Formations, in a structurally optimal position within the North Silah Deep field. Drilling operations are expected to take 24 days and the well will be later tested, completed and brought on to production using one of the workover rigs on contract.

 Operations for this initial three-well programme are expected to finish in February 2022. Petrosilah, on behalf of the Joint Venture, is currently tendering for two drilling rigs to continue the drilling campaign and for a H1 2022 commencement. The estimated capital spend for the three development well programme is circa $2.4m net to Pharos (after adjustment, post the completion of the IPR transaction).

Ed Story, President and Chief Executive Officer, commented:

“I am pleased to announce that, after a significant period of restricted activity in Egypt, we have recommenced development drilling operations in El Fayum. This three-well infill development drilling programme will help increase production ahead of the main multi-year and multi-well programme to be drilled following completion of the IPR transaction, at which time our initial costs will be carried by our new partner in the concession*.”

Good news from Pharos as they resume drilling operations in Egypt, as Ed Story says above this will continue with Pharos being carried after completion of the IPR transaction  and leaves plenty of upward scope for the shares. Standby for my upcoming interview with Ed Story for more detail. 

President Energy

President today announce the workover of two gas wells in Rio Negro, Argentina completed with aggregate current incremental production 40,000 m3/d of gas (230boepd)

New oil well in Salta drilling ahead at 2,500 metres depth with target depth of 3,300 metres expected to be reached in next seven days 

Workover of Triche well in Louisiana continuing

Paraguay farm out still expected to complete at or around end November

Peter Levine, Chairman, commented on the core hydrocarbons business
“While there is certainly a lot of excitement surrounding the forthcoming flotation of the Company’s subsidiary Atome Energy PLC just as exciting is the important work that the team continues to deliver on the ground in Argentina, the United States and Paraguay.
“Thus I am pleased to report that the progress continues and I remain grateful to my colleagues for their diligence and continued honest endeavour in keeping on point and focused on our objectives within the hydrocarbon businesses. Thanks to them our plans remain on track and our production is increasing”.

I continue to be amazed that the President share price has not yet taken note of the continued operational success in Argentina and shortly Paraguay nor that the Atome dividend to come shortly, this should be huge. 

And finally…

In the Prem wins for Liverpool, Chelski and the Noisy Neighbours and the Red Devils got thumped by the Hornets and Solskjaer finally got the tin tack.

Great rugby at the weekend with a clean sheet, Scotland beat Japan, England beat South Africa, Wales beat Australia and Ireland beat the Pumas. With France putting 40 points on the All Blacks the 6 Nations next spring is going to be awesome.

And with 2 more Grand Prix the F1 Championship is still very open….