Malcy’s Blog – Oil price, San Leon, Predator, Coro, Helium One, SDZ & finally

WTI $74.56 +$1.62, Brent $75.55 +$1.43, Diff -99c -19c, NG $3.67 -1c, UKNG 91.4p +5.73p

By Malcolm Graham-Wood

Oil price

Oil was actually only down 60 odd cents on the week, not bad after the sharp falls on Tuesday and Wednesday after the Opec+ meeting broke up without a deal. That prompted further selling of long positions by the Masters of the Universe who have been taking money off the table in the last few weeks but I don’t see much downside from here.

The Baker Hughes rig count didn’t point to anything,  overall units were up 4 to 479 and oil up just the 2 to 378. And as for the virus report the Delta variant is still causing havoc, the latest city to be hit is Tokyo which is really struggling and only a couple of weeks until the Olympic Games.

San Leon Energy

SLE has signed a Heads of Terms in respect of the proposed reorganisation to consolidate Midwestern Oil and Gas Company Limited’s holdings in the Company and Midwestern Leon Petroleum Limited into a single holding in the Company. Following the Potential Transaction, the Company will own 100% of the equity in MLPL.  San Leon currently owns 40% of the equity in MLPL and Midwestern owns the remaining 60% of the equity in MLPL.

The heads of terms, which are subject to due diligence, agreement of final contracts, Nigerian regulatory approvals and the approval of San Leon’s shareholders, sets out the structure of the Potential Transaction and includes, the proposed further debt and equity investments to be made by San Leon in Energy Link Infrastructure (Malta) Limited (“ELI”). The parties are now engaging with their respective advisers to prepare the necessary transaction documentation (including publishing an AIM admission document, given that the Potential Transaction will be classified as a reverse takeover under the AIM Rules for Companies (the “AIM Rules”)) and to carry out due diligence.

Predator Oil & Gas

Predator has announced the appointment of Mr. Lonny Baumgardner as Chief Operating Officer with immediate effect. Lonny is a petroleum engineer by training and has 30 years of experience within oil and gas operations, over 25 years of which has been internationally across all aspects of upstream operations in numerous  locations including several years based in Morocco, Egypt, Tanzania, Australia, Saudi Arabia (with Saudi Aramco), Canada, and the USA (with ExxonMobil).

Lonny has a proven track record in managing multifaceted operations across joint ventures, government agencies, geographic challenges and multicultural differences, to ensure business needs are achieved.

He has been highly successful operating within small to medium-sized exploration and production companies at Board level delivering value to shareholders by applying a dynamic and effective management style to daily and longer-term strategic requirements. Lonny will have a strong focus on delivering business goals for Predator capable of creating long-term value.

Most recently, since 2015, Lonny has been Country Manager and General Director for SDX Energy Inc, Morocco and London. He is highly experienced in the upstream and downstream gas sector in the Rharb Basin and is therefore in a position to apply his experience to further develop from the positive results achieved through the drilling of the MOU-1 well in the Guercif Basin.

Paul Griffiths, Chief Executive of Predator, commented:

“Today’s appointment is significant and reinforces the Company’s position and commitment to developing gas in Morocco. The first step was achieved by successfully finding gas in the MOU-1 well some 49 years after the last exploration well was drilled in this part of the Guercif Basin. MOU-1 established the pre-drill geological comparison with the Hoot and Guebbas gas-producing sequences of the Rharb Basin and most importantly de-risked the pathway required for dry gas from a thermogenic origin to charge the primary targets in a prospective area of over 100 km². MOU-1 therefore further enhanced the CPR prospective gas resources assigned to the proposed MOU-2 and MOU-4 drilling targets whilst adding some additional potential shallow targets that had previously not been considered. MOU-1 was left in a condition to facilitate rigless testing. In common with best practice in the Rharb Basin this will be considered as part of the proposed programme for follow-up drilling that will be building on the success of MOU-1 in order to reduce mobilisation cost of equipment and well services. The latter was only achievable for the drilling of MOU-1 because of the ability to “piggy-back” an existing multi-well drilling programme by SDX Energy Morocco. Success is not final : it is the courage to continue that counts.”

