Malcy’s Blog – Oil price, Chariot, IOG, Eco (Atlantic) Oil & Gas, IGas Energy & finally

WTI $78.90 -56c, $81.75 -74c, Diff -$2.85 +32c, NG $3.92 +11c, UKNG 208.0p -37.2p

By Malcolm Graham-Wood

Oil price

Oil continues to look in a good place, the more I hear about demand holding up despite Covid the happier I am…

Chariot

Chariot has announced the result of the Anchois-2 appraisal and exploration well on the Anchois gas project within the Lixus licence, offshore Morocco. Chariot has a 75% interest and operatorship of Lixus in partnership with the Office National des Hydrocarbures et des Mines which holds a 25% interest.

·      Anchois-2 well has been safely and efficiently drilled to a total measured depth of 2,512m by the Stena Don drilling rig in 381m of water.

·      Comprehensive evaluation of the well has been undertaken through wireline logging, including petrophysical evaluation, subsurface formation testing including reservoir pressures and gas sampling, sidewall cores and well bore seismic profiles.

·      Preliminary interpretation of the data confirms the presence of significant gas accumulations in the appraisal and exploration objectives of the Anchois-2 well with a calculated net gas pay totalling more than 100m, compared to 55m in the original Anchois-1 discovery well.

Appraisal Target

Gas Sand B has a calculated total net gas pay of more than 50m in two stacked reservoirs of similar thickness. The upper reservoir is a continuation of a reservoir drilled in the original discovery well, Anchois-1, with the lower reservoir being newly identified.

Exploration Targets

Gas Sands C, M & O were successfully encountered with multiple gas-bearing intervals across a gross interval of 250m measured distance with no water-bearing reservoirs identified, materially exceeding pre-drill expectations.

·      Previously discovered Gas Sand A was not targeted in the Anchois-2 well, due to the intention of evaluating it in the subsequent Anchois-1 re-entry operations, however, the Anchois-2 well encountered gas bearing sands at this level providing important additional subsurface data.

·      High quality reservoirs were encountered in all gas sands.

·      Further analysis will be undertaken to fully understand the positive implications on:

o  Gas resources within the expanded Anchois field and the scale of the potential gas development.

o  De-risking of numerous additional material exploration prospects within the Lixus licence area with similar seismic attributes to the Anchois discovery now considered to be low risk.

·    The well will now be suspended for potential future re-entry and completion as a production well in the development of the field.

·    The Stena Don rig will then move to the Anchois-1 gas discovery well to perform re-entry operations with the objectives of assessing the integrity of the previously drilled well, and if successful, providing a future potential production well for the development of the field.

Adonis Pouroulis, Acting CEO of Chariot, commented:

“I am delighted to announce that Chariot, as well as conducting a successful appraisal well operation, has made a significant gas discovery at the Anchois-2 well which materially exceeds our expectations. We continue to conduct further analysis on the data collected from the well, but as it stands, we believe the result is transformational for the Company.

This is a tremendous outcome and I would like to thank ONHYM, our partners on the licence, and everyone involved for their invaluable support, which enabled the well to be drilled safely, successfully and on time during a time of significant operational and logistical challenges posed by the current pandemic.

With the recently announced key terms of gas offtake with a prominent international energy group, interest from two highly regarded institutional lenders to provide debt finance, an ongoing collaboration with a leading constructor of offshore gas projects and now this successful gas well result, the Anchois project is getting closer to helping provide a clean transitional fuel to support Morocco’s industrial and economic growth.

We look forward to providing a further market update once the appraisal campaign has completed.”

This is an awesome announcement from Chariot and the 45% rise in the shares as I write is just the start, even back of envelope calculations make me realise why I have been so positive about Anchois let alone the rest of the company’s operations. 

Success at the B sands is good with the bonus of one new reservoir but it is the outstandingly good news at the C, M and O exploration sands where ‘multiple gas-bearing intervals’ which ‘materially exceeded’ pre-drill expectations. This drilling de-risks so many prospects with these sands equivalent to a multi TCF block even before the upcoming well is drilled. 

The next well is planned to re-enter Anchois-1, see if it is good condition and was originally to check on the A sands which werent expected to be tested in this recent well. However the well clipped them which has provided valuable technical information. 

There is much to expect from Chariot and it has laid the groundwork for this well and significant and swift development in the future in recent months. The announcement indicates that there is an international bank lined up to lead the debt financing and with gas sales agreements already in place and the partnering process well under way, the way forward is extremely bright. 

