Malcy’s Flash blog, IOG, Diversified Energy, Union Jack Oil, Egdon Resources & Empyrean Energy

A flash blog today before I head to the smoke for meetings. The oil price is flat today after a big rise yesterday amid signs of Covid easing in China and India beginning to fall into line on oil purchases from Russia.

By Malcolm Graham-Wood

IOG

IOG has provided a further Phase 1 update.

Earlier this month, the Company advised that it was pursuing a rapid solution to a mechanical fault on the Blythe topsides, in collaboration with its offshore Duty Holder ODE Asset Management (ODEAM). IOG can now confirm that the issue has been temporarily addressed and the Blythe well therefore re-opened yesterday, alongside ongoing Elgood production. A further permanent modification on the Blythe platform has been designed and will be installed when materials are available. This permanent modification is not anticipated to involve material downtime.

At Southwark, over last weekend the Noble Hans Deul rig was successfully moved into position alongside the platform, with the legs positioned securely on the newly installed rock pads. Preparations have been underway since then to resume development drilling at Southwark in the course of the next week.

Andrew Hockey, CEO of IOG, commented: 

“We are pleased to have resolved the Blythe platform issue and restored the Blythe well into production alongside Elgood. We expect to gradually build up the aggregate production levels over the coming days and will continue with our initial production data analysis to inform future guidance. Meanwhile, resuming Southwark drilling in the coming days will be another positive step forward.”

This is good news for IOG as they are back up and running and Blythe has reopened to join Elgood in production. Although it was only a teething problem, which is not unusual, it is good to be back collecting revenue from both with no material downtime. Also that development drilling is starting next week at Southwark is further good news. 

On another point I have been asked to join with IOG at the evening event for private investors at 6.30pm next Weds 20 April at the Soho Hotel. Presentation, Q&A, networking and drinks. I am very much looking forward to it and seeing a good number of investors at the event, I have put the link to the evening below.

www.iog.co.uk/investors/private-investor-evening/

Diversified Energy Company

Diversified Energy Company announced today its recent acquisition of the Opgal EyeCGas 2.0, with companion EyeCSite Tablet software, and the Semtech Hi-Flow 2 sampler, both state-of-the art emissions measurement devices that position Diversified as the first company in the U.S. to deploy this advanced technology in natural gas upstream operations. While previous generation equipment was capable only of visually detecting fugitive methane emissions, these devices take the next logical step and estimate the amount of the emission.

Specifically, the Opgal EyeCGas 2.0 uses an Optical Gas Imaging (OGI) Camera and Artificial Intelligence software to quantify methane leaks, especially emissions originating from difficult to access leak sources. The Semtech Hi-Flow 2 sampler utilises Tunable Laser Absorption Spectroscopy (TDLAS) for the accurate measurement of fugitive methane emissions, and is uniquely suited to support additional validation of reported leak quantities.

Reflective of its commitment to detect, accurately quantify and remediate emissions, Diversified is continuously evaluating and actively deploying new technologies to achieve its stated emission reduction goals. With respect to these technologies, Diversified has partnered with Heath Consultants to field test the equipment during development phase, and is pleased to lead the industry as the first to purchase and deploy such equipment across its upstream and midstream operations in Appalachia and the Central Region.

This innovative equipment complements the Company’s existing emission detection devices and well management initiatives, and is funded by Diversified’s $15 million commitment announced during its November 2021 Capital Markets Day.

Rusty Hutson, Jr., CEO of the Company, commented:

“Our investment into advanced and innovative emissions measurement technology advances our efforts to reduce our methane emissions by 30% by 2026 from 2020 levels on the way to net-zero greenhouse gas emissions by 2040. Adding this technology to the aerial surveillance and handheld detection devices we’ve placed in the hands of our skilled well tenders further enhances our ability to proactively detect, accurately measure and repair fugitive emissions across our asset base. We are proud to demonstrate our leadership in the industry with yet another important milestone that supports our fugitive emission reduction initiatives. Diversified remains committed to the continuous improvement of our environmental performance and to outpacing the expectations of our stakeholders.”

This needs little for me to add, since the commitment to net-zero greenhouse gas emissions by 2040 DEC has continued to use all possible tools to eliminate these problems. By bringing in specialist consultants with best-in-class kit and treating the problem with the importance and sensitivity that  it deserves mean that DEC itself will be the standard bearer in an industry where before long these things will be the norm. 

