Malcy’s Blog – Oil price, Predator Oil & Gas, SDX Energy, Prospex Energy & finally

WTI $119.40 +$3.72, Brent $123.21 +$5.10, Diff -$3.81 +$1.38, NG $4.83 -18.3c, UKNG 659.5p +49.5p

By Malcolm Graham-Wood

Oil price

The same story as yesterday except that today oil has held the gain. Yesterday Brent reached as high as $139.12 before losing 16 bucks at the close. Today, as I write Brent is up $8.41 at $131.62 on reasons familiar to you from yesterday.

And my old friend the US retail gasoline price chart has gone off the boards. This week a gallon of Chevron’s finest will cost you an average of $4.102 which is up a huge 49.4c, month on month is up 65.8c and year on year is up £1.332.

And after the disgrace in recent oil trading by Shell, the company has announced that it is withdrawing completely from Russia.

Predator Oil & Gas

 Corporate update – Focus on Security of Energy Supply

 Highlights          

·    Collaborating in relation to European Energy Supply, Storage and Security

 ·    Agreements to evaluate co-operation on gas marketing

 ·    Agreements to evaluate potential Moroccan farm-out

 ·    C02 EOR expansion in Trinidad initiated under existing Memorandum of Understanding

 ·    Agreement to evaluate opportunity to acquire an interest in a green hydrogen company

 ·    Financial Advisor appointed

 Ireland

Mag Mell Energy Ireland Ltd. is a gold sponsor of Ireland’s National Energy Summit at Croke Park on 26 April 2022, https://energysummit.ie/sponsors/. CEO Paul Griffiths will be taking part in the Panel Discussion “Collaborating to ensure Energy Supply, Storage and Security”.

Agreements

As previously announced the Company negotiated a Memorandum of Understanding (“MOU”) with a significant downstream marketing entity to work together to determine the potential market for FSRU gas and to assess the potential to market gas from seasonal storage operations. The objective is to optimise the technical specifications of the FSRU and gas storage facilities for gas send-out to meet periods of high demand and high gas prices.

Preliminary discussions with an Asian LNG supplier, amongst others, have taken place to evaluate the feasibility and possibility of securing LNG supply prior to a Financial Investment Decision for the offshore Mag Mell Floating Storage and Regassification Project (“FSRUP”). Potential future gas storage capacity at the proposed Ram Head offshore subsurface facility is also being considered by the Company in the wider context of security of European energy supply. All decisions are subject to the required Irish regulatory approvals being given in a timely manner at this time of European energy crisis.

Morocco

Escalating geopolitical tensions have impacted the security of European gas supply and contributed to surging wholesale gas prices. The Company’s strategy for appraising and developing the MOU-1 gas discovery remains on track. The release of the Competent Persons Report announced last month defining material contingent gas resources has been a catalyst for attracting significant interest in the Company’s plans to further explore, appraise and develop gas in an area covering 7,269 km² and which is connected to the European gas grid through the Maghreb gas pipeline. Morocco is a country very close to Europe and strategically located to become a potential future gas supplier for the continent by means of a significant expansion of exploration and development. The Company’s large Guercif Petroleum Agreement is optimally located to potentially contribute to developing Moroccan gas.

Agreements

The Company is pleased to announced that it has signed Confidentiality Agreements with a company based in the United Arab Emirates and an Asian exploration and production company  to evaluate the exploration, appraisal and development opportunities in the area covered by the Guercif Petroleum Agreement.

Separately the Company has signed a Confidentiality Agreement with a company in the downstream sector in Morocco to work together to optimise the potential market for gas from the area covered by the Guercif Petroleum Agreement.

The focus of these activities is to seek to build the partnership necessary to finance the development of the prospective area for gas established by MOU-1 and to accelerate monetisation. The attractive commercial metrics and regional political tensions demand that the role of gas as the fuel of choice for a pragmatic Energy Transition and to preserve security of European Energy Supply becomes a strategic objective.

Operational activities

The Company continues to focus on the logistical planning for follow-up drilling to MOU-1 with the objective of developing a multi-well drilling and testing programme (already including MOU-4 and MOU-5) to provide economies of scale to spread fixed drilling and well services costs across several wells.

