WTI (Sept) $98.62 +$2.20, Brent (Oct) $103.97 +$2.14, Diff -$5.35 -6c
USNG ( Sept) $8.22 +9c, UKNG (Sept) 370.0p -6.11p, TTF (Sept) €198.5 -€0.7
The oil price was up last week but still had a down month amid global worries about recession and reduced demand. Oil bears think that this will offset the problems caused by Russia in Ukraine but I’m not sure that’s how Opec leaders will see it when they meet on Wednesday as they are still producing pretty much at full capacity, some recession…
But the US are cranking up the rig count albeit at a snail’s pace, Baker Hughes reported on Friday that overall rigs grew by 9 to 767 and oil rose by 6 to 605, this won’t change worldwide oil dynamics as a little goes a long way when facing 5 years of serious massive capex shortfall in the worldwide industry.
Scirocco has provided the following operations update on the Ruvuma PSA in Tanzania.
· APT has received the first batch of field seismic data last week and expects to have processed and interpreted sufficient data to confirm the final drilling location of the Chikumbi-1 (“CH-1”) well before the end of August. Field acquisition continues to complete the 338km2 3D seismic programme.
· APT continues to advance the planning and prepare the final programme for the CH-1 well and reports that the Operator continues to plan and prepare for the drilling of the well in due course.
Further to the Company’s announcement on 12 July 2022, the Company is in active discussions with TPDC on its position regarding TPDC’s statutory right of first refusal with respect to the Company’s divestment of its 25% interest in the Ruvuma asset. The Company is also maintaining a dialogue with ARA Petroleum Tanzania Limited on its intention to exercise its pre-emption right and will update the market in due course with regard to the status of the respective discussions.
Under the circumstances this is probably best put under the heading for information only but for Scirocco, Aminex and Wentworth it is worth watching in various guises.
Eco (Atlantic) Oil & Gas
Eco has announced its results for the year ended 31 March 2022.
· As at 31 March 2022, the Company had cash and cash equivalents of US$3,403,885 and no debt.
· As at 31 March 2022, the Company had total assets of US$45.9 million, total liabilities of US$5.6 million and total equity of US$40.2 million.
· In April and June 2022, post period end, Eco successfully raised combined gross proceeds of US$37.8 million to fund its ongoing workstreams, with the Company’s cash balance as at 29 July 2022 being US$37.7 million.
· During the period, Eco announced a number of strategic acquisitions and/or investments in line with the Company’s strategy to expand its high impact exploration portfolio and deliver stakeholder value:
o The acquisition of 100% of Azinam Group Limited, including Azinam’s entire offshore asset portfolio in Orange Basin South Africa and Namibia, in return for a 16.5% equity stake in the enlarged Group. This transaction completed on 11 March 2022 and was formally approved by the TSXV on 11 May 2022.
o The acquisition of an additional 6.25% Participating Interest in Block 3B/4B, Orange Basin offshore South Africa, for a consideration of US$10 million, which would provide the Company with a total 26.5% interest in the Block. The Company is awaiting satisfaction of the conditions precedent to completion of this transaction, including regulatory approval, and further announcements will be made in due course.
o On 14 March 2022, the strategic acquisition of JHI Associates Inc. (“JHI”), including JHI’s 17.5% Working Interest (“WI”) in the Canje Block offshore Guyana, was announced, however, on 14 June 2022 this transaction was terminated,. Eco remains a significant shareholder in JHI with a holding of 7.3% (with an option to increase its shareholding to 11%).
· On 21 March 2022, Eco announced an updated Competent Person’s Resource Report (“CPR”) on its assets offshore Guyana, Namibia and South Africa.
· The report highlights Attributable Best Estimate, Prospective Resources:
o Guyana (Orinduik Block) – Net to Eco 681 mmbbls Oil and 544 BCF Gas
o South Africa (Blocks 2B & 3B/4B) – Net to Eco 864 mmbbls Oil and 309 BCF Gas
o Namibia (4 Blocks) – Net to Eco 6,705 mmbbls Oil and 6,565 BCF Gas
· Further details of the CPR can be found on the Company’s website.
