WTI (Aug) $80.90 +7c, Brent (Aug) $85.25 +24c, Diff -$4.35 +17c.

USNG (Aug)* $2.75 u/c, UKNG (July) 79.5p -2.15p, TTF (Aug) €34.22 -€0.48.

*Denotes expiry of the July contract.

Oil price

Oil is robust as mixed news came in various shapes, the EIA inventory stats were not good, crude built 3.591m barrels and with the refinery rate down 1.3% down at 92.2% gasoline also added as many as 2.654m b’s. Against that the Middle East is hotting up, with Houthis on the move, Israel attacking and Turkey getting involved into the bargain. 

Zephyr Energy

Zephyr has announced its audited results for the year ended 31 December 2023.

Rick Grant, Zephyr’s Non-Executive Chairman, said:

“I am pleased to present the Company’s financial and operational results for the 2023 financial year, a period in which we continued to deliver as a cash-generating oil and gas exploration and production group.

 “Despite facing a significant operational challenge during the year, we continued to make steady progress in our pursuit of unlocking the next prolific onshore U.S. oil and gas play.

“With a balanced portfolio of non-operated assets and an operated asset with asymmetric growth potential, our strategy is clear. Cashflows generated from our non-operated asset portfolio in the Williston Basin, North Dakota, will be recycled and reinvested to develop our flagship operated asset in the Paradox Basin, Utah, to acquire and to develop further non-operated assets, and to cover our corporate costs.

“I was delighted by the recent safe and successful drilling operation on the State 36-2R LNW-CC well and we are looking forward to the results from the forthcoming production test.

“I would like to extend my appreciation to the Zephyr team and our contractors for their ongoing work, and I would also like to extend my gratitude to my fellow Board members, leadership team, advisors and most importantly, our Shareholders for their continued support.

“We have an exciting period ahead of us and I believe, more than ever, that we have the pieces in place to enable us to deliver on our strategic objectives successfully.”

Another situation where the historic results add nothing to our total knowledge as all the information is in the market place already. Rick Grant is an excellent Chairman and he runs a tight ship and this management team has done all the right things, they are drilling their flagship Paradox play again and despite a technically challenging time last year, have got back to the point where the new well is testing. 

But the smart thing is that they have a portfolio of non-operated assets which provide cash flow for exploration and to cover G&A and now an interesting asset in Salt Wash…I’m still very confident that the Paradox will deliver and that before long I will be reporting back from Denver.

Challenger Energy Group

Challenger has announce its audited Annual Results for the year ended 31 December 2023.

This is my fourth report to you, the owners of the Company, in my capacity as Chief Executive Officer.

The last 18 months has been a period of excellent progress for Challenger Energy. During this period, we did what we said we would do and we delivered most of what we promised we would deliver. The highlight event being the farm-out of our AREA OFF-1 block in Uruguay to Chevron, a transaction which is transformational for our Company in that it will lead to an exciting program of value-adding activity over the coming 18 months, as well as ensuring that we are fully-funded for the foreseeable future. Therefore, as we look to the second half of 2024 and beyond, I believe that our Company is in the best position it has been in for many years. Details are provided in my commentary below.

Strategic Context

In last year’s Annual Report, I reported on several key developments in Challenger Energy’s business during the 2022 period.

In summary, these were (i) the Company and its business had been successfully “reset”, both operationally and financially;

(ii) significant exploration discoveries had been made in the Namibian conjugate margin, analogous to the Company’s licenced

acreage in Uruguay; and (iii) endeavours to increase production from our Trinidad assets had proved difficult.

As a result of these factors the Company responded during 2023 with a shift in strategy to place primary emphasis on our Uruguayan assets, and to deemphasise growth in Trinidad in favour of achieving cashflow breakeven from the core Trinidadian assets while divesting any assets non-core to this objective.

Uruguay

In a relatively short space of time, our interests in Uruguay have become the centrepiece of our business. It is the place where we expect to be able to realise the greatest incremental value over the coming years, and it is thus the place where we are now focusing much of our efforts.

