Malcy’s Blog – Oil price, PetroTal Corporation, Touchstone Exploration, Far & finally

WTI $66.26 -24c, Brent $69.88 +21c, Diff -$3.62 +45c, NG $4.13 +7.6c, UKNG 221.43p -12.37p

By Malcolm Graham-Wood

Oil price

Last week WTI was down $2.49 and Brent fell $2.84 which was in line with the omicron panic and also that Opec+ left the decision re extra production hanging. Today crude is up about $1.50 as there are some reports that omicron may be less hard-hitting than other variants although it certainly is more contagious.

Also, it looks like the nuclear talks are not going so well, the French have walked out and it seems that Iran itself acknowledging that it is produced enriched uranium which is a deal-breaker. The rig count was unchanged with oil units at 467 itself unlikely to jack up US domestic production.

PetroTal Corporation

Following recent announcements, PetroTal is pleased to announce an end to the social protests near PetroTal’s oil loading facility.  PetroTal’s recently-announced social initiatives contributed to the peaceful resolution. 

Barges from Brazil are on-site and commenced oil loading operations on December 3, 2021.  This will allow PetroTal to ramp up production during the next few days starting with the new 9H horizontal well that was put on production on December 5, 2021, and recommence sales to the Iquitos refinery and through the Brazilian export routes. 

Currently, PetroTal has approximately 300,000 barrels of oil on barges, of which 135,000 barrels are near Pump Station No.1 (“PS1”) at Saramuro, awaiting Petroperu’s ONP pipeline operations to restart, and involves reopening PS5.  The remaining barrels on barges are heading to the Iquitos refinery or to Brazil.

As of December 3, 2021, the protests at PS1 were resolved, demonstrating the positive momentum of the initiatives PetroTal is promoting.  Regarding Pump Station No.5 (“PS5”), a meeting between the government and the indigenous federations has been proposed for December 10, 2021, with the intent to set a working table aimed at achieving a long-term solution to the ongoing protests due to the lack of government attention.  In exchange for setting up this working table, the protesters have offered a 30-day truce starting that same day. 

If the 30-day truce is not achieved, the Company may need to constrain production by the third week of December 2021.  PetroTal is also commissioning additional barges that would allow the Company to produce unconstrained through December 2021.  Including flush production from the recently drilled and completed 9H well, the Company expects to initially produce over 18,000 bopd, although this is likely to be constrained to manage storage and offtake capacity.  Beyond December 2021, PetroTal will require normal access to Petroperu’s ONP pipeline route to produce unconstrained in 2022. 

PetroTal is also pleased to announce well 9H was completed on December 1, 2021, to fill the wellbore with oil and inflate the packers.  A recent December 6, 2021, initial flow rate achieved approximately 9,000 bopd of flush production.  When available, PetroTal will provide the 10 and 30-day average production rates for the 9H well.  

PetroTal is pleased to announce that its forward liquidity profile remains strong with a material cash buffer in December 2021, which is forecast to continue through Q1 2022 with a continuous capital program.  This simulated forecast assumes conservative field closure conditions for the remainder of 2021, constrained oil field operations, reduced Brent prices, and moderate oil sales from currently loaded barges. 

Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented

“We are very pleased to have reached a peaceful settlement with the protesting community near the PetroTal dock.  Based on the Company’s initiatives to promote change and equalization of social profits, a sense of confidence and trust was created between our groups.  We look forward to completing the legal and administrative efforts through the remainder of 2021 for the Social Fund to be live and active in early 2022.  We are also seeing the government engaged in achieving a long-term resolution to the ongoing ONP protests at pump stations 1 and 5 which will hopefully lead to a full reopening of the ONP route in the near term.  PetroTal is doing everything we can to support those discussions.  On operations, I need to thank the entire PetroTal team for achieving another exceptional result in the 9H horizontal oil well, which was opened at more than 9,000 bopd, a new record for our Bretana oil field.”

This latest settlement is proof that PetroTal has an efficient and working relationship with local groups and as proved here can reach peaceful settlements when things boil over. Whilst discussions continue with other protesters it is also good to see that operationally the company has completed the 9H well and overnight has reported production of over 9/- b/d which by any yardstick is a fantastic result. The shares have rallied today but are still well short of my 60p target price and operationally delivering the goods which should start to narrow that gap substantially.  

Touchstone Exploration

Touchstone has provided an update on the results of the first production test at our Royston-1 exploration well and provided data from the second test, both of which confirmed separate light oil discoveries.

As previously released, the first and deepest Royston-1 completion and exploration test was designed to evaluate an interval at the bottom of the well in the intermediate sheet of the Herrera Formation. The completion spanned a 92-foot gross interval (30 feet of net pay) below 10,434 feet that was identified on wireline logs as being hydrocarbon bearing. Following completion and a brief clean-up period to recover load fluid, the well was shut in and built to a pressure of 3,150 psi at surface (estimated 7,100 psi reservoir pressure). The interval was subsequently flowed up 3.5-inch tubing on a variety of choke sizes between 16/64 inches and 40/64 inches at rates up to 550 bbls/d. The recovered oil was light, sweet crude with an average 33-degree API (corrected to 60-degree Fahrenheit) with sampling throughout flow testing indicating an average 94% oil cut with some solution gas present but not measured. The configuration of the downhole assembly was not optimal for testing light oil given it was designed to test a potential liquids rich gas interval.