Lonny Baumgardner, Chief Operating Officer of Predator, commented:

I am excited to be joining Predator today. The success of MOU-1 in finding gas is, in my extensive experience of management of drilling operations and a downstream gas business in Morocco, the beginning of the journey to appraise and develop gas for early monetisation. I very much look forward to being part of a successful team and to contribute to growing the Company’s business to the next level.”

This is very good news for PRD and shows an important level of commitment to Morocco that will be vital as the company analyse the Guercif data and in that respect the comments by CEO Paul Griffiths are required reading for investors in the company.

Coro Energy

Coro has announced it has signed binding Heads of Terms to acquire rights over a portfolio of 150MW rooftop solar projects in Vietnam from Vinh Phuc Electrical Mechanical Installation Co Ltd, trading as Vinh Phuc Energy JSC (“VPE”), commencing with a 5MW pilot project.

 The deal provides low cost entry for Coro into the fast growing Vietnamese energy sector as an independent power producer and will  acquire an 85% equity interest in a newly formed joint venture to be named Coro Renewables Vietnam in exchange for initial funding by Coro of US$500,000 to immediately develop a 5MW pilot rooftop project through to ‘Ready to Build’ status.

VPE, a highly regarded local EPC contractor, is to transfer their existing 150MW project portfolio into the JV and provide management services in exchange for a 15% carried interest in the JV, for their side Coro is to fund the 5MW pilot project through construction once de-risked with the option to fund the broader portfolio of over 150MW solar projects.

 All rooftop projects benefit from attractive economics and are underpinned by long term “take or pay” Power Purchase Agreements (“PPAs”) with creditworthy industrial customers and US Dollar denominated pricing. The direct pricing avoids the grid and selling through third parties and pricing seems to be relatively attractive. 

‘As a first step Coro will fund US$500,000 (specifically for planning and permitting costs) to de-risk a 5MW pilot project which it expects to achieve ‘Ready to Build’ status during 2021. Coro will then have the right to fund the construction of the 5MW pilot project, estimated at US$3.5M, with a view to securing near term cash flows (estimated at around US$0.6m per annum unlevered, net to Coro).  Furthermore, Coro will have the option to fund the entire 150MW portfolio held by the JV, likely through project finance’.

This is the crux of it, scope and costs, speaking to Mark Hood earlier he explained that they would start off with the 5MW pilot project (roughly the size of an Amazon warehouse) to make it work and this is what he describes above. I think the key things are to secure the near term cash flows and then to fund through project finance as otherwise it will be too costly to build up a portfolio. The company has around 9MW under their belt right now and adding 20MW per month is not unrealistic which should make the build out comfortable.

Mark Hood, CEO, commented.

 “Vietnam remains one of the highest growth markets at the forefront of the regional transition to clean energy.  We are delighted to continue rapidly building our clean energy portfolio alongside the progress we are making on our utility scale projects in the Philippines.

 This transaction enables Coro to secure access to a significant portfolio in Vietnam which should see cash generative projects with short development cycles, significant news flow and high returns. I am delighted that we are able to achieve this with minimal upfront development capital.

 This transaction also demonstrates our commitment to building a development portfolio with projects at different stages of progression, creating a number of differently phased cash generative opportunities in the coming months and years.

Helium One Group

Helium One which is currently drilling at its 100% owned Rukwa Project In Tanzania, has announced a further helium gas show in drilling mud in the Red Sandstone Group and will now side-track from Tai-1 well following loss of the drill string at 561 metres.

Helium gas shows were identified in stratigraphy above the primary targets from 552 metres to 561 metres as measured by the on-line gas chromatograph and gas show supported by indications of gas visually identified as ‘bubbles in drilling mud returns at surface’, ie the old fashioned way of reading well results.

Helium shows continued to 561 metres, at which point drilling operations were suspended due to parting of drill pipe in the midst of drilling the gas show, Mitchell Drilling has been unable to recover the lost drill pipe from the hole to date with subsequent delay to drilling operation resulting in the management decision to side-track drilling from above the lost pipe at 483 metres. 

