Malcy’s Blog – Oil price, Union Jack Oil, Angus Energy, Arrow Exploration, Predator Oil & Gas, Trinity Exploration & SDX Energy

WTI $111.76 +$2.19, Brent $117.98 +$2.89, Diff -$6.22 +70c.

Author @mgrahamwood

USNG $6.55 +5c, UKNG 240.0p +72p, TTF €131.855 +€6.355

Oil price

Oil rose sharply yesterday on the story I wrote about in the blog about the allegations that neither the UAE nor the KSA could add much to short term production, as Opec+ meets tomorrow we may see but I suspect that the 640/- odd thousand will be released without much chance of it actually reaching the markets.

Union Jack Oil

Union Jack has announced that following the passing of a special resolution of the Company at its Annual General Meeting on 23 June 2022, the Company is now pursuing a reduction of capital exercise through the court procedure.

The Capital Reduction involves an application to the High Court of Justice, followed by two court hearings, where the Courts will consider whether any creditors will be prejudiced by the Capital Reduction.

Once the Capital Reduction is complete and a positive result obtained, the Company will issue a further announcement outlining details of a share buy back scheme or the payment of a maiden dividend.

This is obviously very good news for UJO shareholders and assuming that a maiden dividend is to be paid shows just how far the company has come, particularly this year.

With exciting and regular news from Wressle where it should be remembered that management significantly increased its stake at depressed prices and West Newton where a substantial development is under way as well as other parts of the portfolio.

Expect the market maybe slowly to get to grips with a company that will likely start making meaningful returns to shareholders and be valued significantly higher accordingly.

Angus Energy

Angus has announced the conclusion of leak testing and the commencement of commissioning of the Saltfleetby Gas Field.   The duration of commissioning is expected to take between one and two weeks with a target date for first gas export (ie sales) between the 7th and 12th July.

The hedged volume for July to September inclusive is for 3.375 million therms. The expected output during that period from existing wells B2 and A4, assuming a start date of 1 July is approximately 5 million therms and comfortably exceeds the hedged amount.

As Saltfleetby delivers on the last days of commissioning, Angus management must be delighted that not only is the first gas that is imminent but that it will comfortably exceed the hedged amount, previously a worry for some observers. This means that during the hedge period the company will easily start to accumulate revenues and remember it now has 100% of Saltfleetby which is accretive to shareholders. 

Arrow Exploration Corp

Following the test results of RCS-1 on Monday I was very fortunate to be able to have an extensive chat with Arrow CEO Marshall Abbott. 

I first asked him about the excellent well result and how the campaign has been so successful operationally. There is no doubt that this well was way better than expected particularly in the Carbonera formation which will be onstream this week and brought to appropriate capacity very carefully. 

Indeed it is not only this well that has been a great success, the previous well, RCE-2 seems to be the gift that keeps on giving and is already producing some 500 b/d more than previously expected. These two wells alone are delivering better than modelled production and that is without making any efforts to raise flows unnecessarily fast. 

On the political front, following the elections and the narrow success of Gustavo Petro to the Presidency it had been considered that as a left wing candidate he had had a strongly anti oil and gas stance. It seems that since taking office he has somewhat softened his stance and as oil and gas accounts for some 40% of exports and 5% of GDP it is already unlikely that the sector will be hit too hard. Add to that it seems that he will have no support from  either house nothing major will be enacted.

I think that it is the initial ban on new licence grants and a ban on fraccing that may stick, Mr Abbott reminded me that with its huge acreage position they are in no need of new licences nor do they partake in fraccing. 

An increase the tax rate from say 25% to maybe 35% wouldn’t be the end of the world as with its 12% royalty on light oil Colombia is still rated as being in the top decile in the world for fiscal regimes. 

Shareholders in Arrow can expect an updated CPR with its much more robust price deck and the company are well up with its production hopes. As a result of recent drilling the first target of 3,000 b/d by early next year looks to be eminently achievable whilst the longer term aim of some 10,000 b/d looks like being on within 3/4 years and I wouldnt bet against them on this front. The shares have fallen by 25% on political worries which I think are overdone, in my view the upside for Arrow is very substantial indeed. 

Predator Oil & Gas

Predator has announced its audited financial statements for the year ended 31 December 2021, extracts of which are set out below.

