WTI $115.68 +$8.01, Brent $118.11 +$7.65, Diff -$2.43 -36c, NG $5.02 +30c, UKNG  610.0p +252.0p

Oil price

Apologies for the late blog, I am just back from the USA and pressed for time and energy! I will update on remaining stuff from today tomorrow if I may…

Oil has jumped again as sanctions on Russia moves to the embargo on energy stage and markets start to worry about where to find the missing 5m b/d of oil and substantial gas shipments.

So, where does MbS stand regarding his and Opec’s relationship with Putin after their recent love-in, given that the only lumps of extra oil production are available in the Middle East. The fact that Sleepy Joe has failed to generate any relationships in that theatre might just turn out to be somewhat short sighted, unless you count potential Iranian production…

Zephyr Energy

Zephyr has provide an update on its flagship project in the Paradox Basin.

Further to the Company’s announcements of 8 December 2021 and 26 January 2022, Sproule International, a leading independent global energy consulting and advisory firm, is continuing its work on the Paradox project Competent Persons Report as commissioned by the Company.

While Sproule continues to work diligently to deliver the CPR, a number of factors, including the large scope of the CPR and the significant increase in activity in the North American oil and gas sector, have led to a short delay to the delivery timeframe previously envisioned.  The Company expects to receive the CPR in the coming weeks, and will publish it as soon as practicable upon delivery from Sproule. A further announcement will be made once the CPR is available.

Colin Harrington, Chief Executive of Zephyr, said:

“Many factors have contributed to the CPR taking slightly longer than originally anticipated, but we do expect to receive the report from Sproule within the next few weeks.  More importantly, we are excited about the detail and analysis provided to Sproule and have appreciated their thoughtful collaboration with our technical team to date.  We look forward to updating the market on Sproule’s completed evaluation, and on multiple additional fronts, over the coming few weeks.”

Growing at the pace that it is doing, Zephyr is catching up with compiling the data needed by Sproule for the updated CPR. I can’t imagine that the results will be a disappointment given the detail that the management have gone into in acquisitions thus far and that in coming weeks when it is released, the CPR will be worth waiting for. 

Touchstone Energy

Touchstone has announced a summary of our 2021 year-end reserves and an operational update.

Our independent reserves evaluation was prepared by GLJ Ltd. with an effective date of December 31 2021. Highlights of our total proved (“1P”), total proved plus probable (“2P”) and total proved plus probable plus possible (“3P”) reserves from the Reserves Report are provided below. All finding and development (“F&D”) costs below include changes in future development capital. Unless otherwise stated, all financial amounts referenced herein are stated in United States dollars. Financial information contained herein is based on the Company’s unaudited results for the year ended December 31, 2021 and is subject to change. Readers are further cautioned to read the applicable advisories contained herein.

2021 Year-end Reserves Report Highlights

·      Relative to year-end 2020, increased 3P gross reserves by 21% to 121,332 Mboe, increased 2P gross reserves by 16% to 75,547 Mboe and increased 1P gross reserves by 13% to 38,731 Mboe in 2021.

·      Touchstone’s net present value of future net revenues discounted at 10% (“NPV10”) on a before tax 3P basis increased by 31% to $1.31 billion, before tax 2P NPV10 increased by 29% to $881.8 million and before tax 1P NPV10 increased by 31% to $474.9 million from the prior year.

·      Realized after tax 3P NPV10 of $535.6 million, representing an increase of 28% from the prior year, after tax 2P NPV10 increased by 26% from year-end 2020 to $363.1 million and after tax 1P NPV10 increased by 29% from the prior year to $210 million.

·      Achieved 1P F&D costs of $10.36 per boe, resulting in a recycle ratio of 2.6 times using our unaudited annual estimated 2021 operating netback of $26.55 per boe.

·      Realized 2P F&D costs of $6.96 per boe, resulting in a 2P recycle ratio of 3.8 times, demonstrating our capital efficient operations on the Ortoire block.

·      Relative to year-end 2020, increased Cascadura 1P reserves by 14% to 26,902 Mboe and 2P total reserves by 16% to 52,082 Mboe following our successful Cascadura Deep-1 well tested in 2021.

·      The Royston exploration discovery was assigned gross working interest 3P reserves of 4,800 Mboe, gross working interest 2P reserves of 3,520 Mboe and gross working interest 1P reserves of 1,280 Mboe.

·      Our independent reserves evaluator estimates that the Royston structure has a low estimate of 128.3 MMbbl, a best estimate of 165.7 MMbbl and a high estimate of 211.7 MMbbl of total petroleum initially-in-place from the overthrust and intermediate sheets of the Herrera Formation, with no estimate provided in the subthrust sheet.

Paul Baay, President and Chief Executive Officer, commented:

“Our 2021 independent reserves evaluation confirms the significant opportunities at our Ortoire property and the profitability of all of our assets in Trinidad. The estimated additions of both future net revenues and reserves at the newly discovered Royston light oil pool are reflective of our successful drilling activities in 2021 and the considerable size of the prospect in the Herrera Formation. The initial Royston reserves evaluation was conservative, given only one well was drilled to date and no reserves were assigned to the subthrust sheet. We have two exciting opportunities to substantially increase reserves in the area with the Royston Deep well intended to evaluate the subthrust sheet of the Herrera Formation and the Kraken well targeting the deeper Cretaceous Formation.

We are proceeding with the final step to bring the Coho gas field online with anticipated first natural gas production in May 2022, which will represent a milestone for Touchstone and Trinidad. We also remain on track with our operations at Cascadura, as we have submitted the required regulatory applications and procured the long lead items for the surface facility, providing visibility to estimated completion in September 2022.

Our focus is to convert our extensive Trinidad resource base to cash flows while continuing to target further exploration opportunities across our licence areas. It is an exciting time for Touchstone, as it is rare to have a combination of solid low decline base production, a near-term step change in production, a multi-year development drilling program and extensive exploration opportunities. I would encourage anyone requiring additional information to view the updated corporate presentation available on our website.

This is a very substantial and detailed report as one would expect from a company that has been as been as busy as Touchstone has been recently. I like the focus on the 200 plus million bbls in place at Royston with TXP only having booked a small portion based on the single well drilled so far.

Also it should be borne in mind that the operations update that shows production rates from Royston and the two gas projects that now have a clear path to production which I suggest should add significantly to long term value especially given the flow rates at here but the 675 bbls/d is only from 120 ft of the 1500 ft section.

The shares have remained unchanged on the news which given that oil is where it is today is clearly an under rating of the company of a substantial nature. When all the numbers are out for the company I am convinced that there will be huge reserves which will make the current share price look ridiculously low and investment at these levels will prove to have been a very wise move.