While we worked to suspend the initial production test to move up hole for the second test, the well continued to flow significant volumes of crude oil at high pressure from the intermediate sheet, and heavy weight mud was required to control the well before proceeding.

We completed our second production test in the lowermost portion of the overthrust sheet at depths between 9,878 and 10,148 feet with a gross 270 feet of section perforated (202 feet of net pay). Test two has established a light oil reservoir in the overthrust sheet of the Herrera Formation with flow rates of up to 430 bbls/d of total fluid observed. Testing indicated light, sweet crude oil with an average 30-degree API (corrected to 60-degree Fahrenheit), while build-up testing indicated a bottomhole reservoir pressure of 7,098 psi. Solution gas was also present on the test but was not measured.

The downhole assembly for the test was designed for a liquids rich natural gas test and again included the use of 3.5-inch tubing which was not ideal for the actual conditions encountered following completion. Unlike results from the first production test, during the second test the lower portion of the overthrust sheet produced with high water cuts averaging 90% throughout the flow test. We designed the completion with multiple intervals where production can be isolated and, in the future if a smaller tubing string is employed, we can segregate the interval to maximize crude oil production.

Paul Baay, President and Chief Executive Officer, commented:

“We are excited to announce this further, large oil discovery at Royston-1. The results are the reason why we find the geology in Trinidad’s hydrocarbon charged basin so exciting. This oil discovery will allow us greater flexibility for the pace of development of the project, as we have the opportunity to design production facilities while we are selling crude oil testing volumes.

I would encourage stakeholders to view our latest corporate presentation to fully understand the areal extent of the Royston structure and its potential. The presentation also provides a glimpse at the underlying Cretaceous exploration opportunity. We now have an exciting development project along with the upside from the remaining exploration in the subthrust sheet and the Cretaceous. Once we have completed the final production test at Royston-1, we intend to work to formulate a long term development plan, which is anticipated to include a number of wells and associated facilities.”

I’m waiting  for a call from the company or IR so will add to my comments when that happens. In the meantime this looks like a very decent discovery which will kick off the Royston development which should be substantial indeed.

Far

FAR Ltd (ASX: FAR) advises that the Bambo-1 well has drilled 3216m MDBRT (measured depth below the rotary table) of a total planned depth of 3450m MDBRT. Oil indications have been detected in rock cuttings and hydrocarbons have been interpreted across several intervals in the well from LWD data. Further wireline logging needs to be completed to confirm the finding.

Drilling operations were temporarily halted at the current depth after significant fluid losses were experienced. These fluid losses were stabilised in accordance with standard offshore operating procedures, and FAR is now planning to plug and side-track the well to continue drilling to the planned total depth. Prior to side-tracking and provided hole conditions remain stable, FAR is undertaking a wireline logging program in the current well bore.

FAR estimates that the cost to complete the well will increase from a total of US$51.4M to US$61.27M, an increase of US$9.87M or US$4.935M net to FAR. FAR forecasts a cash balance of US$37M after the completion of the well, inclusive of the increase in Bambo-1 well costs. The addition of the side-track program has extended the period of operations which is now expected to be completed by the end of December 2021.

The well has been designated a “tight hole” by FAR and JV partner Petronas and as such, no information related to depth or formation is likely to be provided during the drilling beyond what is required to meet ASX continuous disclosure obligations. Market participants should exercise care before transacting in FAR shares until such time as FAR, as Operator of the Joint Venture, makes formal ASX disclosures regarding well results.

FAR’s Managing Director, Cath Norman, said

“FAR is pleased with the experienced drilling team and contractors who have acted to quickly manage and adjust the Bambo-1 drilling program to suit the geological setting and best meet the objectives of the drilling program. FAR is well placed to achieve these objectives through the side-tracked well and in particular drilling through the as yet undrilled Soloo Deep prospect. We are encouraged by the presence of oil in potential reservoirs and look
forward to completing the well in the coming weeks.”

It’s a bit early to tell anything conclusive and the company are wise to be cautioning about trading during a designated tight hole but my spies who have been very positive about this from the start are already convinced there is something down there worth going after so watch this space…

And finally…

The first ever F1 GP in Saudi Arabia was always going to be interesting but it surely proved to be one of the greatest at least in my lifetime. After all was done Lewis won and would have been easier as the stewards handed out another 10 seconds and 2 penalty points to Max who finished 2nd, they go to the UAE next weekend all square at the top of the table but he leads due to more GP wins…

In the Prem the Liverpool and Noisy Neighbours juggernaut rolled on both winning but Chelsea came up against an in form Hammers team and lost 3-2 at The London Stadium. Elsewhere the Magpies notched a win against Burnley,  the Saints and the Seagulls drew in the Riviera derby.

Yesterday saw Leeds drawing with the Bees, the Red Devils beat the Eagles, Spurs beat the Canaries and Villa beat the Foxes. Tonight it’s the Toffees against the Gooners.

The opinions expressed here are those of the author

Malcolm Graham-Wood

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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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