Highlights of Financial Results for 2021

  • Reduced loss from operations of £1,398,821 (2020: Re-stated loss of £1,589,070).
  • Reduced administrative expenses of £1,398,802 (2020: Re-stated £1,363,711)
  • Increased cash balance at period end of 2021 £1,523,035 (2020: £1,325,751)Additional, restricted cash of USD1,500,000 (USD1,500,000 for the period ended 31 December 2021) Placed 53,000,000 new ordinary shares of no par value in the Company to raise £4,585,000 (before expenses).
  • Issued warrants to brokers to subscribe for 1,020,000 new shares exercisable at £0.105 before 12 March 2025 and 600,000 new shares exercisable at £0.150 before 18 June 2025
  • Debt-free and fully-funded for current commitments

Highlights of key Operational Activities in 2021

  • In Morocco MOU-1 was successfully drilled in 15.18 days on budget and within pre-drill budget guidance.
  • Pre-drill seismic amplitude “bright spot” and primary target validated by drilling results.
  • Formation gas shows whilst drilling and wireline NuTech log interpretation identified intervals within the primary target for rigless testing.
  • MOU-1 therefore suspended and completed for rigless testing.
  • Primary target confirmed as covering approximately 32 km² and supporting pre-drill CPR Prospective Gas Resources of 295 BCF net to the Company
  • EIA for follow-up wells MOU-4, MOU-5 and MOU-NE commissioned.
  • New MOU-NE Jurassic structure covering 102 km²identified.
  • Decommissioning of the CO2 EOR surface facilities and down-hole equipment at Inniss-Trinity commenced.
  • Planning with Lease Operators Ltd. for new CO2 EOR project in the PS1 field progresses with submission of an application for Certificate of Environmental Clearance.
  • FSRU LNG Project in Ireland secures collaboration agreement with supplier of gas, LPG and LNG in the UK and Ireland.
  • Successor authorisations to the Licensing Options 16/26 (Corrib South) and 16/30 (Ram Head) under active review by the Geoscience Regulation Office in Ireland.
  • Proposal submitted to evaluate the potential for the conversion of the undeveloped Ardmore gas field (Ram Head) to gas storage.

Highlights of Directorate Changes

  • Board strengthened with appointment of Lonny Baumgardner, with extensive Moroccan drilling and gas marketing experience, as Chief Operating Officer.

Post Period End: 

  • 295 BCF of Contingent Gas Resources likely to be commercially viable supported by independent CPR.
  • EIA approval for MOU-4, MOU-5 and MOU-NE received.
  • Civil works contract awarded for the construction of the MOU-4 well pad.
  • Source of long-lead well inventory items identified and purchase orders being prepared.
  • Confidentiality agreements executed with potential partners for follow-up drilling and potential gas development in Morocco.
  • Discussions opened with FRAM Exploration Trinidad Ltd. regarding a settlement to the dispute surrounding the premature termination of the Inniss-Trinity CO2 EOR project contrary to the terms of the Well Participation Agreement.
  • Final information submitted to GSRO to enable a decision on the Corrib South and Ram Head successor authorisations to be made.
  • Potential green hydrogen acquisition being evaluated.
  • Placed 11,500,000 new ordinary shares of no par value in the Company to raise £1,035,000 (before expenses).
  • Appointed Tom Evans and Alistair Jury as Non-executive Directors to replace Dr. Stephen Staley and Louis Castro.
  • Issued warrants to brokers to subscribe for 690,000 new shares exercisable at £0.09 before 17 March 2025.

Paul Griffiths, Executive Chairman of Predator Oil & Gas Holdings Plc commented:

“We are pleased to have reduced operating losses and administrative expenses in 2021 whilst increasing cash balances at the end of the period and maintaining a debt-free status. This has been achieved despite a significant increase in both operational activity and corporate strategic  planning and execution.

Successful drilling and the completion of MOU-1 for rigless testing was a milestone achievement for the Company in that it established the Company as a highly competent operator whilst also unlocking the gas potential of a vast licence area in northern Morocco, linked via infrastructure to Europe, covering 7,269km².

Whilst disappointed with the manner in which the Inniss-Trinity CO2 EOR project was unilaterally and unexpectedly terminated by our joint venture partner, we are pleased that the project established “Proof of Concept” for CO2 EOR operations in Trinidad. This has allowed us to move forward quickly with a new CO2 EOR project better suited to our commercial guidelines for business development in Trinidad. We remain a niche provider of CO2 EOR services with unique practical operational experience and subsurface technical understanding of CO2 sequestration.

In Ireland we have maintained progressed on our applications for successor authorisations and towards gaining recognition of an FSRU LNG import facility as an important contributor to Ireland’s security of energy supply. We alone in Ireland have taken ownership of the FSRU concept based on management’s long experience and understanding of the vital role of the Kinsale offshore pipeline and the importance of the Inch entry point to the gas grid.