The recent increased perception of the value of gas assets close to the European gas network has created additional financing opportunities for drilling and development that potentially reduce in the medium term or may even eliminate in the short term the requirement for significant shareholder dilution.

As a result the Company is continuing to execute its work programme, which is fully funded, to increase the scale and diversity of its exploration portfolio of prospective leads as follows:

1.    MOU-NE, MOU-2 and MOU-3

§ 250 kilometres of 2D seismic reprocessing commenced to refine well objectives

§ Environmental Impact Assessments completed

2.    MOU-NW

§ Evaluation of the Tizroutine oil seep and potential for oil in the northwest area of the Guercif Petroleum Agreement

FSRU LNG import

The Company previously submitted to regulatory authorities an FSRU LNG import proposal for consideration.

With the significant progress made in the planning and design of the FSRU LNG import facility for Ireland and the worsening situation for security of gas supply in Europe, the Company believes that it is an opportune time to re-engage with the regulatory authorities in Morocco to advance an FSRU LNG solution for Morocco.

 Trinidad

The Company has successfully decommissioned its CO2 EOR surface facilities at Inniss-Trinity and recovered its downhole equipment for safe off-site storage. The Company continues to evaluate its options under the Inniss-Trinity Well Participation Agreement with FRAM Exploration Trinidad Ltd. to recover significant CO2 EOR revenues that the Company believes it is entitled to under the WPA and to assess the potential for an amicable settlement resulting from FRAM Exploration Trinidad Ltd.’s unilateral decision to prematurely terminate the Inniss-Trinity CO2 EOR project.

Agreements

The Company is making good progress with Lease Operators Ltd (“LOL”) for a new CO2 EOR joint development project for the PS-1 Block field. LOL is making excellent progress towards the award of a Certificate of Environmental Clearance and initial potential CO2 injection and production wells have been reviewed. LOL currently have 1850 bopd of production onshore Trinidad.

Discussions are continuing to create a jointly-owned in-country Special Purpose Vehicle to develop CO2 EOR projects based on prioritising the technical suitability of a number of onshore producing fields.

Rising oil prices combined with the Company’s “Proof of Concept” for CO2 EOR and CO2 sequestration in Trinidad has created a much more attractive commercial case for expanding CO2 EOR for “greener” oil production at a time of rising energy costs and demand.

Green Hydrogen

The Company has taken a strategic decision to add green hydrogen (from the electrolysis of water) to its business development plans.

The Company’s management has extensive experience in the natural gas sector in the areas of regulatory and environmental compliance, use of infrastructure, Compressed Natural Gas development options, gas storage, well-site gas-fired power generation, CO2 sequestration and downstream gas marketing and government relations. The Company’s projects can create access to infrastructure and to potentially significant volumes of future surplus gas, particularly at times of lower prices during reduced seasonal demand, with which to be in a position to produce cheap gas-fired, using its own surplus gas feedstock, well-site electricity for green hydrogen as a replacement for carbon-intensive fuel oil during the Energy Transition.

Surging natural gas prices have re-defined the potential commercial markets for green hydrogen, which can also contribute to security and diversity of the Energy Supply.

The Company is seeking to become an early mover into a hybrid “green hydrogen – natural gas” business which could become a significant component of the Energy Transition and generate potential carbon credits by displacing carbon-intensive fuels. The Company has the necessary skills to develop “Proof of Concept”, as demonstrated by the implementation of CO2 EOR and CO2 sequestration in Trinidad.

Unlike gas, green hydrogen is a stable source of sustainable fuel beyond the Energy Transition that has a fixed delivery profile, unlike gas where the delivery profile is impacted by reservoir pressure depletion. This creates the ability to enter into longer term supply contracts at a fixed delivery rate for the duration of the contract, therefore contributing to security and diversity of energy supply.

Currently the Company is fully funded to support desk-top studies to advance green hydrogen opportunities.

Agreements

The Company is pleased to announced that it has signed a Confidentiality Agreement with an entity focussed on green hydrogen to evaluate a possible acquisition of a controlling interest in that entity to develop green hydrogen (electrolysis of water) and green methanol (using anthropogenic CO2 emissions) projects.

