WTI (Oct) $87.54 +86c, Brent (Nov) $90.60 +56c, Diff -$3.56 -29c.

USNG (Oct) $2.51 -7c, UKNG (Oct) 74.56p -8.19p, TTF (Oct) €31.5 -€2.5.

Oil price

Oil remains firm but the continuing poor data from China means that the cuts by Russia and the KSA were probably a sensible insurance policy. The API stats showed another big draw in crude, of 5.521m barrels against a whisper of 1.429m, gasoline drew 5.09m as the last knockings of the driving season kept product demand up. 

Touchstone Exploration- A red letter day…

Touchstone has announced that the Cascadura natural gas and liquids facility has safely delivered first production. Touchstone has an 80 percent operating working interest in the Cascadura field, which is located on the Ortoire block onshore in the Republic of Trinidad and Tobago. Heritage Petroleum Company Limited  holds the remaining 20 percent working interest.

Natural gas and associated liquids production commenced on September 6, 2023 and the Company intends to increase gross aggregate natural gas production from the Cascadura-1ST1 and Cascadura Deep-1 wells to 60 MMcf/d (10,000 boe/d) plus associated natural gas liquids over the coming weeks.

Natural gas and associated liquids production from the Company’s Cascadura wells is separated at the Cascadura facility on the Cascadura A surface location. The facility operates as a self-contained system, capturing all natural gas from the separators and liquids storage tanks and recycling it back into the system to increase sales volumes. Additionally, the facility sustains its own power requirements through onsite solar systems and natural gas generators and is entirely independent of the Trinidad power grid. The facility has a designed gross production capacity of 200 MMcf/d and 5,000 bbls/d of associated liquids, with a current gross production capacity of 90 MMcf/d and 2,250 bbls/d of associated liquids (17,250 boe/d). 

The facility was constructed over the past year and represented approximately 110,000 work hours of local employment using Trinidadian contractors and fabrication facilities. Throughout construction and commissioning, the project recorded no lost time injuries.

Natural gas volumes are transported through a 20-inch pipeline constructed and operated by The National Gas Company of Trinidad and Tobago Limited and sold to NGC pursuant to an Ortoire natural gas sales agreement executed in December 2020. Condensate volumes will be transported via tanker trucks to the Company’s Barrackpore liquids sales facility and sold to Heritage pursuant to a Cascadura field liquids sales agreement executed on September 1, 2023.

Paul Baay, President and Chief Executive Officer, commented:

The commencement of production from Cascadura marks the most significant milestone to date in the Touchstone journey, transitioning us to a majority natural gas weighted production company. Our fixed price natural gas agreement will deliver a significantly increased predictable cashflow stream to be reinvested in the future development of our extensive Trinidad asset base. Cascadura represents the second producing area on our Ortoire block, where we have multiple defined development prospects, alongside a significant pipeline of long-term exploration prospects.

We would like to thank our partners and contractors for their support and attention to safety during the facility construction and commissioning process. Our team will now focus on optimizing Cascadura production and planning a future drilling program to fill our existing Coho and Cascadura facilities.

So, production from Cascadura has started and  the company plans to ‘increase gross aggregate natural gas production from the Cascadura-1ST1 and Cascadura Deep-1 wells to 60 MMcf/d (10,000 boe/d) plus associated natural gas liquids over the coming weeks’.

This is a major landmark occasion which transforms the company, over the next few weeks as the ramp-up continues shareholders will see a dramatic change in revenues for which the management should be congratulated.

Next week sees the company hosting a Capital Markets Day in London at which I would not be surprised to see more data and where the story goes from here, I shall be there there will hopefully be much more afterwards. The stock for 2023 is travelling well. 

Arrow Exploration

Arrow has provided an update on operational activity at the Carrizales Norte field on the Tapir Block in the Llanos Basin of Colombia where Arrow holds a 50% beneficial interest.

CN-3 Well

The CN-3 well was spud on July 20, 2023, and reached target depth on July 30, 2023.  The well was drilled to a total measured depth of 9,260 feet (8,633 feet true vertical depth) and encountered multiple hydrocarbon-bearing intervals within the C7, Gacheta and Ubaque formations.

The CN-3 well encountered two oil pay zones within the Ubaque formation totaling 67 feet true vertical depth). The very thick pay zones and excellent reservoir characteristics are similar to those encountered in the CN-1 and CN-2 wells and further confirms the high potential of the Ubaque formation within the Carrizales Norte field. An additional 23 feet of pay (true vertical depth) was encountered in the C7 and 59 feet of pay (true vertical depth) in the Lower Gacheta formations.

Initially the Lower Ubaque zone was tested which has approximately 50 feet of net oil pay (true vertical depth) with an average porosity of 26%, and an estimated permeability of four Darcies.  Initially the well tested at 593 BOPD gross IP with a 30% water cut. During the 11th day of testing the water cut increased and the lower Ubaque test was completed.