The next stage of the Company’s development will be challenging as we seek to take our various projects to the next level of financing which is why we have taken the opportunity to refresh the Board with Non-executive Directors with the necessary experience to encourage and oversee this critical next step.

Maintaining undiluted project equity has been a priority of the Company during the last 3 years as we juggle and develop our niche positions in three diverse geographies. With the focus now firmly on near-term security of energy supply we are now well placed to potentially trade our project equity for access to financial backing to take projects to development and cash flow as we understand and can navigate our way through the regulatory and environmental processes that would delay new start-up projects of a similar scale to ours.

We thank our shareholders for their continued support. The Company could not have achieved the progress it has made without our supportive shareholders. We will continue to apply our management philosophy and experience to the further development of our assets over the next 12 months. We are a small, cost-effective team that proportional to our size delivers operational success and strategic opportunities for potential project partners on a much larger scale.”

 A busy year as usual for PRD as Morocco continues to offer exciting prospects in one of the world’s highest demand areas for natural gas and most attractive fiscal policy. In Ireland what might eventually be a huge project is moving way faster than people may have expected and of course the company are still in C02 sequestration in Trinidad with previously announced legals under way. 

Trinity Exploration & Production

Trinity has announced that drilling operations have commenced for the first well of its 2022 six well programme.

As previously outlined, the fully-funded drilling programme, which includes conventional infill wells, a horizontal well and a deeper appraisal well, is targeting an aggregate 450 – 1,100mbbls of reserves at a cost of US$14m – US$17m.  These are significantly higher volumes per dollar of capital invested, that in a success case, would generate materially increased cash returns compared with previous drilling programmes.

Management believes that the potential returns from the proposed horizontal and deeper appraisal wells could underpin a material increase in production rates and potentially unlock previously untapped  deeper pools of hydrocarbons. If successful, the horizontal well  could yield production rates and returns c.3x those achievable from conventional infill wells, with the wider programme also benefiting from the mapping and integration of the 3D seismic acquired in 2020, enabling a more targeted and de-risked approach to the Company’s drilling activities.

Overall, management is confident the Company can support a multi-year onshore drilling programme from the prospects and leads identified from the evaluation of the 3D seismic.  The 3D seismic interpretation has, to date, identified a “hopper” of c.40 infill opportunities, which includes c.35 conventional wells and c.5 high angle/horizontal wells.  The successful drilling of the deeper appraisal prospect would add more highly attractive prospects to the hopper, giving greater line of sight on the Company’s ability to deliver on its stated ambition to double production by 2024.

While the Company has a firm timetable in place, inclement weather conditions could have an impact on workflow. Noting the current orange-level tropical storm warning in Trinidad, management will move to ensure the health and safety of its workforce and contractors – and if necessary may opt to briefly pause drilling operations.

Jeremy Bridglalsingh, Chief Executive Officer commented: 

“We are delighted to have recommenced our drilling activities. We have a significantly improved our understanding of our acreage through the 3D data acquired, underpinning our confidence in the current programme while also positioning the Company to take advantage of future opportunities. We have set ambitious drilling targets as we focus on a step change in production, which could be further augmented by potential developments at our Trintes, Galeota and Brighton assets.”

This is a long time coming but no less good news for that, at last shareholders will be able to see Trinity using the drill bit to try and increase value for them. It will be a long haul but at least high oil prices will finally be making their way into the Trinity treasury.

SDX Energy

SDX has announced the spudding of the MSD-23 infill development well on 24 June 2022 at the Meseda Field, West Gharib concession, Egypt (SDX WI: 50%). MSD-23 is targeting the primary Asl Formation reservoir at around 4,000 feet MD (3,200ft TVDSS). MSD-23 is the fifth well in a fully funded, 13-well development campaign on the Meseda and Rabul oil fields in the West Gharib concession. 

The fourth well of the campaign, MSD-24 (TD, 5 June 2022), has been connected to facilities and is currently producing at a gross rate of around 300 bbl/d which is in line with pre-drill estimates. Operations at the third well, MSD-20, continue.

The development drilling campaign is aimed at growing production to c.3,500 – 4,000 bbl/d by mid-2023.

Mark Reid, CEO of SDX, commented:

“I am pleased to announce the spudding of MSD-23, the fifth well in the 13-well infill drilling campaign on the West Gharib Concession together with the commencement of production from the recently completed MSD-24 well. With gross production from the field now reaching 2,150-2,200 bbl/d we are anticipating further increasing production through the completion of operations at MSD-20 and the drilling of the eight remaining wells in the campaign over the next year. I look forward to updating the market further as the campaign progresses.”

Very little comment required particularly as the company is in the middle of a takeout.

The opinions expressed here are those of the author

Author @mgrahamwood

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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