Malcy’s Blog – Oil price, Arrow Exploration, SDX Energy & finally

WTI $112.40 -$1.80, Brent $111.93 -$2.31, Diff + 47c -51c, USNG $8.30 +34c

By Malcolm Graham-Wood

UKNG (June) 184.95p, TTF (June)  Euro 97.1

Oil price

All a bit mixed still, down yesterday after a good start, today is also up at the off. Notice that WTI has gone to a premium to Brent, partly due to imminent expiry and also the API inventory stats but also as the EIA are starting to worry about US domestic production.

I’m starting to add the TTF price above as a comp to the UKNG price after the wise men at Kistos thought it would be a correct balance, good idea and I will endeavour to get the prices right!

Arrow Exploration

Arrow has announced the results of the Rio Cravo Este-2 (“RCE-2”) well testing on the Tapir Block in the Llanos Basin of Colombia.

The RCE-2 well was spud on April 2, 2022.  RCE-2 targeted a large, three-way fault bounded structure with multiple high-quality reservoir objectives on the Tapir Block in the Llanos Basin of Colombia. The well was drilled to a total measured depth of 9,600 feet and encountered six hydrocarbon bearing intervals totalling 90 net feet of oil pay.

Specific production test rates for the isolated zones (shallowest to deepest) include:

·    Carbonera C7 and C7 Stringer:  tested 2,000 bopd (net 1,000 bopd) peak rate of 28 API crude.

The zone was tested for 19 hours at an average rate of 1,199 bopd (net 600 bopd).

·    Gacheta C, C1 and C2: initial testing indicates productive capacity of 300 bopd (net 150 bopd) rate of 27 API crude.  The zone was tested for 14 hours at an average rate of 115 bopd (net 58 bopd).  Reserves have not been assigned to this zone previously.

·    Gacheta D: tested 680 bopd (net 340 bopd) peak rate of 14 API crude.

The zone was tested for 33 hours at an average rate of 362 bopd (net 181 bopd).

Test results are not necessarily indicative of long-term performance or ultimate recovery.

The RCE-2 well costs came in line with the budget.

Continued strong production rates from existing tied-in wells combined with the encouraging results from new drills in Columbia support the Company’s objective of achieving a production rate of 3,000 boe/d within 18 months of its AIM listing (completed in October 2021).

Marshall Abbott, CEO of Arrow commented:

“We’re encouraged by the material results of RCE-2, the second well on the Tapir block. RCE-2 identified new zones for further exploitation with flowing results returning better than expected.”

“We’re currently completing the C7 zone, targeting to be on stream early next week.  This effectively doubles Arrow’s production.  The Company’s procedures will be to bring RCE-2 on slowly and increase production to best manage the oil reservoir.”

“We are now moving the rig to our next well location, the RCS-1 well, which is expected to spud before the end of May. Arrow’s current production exceeds 1,000 boe/d, producing positive cashflow for the Company during a high commodity price environment. This is an exciting time for Arrow, and we look forward to providing further updates on our progress.”

This is great news from Arrow whom I am following with interest especially as readers know how much I rate Colombian opportunities. This well with its 2/- b/d of 28 API crude from the C7 zones beat expectations by a country mile, even more if you bear in mind that nothing was expected from the Gacheta zones.

It paves the way for imminent production which is very good news and of course with the RCS-1 well expected to spud by the end of the month there is more to look forward to. 

It is too soon to have an official target price which I will do as soon as I have met the company in the flesh but I have met over Zoom and I really like what I see. Accordingly I would expect any TP to be substantially above the current price even though that has already started to move, definitely one to watch..

SDX Energy

SDX has announced the spudding of the MSD-24 infill development well on the Meseda field. This well is the fourth in a fully funded 13-well development drilling campaign on the Meseda and Rabul oil fields in the West Gharib concession in the Egyptian Eastern Desert. The campaign is aimed at growing production to c.3,500 – 4,000bbl/d by early 2023.

The MSD-24 infill development well on the Meseda Field (SDX: 50% working interest) spud on 15 May 2022 and is targeting the Asl Formation reservoir at approximately 3,300ft TVDSS. It is estimated that the well will take around six weeks to drill, complete and tie-in to the existing infrastructure. MSD-24, with an expected cost to drill and tie in of US$0.9-US$1.0 million (gross), is anticipated to come on-line and produce at around 300bbl/d (gross), which would immediately contribute to Group cashflow and result in a payback period of five to six months at current oil prices. The Company expects to update the market on its result in mid-June.

 The first two wells in the campaign, MSD-21 and MSD-25, have been successfully tied-in and are contributing to production. Operations at the MSD-20 well have been slower than expected due to the performance of the rig that was being used on this well.  This rig has now been permanently replaced and the Company is confident of improved and accelerated performance in the campaign going forward. It is hoped that results from MSD-20 will be available in the next three to four weeks.

Mark Reid, CEO of SDX, commented:

 “I am pleased that we have spud MSD-24, the fourth well in the campaign and that we will now be drilling simultaneously with two good quality rigs. West Gharib is a very high margin asset in our portfolio with a Netback of US$37/bbl at US$71/bbl Brent in FY2021. Now that we have a second rig in operation, the 13-well campaign can be accelerated to allow us to take advantage of the current high oil price. I look forward to updating the market further as the campaign progresses.”

Nothing much to add here but to say that bringing the extra rig on is definitely good news for revenues in the short to medium term. What it does for the sale process is more difficult to judge…

And finally…

Last night in the Prem Liverpool won at the Saints taking the title down to the last day on Sunday.

Tonight it is the Boropa Cup Final between Eintracht Frankfurt and Glasgow Rangers, apparently there are around 150,000 fans descending on Seville which should make it quite a carnival if the Gers win…

And what a surprise, Anderson and Broad are back for England in the first two tests against New Zealand

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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