Malcy’s Blog – Oil price, Eco, Predator, Hurricane, IGas, Far, Zephyr & finally

WTI $72.15 +3c, Brent $74.39 +40c, Diff -$2.24 +37c, NG $3.25 +1c, UKNG 67.65p -0.76p

By Malcolm Graham-Wood

Oil price

Oil is torn between the inevitable good news of sharply increasing demand with them holding the supply joystick, and with higher inflation indicating a need to pour some cold water on economies. On the inflation front the Fed acknowledged that the problem exists for the first time but rate rises or taper time might not be until end 2022.

The EIA inventory stats show the other, more bullish side of things. Crude drew a substantial 7.4m barrels taking stocks to around 5% below the 5 year average, gasoline added 2m b’s and distillates drew 1m b’s.  With refinery capacity of 92.6% being slightly lower than last week but still high, refiners are clearly still seeing big demand for gasoline and keeping a comfortable cushion of supplies.

Eco (Atlantic) Oil & Gas

Eco Atlantic has provided an operational update on the Group’s activities on their Orinduik petroleum block offshore Guyana that has continued to advance in its maturity to the selection of further drilling prospects. Eco’s partners in the Orinduik Block  are confident in the technical advancement and scheduled progression towards drilling target selection in Q3 of 2021. The seismic reprocessing will be completed this summer, target selection is committed to follow by the JV and Eco is ready and prepared to drill a well in 2022, subject to approval by the JV. ‘The JV did not solicit an extension of time as a result of the ongoing Covid-19 pandemic, and Eco continues to seek to accelerate progress towards the drilling of a third well on the Orinduik Block’.

Tullow, supported by the technical teams of Eco Atlantic and TOQAP, has significantly advanced the exploration of the Orinduik Block over the past 18 months. In-depth analysis of the Joe and Jethro wells, which both showed significant accumulations of biodegraded heavy oil in the lower Tertiary, have been further analysed geochemically. Mapping of thermal maturation, and further basin modelling, has led to an improved understanding of this Tertiary section’s presence in the northern quadrant of the block and onto the neighbouring three Hammerhead discoveries – also anticipated to be in the same resource domain.

The discovery of 27 API light oil in the Carapa well, which was drilled updip and inboard of the Orinduik Block, and within the Cretaceous section has been reviewed and focused on.  Processed and reprocessed data has recently been received by the JV and is now being reviewed for defining the next prospects to be drilled on the Orinduik Block. The Operator, Tullow, has previously released a schematic of the prospects being focussed on, on trend with the Liza and Carapa discoveries. The concurrent PSDM 3D processing, ongoing interpretation, and the multiple analogues created by the on-going discoveries throughout the basin, has progressed the team’s ability for refined interpretation and AVO analysis on the new PSDM.

In addition, the JV is continuing detailed mapping of the depositional channel systems through the basin. This ongoing work is supported and mapped with data from each new well regionally drilled, as well as from prior logs held. The slope channel systems, terraces and resultant ponding create reservoirs and traps that have been further identified by the high resolution reprocessing. The JV has completed significant work on the depo-systems to map hydrocarbon travel updip onto the Orinduik terraces from the same source rock feeding the reservoirs within Stabroek, which is downdip from Orinduik.

Colin Kinley, Co-Founder and Chief Operating Officer of Eco Atlantic further commented:

 The JV geoscience team will continue to focus on the regionally proven light oil Cretaceous Turbidite plays on trend with the Liza and Carapa discoveries on which we have spent a great deal of time conducting technical analysis to define the prospectivity, element by element, within this sector. We are seeing very material independent and stacked prospects and will define a ranking of these targets in the coming fall, which we are prepared and budgeted for, and (assuming JV approval) which will enable us to drill on the play in 2022.”

With the exception of Guyana, exploration activity has been slow since before the pandemic, and with capital available for drilling shifting towards renewables, the issue has been further compounded.  As the world economies begin to recover, we now expect to see demand for new exploration increasing, to bridge the deficit between renewable capacity and growing energy demand.  The Guyana / Suriname Basin is set to mature from its current 10 billion plus discovered barrels, and current 120,000 BBbls/Day, to potentially 10 FPSOs and over a million barrels of production per day, expected mid-way through this decade. This, supported by estimated breakeven prices of US$35, US$25 and US$32 per barrel recently reported by Hess in respect of discoveries on the nearby Stabroek block in the same region, proves extremely positive for the Orinduik partners and company stakeholders. This has motivated the drive to additional drilling.”