Shareholders will recall that in 2020 we were awarded the licence for the AREA OFF-1 block, offshore Uruguay. At the time we saw Uruguay as being an under explored frontier basin location with reasonable potential, although at that time Uruguay was not on the global sector radar, so when we were awarded the AREA OFF-1 licence Challenger Energy became Uruguay’s sole licence holder. However, in geological terms Uruguay, we believe, is the “mirror” of Namibia’s Orange Basin, and thus when very large new discoveries were made by supermajors in the Orange Basin in 2022, Uruguay become a global exploration “hotspot”. In less than two years Uruguay’s offshore went from being completely unlicenced to being 100% licenced, with every offshore block (other than Challenger Energy’s) licenced to majors / NOC. Moreover, new entrants committed to significant work programs to secure their licences, in contrast to the modest work program we bid to secure AREA OFF-1.

In this context we decided to strategically prioritise Uruguay. We laid out a plan of action, and over the last 18 months we successfully executed on that plan, as follows:

(i)    We accelerated our technical work program on AREA OFF-1, thereby rapidly enhancing the value of the asset. Our work program was thorough and focused, including reprocessing of legacy 2D seismic data, advanced amplitude variation with offset (AVO) analysis, seabed geochemical and satellite seep studies and full reinterpretation and remapping of all data, leading to lead and then prospect definition and an initial volumetric assessment. The result was delineation and high grading of three primary prospects, in aggregate representing an inventory of approximately 2 billion barrels (Pmean) and up to 5 billion barrels in an upside case (P10). This served to establish AREA OFF-1 as a high-quality asset of global scale and materiality. Focused technical work continued throughout 2023, in support of maximising the potential for securing a farm-out. This also meant that by the end of 2023 our minimum work program commitment for the first four-year period of the AREA OFF-1 licence – initially meant to be completed by August 2026 – had been completed, more than two years ahead of schedule.

(ii)   To fully leverage the value of our acquired knowledge and understanding, the excellent working relationship established with the Uruguayan authorities and regulators, and the attractive conditions in that country for hydrocarbon industry activity, we decided to bid for a second licence. We were successful in this endeavour, and in June 2023 Challenger Energy was designated as the party to whom the AREA OFF-3 licence – the last available offshore acreage in Uruguay – would be awarded, on attractive terms. This award was subsequently finalised in March 2024, with the initial four-year exploration period for AREA OFF-3 commencing in June 2024. As a result of this award, our Company has emerged as the 3rd largest net acreage holder in Uruguay, and the only junior E&P company with any position in the Uruguay offshore, holding two world class assets and a growing prospect inventory in what has fast become a highly desirable exploration “postcode”.

(iii)  On the basis of our excellent technical results, in mid-2023 we launched a formal, adviser-led farm-out process for AREA OFF-1. The objective was to secure an industry heavyweight as a partner for the project, who could provide the further expertise and capital needed to rapidly take AREA OFF-1 forward to 3D seismic acquisition and ultimately exploration well drilling. Our target was to secure a farm-out by the end of 2023, and whilst ultimately the process took a few months longer than planned, in March 2024 we entered into a farm-out agreement with Chevron. Under the terms of that agreement, Chevron will assume a 60% operating interest in AREA OFF-1, will pay the Company US$12.5 million cash as an entry fee, will carry 100% of the costs of an agreed accelerated 3D seismic acquisition on the block (up to a total net cash value to the Company of US$15 million), and thereafter if the decision is made to proceed to drilling of an initial exploration well, carry 50% of the Company’s share of costs associated with that well (up to a total net cash value to the Company of US$20 million). As at the date of this Annual Report, Chevron’s entry into the project awaits approval from the Uruguayan regulatory authorities, a normal industry formality for any farm-out and one which we expect will be concluded in the coming months, well within the time needed to allow for Chevron’s proposed 3D seismic acquisition to commence at the end of 2024/early 2025. We anticipate thereafter that we will see Chevron undertake significant activity on AREA OFF-1, and it is this activity which we believe will ultimately realise the considerable value we see in this asset.

In summary, the recap for 2023 insofar as our business in Uruguay is concerned is that we completed a high-quality and value-accretive technical work program for AREA OFF-1, we materially expanded our Uruguayan asset base through adding the AREA OFF-3 licence to the portfolio, and we secured a market-leading farm-out for AREA OFF-1.