The Company has also decided to suspend the potential AIM Admission process as the impact of the release of the Competent Persons Report on 13 January this year combined with surging gas prices due to heightened regional instability in Europe has in the view of the Company re-defined potential shareholder value that was not being reflected in the AIM Admission process.

Other options to develop the Company’s extensive portfolio of diverse Energy Transition projects have assumed primary focus and potentially may give a better return for shareholders without increasing the corporate running costs, which an AIM admission would have led to, and without increasing shareholder dilution based on a potential under-valuation of the Company’s assets at a time of surging commodity prices.

The independent legal due diligence work carried out by the advisors during the early stages of the AIM Admission process is extremely valuable in the context of adding to the materials required to support due diligence to execute transactions with third parties at the project level.

Directorate changes

With immediate effect Dr. Steve Staley is stepping down from the Board to pursue other interests. The Board wishes to thank him for the significant contribution that he has made to the Company since admission to the Official List (standard listing segment) and to trading on the London Stock Exchange’s main market for listed securities Standard List segment in May 2018.

The Board is to appoint at least one additional non-executive director with the relevant experience in corporate governance, financial transactions, ESG development and, potentially, with some exposure to the green energy sector to support the Company through its implementation of its business development strategies through the Energy Transition.

Paul Griffiths, CEO of Predator Oil & Gas Holdings Plc commented:

“The Company was formed and its business strategy was initiated in 2015 to incorporate the intuitive premise that an over-reliance on imported gas to markets where gas was critical to sustaining security of energy supply would eventually create niche opportunities for business development. Brexit and recent events in Eastern Europe have shown the value of maintaining this unwavering focus on developing a portfolio that defines this strategy.

2022 so far has been an exceptionally busy time for the Company and an opportunity to re-direct resources to demonstrate the significant strategic value of the portfolio of projects that we are developing to our potential project partners.

The Company is not afraid to take tough decisions to preserve and potentially enhance shareholder value and reduce unnecessary running costs that do not contribute to creating  shareholder value.”

 As always from Predator a full and frank assessment of the current situation and as CEO Paul Griffiths says the company is always looking at areas to create investment opportunities. In this respect it is good to see plans for the follow-up drilling in Morocco an area we know has an appetite for gas and PRD with new partners could make significant progress.

It is also good to see a maintained interest in the CO2 with plans for a new CO2 EOR joint development project for the PS-1 Block field and that ‘proof of concept’ for greener energy is still on the radar screen. With Ireland still hopefully in the mix, as Paul Griffiths has always said would be needed, and is now being proved in spades and the strategic decision to add green hydrogen (from the electrolysis of water) to its business development plans.

SDX Energy

SDX has announced the spudding of the SD-5X exploration well, targeting the Warda prospect in the South Disouq development lease. SD-5X spudded on 4 March 2022 and is expected to reach TD in approximately three weeks.  The primary target, which has already been encountered in the Ibn Yunus and Sobhi field reservoirs, is the basal Kafr El Sheikh sand at around 6,800ft TVDSS. The well is targeting an estimated gross unrisked P50 EUR of 11bcf and has a 40% chance of success.  In a success case, SD-5X will be tied-in to the CPF via the existing SD-4X flow-line and should be on production by the end of June 2022.

SD-5X is the first of three wells to be drilled in the South Disouq area during 2022. The second well in the campaign will be the SD-12_East well on the Sobhi Field (planned spud of mid-April). SD-12_East will target an estimated gross unrisked P50 EUR of 7bcf, and will be followed by the MA-1X well (Mohsen) targeting an estimated gross unrisked P50 EUR of 21bcf. The Mohsen well is planned to spud mid-to-late May.

Mark Reid, CEO of SDX, commented:

“I am pleased to announce the spudding of the first well in the South Disouq 2022 drilling campaign. This campaign will further explore and exploit the potential that we see in the South Disouq area and, if successful, could extend the production life of the asset by a further two to three years. I look forward to updating the market further as the campaign progresses.”