On September 1, 2023, the Upper Ubaque zone was put on test using an electric submersible pump (ESP).  The well initially tested at a 98% water cut and cleaned up to 154 BOPD gross with a 92% water cut, during the four-day test.  Testing of the Upper Ubaque was then completed.

Based on Casing Bond Logs both high quality zones were adversely impacted by compromised cement bond. Premature water production confirmed this analysis. The Lower Ubaque had 65 feet of pay above a water contact. CN-1 and CN-2 were higher structurally with no visible water contact indicating an oil column of 115 feet from the top of the Ubaque to the oil/water contact.

The wells drilled at Carrizales Norte have shown that the Ubaque reservoir is ideally suited for horizontal well exploitation.  Similar fields in Colombia have been developed using horizontal technology and displayed excellent results for both production, oil recovery and reduced costs.  Arrow has extensive experience with horizontal wells and heavy oil reservoirs.  In similar fields, management has experienced three times the production from horizontal wells at an additional cost of 50% of a vertical well.

Currently the Company is preparing to test the C7 formation in the CN-3 well. We expect results in the middle of September.

Initial production results are not necessarily indicative of long-term performance or ultimate recovery.

The Gacheta formation has not been tested.  The potential of this upper zone will be unlocked with future wells and recompletions.

Forward Work Program

Once CN-3 is on production the rig will move to the RCE field where Arrow plans to further exploit the multi-zone RCE structure with two dedicated Gacheta wells and a follow up to the RCE-6 C7 producer. The drilling rig will then return to the CN field to drill additional Ubaque-targeted wells.

Marshall Abbott, CEO of Arrow commented:

“The CN-3 well is the 8th well in a row where the Company has proven commercial production.  The thick pay zone and production from the CN-3 well provides additional evidence of the potential in the Ubaque formation.  The Company expects material reserve additions and production from further development of this zone at Carrizales Norte.  Additional pay zones currently behind pipe provide further opportunities for production and reserve increases in the future.

The CN-3 well results have helped determine the size of the Ubaque pool at Carrizales Norte and there are firm indications that the reserves additions will transform Arrow into a much more significant company. Multiple development locations are anticipated based on current results.  The CN-3 well has also shown the potential for horizontal drill technology in the Ubaque reservoir.  Horizontal wells typically produce at higher rates making the field more economic.

Arrow has undertaken a third-party reserve evaluation of the CN field and hope to release the reserve data shortly.”

“With both the RCE and CN fields, management plans to control pump speed and choke wells back to efficiently manage the reservoir efficiently and discourage premature water production. Arrow believes this is in the best long-term interest of the reservoir and will result in maximum recovery from both fields.”

“Arrow’s fully funded, low risk drilling program continues to build momentum across our extensive portfolio, with the spudding of two wells at the RCE structure targeting the Gacheta formation to follow CN-3 being brought into production. Alongside this we are encouraged by the initial interpretation of the Tapir 3D seismic and look forward to providing further updates in due course.”

These CN-3 well results may look a touch disappointing at first glance but the presence of water and the cement job means that they are going to need a bit more work in the C7 to gain the necessary data.

Nonetheless, the company expects ‘material reserve additions’ and there is no doubt that the programme has been a significant success. Arrow has significant upside and my Target Price of 50p remains unchanged. The company are in town for presentations and interviews at the moment so again I will catch up after a meeting. 

Jadestone Energy

Jadestone has provided the following update on operations at the Montara Venture FPSO offshore Australia.

In line with the announcement on 31 August 2023, production at Montara restarted on 1 September 2023.

Initial production averaged around c.1,000 bbls/d from one well while the FPSO’s oil production and gas compression systems were recommissioned.  With further wells being brought back online in recent days, production has increased to c.8,000 bbls/d.  This figure includes some flush production, and it is expected that average Montara production will return to pre-shutdown levels of c.6,000 bbls/d over the coming days.

Ballast water tank 4P has also been returned to service following completion of final inspections and repairs. Preparations for the repair of the previously reported defect between oil cargo tank 5C and ballast water tank 4S are underway and additional inspections in tank 4S are ongoing.

The Company will now utilise a smaller and lower cost shuttle tanker to provide additional storage during a period of time when the FPSO storage capacity is constrained.

So Montara is back up and running, lets hope we hear nothing more about it. 

And finally…

The NFL is back this weekend and we start with the defending champions Kansas taking on Detroit tomorrow. The big story of the off season was obviously four time MVP Aaron Rodgers leaving Green Bay and joining the Jets. Rodgers is 39 but if he can be compared to Tom Brady then he might have another couple of decades left in him. Elsewhere, the 49ers have put their faith in 2022’s Mr Irrelevant Brock Purdy and Baker Mayfield takes over from TB12 in Tampa. Game on.