WTI (Feb) $72.70 +$2.32, Brent (Mar) $78.25 +$2.36, Diff -$5.55 +4c.

USNG (Feb) $2.67 +10c, UKNG (Feb) 82.0p +5.5p, TTF (Feb) €33.45 +€2.045.

Oil price

Oil rallied sharply yesterday for a number of reasons, the Red Sea remains a no-go area for a number of merchant shipping lines, Maersk and Hapag Lloyd are the latest to boycott the area after an Iranian naval ship was sent to the war zone.

Libya has also succumbed to its historical factionalism with an invasion of the Sharara field shutting-in production of some 300/- b/d of crude oil. And the API reported a big draw of 7.418m barrels of crude but with an opposite build in gasoline and distillates. 

Arrow Exploration

Arrow has provided an update on operations and provide guidance moving into 2024.

CORPORATE & 2024 BUDGET

The Company exited 2023 with a production rate exceeding 3,200 boe/d net.

Arrow’s Board of Directors has approved the 2024 work program, which includes 15 wells and a $45 million net capital budget. The entire capex budget will be financed by current cash reserves and operating cash flow. The 2024 budget focuses on the Tapir block and the development of the Carrizales Norte (CN) field.  The Company expects to employ two rigs for the entire year on the Tapir block with a third rig being utilized as required.  The capex emphasis is focused on development and infill drilling combined with targeting low-risk exploration prospects.

The Company plans to drill three horizontal wells at CN penetrating the 110 feet of oil column proven up by the initial three wells drilled in the Ubaque reservoir in 2023. The Company also plans on drilling four Carbonera C7 vertical wells at CN on a broad structural high. Both zones have proven to be prolific producers in the initial drilling phase. Another vertical well at CN will focus on production out of the Ubaque which will give the Company additional information on the direction of the planned horizontal wells.  In addition to the development of CN, Arrow will be focusing on low-risk exploration, with wells spread across the Mateguafa prospect, a step out from the initial Mateguafa discovery, (that has produced 600,000 barrels to date), the Baquiano prospect,  which is believed to be technically identical to the Carrizales Norte discovery, and the Carrizales Noroeste prospect that will test the  hydrocarbon-charged structure west of the main fault at CN.  In isolation, each prospect has potential, on its own, to add materially to production, reserves and cash flow.

The Tapir Block in the Llanos Basin of Colombia, where Arrow holds a 50 per cent beneficial interest, currently has 11 producing wells including the latest wells to be drilled, Rio Cravo Este 7 (RCE-7) and Rio Cravo Este 8 (RCE-8).  Both RCE-7 and RCE-8 were completed in the C7 and brought on production during the last quarter of 2023. RCE-7 and RCE-8 are exceeding expectations with combined production of over 1,700 BOPD gross (850 BOPD net).  The RCE complex has produced 1.7 million barrels in the last 12 months and additional development locations are planned.

Oso Pardo and Capella

The Oso Pardo-3 and Oso Pardo-4 wells on the Oso Pardo field in the Middle Magdalena Valley Basin of Colombia, where Arrow has a 100 per cent working interest, were drilled and tested successfully.  During the testing phase for both wells, Management determined that there was reservoir damage due to high mud weight used in drilling. Original OP wells were ultimately stimulated with positive results.     Arrow expects the reservoir stimulations to take place early in the first quarter of 2024 and for the wells to be put on production. Production from Oso Pardo 1 was offline at year-end due to a hole in the production pipe.  Management expects to turn the well back on in early 2024 once the workover is complete.

Capella remains offline, while discussions continue between the operator and local communities.

Marshall Abbott, CEO of Arrow commented:

“Arrow is proud of the work completed and results for 2023, our average production rates more than doubled over the year and the Company proved it was able to execute an aggressive capital work program.  The Company believes it is capable of similar production growth in 2024.  Arrow discovered a new, multi-zone, core area and enjoyed a positive step change in reserves.  Arrow was also able to complete a 100 square km 3D seismic program and develop numerous new prospects.

“In 2024 the Company plans to continue the high-paced growth profile with development drilling in the Ubaque and Carbonera formations.  The 2023 results demonstrate that the Carbonera remains a solid high-volume producer while the Ubaque formation has proven production that extends beyond the CN complex. Multiple development locations are anticipated based on current results, including horizontal drilling in the Ubaque reservoir in the CN field. Horizontal wells typically produce at materially higher rates with marginal cost increases compared to a vertical well, increasing recovery and the economics of thick pay oil fields. As well, additional development drilling is contemplated from the RCE pad.