As discussed here only recently, SDX continues with its drilling programme which, if successful  will provide momentum and revenue with which to continue with its current strategy. I am still keen to hear what the plan is for the longer term and what part the major shareholder is going to play in that, cheque book out I hope…

Prospex Energy

Prospex has provided an update on the production strategy from its El Romeral power project near Carmona in Southern Spain in which the Company holds a 49.9% working interest through Tarba Energía S.L. (“Tarba”).

Considering the recent energy shortfalls being experienced across Europe, the owners of Tarba (Prospex and Warrego Energy Limited) have temporarily agreed to operate the power plant 24 hours per day for six days per week from 4 March 2022 until 15 March 2022 at which point the reservoir performance and the operating regime will be reviewed.

Recently, revenues generated by the plant have been at an all-time high as a result of the current electricity prices.  Switching to almost continuous operations will further boost revenue.

This has been made possible as a direct result of the successful plant automation work completed at the end of 2021.  The automation of the power-plant has enabled 24/7 production and therefore an ability to produce at times of peak demand, regardless of day or time.

The price of electricity in Spain remains at unprecedently high levels and is currently more than six-times what it was in March 2021 when the El Romeral power-plant was acquired.

Currently Tarba has cash in hand of more than €450,000.  In January and February 2022 monthly income from power generation was €285,125 and €262,974 respectively.

A reservoir modelling project to history-match and forecast gas production profiles from the El Romeral concession is nearing completion.  Tarba’s management team intend to move to continuous daily gas production and generate electricity from the plant 24 hours per day as soon as results from the study indicate that it is prudent to do so.  Any change in the production regime will be carried out subject to the safety of personnel,  and as permitted by the operational condition and maintenance requirements of the facilities.

Continuous operations will also optimise reservoir management because a constant flow of gas from a gas well is preferable to shutting in production several times a week.  Generator efficiency will also benefit from 24/7 operations.

Further additional production capacity exists if new wells can be drilled on the concessions to increase gas production.  Tarba applied for permits to drill several infill wells in September 2021 and continues to pursue the consent of the regulatory authorities which is expected later this year.

Mark Routh, Prospex’s CEO, commented:

“Before switching to continuous plant operation which has been made feasible by the plant automation project which completed in December 2021, it is essential that safe and reliable operating procedures and systems are tested and proven.  It was also crucial that a reservoir modelling history matching and production forecasting study was undertaken to ensure that moving to continuous operations would not jeopardise gas production.  When the results of this study are known I believe that a move to 24/7 operations is not only beneficial but prudent.”

“It is extremely satisfying that Prospex, through its ownership of Tarba, is now able to increase its electricity output at a time when security of energy supply is so important to us all.  I accept that it is a small contribution but our generation capacity could be increased five-fold by receiving permissions to drill our planned infill wells, the first two of which are to be drilled into proven discoveries.”

“The extra income generated from the new production regime and the current forward curve electricity prices puts Prospex in a very healthy position for further growth opportunities.

“I expect to be sharing further updates in the coming months.”

This is very good news for Prospex, assuming  that is, the tests show that switching to continuous operation a double whammy of being better operationally and of course financially significantly better. Let’s see how the next few days go…

And finally…

From yesterday’s Prem round up, situation normal as the Naughty Neighbours won easily against the Red Devils, Liverpool beat the Hammers and Chelsea put 5 on Burnley. The Gooners, with three games in hand are the dark horses now going into 4th with a 2-3 win at the Hornets and its London all over MU with Hammers and Spurs right in there.

Tonight Liverpool host Inter in the Champions League.

The first test for England’s cricketers in the West Indies has started badly, as I write having won the toss and batted the inevitable collapse is underway

but with another dodgy selection by the latest England management team it was always going to be.

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


Linking Shareholders and Executives :Share Talk

If anyone reads this article found it useful, helpful? Then please subscribe www.share-talk.com or follow SHARE TALK on our Twitter page for future updates. Terms of Website Use All information is provided on an as-is basis. Where we allow Bloggers to publish articles on our platform please note these are not our opinions or views and we have no affiliation with the companies mentioned
Share Talk
Share via
Copy link
Malcare WordPress Security