South Africa – Block 2B
· Block 2B Joint Venture partners have entered into a drilling contract for the Island Innovator semi-submersible rig with Island Drilling Company AS for the upcoming drilling of the Gazania-1 well, offshore South Africa.
· The well will be drilled 25km offshore in 150 meters of water to a depth of approximately 2,800 meters to target a stacked pay section up dip of the AJ-1 discovery and in the proven oil horizon.
· The JV partners remain on track to drill this significant well in Q3 2022, with the rig anticipated to mobilise on or around 8 August 2022 and spud expected during September 2022. The Company plans to seal and plug the well after the test with no remaining equipment left on the sea floor, and further updates on the well spud will be made in due course.
South Africa – Block 3B/4B
· Eco holds a 20% Participating Interest in Block 3B/4B, which is located between 120-250kms offshore South Africa in the Orange Basin directly south of the multibillion barrels discoveries offshore Namibia announced earlier this year by Shell (Graff-1) and TotalEnergies (Venus-1) and has announced the acquisition of a further 6.25% interest, which remains subject to completion.
· The Block Partners are currently finalising the reprocessing of a large 3D seismic survey that will be used to high-grade leads towards identifying drilling targets and preparing for a potential drilling campaign next year.
· As noted above, further announcement(s) will be issued following receipt of government and/or regulatory approvals in respect of the acquisition of a further 6.25% interest in the Block.
Guyana – Orinduik Block
· The block partners are currently further defining the Orinduik geological modeling, prospects maturation and upgrading of the drilling targets inventory in an ongoing process. The intent is to provide further definition to the light oil Cretaceous targets’ selection for drilling in the next drilling campaign.
Guyana – Canje Block
· Following termination of the proposed acquisition of JHI, Eco retains an indirect ownership of an interest in the Canje Block offshore Guyana though a 7.3% ownership in JHI.
· On July 5, 2021, the Company announced that it received a detailed update from JHI Associates Inc. The Jabillo-1 well in the Canje Block, offshore Guyana, reached its planned target depth and was evaluated but did not show evidence of commercial hydrocarbons. Jabillo-1 was plugged and abandoned. ExxonMobil (the Block operator) have filed for environmental permit to drill up to an additional 12 exploration wells on the Canje Block over the course of 2023 and 2024
· The Company holds four offshore petroleum licenses in the Republic of Namibia being petroleum exploration license number 097 (the “Cooper License”), petroleum exploration license number 098 (the “Sharon License”), petroleum exploration license number 099 (the “Guy License”) and petroleum exploration license number 100 (the “Tamar License”), (together the “”Namibia Licenses”).
· Eco has a strategically significant acreage position in-country and is progressing its various work programmes across its four blocks offshore Namibia.
Solear Ltd. (formerly Eco Atlantic Renewables [post period end])
· On January 26, 2021, the Company announced the formation of a new company to source, acquire and develop an exclusive pipeline of potential high yield solar energy projects.
· On January 29, 2022, the Company approved to sell the Kozani project in Greece and discontinue the renewable energy business to focus entirely on oil and gas exploration, subsequently announcing on 24 February 2022 that it had entered into an agreement for the sale of the asset. As such, all the assets and liabilities relating to the Kozani project have been reclassified to discontinued operations.
· The Company is awaiting receipt of the balance of consideration due from the acquirer in respect of this disposal, having received to date €120,000, and accordingly retains ownership of the asset. However, the acquirer has confirmed its commitment to completing the acquisition and the Company is considering a legal claim in the event that the consideration is not received in the coming months.
· Guyana continues to be one of the most prolific exploration regions in the world, with approximately 11 billion barrels of oil discovered in the last six years. Eco and its JV partners have already delivered two substantial oil discoveries on the Orinduik Block and the licence continues to offer significant upside potential. With the increase in oil prices the JV partners are revisiting the Jethro discovery commercialisation potential.
