Malcy’s Blog – Oil price, Advance Energy, Longboat Energy, Touchstone Exploration & finally

WTI $71.12 +$2.51, Brent $73.98 +$2.46, Diff -$2.86 -43c, NG $3.87 +4c, UKNG 433.83p +39.73p

By Malcolm Graham-Wood

Oil price

In this seesaw market yesterday was an up day, what might Santa bring on Friday. Yesterday saw a big fall in cases in South Africa the alleged source of Omicron so fears were dowsed. The API stats after the close also showed a draw in crude and distillates but a rise in gasoline stocks. This looks right as refiners stock up ahead of the Christmas holiday mini driving season.

Advance Energy

Advance has provided the following update on the Buffalo project offshore Timor-Leste ahead of the drilling of the Buffalo-10 well.

The Operator, Carnarvon Petroleum Timor, Lda., has advised Advance Energy that the Valaris JU-107 jack-up rig is currently en-route to the Buffalo-10 well location, with spudding of the well expected to commence within one week. The estimated time to drill and complete the well is around 35 days.

 The base case well design is:

·    Drill 36″ x 26″ hole and set 30″ x 20″ conductor at around 120 metres

·    Drill 17 1/2″ hole and set 13 3/8″ surface casing at around 800 meters

·    Drill 12 1/4″ hole and set 9 5/8″ intermediate casing at around 2,800 metres, and

·    Drill 8 1/2″ hole and set 7″ production liner to approximately 3,500 metres

 Once the oil column encountered has been determined from wireline logging, the Buffalo-10 well will likely be suspended, ready for re-entry as a production well for the future Buffalo field re-development, assuming commerciality is proven.

The Buffalo-10 well is being drilled offshore Timor-Leste within the TL- SO T19-14 Production Sharing Contract (PSC) in a water depth of approximately 30 metres.

The well is being drilled to test for the presence of commercial quantities of high-quality light oil that is expected to lead to the early re-development of the Buffalo field.

RISC Advisory certified the mid case recoverable volume in the Buffalo field to be 34 MMstb (gross, 2C contingent resource), and the primary objective of the Buffalo-10 well is to demonstrate the presence of a significant, previously undrilled attic oil accumulation and for this resource to be converted to 2P reserves.

Furthermore, the CPR developed by RISC in March 2021 has demonstrated that an economic development of the 1C resource of 16 MMstb would be viable down to an oil price of $35. It is therefore considered that there is a strong likelihood that the Buffalo-10 well will confirm an economic development project, with RISC’s CPR stating that: “RISC estimate the probability of development to be 86%.”

 Leslie Peterkin, CEO of Advance Energy, commented:

“As previously noted, the drilling of this well is transformational to Advance Energy, representing a material value catalyst for the Company and our shareholders, and we are excited to report today’s operational milestone. We look forward to providing further updates as the drilling program progresses.”

This really is a milestone moment for Advance and I’m not sure whether the market has got it into its thick head quite how much this could deliver for Advance and in such a short time. It is worth re-reading the statement and the CEO comments if only the 86% probability of development at prices down to $35…

Later today I am publishing the 2021 review of the Bucket list showing the results, in the next day or 2 I will make a few modest changes for 2022, Advance is making significant noises to be included.           

Longboat Energy

Longboat Energy, the emerging full-cycle North Sea E&P company with a portfolio of significant, near-term, low-risk exploration assets, including three discoveries to date, is pleased to announce that a rig contract has been signed for the drilling of the Copernicus exploration well (Company 10%).

Copernicus (PL 1017) will be drilled using the Deepsea Yantai and is expected to be drilled between June and September 2022.  The prospect lies on the Utgard High in the Vøring Basin region of the Norwegian Sea and the prospect is a combination trap with mapped stratigraphic pinch out down-dip and a small structural component at the apex.

Copernicus is estimated to contain gross mean prospective resources of 254mmboe with further potential upside to bring the total to 471mmboe. The chance of success associated with this prospect is 26% with the key risks being reservoir presence/quality and trap.

Prior to drilling Copernicus, Longboat expects to drill three other exploration wells including the Ginny and Hermine exploration well which is due to spud in the coming weeks.  Ginny / Hermine is the first in a high impact, four-well 2022 drilling programme targeting 75 mmboe net to Longboat. Copernicus is expected to be the last of the four wells to be drilled.

Helge Hammer, Chief Executive of Longboat Energy, commented:

“I am pleased that we have now secured a rig for the Copernicus prospect which will be the seventh well in our programme.  We are entering an active period of drilling with each of the four 2022 wells having the potential to create very significant shareholder value.”

 After a false start Longboat is on the move and with early success is confident in the 2022 drilling programme will significantly add to the value of the business. I would only add to my previous comments that this remains one of the top managements in the industry with proven success and I’m sure that this will out in due course.

Touchstone Exploration

Touchstone has announced that it has entered into an amended and restated loan agreement with its Trinidad based lender providing for a $10 million increase in the principal balance to $30 million.

Touchstone currently has $15 million of the loan principal balance drawn and anticipates withdrawing the remaining $15 million available balance prior to the end of 2021. The Amended Loan Agreement provides enhanced financial flexibility at attractive after tax pricing.

The Amended Loan Agreement did not alter any material terms of the Company’s prior loan agreement, save for an additional underwriting fee of $50,000 payable to the lender, equivalent to 0.5% of the increased principal amount. Full details are in the RNS.

Nothing of any surprise here, Touchstone now has a  lot to do as it develops what it has already discovered and will be paid for from what I expect to be substantial revenues in due course.

And finally

In the Haribo Cup the Gooners beat Sunderland 5-1, tonight sees the Bees host Chelski in one of two London derbies, the Hammers go to White Hart Lane and the Foxes go to fortress Anfield.

The opinions expressed here are those of the author

Malcolm Graham-Wood

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Disclaimer: Malcy’s Blog is provided for general information about the international oil and gas industry and the companies that operate within it. It does not constitute investment advice and Malcy does not buy or sell shares, warrants or bonds in any company written about within the blog. Information is taken from publicly available sources and any comment is that of the author who does not take any third party comment in the blog


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