WTI (Jan) $77.24 +96c, Brent (Jan) $83.19 -44c, Diff -$5.95 -$1.40.
USNG (Jan) $6.71 -31c, UKNG (Dec) 300.0p +9p, TTF (Dec) €129.5 +€7.5.
The fight right now is between Opec+, who meet on Sunday and China who are still shutting down, either way oil is up over two bucks today.
Jersey Oil & Gas
Jersey Oil & Gas has announced that the North Sea Transition Authority has approved an extension to the Second Term of its P2170 “Verbier” Licence. This licence is now aligned with JOG’s P2498 “Buchan” Licence with the current phase expiring end of August 2023, in keeping with the Company’s stated strategy of developing the Greater Buchan Area as an area-wide development plan.
Following a recent period of fiscal uncertainty, confirmation of the retention of the investment allowance as part of the recent amendments to the UK’s Energy Profits Levy is welcome, as we progress advanced commercial discussions with a select number of counterparties in relation to the Company’s GBA farm out process.
Andrew Benitz, CEO of Jersey Oil & Gas, commented:
“We are pleased that the NSTA has agreed to extend the Second Term of the Verbier Licence in order to align it with the rest of our GBA asset base. Although multiple fiscal changes have slowed progress with closing out commercial farm-out discussions, we look forward to a successful conclusion if not by the end of the year then certainly in Q1 2023.”
A perfectly sensible piece of house-keeping from JOG whose licences at Buchan are all now aligned as the company progresses the farm-out process. Indeed, despite the ‘multiple fiscal changes’ slowing this progress it is good to see the company upbeat about the timing of such a farm-out as it expects that a ‘successful conclusion’ looks like being not far away.
The shares have performed well on the year but have suffered somewhat recently as the market awaited details of the updated North Sea fiscal policies which understandably unnerved the market. With that now quantifiable and the company being more positive I am very happy to remain a buyer of the shares.
Sound has provided a progress update on its Phase 1 micro LNG development and announce an amendment to the project contract entered into between Italfluid Geoenergy S.r.l. (the “Contractor”) and Sound Energy’s wholly owned subsidiary, Sound Energy Morocco East Limited (“SEMEL” and together with the Contractor, the “Parties”), in respect of the design, procurement, construction, operation and maintenance of Tendrara Concession micro LNG facilities onshore Morocco. The Contractor was previously provided with ‘Notice to Proceed’ under the Project Contract, as confirmed by the Company on 16 February 2022.
Phase 1, Micro LNG Development: Progress Update
Good progress continues to be made on the Company’s Phase 1 micro LNG development, with construction of the LNG storage tank ongoing and wellhead work undertaken. Work on the LNG storage tank has included site preparation, excavation for the tank foundation, laying the concrete base for the tank foundation, laying reinforcing bar and installing the reinforced concrete columns on the base, of which there are 60 in total and each 4m high. Once complete, the tank will stand 24m high and be 22m in diameter.
Wellhead inspection and remedial well servicing work at TE-6, one of the first of two wells to be put on production in Phase 1, was also completed safely in September.
Project Contract Amendment
The amendment to the Project Contract effects a reduction of the operating day rate of the plant by US$3,000 to a revised US$38,000 per day over its 10-year term, an approximate 7% reduction. The reduction in the operating day rate represents savings of US$1.1 million per year to the project, and US$11 million over the 10-year term. Additionally, the Parties have agreed to exercise their best endeavours to execute an option agreement under which the Company will have the right (but not the obligation) to acquire the micro LNG facilities, or the entity owning and leasing the facilities, after five years of operation for a sum of c.US$9.15 million, a reduction of US$1.5 million from the previous “option to purchase” sum agreed in principle between the Parties.
In return for the Contractor agreeing a reduction in the operating day rate under the Project Contract, the Contractor will be paid by the Concession owners (Sound Energy, 75% working interest) additional staged payments of an aggregate of US$6.5 million during the construction phase, in doing so providing the Company with the right to own the permanent on-site LNG storage tank facility once the plant is commissioned and LNG production starts. These staged payments, which are intended to be borne pro rata by all of the Tendrara Production Concession JV partners, will be presented to the December Tendrara Concession Management Committee Meeting (the “TMCM”), with the initial payment likely to be advanced to the Contractor in full by the Company on behalf of the JV partners ahead of the TMCM from proceeds of the Company’s existing project debt facility which is in place with Afriquia Gaz S.A. The LNG storage tank will remain part of the Operation and Maintenance responsibility of the Contractor over the life of the Project Contract.