· As previously reported, Eco and its JV partners are committed to further drilling on the Orinduik Block and, with its JV partners, are assessing all opportunities available to drill at least two exploration wells into the light oil cretaceous targets as soon as practical. The Company is fully aligned with its JV partners on careful target selection based on the reprocessed 3D and the block and nearby oil discoveries for the next drilling campaign and Eco expects to be able to update the market on further drilling plans in due course.
· Further updates on the Canje Block will be issued in due course.
The Orinduik JV partners are Eco Atlantic (15% working interest (“WI”)), Tullow Guyana B.V. (“Tullow”) (Operator, 60% WI) and TOQAP Guyana B.V. (“TOQAP”) (25% WI) a partnership between TotalEnergies E&P Guyana B.V. and Qatar Energy.
· During the period, two significant hydrocarbon discoveries were made offshore Namibia. TotalEnergies reported a significant discovery of light oil with associated gas on the Venus prospect, located in block 2913B in the Orange Basin. The National Petroleum Corporation of Namibia (“Namcor”) also reported on behalf of the Block 2913A JV Partners, Shell and Qatar Energy, a play opening light oil discovery at its Graff prospect in both the primary and secondary targets.
· Both discoveries, combined with further drilling plans offshore Namibia, have had a material impact on interest in hydrocarbon exploration in the region. Eco is witnessing considerable interest in its licences and is currently assessing options as to how best move forward with progressing exploration and commercial activity on them.
Total Voting Rights
It is noted that, pursuant to a historic amalgamation with Pan African Oil Limited (“PAO”) within the Group, effected in January 2015, 841,824 outstanding common shares in the Company have now been cancelled as a result of such shares having not been claimed by certain vendors of PAO. Following this share cancellation, the issued share capital and total voting rights of the Company is 344,022,014 Common Shares. The above figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company.
Gil Holzman, President and Chief Executive Officer of Eco Atlantic, commented:
“The past 12 months have seen us make considerable progress as a business, increasing our geographic footprint and overall acreage considerably, growing the company in some of the most active and exciting oil and gas exploration regions on the globe. This, combined with the improved commodity price conditions, means that interest in exploration activity in the areas where Eco has strategically important acreage has increased significantly.
“Our acquisition of Azinam has paved the way for our exciting near-term drilling campaign at Block 2B, offshore South Africa. The Gazania-1 well, in which we hold a 50% WI, is targeting a 300 million barrel light oil resource, which, if successful, would be transformational for Eco and the partners on the Block. We remain on track to spud the well in September with the rig mobilising from Norway in the next two weeks and we will provide updates as appropriate. At 3B/4B, we chose to increase our acreage position, as we believe that the licence holds significant potential, and we look forward to disclosing further progress on this licence in the medium term. Namibia has witnessed some of the largest hydrocarbon discoveries made in the world this year, making our strategic acreage in country highly valuable. As one of the largest licence holders in the region, we believe that we will be able to progress our operations in a swift manner.
“In Guyana, we continue to benefit from our interest in the Canje Block, via Eco’s ca.7.3% holding in JHI. The licence remains highly prospective and following the drilling of two wells in 2021, ExxonMobil and the licence partners are currently evaluating next steps. At Orinduik, alongside our partners on the block, we are further defining the geological modeling, prospects maturation and upgrading of the light oil drilling targets inventory, ahead of final target selection for drilling in the next campaign. We look forward to updating our stakeholders on the campaign in the near to medium term while we are making preparations to enter into the next exploration phase under the Orinduik Petroleum Agreement.
“Following the targeted completion of the sale of the Kozani Photovoltaic Park for a total of €1.8 million in the coming months, the Company will be exclusively focused on high impact oil and gas exploration projects and on progressing its near-term drilling opportunities offshore South Africa, Namibia and Guyana.