However, before moving on to considering the rest of our business, I think it is worth making a brief, specific comment on the value and impact of this last item – the farm-out agreement with Chevron. As already noted, entry into this agreement was undoubtedly the highlight of the last 18 months for Challenger Energy, and represented the culmination of a huge amount of technical and commercial work, by many people over more than a year. It is thus an outcome we are extremely proud of, and is important for two reasons.

Firstly, the farm-out metrics achieved in this transaction are in our view, excellent. All CEOs will have you know that their Company is undervalued, but in this case, if properly analysed, the embedded value to our Company in the AREA OFF-1 farm-out arrangement is many multiples of our current share price – something I believe the equity market is yet to appreciate.

Secondly, over and above the mere numbers, the AREA OFF-1 farm-out is genuinely transformational for Challenger Energy’s future, in that (i) our strategy and technical work has been validated by one of the world’s leading energy companies – the resulting intangible benefit in terms of our industry “credentials” is immeasurable, (ii) going forward, operation of the AREA OFF-1 project will be in the hands of an operator and partner who has made a clear commitment to accelerating 3D seismic acquisition (and hopefully thereafter, exploration well drilling), and (iii) we will retain a material stake of 40% in the AREA OFF-1 licence, which will give us enormous flexibility when it comes time to consider how we participate in any future success case.

Trinidad and Tobago

By the end of 2022 we had come to the conclusion that achieving a material increase in production from our Trinidadian onshore asset portfolio was not commercially viable, due to the age of the fields and the technical characteristics of the relevant reservoirs. We thus shifted our objective from production growth to achieving financial breakeven from core assets, and streamlining our operations by divesting any assets considered non-core to this objective.

Thus, in early 2023, we sold the small and geographically removed South Erin asset, and in late 2023 we completed the sale of the non-producing Cory Moruga appraisal asset. In both cases the sales not only realised cash, but also relieved the group of significant liabilities, work program commitments, and administrative burden and cost associated with management of those assets.

At the same time, we concentrated our operational efforts on our two primary producing assets – the Goudron and Inniss-Trinity fields in south-east Trinidad. There, the focus was very clear: maintain constant production, eliminate excess cost, realise operating efficiencies from our people and equipment, and achieve cashflow breakeven.

In terms of results, 2023 production from these two fields was generally constant (on a like-for-like basis almost identical to 2022 production), and total operating expenses and G&A were reduced considerably (33%) as compared to 2022. However, realised oil prices across 2023 were lower than across 2022, so many of the operational gains we made were offset by lower revenue, such that whilst we were successful in operating on a cashflow breakeven basis, we did record a (relatively small) net operating loss (as compared to a small positive operating cash surplus in 2022). This financial performance also necessitated us reconsidering the carrying value of the Trinidadian licences on our balance sheet, and at the end of 2023 we decided to write down both the goodwill and asset values associated with these licences.

Through 2023 we also spent a substantial amount of time and effort on trying to develop options to expand our Trinidad business into a more sizeable and profitable production operation, either through organic growth or through adding new acreage to our portfolio. However, despite our best efforts, we did not make any progress of note on this important task.

In summary therefore, insofar as our business in Trinidad is concerned, I can report that 2023 was a mixed year. We largely met our core objectives of achieving cashflow breakeven operations and selling non-core assets. But, we did not turn a profit, and we did not “crack the code” as to how, in the longer term, we can transform the Trinidad business into a profitable production base of greater scale. We will continue our efforts to make progress on this front in the coming year.

Other Assets

In relation to the Company’s licences in The Bahamas, throughout the course of 2023 we continued to pursue a renewal of the licences into a third exploration period. In parallel we continued to explore various alternative strategies seeking to monetise those assets. The process has been frustratingly slow, but we expect to make better progress in the coming 12 months.

During 2023 we also undertook a detailed “economic basement to surface” technical review of the Weg Naar Zee project in Suriname, and concluded that the project did not offer the prospect of long-term commerciality (especially as compared to the better return potential we saw available from other assets in our portfolio). We thus made the decision to exit from the Suriname project, a process which was fully completed by the end of 2023.