Graham Lyon, Sound Energy’s Executive Chairman, commented:
“We are working closely with the Contractor to ensure the project remains on track to meet the joint venture’s delivery obligations to Afriquia Gaz under the LNG sale and purchase agreement. The restructuring of the payment structure under the Project Contract increases our alignment with Italfluid during the construction and commissioning phase whilst notably facilitating a valuable reduction in the operating day rate of the facility of some US$1.1 million per annum over the 10-year contract. Additionally, under the “option to purchase” agreement, which we expect to agree and execute in the coming weeks, the proposed reduction of the purchase price of the facility (or operating company, as the case may be) provides a valuable opportunity for Sound Energy to access additional value upside from the micro LNG development.“
Continued solid growth from Sound at the Phase 1 micro LNG development and they also announce an amendment to the project contract entered into between Italfluid Geoenergy. The restructuring seems eminently sensible and the management are clearly on the case when it comes to shaving of costs where at all possible.
The project looks like it is maintaining progress and operationally on track in line with market expectations, this deal looks like an exchange of some up front phased capital support in exchange for longer term value creation.
Arrow has announced the filing of its unaudited interim Financial Statements and Management‘s Discussion and Analysis for the quarter ended September 30, 2022, which are available on SEDAR. All dollar figures are in U.S. dollars, except as otherwise noted.
· The Third Quarter has been the best quarter in the Company’s history generating record cashflow from operations and a threefold increase in production from the date of the AIM Admission.
o EBITDA of $4,664,345 compared to $966,234 in Q3 2021.
o Average corporate production of 1,503 boe/d compared to Q3 2021 575 boe/d and Q2 2022 980 boe/d.
· Operating netbacks quarter-over-quarter, increased to $56.75/boe in the third quarter of 2022 from $49.18/boe in the second quarter of 2022 due to higher crude oil production and better netbacks from natural gas sales.
· Capital raised at the time of Admission to AIM has been deployed on a successful two well drilling campaign at Rio Cravo on the Tapir Block in Colombia, both of which were on production for most of the quarter.
· At the end of the quarter, positive working capital position of $7.4 million and a cash position of $11 million.
· Generation of positive cashflows in Q3 means that the Company is committing to a further drilling program.
· Subsequent to Q3 2022, the Company also completed two workovers to the RCE-1 and RCS-1 wells and has tied in the East Pepper well.
· The Company expects to commence drilling, around the end of 2022, the first of five additional wells – three wells at Rio Cravo and two wells at Carrizales Norte on the Tapir Block.
· The Company anticipates the robust CAPEX program will be funded from cash on hand and cashflow from operations.
· Robust operational tempo ensures that the Company is on track to achieve 3,000 bopd within 18 months of the AIM listing (H1 2023).
· Arrow continues to focus on shareholder value, improving its strong balance sheet, and free cash flow.
Marshall Abbott, CEO of Arrow Exploration Corp., commented:
“We have initiated the largest capital program in the history of the Company. Arrow has successfully executed the two workovers with production improving daily. The plan to add further perforations to RCS‑1 provides additional and material production increase potential. The RCE infill drilling program will aid in achieving our 3,000 (net) bopd production target in H1 2023. The low risk Carrizales Norte project has significant production and reserve potential. In addition, the West Tapir seismic project is expected to add low risk exploration prospects, which have the potential to provide material production and reserves increases in the near term. The seismic project will highlight the reserves potential of the western section of the Tapir block. The Company’s plans are to explore the east half of the Tapir block with a second seismic shoot in 2024. The Arrow Team continues to execute our strategy to increase shareholder value.”
Arrow is certainly delivering the promised goods and these figures prove up the numbers. As said, this is the best quarter in the Company’s history with production of 1,503 boe/d, above my expectations and as they say is ‘a threefold increase in production from date of the Aim admission’. This leads to expectations of nearly 2,000 boe/d before the year end and the target of 3,000 boe/d in 1Q 2023 being achieved.
This has given EBITDA of $4,664,345 compared to $966,234 in Q3 2021, end quarter, positive working capital position of $7.4 million and a cash position of $11 million. This in itself means that the company is beefing up reinvestment in the drilling programme and adding to capex. The next stage we should now look forward to and expect to commence drilling, around the end of 2022, the first of five additional wells – three wells at Rio Cravo and two wells at Carrizales Norte on the Tapir Block.
When I published my target price of 50p back in September I did it on the back of good production figures and a target of 3,000 boe/d being achieved in 1Q 2023. That figure looks like it will be achieved, currently running ahead of my expectations, and the share price is continuing to perform well, it may well see a modest upgrade and this is a no-brainer in the Bucket List.
· East Pepper tie-in
o The East Pepper well was put on production October 25, 2022, at 7 Mmcf/d (1,167 boe/d). As expected, initial production decline was steep and the well appears to have now stabilized and is producing in excess of 250 boe/d.
o The Company expects typical production declines of 2-3% per month going forward.
