Malcy’s Blog – Oil price, Sound Energy, Longboat Energy & finally

WTI $123.70 +$4.30, Brent $127.98 +$4.77, Diff -$4.28 +47c, NG $4.53 -30c, UKNG 450.0p -209.5p

By Malcolm Graham-Wood

Oil price

The US confirmed that it would ban imports of Russian oil but to be honest that in itself is not a major league blow. My sources say that in recent times the US only take the odd delivery from Russia and that is an occasional shipment landed in the Gulf when buyers fancied it.

Today oil started up another $3 but with markets ablaze crude is down around $6, daily movements we havent seen the like of for some time. The API stats had a build of 2.8m bbls in crude but gasoline drew 2m and distillates a huge 5.5m.

Sound Energy

Sound has announced an extension to the date by which the conditions to its binding gas sale and purchase agreement (the “GSA”) in respect of the Phase 2 development of the Tendrara Production Concession with Morocco’s state owned power Company ONEE (Office National de l’Electricite et de l’Eau potable) for the sale of natural gas from the Tendrara Concession in Eastern Morocco over a 10 year period are required to be satisfied by a further three months. The terms of the GSA were announced by the Company on 30 November 2021.

The GSA remains conditional upon, inter alia: (i) all necessary authorisations and permits having been granted for the construction of the Phase 2 gas installations (ii) the final investment decision, when taken, by the Tendrara joint venture partners, being approved by the Moroccan Ministries of Transition Energy and Sustainable Development and Economy and Finance; and (iii) the entry by the Tendrara joint venture partners of an interconnection agreement with the operator of the GME Pipeline, and the commencement of works, for the connection of the Tendrara Production Concession to the GME Pipeline.

Progress has been made in the preparation of pipeline entry agreements, term sheets for financing, approvals and FID and consequently all parties have agreed to a 90 day extension period to the GSA.

Further announcements will be made, as appropriate, in due course.

Graham Lyon, Sound Energy’s Executive Chairman, commented:

“The progress on the various conditions over the last 90 days is encouraging to all particularly the interest of local and international funding partners financing and as such the extension of the agreement of the GSA is welcomed.  We are delighted with this confirmation that the UK-Morocco, ONHYM and Sound Energy partnership is working well.”

No surprises here, the financing arrangements take their time but there is no need to worry, the term sheets have been received and operationally the pipeline tie-in agreements are advanced. More impressive is that Sound has not taken their eye off the ball regarding Phase 2 given that Phase 1 was kicked off with the notice to proceed which they announced last month.

Sound is continuing to deliver on its promises and with both Phases underway the longer term picture is beginning to emerge. Whilst the share price, which had doubled at the end of last year has recently drifted off, the long term outlook should provide an big opportunity to rebuild and I expect a substantial rise this year.

Longboat Energy

Longboat has announced the commencement of drilling operations on the Kveikje exploration well (Company 10%).

Kveikje is the primary prospect in licence PL293B, which lies in an area north of the giant Troll field in the Norwegian North Sea with many producing fields and significant infrastructure. The Kveikje well will be drilled close to recent discoveries, lying c. 8km from the Swisher discovery and c. 10km from the Toppand discovery. If successful, Kveikje could potentially form part of an area cluster development.

The prospect is an Eocene Balder Formation injectite with seismic amplitude support. Injectite reservoirs are typically characterised by excellent reservoir properties, with recent exploration successes of this type including the King and Frosk discoveries in the Balder and Alvheim area respectively. The exploration well has further potential upside in the underlying Paleocene Rokke and Late Cretaceous n’Roll secondary prospects.

Kveikje is estimated to contain gross mean prospective resources of 36 mmboe with further potential upside estimated at 79 mmboe on a gross basis. The chance of success associated with the Kveikje prospect is 55% with the key risks being trap presence and seal integrity.

Rokke and n’Roll have an additional 127 mmboe of gross mean prospective resource with chances of success in the range of 14%-34% which have not been reviewed by ERCE and are based on Operator estimates.

The drilling of the Kveikje well 35/10-8S is being undertaken by the Deepsea Stavanger semi-submersible drilling rig and operated by Equinor and is expected to take up to four weeks to drill.

Helge Hammer, Chief Executive of Longboat, commented:

“I am pleased that we have now commenced drilling operations for the fifth exploration well in our drilling programme.

“Longboat Energy’s 2022 exploration programme offers shareholders a unique opportunity to gain exposure to a drilling portfolio of three wells targeting net mean prospective resource potential of 69MMboe1 with an additional 256 MMboe1 of upside.”

This looks like a really major target for Longboat with its 50% COS and close to recent discoveries. After some disappointments recently they need a discovery and hopefully acquire some more acreage. The shares have yet to recover from the very first day of trading when a technical market situation was allowed to develop but I would back Helge and his team from here every day of the week. 

And finally…

Last night Liverpool lost 0-1 to Inter in the Champions League but still went through the the QF’s 2-1 overall. Tonight the Noisy Neighbours entertain Sporting Lisbon at the Emptihad but could play the 2’s as they lead 5-0 from the first leg.

In the cricket England recovered from 48-4 and are 282-7 as I write with a ton from Bairstow and support from, wait for it, Stokes, Woakes and Foakes. Tell me it was worth waiting for…

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


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