One has to feel sorry for Eco in particular as they probably could have, if not drilled, committed on targets by now. The delays that Tullow has faced at least has meant that the JV has done some serious science and when it does drill in 2022 now there should be no doubt as to what is down there…

Predator Oil & Gas

Predator announced yesterday that the Star Valley rig 101 ‘is today under contract to Predator Gas Ventures Ltd and is being mobilised to Guercif to drill the MOU-1 well. For those who want to see some heavy duty trucks on Moroccan roads the video can be seen on the PRD website.  http://www.predatoroilandgas.com/

Hurricane Energy

Yesterday Hurricane provided an update on Lancaster field operations. ‘Further to the announcements on 10 and 11 June 2021, the Company is pleased to announce that it has successfully restarted the electric submersible pump in the Lancaster 205/21a-6 (“P6”) well. Once stabilised, the Company intends to target oil production from the P6 well at a rate of c.11,000 bopd, being a similar level to that achieved immediately prior to the trip on 8 June 2021. Thereafter, oil production from the P6 well is expected to continue declining’.

They also announced an update on operations to plug and abandon the 205/26b-14 well on the P1368 (South) licence in the Greater Warwick Area, which Hurricane operates on behalf of the GWA joint venture. The Company previously announced, including in the Proposed Financial Restructuring announcement as initially published by the Company on 30 April 2021, that the GWA joint venture has a regulatory obligation to plug and abandon the Lincoln-14 well by 31 October 2021, and that a rig had been contracted by Hurricane, as licence operator, for this purpose. The Company can confirm that the Stena Don semi-submersible rig is now on hire. The Lincoln-14 plug and abandonment is scheduled to take c.20-25 days to complete with a gross budgeted campaign cost of c.$13 million (net $6.5 million to Hurricane).

Today the company announced the approval of the Lancaster Field Development Plan Addendum by the UK’s Oil and Gas Authority. The FDPA approval, together with associated production, flare, and vent consents, enables production with the flowing bottom hole pressure up to 300 psi below the bubble point pressure of the fluid (1,605 psia at 1,240 metres TVDSS), subject to the Company ensuring that no incremental liberated gas is produced to surface.

The initial consent is for a three-month period from 16 June 2021 to 15 September 2021. Production, flare, and vent consents will be issued on a three-monthly basis. The Company will regularly provide the OGA with data to demonstrate conformance with the consent conditions. In line with the FDPA, the Company will ensure that no incremental liberated gas is produced to surface and commits to choking back or shutting in any well which may produce incremental gas liberated due to below bubble point production.

The approval of the Lancaster FDPA satisfies a key condition of the Company’s proposed financial restructuring, as originally announced on 30 April 2021.

Antony Maris, CEO of Hurricane, commented:

 I would like to express my thanks to the OGA technical and management teams for the open-minded approach they brought to these discussions. This approval, whilst not having any immediate impact on the reservoir performance of the Lancaster field, will assist with longer term reservoir management, enabling us to optimise the field’s performance. Approval now, while we still have some months before we reach bubble point, will allow both us and the OGA to establish base line performance and to test the three-month approval process.”

Not a day goes by without an announcement of some sort from Hurricane, it is difficult to envisage how many of these items are needed at such short notice but only they can tell this.

What is needed after all is that the equity shareholders to try and avoid the inevitable dilution that will happen as a result of the board’s unnecessary early repayment of the bonds not due yet. This will eradicate any money that is owed to equity shareholders and at today’s $75 per barrel it is by no means certain that such dramatic action should be taken. Shareholders are left in no doubt whatsoever that they should get out and vote with Crystal Amber at the upcoming meeting.

IGas Energy

Yesterday I was very lucky to spend some time with IGas and interviewed CEO Steve Bowler on Core Finance. The link is below and Steve looks at the existing businesses since Covid and more importantly also took me through the geothermal and hydrogen opportunities they are looking at.