Financial Performance

For the 2023 period under review, we recorded a loss of $13.4 million, although this includes the impact of various non-cash items, including non-cash losses arising from accounting impairments associated with the Trinidadian assets of approximately $12.9 million. Therefore, a more relevant metric to evaluate our financial performance during the period would, in my view, be a consideration of our “burn” – that is, cash used in running/sustaining our business across the period. In that respect, as noted, our Trinidadian operations operated on a largely self-sustaining basis through 2023 (thus requiring no cash support from the group), and the general and administration cost for the rest of our business was reduced to under US$200,000 per month (this being a reduction of 37% as compared to 2022). Based on benchmarking, we believe that this level of “burn” which represents the basic costs needed to stay in business as an AIM-listed vehicle, compares favourably with most of our peers. That said, we are always considering ways in which we can reduce our cost base further.

Capital Allocation and Funding

For a junior E&P company, effective capital allocation is one of management’s most important tasks. This is because within any given portfolio of assets, there will almost always be more opportunities and activities in need of funding than there are funds available. With this in mind, prudently managing our available capital has always been a key priority, with the overriding goal being to strike a balance between advancing our business quickly and in the most advantageous way, but at the same time making the most out of every dollar spent, and avoiding to the greatest extent possible the need to seek additional funding by way of dilutive equity raisings.

Pleasingly, over the last 18 months we have largely been able to achieve this goal. Specifically, Challenger Energy’s last equity capital raising was in March 2022 as part of a broader corporate restructure / recapitalisation. At that time, we raised an amount that was then estimated to be sufficient to sustain 12 months of future operations, but we have “stretched” the funds raised such that we have operated without needing to undertake an equity placing for more than two years now. We have done this by:

(i)      keeping overheads lean and efficient: as mentioned, through the course of 2023 our corporate overhead was low, both in an absolute sense and as compared to 2022;

(ii)     ensuring any incremental expenditure is very focused in its application: in 2023, we only allocated discretionary capital to value-adding technical work in Uruguay, and, as noted, operations in Trinidad and Tobago were largely self-funding through the period, thus requiring almost no financial support from the Group; and

(iii)    successfully selling non-core assets: the sales of the South Erin and Cory Moruga assets supplemented available working capital, and whilst a delay in regulatory approval for the sale of the Cory Moruga asset necessitated a bridge funding facility being put in place in mid-2023, we were eventually able to deliver on that transaction, which in addition to releasing capital back to the business also allowed for the bridge funding facility to be fully repaid and cancelled.

Subsequently, in May 2024 we secured a meaningful equity investment – at a premium price – from specialist E&P investor Charlestown Energy, and as previously noted, on closing of the farm-out for the AREA OFF-1 licence in Uruguay we will receive US$12.5 million in cash. Against this we have no debt, our cost base is low, the minimum work program on AREA OFF-1 in Uruguay has been completed and our share of 3D seismic costs will be carried by Chevron, the work program for AREA OFF-3 is modest, and we have no unfunded forward work program commitments. This means that once the AREA OFF-1 farm-out completes we will have cash reserves more than adequate to ensure ongoing operations on a “fully-funded” basis for the foreseeable future. This puts our Company in the best financial position it has been in for many years.

ESG

As I noted in last year’s Annual Report, the broad category of activities generally referred to nowadays as Environment, Social and Governance, or ESG, are central to everything we do. It is a core value in our business to ensure that achieving our commercial objectives never comes at the expense of harm to people or the environment, and that our “social licence to operate” is maintained intact at all time. We want to be known as a responsible, reliable operator and a partner / employer of choice.

In 2023, our excellent track record in this all-important area was maintained. Across all of our operations there were no incidents of note – whether personal injury, property damage or environmental. We maintained productive and positive relationships with all relevant Governments and regulatory bodies, we continued our policy of investing considerably in Company-wide training programs and ESG awareness activities, and we made a number of targeted social and welfare contributions in the communities where we operate. A tangible expression of our record of achievement in this area was the considerable body of work undertaken in support of renewing our Safe-to-Work (STOW) accreditation in Trinidad, a regulatory certification granted to only a few operators in that country. After almost a full year of preparation and audits this renewal was granted in April 2024, a testament to the strong culture of workplace health and safety awareness, commitment, accountability and performance that we have fostered and maintained.