“Given the significant corporate activity over the last 12-18 months, as a Company we remain very positive about what the future holds and our ability to generate returns for all our stakeholders. The Company possesses highly strategic acreage in exploration hot spots, a robust balance sheet with over US$37m in cash, an entrepreneurial and ambitious management team, and the potential for considerable operational catalysts that can create material and sustainable value for shareholders. As ever, we are excited about what the coming months will bring and look forward to updating the market on our progress over the coming months.”
This is a detailed and highly positive report from Eco Atlantic who have had a very busy time in the period but are also scheduled to be even more busy in the next few months. The Azinan acquisition has opened up the imminent drilling of the Gazania well on Block 2/B offshore South Africa whilst adding to the stake at Block 3B/4B in the Orange Basin looks very exciting to me.
Following quitting the JHI deal after unsatisfactory lock-up provisions were proposed, Eco still have two potential prospects in Guyana where Exxon announced further discoveries last week but Africa seems to be the area of most focus in the south as well as in Namibia.
Eco is another stock where the upside potential dwarfs the current share price, not least near Venus and Graff where I have already talked about further wells from Total and Shell are tight but would propel the post codes into a different stratosphere should the be more big discoveries. A must have for the beta end of the portfolio and the good news is that the action is not very far away.
TRADING AND OPERATIONS UPDATE AND INCREASE TO 2022 GROUP PRODUCTION AND CAPEX GUIDANCE
· Increased production guidance: Group 2022 entitlement production guidance is increased to 3,480 – 3,795 boe/d from 3,330 – 3,550 boe/d
· US$1.8 million increase to 2022 mid-point capex guidance.
· Net Cash position of US$12.8m (unaudited) as of 30 June 2022
· With the introduction of Aleph Commodities Limited as a new cornerstone shareholder, a strategic review and expansion plans are being formulated with a focus on increased production, reserves and shareholder returns.
SDX has provided an update on its unaudited capex, cash, and liquidity position for the six months ended 30 June 2022. All monetary values are expressed in United States dollars net to the Company unless otherwise stated.
Mark Reid, CEO of SDX, commented:
“Following on from our previously announced drilling success at SD-5X in South Disouq, which also includes a richer than expected condensate yield, I am pleased to announce that our 2022 production guidance for this asset is being increased by 15%. Although we have had to slightly reduce our West Gharib production guidance due to mechanical issues with one of the rigs, our overall 2022 group mid-point guidance has increased to 3,480 – 3,795 boe/d from 3,330 – 3,550 boe/d. Given that both the SD-5X and MA-1X wells in South Disouq encountered gas, we have also slightly increased our capex guidance by US$1.8 million, reflecting the costs of completing and testing these wells and tying in SD-5X. I am also pleased to report continued strong production of 3,742 boe/d in the first half of the year which is above our increased 3,638 boe/d mid-point entitlement guidance, and a robust net cash position of US$12.8 million as at 30 June 2022. Finally, we are working with our new cornerstone shareholder Aleph Commodities Limited on a refreshed and ambitious strategy and we will be updating the market on the outcome of this in the weeks ahead.”
The arrival of Aleph on the shareholder list at SDX must have been like all the boards Christmases and birthdays come together. The last year has seen the company being touted around by its major shareholder along with others and eventually a low bid came in. This ‘strategic review’ is a new meaning for a bid defence as it tries to smoke out a higher bid from Tenaz.
On an operational note, today’s update is reasonably positive and with some cash in the bank either Tenaz or Aleph and its ‘refreshed strategy’ can see a little light at SDX but realistically if you were building a company you wouldn’t start with this bunch of assets so upside from another bid or the Aleph model must have modest upside.
Longboat has announced the commencement of drilling operations on the Oswig exploration well (Company 20%) in Norway.
Oswig (PL1100) consists of a high pressure, high temperature Jurassic rotated fault block nearby the Equinor operated producing Tune and Oseberg fields in the Norwegian North Sea. The well is targeting the Tarbert and Ness formations, two separate intervals which are estimated to contain combined gross unrisked mean resources of 93 mmboe1, 19 mmboe1 net to Longboat. The Oswig geological chance of success is estimated to be 36%1 and the key risks are reservoir quality and fault seal.