“Arrow’s fully funded, low risk drilling program for 2024 continues to build momentum across our extensive portfolio. Arrow is poised to achieve significantly higher production and commensurate cash flow through the 2024 calendar year.

“The Board of Directors appreciates the successful work of our dedicated employees in Calgary and Bogota and the support from our patient shareholder base.”

Last year was a very good year from Arrow who more than exceeded expectations and doubled production, for this year they have submitted a substantial work programme of some 15 wells costing $45m in a budget financed by cash and cash flow from assets. 

Whilst concentrating on the Tapir Block and Carrizales Norte field who will do the heavy lifting there will also be an eye kept on other parts of the portfolio including Oso Pardo where stimulation will take place and workover attended to. 

In the drilling programme Arrow will have two rigs on the go all year, occasionally three which will enable them to drill development and infill wells as well as low-risk exploration prospects with some vertical and horizontal wells expected to deliver ‘significantly higher production and cash flow. 

I look forward to a face to face meeting before long and still continue to believe that with last year’s production in the bag and with a substantial drilling programme for this year to come my Target Price of 50p having been set some time ago still very much stands and Arrow will take its place in the upcoming Bucket List. 

i3 Energy

i3 Energy has announce the publication of its 2022 ESG report on its website.

Highlights of 2022 Environment, Social and Governance (ESG) Report

Emissions Reduction Initiatives

·    i3 is committed to being net zero for Scope 11 and Scope 22 emissions for its operated assets by 2050, with accelerated targets to be set following additional pathways analysis.

·    Since 2021, during which period the scope and scale of i3’s operations grew significantly and production by 23%, the Company managed to achieve a 4% reduction in its Scope 1 and Scope 2 emissions.

·    Continued the successful efforts to reduce methane emissions – completed the replacement of the Company’s entire inventory of hi-bleed pneumatic controllers with low bleed or instrument air and commenced the replacement of 400 pneumatic pumps on the assets acquired from Cenovus with solar powered electric pumps; once complete these initiatives in aggregate will reduce annual methane emissions by an estimated 64,600 tCO2e3, which is equivalent to circa 28% of the Company’s total CO2e emissions in 2022.

·    Commenced electrification of well pumpjacks, completing 30 conversions in 2022 at the Company’s Carmangay and Retlaw properties, reducing emissions by 6,366 tCO2e annually.

·    Reduced emissions from the Company’s extensive fleet of compressor engines by installing air-to-fuel gas gauges to optimise fuel efficiency and engine performance and converting rich burn engines to lean burn engines.

Emissions Reporting

·    GHG Scope 1 and Scope 2 total emissions intensity for 2022 was 41 KgCO2e/boe, a 4% reduction on the 2021 level and below the average for Canadian conventional oil production and gas production and processing of 48.14 kgCO2e/bbl and 42.04 kgCO2e/boe, respectively.

·    In 2022 commenced an alternative Fugitive Emissions Management Programme (launched in 2023), which uses a crewed aircraft equipped with laser technology to image methane emissions from the air, allowing more rapid and efficient repair operations, which could reduce fugitive methane leakage by more than 10% across our operations.

·    Invested in software to optimise field process data acquisition to proactively detect and repair leaks, track fugitive emissions, and enhance reporting. When fully implemented across the Company’s portfolio the software will assist in further reducing emissions.

Environment

·    i3 operates in jurisdictions with environmentally responsible operating contexts and world class regulations for all aspects of ESG, with currently circa 77% of its production being gas and natural gas liquids.

·    Abandonment and reclamation are ongoing activities, and in 2022, 70 wells were abandoned, 37 well sites were decommissioned and 9 reclamation certificates were received.

·    The Company had 4 reportable spills in 2022 (a 53% reduction from 2021), all of which were rapidly cleaned up and remediated.

Social

·    Safety is a top priority for i3; there were no employee loss time injuries and only 2 contractor loss time injuries in 2022.

·    The Company is proud of its gender diversity with 26% of employees being women.

·    i3 has an ongoing program of support, via charitable donations, to the communities in which it operates.

Governance

·    Established i3 Energy’s ESG committee which reports to the CEO and comprises a multidisciplinary team of senior leadership and subject matter experts across the organisation, tasked with assessing and recommending policies, programs and practices that promote the Company’s ESG goals and long-term sustainability strategy.

·    Established ESG-linked Key Performance Indicators (KPIs) as well as monitoring leading and lagging indicators of safety.