In summary, the Company’s excellent ESG performance record continued in 2023, and everyone at Challenger Energy is 100% aligned to ensure that this continues into the future.

Outlook

I believe that the outlook for our Company over the coming period is as strong as it has ever been.

In the next 12 months we will be looking to see a result from efforts to realise value from our assets in Trinidad, and, as noted, we hope to reach a resolution in relation to our licences in The Bahamas in the same timeframe. But, undoubtedly, the key area of focus and value creation for Challenger Energy going forward will be Uruguay.

There, we expect the AREA OFF-1 farm-out to be finalised in the coming months, following which we expect that Chevron will begin to rapidly take the project forward. 3D seismic acquisition may happen as soon as the end of 2024, meaning that we could see new data for AREA OFF-1 as soon as the middle of 2025, leading to a decision on exploration well drilling thereafter.

Meanwhile, we will shortly kick off our technical work program for AREA OFF-3, which will see reprocessing of legacy 2D and 3D seismic, as well as a number of other work streams similar to those we found leveraging for the AREA OFF-1 farm-out strategy. We will be looking to replicate our AREA OFF-1 farm-out success for AREA OFF-3, this time with a process we expect will commence in early-to-mid 2025, with a goal to secure a new partner during 2025/early 2026, and exploration well drilling thereafter. And, all of this activity in Uruguay will occur against a backdrop of heightened industry interest, and substantial offshore exploration work being undertaken by others in Uruguay, northern Argentina, and southern Brazil – so it will be a busy and exciting time.

In concluding my review of 2023, I would like to take this opportunity to thank all of our team. We may be a small company, but we have highly-skilled, committed, and fiercely loyal employees, whose hard work and dedication deserves recognition. I also wish to express my deep appreciation for the support we receive from our Board, stakeholders, regulators, suppliers, contractors and shareholders.

2023 was a period of great progress for Challenger Energy. Now, with the benefit of the excellent foundations put in place over the past few years, our task is to realise the value we see in our assets. All of us who work at Challenger Energy are very much looking forward to doing just that.

As financial results are always historic in content and rarely containing anything new I thought the best way of covering it would be to produce the comments of Eytan Uliel, CEO as they fully cover just where CEG is right now.

For me Challenger is one of the most exciting companies in the sector with huge upside in its partnership with Chevron in Uruguay and the process is about to begin.

Serica Energy

Serica has provided the following operations and financial update.

Guidance

Production guidance is unchanged at 41,000 boe/d to 46,000 boe/d.

Operating costs for the year to date are consistent with the target of US$20 per boe. 

Production

Average net production for the year to date[1] is 43,781 boe/d. The average monthly breakdown by area is as follows (all numbers in boe/d):

Jan

Feb

Mar

Apr

May

June[2]

Total

Bruce Hub

 22,670

 23,958

 21,458

 23,382

 23,555

25,771

23,355

Triton Hub

 12,726

 18,364

 17,470

 17,076

 3,691

17,520

14,276

Other Assets

 7,259

 6,174

 5,454

 5,656

 6,743

5,408

 6,150

Total

 42,655

 48,496

 44,382

 46,114

 33,989

48,699

43,781

Bruce Hub production has been steady year to date. The uptick in June reflects the impact of the recent Light Well Intervention Vessel (“LWIV”) campaign on Bruce. More production history is required to estimate the ‘steady’ state levels of production from the worked over wells.

The well intervention to reinstate production from the Keith field has also been successfully completed. Production from the K1 well restarted on 8 June but has been intermittent to date while topsides operations are optimised.

This summer’s programme of Bruce field platform well interventions is on track to commence in mid-July. The programme has a planned duration of ninety days and includes a range of activities designed to enhance production and routine monitoring.

A brief routine outage of the Forties Pipeline System is scheduled in July. We plan to take advantage of this to carry out some maintenance work on Bruce. The Bruce Hub is scheduled to be shut-in for seven days to carry out these activities.

