WTI (Dec) $75.89 +$2.99, Brent (Jan) $80.61 +$3.19, Diff -$4.72 +20c.

USNG (Dec) $2.96 -10c, UKNG (Dec) 119.0p +2.75p, TTF (Dec) €46.925 +€0.625. 

Oil price

Oil was down last week but not by as much as the previous two, $1.28 for WTI but only 82 cents for Brent, today things are a good deal better with a two dollar bounce. It’s a busy week ahead, the WTI December contract expires tonight and markets rarely do much in the run up to Thanksgiving on Thursday whilst the Opec meeting is on Sunday where quotas may or may not be discussed.

Arrow Exploration

The decision of the Colombian Constitutional Court to allow extractive companies to deduct royalties from their taxable income is positive news for Arrow.

It implies a reduction of the effective income tax rate that the Company will be paying and will positively impact cash flow.

A number of shareholders have been in touch and we provided them with the following example:

Colombia Oil General Example
Based on per barrel calculations
Assume Field Price$70.00
Assume Royalty 12%$8.40
Assume Tax Rate 45%$3.78
In this example a company would have an additional $3.78 per barrel of tax shield.

If taxable the company would be making an additional $3.78 per barrel after tax.

I was delighted to see this good news from Colombia and hope to add some further details in dues course. This only goes to confirm my ideas that Arrow is a high quality investment with a Target Price of 50p.

Trinity Exploration & Production

Trinity has provided an update on operations at its Jacobin oil discovery.

Operations on the Jacobin well are now focussed on flow testing the discovered oil zones in the Lower Cruse 1 (“LC1”) upper intervals. Testing of the thin Lower Cruse 3 (“LC3”) zone is being terminated, as despite clearing the sand blockage (as reported on 8 November 2023), further sand production issues were still experienced. Laboratory analysis of produced fluids and reservoir grain size and composition is on-going in order to assist with Company’s assessment of the future production potential of this zone.

The upper two zones are well developed oil-bearing sandstone intervals, with thicker net pay zones for testing (with a combined test interval circa five times that tested at the LC3 level), and generally better developed than the deeper reservoir encountered at the LC3 level. We believe the risk of experiencing material sand production issues is much reduced at this level but will be carefully monitored regardless as testing proceeds.

The testing of the upper zones will be conducted by perforating via wireline and the rig is at the well site conducting preparatory work.  All regulatory approvals are in place for the next phase of the testing programme.

The Company expects to perforate the upper zones in the well by mid-December. Reservoir behaviour will be closely monitored during the production testing phase and the testing regime will be adjusted in line with the well’s performance.

The Company will keep the market informed of progress on the next phase of operations on the Well.

Jeremy Bridglalsingh, Chief Executive Officer of Trinity, commented:

“We are moving up-hole to commence testing of the main zones of interest. The well-testing team has worked hard to try to achieve production from what was always going to be a challenging zone but we will now take the valuable operational lessons learned and data gathered, up-hole to what is expected to be more productive zones.”

Problems at Jacobin then for Trinity as the Lower LC3 interval now has further problems to add to the original blockage and they are now moving to the Upper Zones and will perforate and then test the LC1 zone where oil has already been discovered. Indeed the company says that these sands are ‘better developed’ than the deeper LC3 reservoir.

This next process should be underway within a month, after that we will find out about the well, it is of significant importance because it looks like the LC3 is not commercial leaving the higher level to do the heavy lifting. Trinity are relying a great deal on Jacobin, a failure is not something worth bearing in mind… 

And finally…

Australia won the CWC and saw off India the favourites in a low scoring match and deserved their victory.

Viva Las Vegas as the F1 circus took like ducks to water in the overhyped, psyched up environs of the Nevada desert.

And the Euro qualifiers continue, Scotland are in the finals and England should be OK even before their match in North Macedonia tonight whilst Wales are in the hands of the gods of football, or at least other results.