Majid Shafiq, CEO of i3 Energy plc, commented:

“Since 2021, during which period the scope and scale of our operations grew significantly and our production by over 23%, we are very proud to say that multiple initiatives and Company-wide efforts have managed to reduce our Scope 1 and 2 emissions intensity by 4%, and our emissions intensity remains below the average of our peers operating in Alberta on a CO2e/boe basis. This achievement is down to the strong oversight of our ESG Committee, and especially to the skill, ingenuity, dedication and hard work of all our employees and the daily efforts of our operations teams in the office and at the field level. We look forward to the future with optimism, as we continue to responsibly grow a sustainable energy business serving the needs of the communities and countries in which we operate.”

i3 has been at the forefront in ESG work and is rewarded by a reduction in emissions intensity to peer-beating levels. 

Footnotes:

1.         Scope 1 – direct greenhouse gas emissions that occur from sources that are controlled or owned by an organisation (e.g., emissions associated with fuel combustion in boilers, furnaces, and vehicles).

2.         Scope 2 – indirect greenhouse gas emissions associated with the purchase of electricity, steam, heat or cooling.

3.         tCO2e is tons of CO2 equivalent per year.

4.         Source: Canada’s Greenhouse Gas and Air Pollutant Emissions Projections 2021. Published by Environment and Climate Change Canada,  

Trinity Exploration & Production

Trinity has announced that further to previous announcements, the Trinidad and Tobago Finance Act 2023  was assented to by the President on 20 December 2023 and is now in effect.

The Act (https://www.ttparliament.org/wp-content/uploads/2023/12/a2023-15.pdf) includes reforms to the Supplemental Petroleum Tax (“SPT”) regime. In particular, effective 1 January 2024, the SPT rates applicable to Small Shallow Marine Area Producers are shown in the table below.  The Act defines Small Shallow Marine Area Producers as “a person who carries out petroleum operations in shallow marine areas under a license, sub-license or contract and produces less than four thousand barrels of crude per day”. Based on this definition, all of Trinity’s existing offshore production as well as future growth projects that fall within this production threshold, will benefit significantly from this reform.

 

Previous SPT – Shallow Marine

 

Amended SPT – Shallow Marine

Oil Price (USD)

Rate of SPT

Oil Price (USD)

Rate of SPT

$0.00 to $50.00

0%

$0.00 to $75.00

0%

$50.01 to $70.00

15%

$70.01 to $90.00

20%

$75.01 to $90.00

18%

$90.01 to $200.00

20% + 0.2% (P – USD 90.00)

$90.01 to $200.00

18% + 0.2% (P – USD 90.00)

$200.01 and over

42%

$200.01 and over

40%

Note: P = weighted average crude oil price in USD.

SPT liability for Trinity’s offshore production is estimated at USD4-5m for 2023 and we expect a similar amount, adjusted for production, to be additional operating cash flow in 2024 and future, at current long term oil price forecasts, which suggests that the realised price will be below USD75/bbl.

Jeremy Bridglalsingh, Chief Executive Officer of Trinity, commented:

“We welcome this proactive approach from the Government which will provide us with additional growth opportunities. These reforms will positively affect our cashflow throughout 2024 and be of material benefit to the Company’s growth projects, in particular the Trintes and wider Galeota developments.”

Whilst this is pretty handy and welcome for a rare Governmental tax reduction it was dreadfully high and needed some adjustment. I can’t see it making a shed load of difference to Trinity as their exposure to shallow offshore is pretty limited.

Deltic Energy

Deltic yesterday announced that the Company has been certified as a Carbon Neutral Business by Carbon Neutral Britain Ltd.

Deltic’s Scope 1, Scope 2 and Scope 3 emissions were assessed for the 12-month period ending 31st October 2023 by Carbon Neutral Britain Ltd and 100 per cent of corporate emissions have been offset through independently verified carbon offsetting projects. The carbon neutral certification will require renewal on an annual basis. 

Graham Swindells, Chief Executive of Deltic Energy, commented:    

“Deltic takes its obligations to the environment and the North Sea Transition Deal seriously, and this independent audit of our corporate greenhouse gas emissions footprint and Carbon Neutral Certification is an important step in that process. We’ve chosen to offset our emissions through Carbon Neutral Britain’s Climate FundTM, which supports a range of global projects which have benefits above and beyond simple carbon offsetting. We will continue to monitor and, where possible, look to reduce our corporate footprint as we continue to move the business forward.”

Deltic have rightly made a point of emissions and the path towards Carbon Neutral Certification which will be the way to go and a mandatory point of regulation for both the British Climate Fund and for investors as well as other regulators. 

And finally…

The Third Round of the FA Cup starts tonight, yes tonight on a Thursday night and goes on until Monday night. The first round proper as we used to call it never used to last five days except for bad weather! Tonight the Eagles host the Toffees…