WTI (Sep) $84.50 +$2.10, Brent (Oct) $90.87 +$2.35, Diff -$6.37 +25c.

USNG (Sep) $2.69 -4c, UKNG (Sep) 154.45p +1.17p, TTF (Sep) €62.475 +€0.33.

Oil price

Oil is up one dollar this morning after the rise yesterday when the 60 day ceasefire ended with aggro from both sides. Iran has apparently seized a UAE tanker after attacking one last Friday and has said that it could step up to a more aggressive fight against the US military…

It was not that easy to find a ship to attack in the area as Kpler say that after only five transited on Saturday and none on Sunday which only confirms quite how little crude is getting through, we laugh at $90 Brent…

Now Oman. Today everyone seems to be getting aerated about what the Donald said about Oman overnight when he said that if they did a deal with Iran he would bomb them, or words to that effect. Now I don’t normally express anything too controversial but on this occasion I can see where he is coming from, after all Oman has just suggested that they could do a deal with Iran over the traffic in the Strait. 

Now that includes Iran choosing who gets through and also that they can charge them, which is crossing an important red line not just for the USA but also for the other Middle East states reliant on the waterway. Those other states have joined with the US and have all said that any deal like this is a non-runner with which I concur, maybe Oman just had dollar bills in its eyes. 

So although it was said in his usual Trumpish clumsy fashion and maybe it could have been done with a touch of tact although he doesn’t possess that gene, it wasn’t as far as wide of the mark as some of the screeching commentators have suggested. 

Arrow Exploration

I wrote up the Thorsby acquisition on Friday and my comments are repeated below. But for today I am adding a short addendum, as following further conversations with the Arrow CFO over the weekend I have been enlightened as to the deal metrics which only serve to make me feel even more happy with this deal.

The key metric in this case is the acquisition cost, at $2.44 per 1P boe and $1.61 per 2P boe it is very attractive and the reserves acquired, if taken at end 2025 would see a rise of 92% for 1p and 64% for 2P respectively. And it should not be forgotten that the recent successes at Icaco in Colombia have yet to be added to reserves, I expect this to come in the next CPR update, probably for the end of 2026. 

As for individual wells the costs are in the c.$2m-$2.2m range, depending on lateral length, they payout in less than a year and have a profit to investment ratio of >2x and a >500% IRR return on wells. This makes the deal highly accretive and is a very wise use of cash funds and still leaves plenty of funding for the current drilling programme so organic and inorganic growth is still very achievable. 

The 22 well programme is scheduled over four years and by 2023 is planned to add over 4/- boepd and I understand that the newer wells will be more oil weighted than the current higher gas mix. Overall I am, as I said, even happier with this deal than I was last week having been educated as to the key metrics which make a seriously good addition to the portfolio.

 

From Friday

This looks to be an interesting deal for Arrow, it is in their own back yard and appears to be being acquired on very attractive metrics. They are acquiring a 100% WI in a 550 boepd oil producing property in Thorsby, Central Alberta, Canada for C$12.15m

For me it ticks a number of boxes, it is highly cash generative having generated some C$2m of operating profit in the last 12 months and is being paid for out of Arrows significant cash reserves. The 1p reserve base is 4.973m boe with 2P of 7.537m boe and also has prospective opportunities across 9,501 net acres of land. 

I like that there is a development of 22 low-cost, quick payout locations and has current production that is ‘27% of oil and liquids and with 1P and 2P volumes of approximately 55% oil and liquids. The deal represents a ‘low-risk, exceptional return inventory suite of development drilling opportunities’.

There is another point worth making which alludes to the significant tax losses and pool that Arrow has and which give them an advantage when looking at Canadian acquisitions. With them the opportunities they look at have stronger economics over a company that needs to pay tax, and as such it is worth noting the comments by CEO Marshall Abbott when he stated that the deal ‘adds significant cash flow and IRRs that exceed 500% on a well-by-well basis’.

I also like that the Cretaceous Sparky Formation is a proven reservoir where the management has ‘years of geologic fluency’ and gives a more than useful contribution which complements the existing Colombian assets very well, specifically in its subsurface play types and trapping mechanisms.

Arrow has performed very well operationally in Colombia recently and this deal is well placed to diversify with another big low-risk development programme at a low cost in a familiar location. The company is debt free, has a robust, healthy balance sheet  with increasing production and an excellent reserve base. 

The share at 28.5p are up 3.28% today on this news, they have risen 14% m/m, 65% over 6 months and 98% year on year so they have more than justified my confidence and their spot in the Bucket List is assure for some time to come. I recently increased my target price to 50p and that seems perfectly achievable as the portfolio continues to  grow with excellent deals like this one.

And finally…

Whilst there has been a shortage of excitement in world sport lately there is one corner of the globe where it has been abundant. The test series in Australia agains the Bangas was already looking good and it proved to be so, with only two tests in the series Bangladesh whipped the Aussies by 9 wickets and therefore can’t lose the series. No one likes to see that…

And Scotland has announced a new national manager, hardly an international big name Sebastien Pocognoli comes fresh from being sacked by Monaco after only 38 matches in the Principality….