Core Finance CEO Interview: Steve Bowler, CEO of IGas Energy

Far Limited

Far has announced that a rig has been contracted for the drilling of the Bambo-1 exploration well offshore The Gambia, located to drill the extension of the Sangomar Field concurrently with two additional prospects The well is targeting 1.118bn barrels of prospective resources and we can expect it to spud in Q4 2021.

Managing Director Cath Norman said,

“We are pleased to be recommencing exploration drilling at FAR with this high impact well in The Gambia and the same drill team that drilled efficiently and safely for the Samo-1 well in 2018. The rig is planned to commence drilling in Q4 this year and the well will be the first well to be drilled in the Mauritania, Senegal, The Gambia, Guinea-Bissau and Guinea-Conakry (MSGBC) Basin since the collapse of the market in the wake of the oil price crash and the COVID-19 pandemic and we look forward to getting back to basics at FAR and delivering value to our shareholders through successful exploration drilling.
A discovery of oil offshore The Gambia would be extremely significant for FAR shareholders and the people of
The Gambia and help move Gambia out of ‘energy poverty’ and to transition from burning heavy fuel oil for
power generation”.

Zephyr Energy

Zephyr has provided an update on recent progress on its non-operated assets in the Williston Basin, North Dakota, United States of America and on its flagship project in the Paradox Basin, Utah, U.S.

In March 2021, Zephyr completed the acquisition of non-operated working interests in five wells located on three separate pads operated by Whiting Petroleum Corporation: The producing Iverson 11-14HU well; The S-Bar 11-7HU and 11-7TFHU wells (which were drilled but not completed (“DUC” wells) at the time of acquisition); and, The Feehan 11-9HU and 11-9TFHU wells (which were also DUC wells at the time of acquisition).

 In the period since the acquisition closed, Zephyr has received two scheduled monthly revenue payments from the Iverson well.   In addition, the S-Bar and Feehan wells were completed by Whiting – completion operations progressed as envisioned, at expected lateral lengths, and ahead of initial schedule. 

 Zephyr is now pleased to announce that the S-Bar wells have been placed into production, also ahead of forecast schedule, and the Feehan wells are expected to be placed into production within the next month.  Zephyr will update Shareholders on production rates in the coming weeks, once the wells have cleaned up and reached peak initial rate.

 Preparations continue ahead of the drilling of the State 16-2LN CC lateral appraisal well which is scheduled to spud in July and which will target the Company’s first production from the Paradox project.  Final permitting is expected shortly and vendor negotiations (including the rig contract) are expected to be finalised in the coming weeks.

 The additional evaluation work related to the overlying reservoirs continues to progress, and it is the Company’s intention to update the market by the end of the month once final analysis has been received from our third party partners and consultants.

 Colin Harrington, Chief Executive of Zephyr, said: “We have a great deal of activity going on across our project portfolio and I’m delighted with how everything is progressing.  We are particularly gratified that Whiting, the operator of five of our Williston wells, worked to accelerate the completion and production dates on the four DUC wells.  When we initially agreed to terms on the acquisition of these interests, we ran our economics at a price of US$45 per barrel of oil. With current pricing at over $70 per barrel, we now envisage significant cash flow generation from this part of our portfolio over the coming months.

“On our flagship Paradox project, we have a fascinating period ahead of us.  Preparations for our forthcoming drilling programme continue to move ahead at full speed and we are also excited to finish the evaluation work around the exploration potential of the overlying reservoirs, with more detail on this to come shortly.

“There is significant activity expected across our asset portfolio in the coming weeks, and I look forward to presenting our story to investors tomorrow evening.”

And finally…

The US Open starts today at Torrey Pines in California.

And Royal Ascot continues, after a lot of overnight rain the going may have loosened a bit but is showing good to firm.

And in the Euro 2020 tournament Wales beat Turkey 2-0 and should comfortably be in the next round. Tonight its Denmark v Belgium, Ukraine v North Macedonia and the Netherlands v Austria.

(The opinions expressed here are those of the author, a columnist for Share Talk.)

Malcolm Graham-Wood

Source Link https://www.malcysblog.com/2021/06/oil-price-eco-predator-hurricane-igas-far-zephyr-and-finally/

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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