· RCS-1 and RCE-1 Workovers:
o The workover of RCS-1 and RCE-1 is in progress and the wells are continuing to clean-up. Due to electrical storms in the area causing power outages, the clean-up of the wells is taking longer than expected.
o RCS-1, the first well to be worked over, is currently producing at 660 bop/d (gross), 330 bop/d (net) with daily decreases to water cut and corresponding increases in oil production. Prior to the workover, the well was producing 330 bop/d (gross).
o RCS-1 has shown a 330 bop/d (gross) increase since the recompletion procedure. The production gain results in payout of the workover cost in 17 days at current Brent prices.
o An upper unit in the Carbonara 7A was perforated and flowed 330 bop/d (gross) after stabilizing. Management believes a thin shale barrier bifurcates the C7A. It is apparent that a thin shale break prevents inflow from the C7A main sand, which has superior reservoir characteristics akin to RCE-2. Arrow now plans to perforate the C7A in RCS-1 as it is the highest reservoir in the pool. The Company expects that RCS-1 should have a comparable flow rate to RCE-2, where C7A is currently producing 1,025 bop/d (gross) / 512 bop/d (net) with a flat watercut.
o RCE-1, the second recompletion, is continuing to show a high water-cut as it cleans-up. Prior to the workover, the C7A was flowing at 110 bop/d (gross) with a very high watercut. The C7A Stringer was then perforated and is slowly recovering. Production continues to increase daily, currently at 90-110 bop/d (gross), and watercut continues to decrease daily as the well continues to clean up.
· RCE-3, RCE-4, and RCE-5 Infill Drilling:
o Operations remain on track for RCE-3 to spud in late December/early January 2023, and mobilization of the camp facilities is underway. Civil works on the pad are nearing completion. Subsequent to completion of RCE-3, both RCE-4 and RCE-5 will follow in sequence.
· Carrizales Norte
o After drilling RCE-3, RCE-4 and RCE-5, the same drilling rig will be moved to the Carrizales Norte field.
o Currently Arrow is building a road and pad for the Carrizales Norte field. The road and pads are expected to be completed in mid-February 2023.
o The spud of Carrizales 1 is anticipated to begin in the latter part of Q1 2023 with Carrizales 2 expected to spud immediately thereafter, followed by a contingent Carrizales 3.
· Tapir Seismic
o The Company has received all commensurate approvals to proceed with the 100 km2 seismic program.
o The Company is permitting and moving equipment and personnel to the program area on the west side of the Tapir field.
o The estimated cost of the seismic program is $5 million gross ($2.5 million net to Arrow) and is expected to provide multiple prospects beyond what has been identified on the coarse 2D seismic grid.
o Processing and interpretation of the seismic will take place over Q2 2023 with drilling plans to be pursued in Q4 2023.
This robust operational tempo is expected to see the Company achieve 3,000 bop/d within 18 months of the AIM listing (H1 2023). Furthermore, the integrated seismic and geological data will provide significant running room for production growth on the Tapir Block.
Corporate production in November 2022 to date ranges between 1,900 boe/d and 2,000 boe/d net. Total net production from the Rio Cravo field is 887 bop/d. Contribution from the workover program continues to increase Rio Cravo’s production. The Pepper Field has been producing approximately 563 boe/d net, partially curtailed by the facility operator. The two Pepper wells, along with continuing and expected robust natural gas prices in North America, are expected to further enhance the value of the Pepper field. Arrow has 23,000 acres of contiguous Montney rights in the Pepper Area.
Eco (Atlantic) Oil & Gas
Eco has announced its results for the six months ended 30 September 2022 and to provide a corporate and operational update.
Financials (as at 30 September 2022)
· The Company had cash and cash equivalents of US$24.6 million and no debt (after paying US$11.3 million, being Eco’s cash share of the Block 2B well) as of September 30, 2022.
· The Company had total assets of US$67.3 million, total liabilities of US$5.7 million and total equity of US$61.6 million.
· As of November 27, 2022, the Company is expected to have approximately US$17.5 million cash and cash equivalents at the end of November 2022, following receipt of the initial proceeds from the sale of the Kozani project in the coming days referred to below.
· On November 28, 2022, the Company closed the sale of its 100% interest in the Kozani Photovoltaic Development Project for total cash proceeds of €2.3 million (US$2.4 million). US$2 million is to be received by the Company by close of business on November 30, 2022, and the outstanding balance is expected to be received by year end 2022.
· After 12 years with the Company, Eco’s Non-executive Chairman, Moshe ‘Peter’ Peterburg has informed the Board of his plans to retire, as such, he will not stand for re-election at the upcoming Annual General Meeting on December 29, 2022, and will step down from the Company with immediate effect. The Company has commenced the process to find a replacement and, in the interim, Peter Nicol, currently a Non-executive Director, will assume the role of interim Non-executive Chairman. Further announcements will be made as appropriate.
