Malcy’s Blog – Oil price, Advance Energy, Union Jack Oil, Egdon Resources, Europa Oil & Gas,, Longboat Energy & finally

WTI $85.43 +$1.61, Brent $87.51 +$1.03, Diff -$2.08 -58c, NG $4.28 +2c, UKNG 184.5p -5.5p

By Malcolm Graham-Wood

Oil price

Oil is up again today after the Opec report, whilst still fairly reserved, showed that despite 1Q and 2Q will show call on Opec of 27.89m b/d in Q1 and 28.3m b/d in Q2. Proof that the market remains tight is in the Christmas pudding, December output was 23.67m b/d  still 660/- b/d light of quotas in the deal.

Gasoline prices have yet to go up, a gallon of Exxon’s finest will rush you an average of $3.306 which is up around a cent on the week and the month but sleepy Joe should be very afraid as $85 WTI will soon find its way to the pump and the SPR has already been raided and don’t forget it was only loaned out…

Advance Energy

Advance has provided the following update on the Buffalo-10 well. The Operator, Carnarvon Petroleum Timor, Lda., has advised that, since the last announcement on 14 January 2022, the 9 5/8” casing has been successfully cemented in place and drilling has reached total depth of around 3,415 metres Measured Depth (“MD”) in the 8 ½” hole section.

Observations from Logging While Drilling (“LWD”) tools have identified that the primary reservoir has been intersected, with indications of hydrocarbons as anticipated in the Elang. The top Elang reservoir was intersected at a depth of around 3,338 metres MD, which was approximately 80 metres low to prognosis and outside the pre-drill range of expectations.

The interpretation from the LWD tools and drilling information is that an approximate 12 metre gross oil column was encountered. Wireline logging results will be used to determine the reservoir properties (porosity, net to gross) and to confirm a net oil column.

The information to date indicates that the seismic processing techniques employed on this project have not resolved the underlying seismic velocities or imaging resolution issues that are present in this field.

The Buffalo-10 well is being drilled offshore Timor-Leste in the TL-SO-T 19-14 PSC in which Advance Energy holds a 50% interest.

The update on the drilling of B-10 well and the results are clearly not what was hoped for from this much anticipated well.  The drilling operations are ongoing so it’s too early to definitively know what has happened, but the update today indicates that the well clearly encountered a significantly deeper reservoir than was expected.  The principal challenge with the field was choosing the well location based on the field’s production history and the seismic data. 

The JV will likely run further testing activities, including logging to get a picture of exactly what has happened and will provide an update in due course, however the market reaction clearly indicates that this is a very disappointing result for Advance.

Despite the disappointment, Advance remains a high-quality team with a strong industry reputation and, within the Interim results issued yesterday, they acknowledged the inherent risks associated with all drilling activities, but more importantly it provided an update that the team is actively progressing a pipeline of compelling business development opportunities which, if they come to fruition, can reinvigorate the story.  And as demonstrated by the recent Savannah deal, the right teams are able to access highly value accretive deals with limited equity financing required.

Union Jack Oil/ Egdon Resources/Europa

Egdon, Union Jack and Europa provide a summary of the results of the analysis of the downhole hole pressure data acquired in the Wressle-1 well during December 2021.  The interpretation was carried out by ERCE, an independent energy consultancy, on behalf of the Wressle joint venture partners.

Egdon holds a 30% interest and is operator of the field, Union Jack hold 40% and Europa 30%.

Highlights

·   The results demonstrate the significant potential of the Wressle-1 well and the production rates that could be achieved once the surface facilities are optimised and a gas utilisation scheme is in place

·   Based on the current reservoir pressure and a flowing tubing head pressure of 400 pounds per square inch gauge (“psig”), ERCE estimates that a rate of 1,216 barrels of oil per day (“bopd”) would be achievable, whilst maintaining a flowing bottom hole pressure above the oil saturation pressure (“bubble point”)

·    At 300 psig flowing tubing head pressure, ERCE estimates the well could flow at a rate of 1,543 bopd whilst at the oil bubble point

·   ERCE estimates a reservoir permeability of 80 millidarcies, and the analysis also confirmed the effectiveness of the proppant squeeze in reducing the skin factor from 107 to 0.2.  (The skin factor is an estimate of the impairment to flow within the reservoir caused during drilling, completion or the original testing operations.)

