Malcy’s Blog – Oil price, San Leon, Block Energy & finally

WTI $59.60 -17c, Brent $63.20 +4c, Diff -$3.60 +21c, NG $2.52 n/c, UKNG 48.0p n/c

By Malcolm Graham-Wood

Oil price

Nothing doing, I’d guess that the virus is slightly ahead on points but the vaccine is rolling out continuously despite some disputes about efficacy and clotting issues.

San Leon

An update on its investment in the Oza Field, Nigeria from SLE this morning. The company ‘notes the announcement made by Decklar Resources Limited yesterday in Canada’, the full text of which is set out below:

Decklar Resources Inc. Announces Operations Update on Oza-1 Well Re-entry

·   Drilling rig for re-entry and testing operations has been contracted, with mobilization anticipated to commence next week.

·   Camp and logistics equipment required for Oza-1 well re-entry is currently being staged on site.

·   Long lead equipment items required to test and complete the Oza-1 well re-entry have been ordered and service contractors have been sourced and secured.

Decklar Resources Inc. (DKL-TSX Venture) (the “Company” or “Decklar”) and its co-venturer Millenium Oil & Gas Company Limited (“Millenium”) are pleased to announce that activities for the Oza-1 well re-entry at the Oza Oil Field have made significant progress. The Oza-1 re-entry represents the start of an aggressive field development of the Oza Oil Field through the Company’s wholly-owned Nigeria-based subsidiary, Decklar Petroleum Limited, and Millenium, its Nigerian co-venturer on the Oza Field.

Progress on Preparation for Oza-1 Well Re-entry

Decklar has contracted a 1300 HP trailer-mounted drilling rig that is currently located in Port Harcourt, approximately 60 km from the Oza Oil Field in the Niger Delta. The drilling rig will be used for the re-entry and testing of the Oza-1 well, then immediately followed by the drilling of a horizontal development well from the Oza-1 drilling pad. Drilling of additional development wells is planned after completion and analysis of the re-entry and horizontal wells at the Oza-1 location. It is anticipated that the drilling rig will commence its mobilization to the Oza Field next week, with the move expected to take approximately seven days. Further, the camp to house the personnel engaged to provide support for operations and related logistics facilities is currently being moved and set up at the Oza Oil Field. Additionally, equipment and supplies with longer lead times that are needed to test and complete the Oza-1 well as part of the re-entry activities have been ordered, secured, and are expected to arrive in Nigeria over the next two to five weeks. Service contractors have been sourced and contracted for the near-term operational activities.

Decklar’s CEO, Duncan Blount commented, “We are pleased with the progress being made and look forward with anticipation to the commencement of Oza-1 re-entry operations, testing, completion, and initial production at the Oza Field. These initial operations at the Oza Oil Field represent a milestone culminating from considerable effort and preparation for the initial development activities at the Oza Oil Field with Millenium.”

All things are looking good for San Leon and I continue to maintain that the company’s strategy in Nigeria is on course and that another year of significant payments can be relied on. With stated policy of a 50% pay-out investors can expect a substantial income and of course a very decent capital increase to go with it, the company is on course to deliver the goods…

Block Energy

Earlier this week Block announced an operational review in which they noted that ‘Wells WR-38Z and WR-16aZ were returned to production on 28 January 2021 and 3 February 2021 respectively. During 1Q 2021, the Company produced total of 29.8 Mbbls of oil and 14.6 Mboe of gas, resulting in a combined total of 44.4 Mboe of oil and gas. The average production rate for February and March 2021, after WR-38Z had commenced production but excluding WR-16aZ (as the well is currently suspended), was 573 boepd. This rate of production generates sufficient revenue, at current oil and gas prices, to cover over 95% of operating and administration costs and therefore preserve almost all of the Company’s existing cash for new wells and facilities’.

It has not been easy to follow the operational smoke signals from Block and this week’s announcement doesn’t do much to alleviate long suffering shareholders concerns. With newsflow over many months often appearing at best contradictory, it continues to look like key parameters can be conflicting. I am unsure how the 573 boepd ties with the “approximately 940 boepd, resulting in estimated future revenue for the Company of approximately US$920,000 per month at current oil and gas prices” announced on 16 February and what that means for expected production forecasts and revenue – like all this Block related there is an opaqueness in the forward programme.

Perhaps of even greater concern was the news, buried deep in the announcement, that the gas price (previously announced in Q4 2019 as a fixed price contract) was revised in May 2020 for a floating price with a discount to an in-country reference gas price. It is not clear to me why the Company has sat on that commercial information for so long….

The other concern I have had recently has been the flurry of share dealings, indeed in the blog of March 18th I was somewhat surprised that the CEO had exercised 4.4m options at 2.5p. Given the lack of market communication between the update in mid-February and this weeks announcement it seems strange that the Board and Executives would be free to trade….maybe time out for referral to the third umpire…

And finally…

This big weekend for sport continues with Aintree today and tomorrow with the Grand National at 5.15, place your bets.

In the Boropa Cup last night the Gooners looked good after scoring late on but not as late on as Slavia Prague who equalised after 93 minutes. The Red Devils were away at Granada and won 0-2 ahead of next week’s 2nd legs.

In the Prem this weekend the Cottagers kick the programme off against Wolves tonight, tomorrow sees the Noisy Neighbours hosting Leeds, Villa are at Anfield and the Eagles host Chelski. On Sunday its Burnley hosting the Magpies, the Hammers entertain the Foxes, the Red Devils go to White Hart Lane and the Blades host the Gooners.

It is the start of the IPL today, the show goes on until the 30th of May with many English players involved.

And the Masters started at Augusta National and with only 12 players coming in under par Justin Rose tops the leader board by 4 shots and with another Englishman, Tommy Fleetwood having a hole in one at the 16th.

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

Malcolm Graham-Wood

Source Link https://www.malcysblog.com/2021/04/oil-price-san-leon-block-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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