But that is not quite all of the Chariot story, we know that there is much going on in the pan-African mining and hydrogen parts of the business as well as at Rissana and of course other new ventures promised within Total Eren.  This looks like being just the start for Chariot and the share price should increase very substantially from here.

IOG

IOG has provided a further Southwark drilling update. Drilling operations have continued at Southwark since the first development well was spudded on 30 December 2021. However, the Noble Hans Deul rig has experienced an increasing challenge with seabed conditions that, if not remediated, would compromise rig stability.

Technical personnel have explored potential options to manage these challenges. However, on Friday 7 January, the rig owner concluded that, as a prudent precautionary measure, temporary re-location of the rig will be required to facilitate seabed remediation and enable safe continuation of Southwark drilling operations. This course of action is now in motion.

As ever, the top priority of IOG and its drilling contractors remains the safety of all personnel, whilst ensuring the safe and timely continuation of the Southwark drilling campaign. Temporary relocation of the rig minimises the safety and integrity risks to personnel and assets. The rig is expected to remain offshore with non-essential crew and equipment demobilised while the issue is rectified. Further updates will be provided once there is more certainty on the length of remediation work.”

Andrew Hockey, CEO of IOG, commented: 

“This is a frustrating but absolutely necessary step to ensure we can drill and complete the Southwark production wells in a fully safe manner, which is always our foremost priority. Our team is working around the clock with our drilling contractors Noble Corporation and Petrofac to minimise the interruption and resume the Southwark drilling programme at the earliest opportunity.”

Not a lot to add to this, technical glitches have caused a further delay to Southwark but CEO Andrew Hockey is right to remain supportive of the technical teams who will indeed be working flat to the proverbial boards to get the rig back on site. I see no valuation or revenue implications and am assuming a relatively short break. 

Eco (Atlantic) Oil & Gas

Eco has announced today that it has signed a Memorandum of Understanding  to acquire 100% of Azinam Group Limited, including Azinam’s entire offshore asset portfolio, in return for a 16.65% equity stake in the enlarged Group on completion of the Acquisition.

Highlights

 ·    Acquisition of a material offshore petroleum exploration asset base in Namibia and South Africa

·    Consideration in the form of new common shares to Azinam Holdings Limited who will own 16.65% of the enlarged Group

·    The Vendor will also be issued warrants in the Company, exercisable only upon a producible commercial discovery

·    The transaction strengthens the Groups strategic partnership with Africa Energy and Africa Oil

·    Clear drilling programme with an exploration well planned to be drilled on Block 2B – South Africa in H2 2022

·    The deal is expected to complete by 31 January 2022 subject, inter alia, to the signing of a Share Purchase Agreement and satisfactory completion of due diligence by Eco and any requisite approvals

·    Discussions are already underway with Eco’s key existing stakeholders in relation to underwriting the funds required to participate directly in the 2022 Block 2B South Africa drilling programme.

 Information on the Acquisition

Azinam is a wholly owned subsidiary of Azinam Holdings Limited, which is majority owned by Seacrest Capital Group. Azinam has successfully built a material offshore petroleum assets base in Namibia and South Africa. Pursuant to the MOU and subject, inter alia, to the signing of a binding share purchase agreement and completion of the Acquisition, Eco Atlantic will issue to the Vendor such number of new common shares in Eco as provides the Vendor with 16.65% of Eco’s share capital as enlarged by such issue, providing for a cashless acquisition to become the sole owner of Azinam’s entire African portfolio. 

Offshore South Africa, Orange Basin, Eco Atlantic will acquire 50% Working Interest and Operatorship in Block 2B, where Africa Energy Corp. and Panoro Energy ASA maintain Working Interests. Eco will also acquire a material Working Interest of 20% in the deepwater 3B/4B Block and the shallow water and Nearshore 3B/4B Blocks where the Company will strengthen its ongoing strategic partnership with Africa Oil Corp. as the Operator and 20% Working Interest partner.

Offshore Namibia, Eco will acquire additional Working Interests in its current oil blocks where Azinam is a partner, being Petroleum Exploration Licenses (“PELs”) #97, #98 and #99. Eco’s resultant net Working Interest in these PELs will be 85% on completion. Working Interest on these Blocks are the same as its existing interest in PEL #100, and Eco is the Operator on all four PELs.