Oswig is one of the larger gas prospects being tested in Norway this year and several additional fault blocks have been identified within the licence area. These prospects are estimated to contain further gross unrisked mean resources of 80 mmboe which would be significantly derisked by an Oswig discovery.
The drilling of the Oswig well 30/5-4 S, operated by OMV (Norge) AS, is being undertaken by the Maersk Intrepid jack up drilling rig and is expected to take up to seven weeks to drill.
Helge Hammer, Chief Executive of Longboat, commented:
“We are pleased to commence drilling of the first of three fully-funded, gas-focused exploration wells, with Copernicus – the second well in the series – also anticipated to spud this quarter.
“Longboat Energy’s exploration programme offers shareholders a unique opportunity to gain gas weighted drilling exposure targeting net mean prospective resource potential of 70 mmboe1 with an upside case of 142 mmboe.”
This is an exciting well which starts the three well programme and should it come in would be the start of something big. To put it into some perspective it is worth taking a look at the interview I recently did with CEO Helge Hammer, I have repeated the link below.
Core Finance CEO interview: Helge Hammer of Longboat Energy
Prospex has provided an update on the production and income from the El Romeral power plant in southern Spain. El Romeral continues to provide a very healthy income stream from selling electricity into the spot market in Spain. The Company holds a 49.9% working interest in El Romeral through its interest in Tarba Energía S.L.
· El Romeral revenue for the quarter April to June 2022 was €925,134 (gross), down 12% compared with the previous quarter to March 2022 (€1,046,485)
· Peak electricity spot prices have levelled off when compared to the extreme prices experienced in March when gross income exceeded €500,000 in a single month
· Gas price cap imposed by the Spanish Government from mid-June has had a knock-on effect to electricity prices resulting in reduced volatility and peak prices seen in the electricity spot market
· Electricity spot prices averaged more than €180/MWhr in the quarter to April to June 2022
· Transition to full automation completed and since mid-March 2022 the power plant has been operating 24/7
· The plant is at 30% capacity with potential to increase output to up to 100% when infill wells are approved and drilled successfully
· Project Apollo, the installation of solar panels on the roof of the El Romeral facility to power ancillary services is underway and due to be fully commissioned in early August
· Project Helios, the renewable co-generation via a proposed 5 MW solar farm adjacent to El Romeral is at FEED stage
· Connection to the power grid at El Romeral is pre-existing and the grid network has ample capacity to export increased electricity output from the new photovoltaic generation, subject to permitting
Mark Routh, Prospex’s CEO, commented:
“El Romeral continues to generate very healthy revenues with daily electricity spot prices averaging more than €180/MWhr in the quarter to 30 June 2022. The gas price cap imposed by the Spanish Government from mid-June has had a knock-on effect to electricity prices. Since Tarba produces its own gas from the El Romeral production concessions, it is not directly affected by the gas price cap, but that cap has reduced the number of extremely high within day prices and has limited the volatility and peak electricity spot prices seen in the previous quarter.
“Tarba remains ready to increase its gas to power generation capacity at El Romeral as soon as the permits to drill a portfolio of infill wells on the El Romeral concessions are received. Achieving 100% output capacity could be realised from the first two infill wells. A further increase of the plant’s generation capacity by recommissioning the mothballed third generator would be possible in parallel with the drilling programme.
“I am extremely pleased to report that the first of our photovoltaic projects is about to be commissioned. Project Apollo will cover part of the plant’s ancillary electricity usage, thus allowing increased income from the sale of power.”
A slightly mixed bag in this update, nobody likes to see the price of their commodity controlled by the state but it does leave plenty of upside in this operation when permitting and drilling is possible. Overall however this part of Prospex is looking in pretty good nick.