At our Triton Hub, the Triton FPSO is currently operating with a single gas export compressor with repairs to restore two-compressor operations due in October. A trip on the available compressor during May led to no production via the Triton FPSO for three weeks. Full production has been re-established but this operating vulnerability will remain until the second compressor is repaired. The planned 2024 summer shutdown of the Triton FPSO remains at forty days commencing on 1 July.

In our Other Assets, we are seeing generally good performance in line with or above our targets. The exception is Erskine which was shut-in on 26 January 2024 due to a problem with a compressor on the host Lomond platform. Although production was re-established in early May, it has since been taken offline for the planned Lomond turnaround. Erskine production is scheduled to restart in late July.

Triton Area drilling

The reservoir section of the B1z sidetrack (re-named as the “B6” well) on the Bittern field has been drilled successfully. Initial well logging has given good indications of high quality, oil filled reservoir, consistent with pre-drill expectations. The forward plan is to complete the well and to commence testing in August 2024 after the planned Triton summer shutdown.

Following completion of the B6 well, the COSL Innovator rig will move to the Gannet E field in order to drill the GE-05 well. Production from this well is expected to start in November 2024.

Financial

At 26 June 2024 the Company held cash and cash equivalents of £301.6 million and debt drawings of US$231.0 million (£182.0 million) respectively. This is after 2023 final tax payments of £58.3 million, capital spending of £80.0 million, asset acquisition costs of £17.3 million (including completion of the Greater Buchan Area transaction and ‘BKR’ transaction related payments) and the share buyback of £15.0 million.

Following the sanction of the Belinda development, estimated cash spend on capital items during 2024 as a whole is currently estimated at about £200 million pre-tax. It should also be noted that the schedules for tax payment in respect of 2024 and dividends mean these cash items fall disproportionately into the second half of the year.

AGM presentation

At the Annual General Meeting (“AGM”) today, presentations will be made by the Chairman and Interim CEO, David Latin, and the CFO, Martin Copeland. Copies of the presentations will be available on the Company website www.serica-energy.com under Investors/Presentations.

The full text of the Chairman’s Statement to be delivered at the AGM by David Latin, Chairman and Interim CEO, is below. It includes the following:

“Over just a few years Serica has been transformed from a small international exploration focussed company into one of the top 10 producers in the UK North Sea, safely and responsibly operating complex facilities offshore and growing its 2P reserves some 35 times since the beginning of 2015. To deliver these achievements we have navigated operational challenges, oil and gas prices hitting historic lows – remember gas prices of 10 pence a therm in May 2020 – and pulled off multiple good acquisitions.  With the assets, financial strength, staff and leadership now in place, we have a very solid platform for entering the next phase of growth.”

We are rightly proud of our track record of growth and value creation, and we aim to repeat the same in the future. Unfortunately, recent and potential future increases in UK oil and gas taxes make that increasingly difficult. Consequently, while we remain watchful for opportunities in the UK that might be attractive despite this increasingly challenging context, we are also looking very actively overseas.

This is yet another very positive update from Serica where production of 43,781 boe/d is in line with guidance which is unchanged at 41,000-46,000boe/d and takes into account a number of planned shutdowns for summer maintenance.

With a number of wells being drilled to improve capacity and improve well performance Serica is in a very strong position as the new CEO joins next week alongside the relatively new CFO and the Chairman who has been standing in as CEO. The company remains one of the best run in the industry, over recent years growth by organic and inorganic methods has been exceptional and could grow more if circumstances allow. 

Unfortunately those circumstances are not in their gift as the political process has overtaken any common sense and has moved from a fiscal battering to what might cut domestic production and eventually sever any income to the Treasury. Despite their best efforts the 220,000 people in the industry are at risk and in the most senseless of political crusades. The idea that the world won’t need fossil fuels any time soon is mad enough but to lose an efficient industry on the basis of vague notions of a carbon free future is made worse by the thoughts of 20 years to come of importing dirty hydrocarbons from halfway round the world and all in the name of the climate crisis.