Union Jack Oil/Egdon

Egdon has advised that further to the announcement of 25 January 2022, it has submitted an appeal against the refusal of planning permission by Lincolnshire County Council for a side-track drilling operation, associated testing and long-term oil production at the Biscathorpe site, held under licence PEDL253.

Egdon is operator of PEDL253 and holds a 35.8% interest in the licence and Union Jack holds a 45% economic interest.

The appeal documentation was submitted to the Planning Inspectorate  on 12 April 2022.  The appeal will now be validated by PINS before an Inspector is appointed and a timetable is defined.  The expectation is that the appeal will be decided under the written representations procedure, a process where PINS will consider written evidence from the appellant, the local planning authority and anyone else who has an interest in the appeal.

What can I say, surely if it were ever important to approve such an appeal it will be now, obviously with all the necessary health and safety concerns have been addressed if it is to be ok’d? 

With the change in approach by the UK Government in recent weeks and the value attributed to domestically produced hydrocarbons to the UK economy provided all the HSE boxes are ticked then it would be strange not to approve the planning permission at Biscathorpe? 

Empyrean Energy

Empyrean has provided the following update on drilling commencement on the Jade prospect at its 100% owned Block 29/11 permit, offshore China:

HIGHLIGHTS

·      LH 17-2-1 well at the Jade prospect drilled 17-1/2″ section to 1056 metres Measured Depth

·      Current operations are installation of the 13-3/8″ casing

·      Once the 13-3/8″ casing is set the Blow Out Preventer (“BOP”) will be installed and tested before drilling ahead to the next casing point at 2140 metres Measured Depth

Empyrean is the operator of Block 29/11 in China and has 100% working interest during the exploration phase. In the event of a commercial discovery, its partner, China National Offshore Oil Company (“CNOOC”), may assume a 51% participating interest in the development and production phase.

Progress

The NH9 Semisubmersible drilling rig made excellent progress at LH 17-2-1 with the drilling of the

17-1/2″ hole down to 1056 metres Measured Depth (“MD”), and current operations are preparation for running 13-3/8″ casing.

Forward plan

Following the setting of the 13-3/8″ casing, the 12 -1/4″ hole will be drilled down to 2140 metres MD.

After setting the 9 ⅝” casing, the rig will drill ahead in the 8 ½” hole section through to Total Depth at 2860 metres MD.

Well Objective

The 2021 drilling campaign is targeting a world class conventional oil target in the Jade Prospect, to which Gaffney Cline & Associates assigned a Geological Chance of Success (“GCoS”) of 32%. Subsequent to this independent assessment, the Company completed a gas cloud study and post stack seismic inversion study that it believes further mitigates risk and increases the GCoS to 41%.

The Jade Prospect has a GCA audited mean in place potential of 225 MMbbl and a P10 in place upside of 395 MMbbl. Four recent nearby discoveries by CNOOC immediately to the West of the Jade Prospect are filled to their P10 potential or better. All four CNOOC discoveries have gas clouds showing in the overburden on seismic.

Empyrean’s excellent quality 3D seismic indicates that there is a classic “fill to spill” geological setup in the basin, and a robust regional seal, that provides the Jade and Topaz Prospects with a very real possibility of being filled in a similar fashion to nearby discoveries. The Jade and Topaz prospects both have gas clouds, similar to nearby discoveries, in the overburden on 3D seismic. Dry wells nearby do not have gas clouds. The Jade Prospect is the first of the three identified prospects within Block 29/11, which also contains the Topaz and Pearl prospects. The combined audited mean in place potential of all three prospects is 884 MMbbl and a P10 in place upside of 1,588 MMbbl. The post stack seismic inversion study showed Jade and Topaz both have the potential for excellent carbonate build-up reservoir quality with excellent porosity and permeability. Any oil discovered is expected to be light oil in the 38-41 API range, similar to nearby discoveries. These attributes combined with the potential for exceptional natural reservoir drive supports the potential for excellent recovery rates.

The objective of the Jade well is to test for hydrocarbons down to TD of 2860 metres MD.

The information contained in this announcement has been reviewed by Empyrean’s Executive Technical director, Gaz Bisht, who has over 31 years’ experience as a hydrocarbon geologist and geoscientist.

Empyrean CEO, Tom Kelly, stated:

“Drilling operations continue to run smoothly and safely, with progress to date right on schedule”.

Drilling updates pretty regularly from Empyrean on their flagship right now as the Jade well is drilling. I won’t embarrass them by trying to second guess anything…

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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