· With regard to the closing of the acquisition of Azinam Group Limited (“Azinam”), and in accordance with the previously announced Share Purchase Agreement, the Company will shortly issue the balance of 1,625,000 Common Shares (“Azinam Shares”) to the previous shareholders of Azinam representing the full and final number of Common Shares to be issued in respect of this transaction. These Common Shares are subject to a restrictive hold period of four months and one day (beginning on the date of issuance). The issuance of Common Shares is subject to approval from the TSX Venture Exchange and a further announcement will be made once such approval has been received and the Common Shares issued.
Block 2B (post period end)
· In early October 2022, the Island Innovator Semi-Submersible Drilling Rig arrived on Block 2B, offshore South Africa, and operations on the Gazania-1 Exploration Well commenced.
· The well was spudded on October 10, 2022, and reached target depth of 2,360m. However, evidence of commercial hydrocarbons was not found, and the well has been plugged and abandoned.
· The JV Partners submitted a Production Right Application to the Petroleum Agency of South Africa (“PASA”) on November 15, 2022, for Block 2B, based on the existing oil discovery of AJ-1 and potential future operations. Well logging has been completed and the JV Partners now have time to conduct further analysis and integrate the well data to allow them to determine the next steps on the Block.
· The Company and its JV partners are progressing plans to conduct a two-well campaign on Block 3B/4B offshore South Africa.
· As previously announced by the Operator of Block 3B/4B, a collaborative farm-out process (up to 55% gross WI), has been ongoing, and is now in a farm-out agreement negotiation stage. The JV partners will update the market as appropriate and should a farm-out agreement be concluded.
· Following recent significant hydrocarbon discoveries offshore Namibia, Eco continues to assess options for progressing exploration and commercial activity on its acreage.
· Eco is witnessing considerable interest in its licences in Namibia and is currently assessing options, including a potential farm-out.
· As previously announced, Eco and its JV partners on the Orinduik Block, offshore Guyana, are currently drawing up plans to drill at least one well into light oil Cretaceous targets in the next Petroleum Agreement exploration phase which begins in 2023. Further updates will be made on this matter in due course.
Gil Holzman, President and Chief Executive Officer of Eco Atlantic, commented:
“Our main focus during the period, and through to recent weeks, was to execute a safe and environmentally friendly drilling campaign on the Gazania-1 exploration well, offshore South Africa. Although it was disappointing to not announce a commercial discovery, we can be proud of how we conducted our operations, which led to the well being drilled safely and on-time. We are now working with our JV partners on the licence to analyse the well data found and plan our next steps on the Block, which we believe contains significant untapped potential.
On Block 3B/4B, offshore South Africa, we are making steady progress towards conducting a two well drilling campaign on the licence. The drilling preparations and program are expected to commence in 2023 and, as previously announced, a potential farm-out process is also underway on the licence. We look forward to updating the market on both of these workstreams as appropriate.
In Guyana, we remain highly optimistic about the potential contained within the Orinduik Block, and we are working with our JV partners to drill another well as quickly as possible. Guyana remains one of the most exciting exploration hotspots, alongside Orange Basin SA and Namibia, where we also hold a highly strategic acreage position, and we are working hard to deliver value for all our stakeholders across our asset portfolio in the near to medium term.
Finally, on behalf of the Board I would like to thank Moshe Peterburg for his tireless efforts during his tenure as Eco’s Chairman for the past 12 years and since inception of the Company. He played a pivotal role in the development and success of the Company to date and we wish him all the best for a happy retirement and are pleased he will remain an important shareholder of Eco.”
The financial results, like for any company primarily involved in exploration is a historical document and of little importance. As for the exploration results this was a disappointing quarter with the duster at Gazania although the company remain positive.
What I am most excited about is Block 3B/4B, offshore South Africa, where the company ‘are making steady progress towards conducting a two well drilling campaign on the licence. The drilling preparations and program are expected to commence in 2023 and, as previously announced, a potential farm-out process is also underway on the licence’.
The Lord only knows what is happening at the Orinduik Block in Guyana but they say that they hope to drill sometime starting in 2023…
There is lots of upside here, obviously I like South Africa but expect farm-outs in Namibia and drilling in Guyana to add to what is a portfolio bulging with exciting upside, for the patient…
Zephyr has announced that an updated corporate presentation has been uploaded to the ‘Investors’ section of the Company’s website: https://www.zephyrplc.com/investors/
I’ve taken a look and it is well worth looking at this important presentation, it might even make you invest…
The World Cup is getting to the end of the Group stages so yesterday Cameroon drew 3-3 with Serbia, Brazil beat Switzerland 1-0, Ghana beat South Korea 3-2 and Portugal beat Uruguay 2-0.
Today we are in the final Group games, this afternoon the Netherlands play Qatar and Ecuador play Senegal whilst this evening England face Wales and Iran play the USA.