Longboat Energy

Longboat has provided the following summary of the Competent Persons Report published today on its website in respect of Block 2A offshore Sarawak in eastern Malaysia.

Block 2A Competent Persons Report

In anticipation of a farm-out process, Longboat commissioned ERC Equipoise Ltd (“ERCE”) to undertake a CPR on the main Kertang prospect located in Block 2A (Longboat 52.5%, op), offshore Sarawak in eastern Malaysia.

Kertang is a well-defined, large, four-way dip closed structural high with over 220 km2 of closure. Four target intervals have been evaluated comprising of Cycle I and Cycle II/III, Oligo-Miocene reservoirs, representing the primary targets and shallower Cycle V/VII reservoirs representing the secondary targets. The prospect is covered by high-quality, wide-beam 3D seismic shot by CGG in 2015.

The CPR confirms the giant scale of the Kertang prospect assigning total gross, unrisked mean prospective resources of 9.1 TCF plus 146 mmbbl of NGLs across the four target horizons. A summary of the findings is provided in the table below:

Gross Mean Unrisked Prospective Resources (as of March 2024)

 

Gas

(bscf)

NGL

(mmbbl)

CoS%

Cycle I

4,993

77

22%

Cycle II/III

3,435

50

16%

Cycle V/VII AA1

143

4

24%

Cycle V/VII AA2

514

14

27%

Total

9,083

146

 

Source: ERCE Competent Persons Report (26 June 2024)

The prospect exhibits direct hydrocarbon indicators (DHIs) including an overlying gas cloud feature and amplitude brights at the Cycle V/VII level. Based on the results of seabed core samples taken by PETRONAS MPM in 2019, Kertang is believed to be outside of the CO2 fairway. Preliminary work undertaken by Longboat indicates that all target horizons are capable of being tested by a single exploration well.

A summary of the ERCE Competent Persons Report  can be found on the Company’s website (https://longboatenergy.com/presentations-reports/) and a full table, which should be read with the accompanying notes, can be found at the end of this press release.

Background

In February 2023, Longboat announced it had been awarded a 36.75% operated interest in a Production Sharing Contract for Block 2A alongside partners Petronas Carigali Sdn. Bhd (40%), Petroleum Sarawak Exploration & Production Sdn. Bhd. (7.5%) and Topaz Number One Limited (15.75%) as part of the Malaysian Bid Round 2022. Subsequently, Longboat purchased Topaz Number One Limited in a transaction announced in September 2023 bringing its total holdings in the block to 52.50%.

Block 2A is located offshore Sarawak, eastern Malaysia in the North Luconia hydrocarbon province covering approximately 12,000 km2 in water depths between 100-1,400 metres. Bintulu LNG, one of the world’s largest LNG facilities with capacity of 30 MTPA, is located onshore on the coast of Sarawak. 

The PSC is split into two terms; the first term (3-years) entails minimal work commitments focused on subsurface studies with the second term (2-years) requiring the drilling of one firm well to depth > 3,000 metres.

Following recent increased interest levels in exploration for world-scale fields, multiple large companies have approached Longboat regarding Block 2A. Having consulted with PETRONAS, the Company now intends to run a farm-out process during H2-24 to identify a suitable partner.

Nick Ingrassia, CEO of Longboat, commented:

I am extremely pleased the results of the ERCE CPR confirms Longboat’s internal view of the world-class scale of the Kertang prospect. Based on the excellent subsurface work undertaken to date by the Longboat team, we believe that Kertang is one of the largest undrilled structures in Malaysia and look forward to working with our partners PETRONAS and Petros to progress the prospect towards drilling in the next 18 months.”

I have made plenty of comments recently about ‘new Longboat’ recently and having listened to the webcast this morning there is nothing really new to say except confirmation by today’s CPR that they are in a world class prospect at Kertang. 

Smart investors have noticed the speed with which Longboat has moved to get rid of Norway and concentrate on SE Asia, somewhere that new Chairman James Menzies is as experienced as anyone I know. In addition there are other prospects in the portfolio which ensures a width of potential and a higher possible share price. 

And finally…

A break in Germany but the T20 World Cup is at the semi final stage, South Africa are through to the final and in the other semi England play India this afternoon.