Completion of the Acquisition (“Completion”) is subject, inter alia, to the signing of a Share Purchase Agreement and satisfactory completion of due diligence by Eco (which is nearing completion) by 31 January 2022 (or such later date as may be agreed) and any requisite approvals from the Government of South Africa, the Government of Namibia and the TSX Venture Exchange.

Gil Holzman Co-Founder and CEO of Eco Atlantic commented:

We are delighted to update the market on this exciting transaction and welcome the stronger alignment with Africa Oil Corp. and the broader Lundin Group through direct partnership in Blocks 3B/4B and 2B

“The acquisition strengthens our long-term and strategic position in Namibia, giving us 85% and Operatorship in four highly prospective blocks, and gives us added versatility as we look to partner with a major player to help accelerate further exploration activities in the country’s burgeoning energy industry. 

“As we have always stated in our corporate strategy, our goal is to build a portfolio that will offer shareholders near-term exposure to high impact drilling catalysts. The Azinam acquisition requires no cash funding to close, and positive discussions have been ongoing with Eco’s key existing stakeholders in relation to underwriting the funds required to participate directly in 2022 South Africa drilling activity. 

“We anticipate that our drilling in South Africa this year will be closely followed by an exploration well in Guyana. These activities come at a time when global discovered resources volumes and access to energy in southern Africa is at an all-time low and hydrocarbons are desperately required as the world navigates the path of successfully achieving the energy transition.  We firmly believe that companies such as ours that explore for oil in and around emerging economies will play a vital role in reducing energy poverty.

“We are looking forward to commencing with our drilling campaigns planned in the prospective Block 2B in South Africa and in Guyana this year and beyond, and we will continue to further build our corporation to offer additional exploration catalysts as and when we believe these opportunities will be value accretive to our stakeholders.”

Eco has moved to increase its position in Namibia and South Africa with this corporate move that should be warmly applauded. Ever a CEO to be recommending consolidation in the sector this, in one stroke, moves the dial strongly in Eco’s favour. 

I see plenty of upside with Namibia being very exciting and rumours of some decent finds imminent and where they are with Africa Energy and Africa Oil as well as Panoro. With potential additional partners funding shouldn’t be a problem and this acquisition structure looks eminently sensible. 

Whilst Guyana has been a short term problem as Tullow continue to prevaricate but might have to get off the pot by later this year if not the rest of the syndicate will drill there. I look forward to drilling there this year. 

Overall this is most interesting and not before it was due, exciting times are back for Eco shareholders. 

IGas Energy

IGas announces that Cuth McDowell has notified the Board, after 10 years of service as a Non-executive Director and currently Interim Non-executive Chairman, of his intention to step down from the Board later this year. 

IGas is pleased to announce the appointment of Chris Hopkinson as Independent Non-executive Director with immediate effect. It is intended that Chris will take over the role of Non-executive Chairman from Cuth in due course. Chris will be a member of the audit, nominations and remuneration committees.

A review of the Board composition remains ongoing, including addressing its diversity.

Chris is currently Non-executive Chairman of Enwell Energy an AIM-quoted oil and gas exploration and production group and founder of Astra Resources Management advising utility scale PPP Solar projects.

Chris began his career with Shell International, followed by technical and management roles with Yukos and Lukoil Overseas, before becoming Chief Executive Officer of Imperial Energy Group up until its acquisition by ONGC in 2009. He was then Vice-President Western Siberia for TNK-BP, Senior Vice-President North Africa for BG Group, Chief Executive Officer of International Petroleum Limited, and Chief Operating Officer for JSC National Company KazMunayGas.

Chris holds a BSc Honours degree in Applied Physics from St Andrews University.

Commenting Cuth McDowell, Interim Non-executive Chairman said:

“I am delighted to welcome Chris to the Board.  Chris has a tremendous amount of highly relevant experience and I am in no doubt that he will make a strong contribution to IGas as we move forward.” 

Chris Hopkinson said:

“I am excited to be joining IGas and helping to support the team in driving the business forward to create future shareholder value through its existing cash-generative assets and through its bold energy transition strategy.”

I don’t often comment on board changes but this seems interesting that IGas are working hard to bring on the transitional work in the portfolio, this appointment should help that.

And finally…

England drew the fourth test which is a headline in itself and head to Hobart of Friday with almost a spring in their steps, the ones that aren’t injured that is.

In the FA Cup 3rd round the big losers where the Gooners went out at Forest whilst most other fancied sides went through. Winners living to fight another day included Hartlepool, Boreham Wood and Kidderminster whilst Cambridge went to St James Park and dumped out the Magpies.

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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