I have been increasingly aware that there have been significant developments at Gulfsands in recent months, so I took time to catch up with Managing Director, John Bell. My conversation with him was extensive and so I have added a link and a pdf below so that it can be read in its totality.
From a corporate perspective, Gulfsands has ensured that it has maintained high standards of corporate governance and transparency despite delisting in 2018 and its shares continue to trade on the Asset Match platform. The team is keen to return in more ways than one, both in terms of returning to the markets in due course, and an important return to oil and gas operations when circumstances allow.
Operationally, Gulfsands recently successfully completed its withdrawal from Colombia, its last non-core asset, on extremely attractive terms. With that, and with clarity over the debt facility conversion terms, the company now has a clean, solid platform from which to focus on its core asset in Syria(which remains in force majeure), as well as business development elsewhere in the MENA region.
Gulfsands is ready to return to operations in Syria as and when the legal, political and security circumstances allow. The Company is of the very firm view that, along with the other IOCs with PSC in-country, it continues to be party to a legitimate PSC valid under both Syrian and international law and believes that, at the appropriate time, the terms of the force majeure will be honoured, and that IOCs will be enabled- indeed expected – to return to operations when circumstances allow.
While Gulfsands focuses on preparing for a return, it is “frustratingly” (as John Bell describes it) aware that oil is being illegally produced and sold from its, and others’, facilities in North-East Syria by the SDC/SDF and its affiliates, in violation of the PSCs and contrary to international sanctions. He explains that this unlawful activity is, most importantly, damaging Syria in multiple ways as the black-market trade denies the Syrian people the full value of the country’s oil due to “depressed prices and high levels of corruption”.
In addition, the unregulated and unsophisticated management of oil production from the fields is causing significant environmental damage, with negative repercussions for community health. There is also a lack of maintenance and investment which is damaging the reservoirs, further risking the future value of the country’s energy resources.
In our interview we turned to how and when Gulfsands might address the fact that there has been a notable lack of action by international governments in dealing with what is effectively the theft of oil, illegal trade and resultant environmental consequences.
John acknowledged the complexities of the situation in Syria and explained how Gulfsands is eager to play a positive and constructive role – in cooperation with international and Syrian stakeholders – to help to achieve a win-win solution.
To that end, he explained that Gulfsands is proposing a new idea whereby IOCs would return to operations in North-East Syria with revenues from oil sales contractually entitled to the SAR being deposited by stakeholder agreement to finance humanitarian, economic and security projects across the country. It is proposed that the initiative would be designed under the auspices and supervision of the UN with international and local stakeholder support.
In terms of materiality, we discussed the fact that Syria has the potential to generate annual gross revenue of $20bn at today’s oil prices. This is desperately needed to finance programs to address the current social crisis and to build a resilient society for the future.
Gulfsands is conscious of the parallels that might be drawn between this initiative and other models used in the past, such as the Iraqi Oil for Food program. The company is proactively working to ensure that all lessons learnt from these previous schemes are absorbed and applied, to avoid similar pitfalls.
Gulfsands is also proactively working with international parties to ensure that its approach “remains consistent with relevant UN resolutions and compliant with all applicable sanctions”. It is early days, of course, but John Bell is “encouraged by discussions to date” and is eager to raise the profile of the idea and draw on all possible international expertise to give the proposal the very best chance of success for the benefit of the Syrian people.
I would like to thank John for his time doing this extensive interview. It is produced in full in this PDF link for those who have an interest in the company, the country and the region.
England won the Womens Euros yesterday beating Germany 2-1 at Wembley after extra time.
In F1 a crucial tyre cock-up by Ferrari left Chas LeClerc trailing Max and eventually Lewis and George who came in 2nd and 3rd as we head towards the summer break.
Perhaps more important is the news that Fernando Alonso has signed a two year contract with Aston Martin who have a spare berth after the retirement of Seb Vettel last week.
And England’s poor form in white ball cricket continues as they lose another series, this time in the T20 format to the Proteas.
The opinions expressed here are those of the author
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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