Mark Abbott, Managing Director of Egdon, commented:

“The conclusions of this work clearly demonstrate the significant potential of the Wressle-1 well and the possible production rates that can be achieved from the Ashover Grit reservoir interval.  

We continue to work to realise the full commercial potential of the Wressle field. This will be achieved through optimising the production facilities, progressing options for gas monetisation and advancing the development plan for production from the Wingfield Flags and Penistone Flags reservoirs. In the meantime, the asset continues to generate material cash flow that has transformed the Company’s financial outlook.  

Executive Chairman of Union Jack, David Bramhill, commented: 

“The conclusions of the ERCE interpretation demonstrate the material potential of the Wressle-1 well and the flow rates that could be achieved from the Ashover Grit reservoir interval.

“Apart from the reserves within the Ashover Grit reservoir as currently accessed by Wressle-1, there remains a significant resource volume identified in the separate Wingfield Flags and Penistone Flags reservoirs which await development and the progression of the proposed gas monetisation scheme which offers an additional revenue stream.

“The Joint Venture partners look forward to unlocking the full potential of Wressle-1 and to making further announcements in respect of progress in due course”.

Simon Oddie, CEO of Europa, said:

“This result clearly demonstrates the significant potential of the Wressle well and the rates that can be achieved from the Ashover Grit reservoir alone. The Operator is now advancing plans to allow production of the well to meet its full potential as soon as possible and also with the development of further resources in the Wingfield Flags and Penistone Flags reservoirs, which underpins our excitement on Wressle”.

As can be seen from the similar comments from the company bosses, this work by ERCE is of significant interest to them all in different ways. Whatever they all decide to do though there is an immediate uplift in production and at record oil prices into the bargain. 

The potential increase in revenue terms is substantial and also makes for a material rise in the asset value of Wressle, even a few weeks ago the idea of 1,500 b/d + would have been fanciful, now it can transform the profit and loss accounts of each company. Whatever they decide to do, the appeal to a larger entity may lead to Wressle being the target à la Angus of a potential bidder for the asset is a possibility, although Wressle means different things to each of the owners. For example after its good news from West Newton earlier in the week the Union Jack portfolio is bulging with upside.

Either way this  ERCE valuation is a significant boost to the value of all three companies not yet in the price in the market but the accumulation of its stake in Wressle is a standout success for UJO. 

Longboat Energy

Longboat has announced the award of a licence under the Norwegian APA licensing round. The Ministry of Petroleum and Energy has offered Longboat Energy Norway AS a 25% interest in Production Licence, PL 1049C, covering a possible extension of the Cambozola prospect towards the north.

Cambozola will be drilled back-to-back following the PL 293B Kveikje well (Company 10%) which in turn is expected to spud at the end of Q1 22. Equinor Energy AS is the Cambozola operator with a 35% working interest; the other licensees are Spirit (20%) and Petoro AS (20%).

Helge Hammer, Chief Executive of Longboat Energy, commented:

“I am pleased that we have been awarded an extension to the Cambozola licence which is one of the most exciting prospects in our portfolio.

“We are in an active period of drilling with the Ginny Hermine well currently underway and with each well in our 2022 programme having the potential to create very significant shareholder value.” 

Longboat are now kicking on with not only the drilling programme but the addition of acreage in licensing rounds available to it. This process is part of the building of Longboat and is one that I am sure will make the company a great success. That doesn’t mean that I would also like to see the company making a bigger stride through an acquisition either corporately or of acreage, I would very much welcome such a move should it be possible. 

And finally…

Last night in the Prem Chelski dropped more points by drawing 1-1at the Seagulls. Tonight The Foxes host Spurs and the Red Devils go to the Bees.

In his announcement of the England squad for the upcoming Six Nations Championship Eddie Jones in picking super star Marcus Smith says that he needs Owen Farrell outside him ‘to help him run the game’, what a load of tosh…

The opinions expressed here are those of the author

Malcolm Graham-Wood

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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