Malcy’s Blog – Oil price, Scirocco, Touchstone Exploration & Finally

WTI $73.30 +$1.07, Brent $77.25 +$1.06, Diff -$3.95 -1c, NG $4.98 +17c, UKNG 172.0p -5.01p

By Malcolm Graham-Wood

Oil price

Yet another good day for oil as various news items brought the buyers in. It wasn’t always going to be like this, the Euro economic data was underwhelming, nerves associated with the Evergrande debt payment and the FOMC tapering news failed to dent the optimism.

Even Tropical Storms Peter and Rose didn’t develop but in what is becoming a busy storm season the latest TS on the block, Sam, is headed towards the northern Caribbean and Hurricane status. This weekend sees the start of the German elections with the Greens making a play to be in a coalition Government.

Finally, on the technical front, Bloomberg reported that global floating crude storage was at its lowest since March 2020 and in London analysts suggested that power stations were switching from gas to oil as its economics changed.

Scirocco

SCIR noted that the Ruvuma operator ARA has awarded a seismic acquisition contract to AGS and due to favourable market conditions is ‘considerably below’ its expected budget. Work will start in October 2021 and focus on the proposed location for the CH-1 well before the rainy season starts.

Tom Reynolds, CEO at Scirocco Energy comments: “The award of the seismic acquisition contract is exciting news and marks an important milestone for the Ruvuma project. Following the recent award of the two-year licence extension, the project is now entering a period of operational activity designed to understand the full potential of the development – a key value inflection point. Operator APT has made excellent progress to secure highly competitive seismic acquisition rates, delivering a considerable cost saving to the joint venture. The project is now gathering momentum towards development of a proven gas resource into the established Tanzanian gas market.”

Touchstone Exploration

Touchstone reports that the Company has completed drilling the Royston-1 exploration well and has announced that the well encountered ‘substantial hydrocarbon accumulations based on drilling and wireline log data’.

Royston-1 was drilled to a total depth of 10,700 feet and is the deepest exploration well drilled by Touchstone to date, mud logging and wireline logs indicate hydrocarbon accumulations in the Lower Cruse, Karamat and Herrera sections.

The well encountered a total Herrera turbidite thickness of 1,014 feet (609 feet net sand) in two stacked thrust sheets. An aggregate 393 gross feet of hydrocarbon pay was identified in two unique thrust sheets in the Herrera sands from 9,700 feet to total depth, with wireline logs indicating that the well was in hydrocarbon pay at total depth.

The well is currently being cased and prepared for production testing of the Herrera Formation.

Paul Baay, President and Chief Executive Officer, commented:

The Royston-1 well was the fifth and final well of the first phase of our exploration drilling program on the Ortoire block, with logging data indicating better than expected results. The amount of identified hydrocarbon pay further verifies the opportunity in the block for our future phase two exploration program. Prior to drilling, we targeted 200 feet of gross sand pay, with results almost doubling our expectations. The team has commenced planning production testing operations in the Herrera Formation using the same equipment that verified the Cascadura discovery. I would also like to commend the team for drilling the well safely and in adherence to all health protocols. With the assistance of the new seismic and upcoming production testing data, we anticipate this to be the largest geological structure identified on the block in the Herrera Formation.

This looks like a very decent well despite the lower porosity, which incidentally is like other wells in the programme and not markedly different to when Shell was producing. The pay was nearly double the expectations and the whole Ortoire area looks fit for further drilling and has so far more than matched expectations. I don’t normally quote more than one company executive but I think that COO James Shipka provides really important data here as the company look to identify the second exploration phase.

Readers know that I am a big fan of Touchstone whose value is way above the current price even after today’s run up.

James Shipka, Chief Operating Officer, commented:

“The Royston-1 well has delivered on all accounts, confirming that the world-class Ortoire Herrera Fairway is well developed through the Royston structure, and most importantly, verifying the presence of hydrocarbons within these targeted Herrera Formation sands. The Royston structure was reimaged by our recent 2D seismic survey revealing a SW-NE trending anticline measuring nearly 7.2 kilometres in length and 1.8 kilometres in width. The 393 feet of identified hydrocarbon pay exceeded our objective, and while we believe the discovery to be natural gas, we will wait for testing results to confirm. The testing results will also provide us with deliverability capability as the porosity measured at Royston-1 is lower than Cascadura but similar to data seen at other offsetting producing wells. The noteworthy hydrocarbon accumulations in the lower Karamat sands give us additional insights into the geological deposition and hydrocarbon migration in the Ortoire area and are encouraging for our future second exploration phase. We anticipate commencing production testing in late October and providing full results when available.

 And finally…

It’s a cracking weekend for sport with the headline act of the Ryder Cup starting at Whistling Straits, Wisconsin this afternoon. Europe will be handicapped by having no fans present, so much a part of the spectacle, what will Ian Poulter do without the fanatical fans?

It is also the Russian F1 Grand Prix at Sochi, where the rivalry between Lewis and Max will continue but after the last attempt by Verstappen to barge in Hamilton we know that unlike him, Max will never give even to avoid an accident.

Also a great card at Newmarket tomorrow on the flat.

Finally in the Prem, tomorrow sees the best match of the weekend with the Noisy Neighbours visiting Stamford Bridge, also the Red Devils host the Villa, Burnley go to the Foxes, the Toffees entertain the Canaries, the Hammers visit Leeds, the Hornets host the Magpies and the Bees entertain Liverpool. On Sunday it’s the Saints against Wolves and the big North London Derby with the Gooners hosting Spurs.

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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