Malcy’s Blog – Oil price, Challenger, UOG, Longboat, Bruce Dingwall & finally

WTI $68.44 -65c, Brent $70.59 -72c, Diff -$2.15 -7c, NG $3.86 -7c, UKNG 113.99p +0.7p

By Malcolm Graham-Wood

Oil price

Last week oil was almost unchanged, the 60/70c fall on Friday ensured +16c for WTI but -11c for Brent for all the reasons we knew plus the rig count which rose by 9 unit overall and 10 in oil which is higher than it has been for some months.

This morning the price has dipped again, this time as the situation in China worsens with economic data being weak in both production and retail sales put down to bad weather, the Covid spread and the closure of part of the Ningpo port continuing.

Challenger Energy Group

Challenger has this morning confirmed that the legal proceedings in the Bahamas have been concluded, they also add comment on the P-1 well, potential farm-out and the licence status. With regard to the key technical findings of the well I reproduce their conclusions verbatim below.

On completion of the drilling of the Perseverance-1 well, the Company had indicated that a technical “debrief” would be provided for shareholders’ information once the post-well analysis had been sufficiently advanced. The Company expects to be able to post this report to its website during September 2021, once appropriate prior notices to, and engagement with, the Government of The Bahamas has occurred. However, at this stage the following key highlights / learnings from the drilling of the Perseverance-1 well are noted:

·    The Perseverance-1 well was drilled in the period 20 December 2020 to 5 February 2021, in the territorial waters of The Bahamas, at a location approximately 20 miles from the Bahamas-Cuba maritime border, in water approximately 518 metres deep. Perseverance-1 represented the first exploration drilling in The Bahamas since the mid-1980s, and the first test of any prospect located in deeper waters off the shallower water carbonate banks.

·    Perseverance-1 reached total depth of 3,905 metres, having intersected five Albian, Upper Aptian, and Mid-Aptian horizons of interest. Post-drill analysis of the well has confirmed the geological risk elements for trap, seal and reservoir were present in the Lower Cretaceous carbonate play. Perseverance encountered high quality reservoirs in the targeted Lower Cretaceous carbonate closures, with thick sequences of evaporites providing effective seals. Depth and thicknesses of reservoir sections encountered were generally as prognosed pre-drill, and reservoir porosity was likewise generally in line with pre-drill expectations (in the range of 10% to 20%).

·    The presence of hydrocarbons was encountered at various horizons, indicated by elevated gas chromatography readings detected continually during drilling, generally increasing with depth and through the deeper Aptian reservoir column in particular. Oil was identified from high oil saturation values from logs in a number of reservoir sections, thus verifying the existence of a working Lower Cretaceous petroleum system and reservoir quality sequences in the Aptian.

·    Drilling execution using modern technology, revised casing plan, hybrid bits and bottom hole assembly design optimized the achieved rate of penetration. Mud plans and formulation were successful in the primary aim of averting the consistent lost circulation issues experienced in previous wells in The Bahamas.

·    The Perseverance-1 well was drilled safely and without incident, with effective Covid-19 management protocols operating throughout the drilling campaign. Following completion of drilling operations, the well was plugged and secured in accordance with international and BSEE (Bureau of Safety and Environmental Enforcement) standards.

·    Although hydrocarbons were present, these were not in commercial quantities, with the source quality and migration interpreted as being the primary reason for this non-commercial well outcome.

·    Petrophysical analysis of the well logs have confirmed high quality reservoirs down to the base of the well with no significant deterioration in porosity with depth, indicating the potential for high deliverability reservoirs in the underlying Jurassic formations.

·    In aggregate, the analysis of the data from Perseverance-1 drilling is broadly indicative of increased potential for oil in the underlying Jurassic interval (which was not penetrated by Perseverance-1). In particular, the relatively cool well temperatures place the postulated Jurassic source rock (producing in nearby Cuba and the US Gulf of Mexico) in the oil window, thus oil generative.

·    Ultimately, the technical findings from Perseverance-1 thus support a forward program to include further biostratigraphic analysis, fluid inclusion analysis, and selective re-processing of 3D seismic to further educate sequence stratigraphy and seismo-facies of the deeper Jurassic horizons. This work will underpin an assessment of the merits of a further exploration well in the future, both to continue to assess Aptian horizon potential, whilst at the same time targeting the deeper Jurassic intervals.

The company also comment that the farm-out process is under way with a data room open and due diligence happening and that discussions are under way with the Government in order to renew the licences which have also to see some relinquishments.

Eytan Uliel, Chief Executive Officer, commented:

“As I have commented previously, it is often the case in our industry that several exploration wells are required before the potential of a frontier basin is unlocked. We had hoped for ‘instant gratification’ with Perseverance-1, which was not the case. However, notwithstanding the non-commercial results of that well, based on what we have learned we continue to believe that the licences in The Bahamas are highly prospective. As such, we advised the Government of The Bahamas of our desire to renew the licences into a third three-year exploration period, and are working through that process, which will likely take some time. Meanwhile, we are continuing with our evaluation of the exploration potential of the licences, working to reduce technical uncertainties, and continuing in our efforts to secure a farm-in partner for the future. We will keep shareholders appraised of material developments.

United Oil & Gas

United Oil & Gas has announced the spudding of the ASX-1X exploration well in the Abu Sennan Licence, Egypt on 14 August. United holds a 22% working interest in the Licence, which is operated by Kuwait Energy Egypt.

Drilling of the ASX-1X exploration well commenced on 14 August 2021, the well is located c. 7km to the north of the producing Al Jahraa field and will test a number of stacked reservoir targets. In a success-case scenario, the well is expected to take up to 54 days to drill, test and complete.

United’s Chief Executive Officer, Brian Larkin commented:

 “There is considerable exploration potential in the Abu Sennan licence, and it is great to be actively drilling our second exploration well this year to further unlock that potential. We are delighted that the ASX-1X exploration well has been spudded and look forward to updating shareholders once the well has reached the target reservoirs.”

 Longboat Energy

A farm-in completion update today, with the approval from the Norwegian energy ministry means that they expect to complete the farm-in on 1st September 2021.

Helge Hammer, Chief Executive of Longboat, commented:

We are pleased to announce this milestone for Longboat which sees us join a select group of companies holding oil and gas assets on the Norwegian continental shelf and will enable us to complete the Farm-In transactions as planned.

“We are looking forward to spudding the first well in our multi-well programme later this month and will be updating shareholders on its progress in due course”.

Bruce Dingwall CBE

Such a sad day, as the Service of Thanksgiving takes place at Kettins Parish Church, Perthshire, today, Monday, August 16, at 11 am. The service is being broadcast so if you would like the password and link please get in touch with me as the family have kindly agree to pass it on. Also it will be available to watch afterwards.

And finally…

The cricket is on a knife edge, going into day 5 India are 181-6, 154 ahead with Pant the key batsman still at the crease, all four potential results are possible.

The Premiership started at the weekend and on Friday night with newly promoted Bees seeing off the Gooners 2-0. Elsewhere the big result would have been a Kane-less Spurs beating the Noisy Neighbours 1-0. Wins for the Red Devils, the Hammers, Seagulls, Chelski, Toffees, Foxes, Hornets and of course Liverpool.

The opinions expressed here are those of the author

Malcolm Graham-Wood

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Website Link www.malcysblog.com

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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