 David Minchin, Chief Executive Officer, commented: 

“The identification of helium gas shows in the Red Sandstone Group between 552 and 561 metres is another unexpected, but positive result as this zone was previously considered to be of low prospectivity.

“This gas show, along with our earlier reported gas show announced on 22nd June, demonstrates a working helium system and supports helium prospectivity for additional gas shows throughout the stratigraphy.

“Visual identification of bubbles in mud returns also offers circumstantial evidence of free helium gas in the sub-surface. However, it is important to note that this interval needs to be logged with wireline before a pay zone can be determined.

“The delay caused by the loss of drill string in the midst of the drilling is unfortunate, however contingency plans have been implemented to side-track from above the lost pipe and continue drilling to test both the Red Sandstone gas show and priority target horizons beneath. This option allows us to utilise the existing 483 meters of already completed drilling rather relocating to a new location.

“With the above indicators already identified we look forward to a successful completion of drilling on this target location.”

SDX Energy

SDX has provide an unaudited update on its operating results and cash and liquidity position for the six months ended 30 June 2021. Average entitlement production for the period of c.5,930 boe/d, 3% higher than 2021 mid-point market guidance of 5,770 boe/d.  

Capex for the six months to 30 June 2021  is compared to an updated guidance figure of US$26.5-28.0 million (previous guidance US$25.0-26.5 million).  Capex guidance for Morocco for the 12 months ended 31 December 2021 has been increased by US$1.5 million as the wells planned for the second phase of the 2021 campaign in the second half of the year are deeper, requiring greater drilling time, than those included in the original guidance. Group 2021 capex guidance is now US$26.5 – 28.0 million.

H1 2021 expenditure by asset was as follows:

South Disouq: US$3.7 million of capex for the compressor project (US$1.5 million), the IY-2 development well (US$0.6 million), the completion of the SD-12X tie in (US$0.4 million), planning for the HA-1X exploration well (US$0.2 million), the workovers of SD-4X and SD-1X (US$0.2 million) and other CPF projects.

West Gharib: US$1.2 million on well workovers and development drilling preparations; and

Morocco: US$10.9 million on three development wells (US$8.9 million, including US$0.5 million of decommissioning provisions) and a well workover campaign (US$2.0 million).

Cash and liquidity remains strong with cash as at 30 June 2021 of c.$9.1 million and the $10.0 million EBRD credit facility remaining undrawn and available.

 Together with cash generated from operations, the Company is fully funded for all of its planned activities in 2021 and 2022.

Mark Reid, CEO of SDX, commented:

 “It has been a busy period for the Company, with multiple drilling campaigns running in tandem and successful results to show for our efforts already. We are very pleased that our three appraisal/ development wells drilled in Morocco are commercial successes, with two of the wells already connected and producing, contributing to average production of 5,930 boe/d for the period, above our 2021 guidance. The outlook for the remainder of the year is exciting as we look forward to results of the IY-2 step-out development well at South Disouq as well as spudding and drilling the Hanut well, which if successful could provide a transformational resource increase for SDX.”

And finally…

So, unless you live in Italy football is not coming home anytime soon. Having started well England faded and after being 1-1 at the end of extra time and Italy won 3-2 on penalties. No blame on the youngsters who took the pens, two of whom came onto the pitch cold a minute before the end of the game.

Djokovic duly won Wimbledon making his 20th grand slam equal with Rafa and Roger but he could still win in the US making a calendar grand slam and also the Olympics making a  golden slam.

The British & Irish Lions tour to South Africa staggers on from one Covid storm to another. If you were watching the England v Canada game on Saturday there were joyous scenes as Marcus Smith was told as he came off the pitch that he had been selected for the Lions after Finn Russell tore his Achilles.

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

Malcolm Graham-Wood

Source Link https://www.malcysblog.com/2021/07/oil-price-san-leon-predator-coro-helium-one-sdz-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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