Malcy’s Flash Blog – Oil price, Zephyr, Longboat, President/Atome, Lamprell, Arrow, Zenith & finally

WTI $83.76 +$1.26, Brent $85.53 +92c, Diff -$1.77 -34c, NG $5.28 +16c, UKNG 232.89p +9.15p

By Malcolm Graham-Wood

Oil price

Oil is modestly better again this morning after last  week’s positive run in which WTI was up $1.48 and Brent rose by 67 cents. The oil market is not seeing any problems right now and is shaking off problems in China and some mixed inventory numbers. Drawing down SPR’s is no long term answer and people are grasping on the straws of the weather to determine the oil price this winter.

Last week I mentioned that the Baker Hughes rig count might prove good for US domestic production as it had been rising slowly for many weeks but as soon as I said that last week’s numbers on Friday registered a fall of 1 rig overall to 542 and down by 2 in oil to 443 units. The easy meat of DUC’s appears to be only any good short term and it looks like US E&P companies are still not being encouraged to open up the spigots.

Zephyr Energy

Zephyr has provided an update on activity at its flagship project in the Paradox Basin, Utah  where it recently drilled the State 16-2LN-CC well. Further to its announcement on 15 October 2021, Zephyr announces that the State 16-2LN-CC well has now been successfully and safely completed via hydraulic stimulation in the Cane Creek reservoir.
 

 
The well was stimulated in fourteen separate stages across 4,020 feet of horizontal lateral wellbore. The stimulation utilised a total of 40,000 barrels of water, 2.4 million pounds of sand and a cross linked gel fluid, all in line with pre-completion forecasts.

Production testing operations will commence later today.  As an initial step, cement plugs placed between stages will be drilled out, allowing for well clean up and the flow back of stimulation fluids. The Company will provide information on initial production test results after the well cleans up and when an adequate amount of data has been obtained, details of which the Company expects over the next few weeks.

Colin Harrington, Zephyr’s Chief Executive said:

I’m delighted by how smoothly the well completion operation progressed, and I’d like to congratulate our technical team and contractors on their excellent work in effectively managing both the operational challenge and the significant logistics involved. As this was the first modern horizontal stimulation carried out in this part of the Paradox Basin, a huge amount of preparation went into planning this completion, so I’m equally happy to report that the operations unfolded directly in line with our expectations.”

“We are now able to commence the production test.  I very much look forward to keeping the market updated as soon as the well cleans up and production volumes become apparent – information which we expect to obtain over the next few weeks.”

Zephyr go from strength to strength and appears to be handling difficult operations with some ease. Investors will be excited and optimistic as the production test is about to start which hopefully will take the Paradox Basin to the next stage of growth which I am confident will be successful but we must wait for the next few days for confirmation.

Longboat Energy

Longboat has announced a ‘material discovery’ at the Egyptian Vulture exploration well in PL939 (Company 15%), the second well in its fully-funded, seven well exploration programme. The exploration well 6407/1-9 in the Norwegian Sea encountered light oil in the primary target in the Lower Cretaceous (Cenomanian) Intra-Lange Formation. The top of the reservoir was reached close to prognosis at a vertical depth of 3,684 metres below sea level with 13 metres net sand in a 37 metre oil filled gross interval. The upper part of the Lange sand interval has a high net to gross ratio and porosities in the order of 16 percent. An extensive programme of data acquisition and sampling has been carried out and the preliminary analysis of the oil sample indicates a very light oil. The oil-water contact was not encountered.

The operator’s preliminary estimate of recoverable resources in the Egyptian Vulture discovery is 19 to 63 MMboe (gross) and the oil-in-place volume has been estimated at 220 to 440 MMboe (gross).  Conservative recovery factors have been applied by the operator in calculating these preliminary resource estimates and further appraisal will be required to understand the flow potential of the reservoir and future development wells. This could significantly increase the resource estimate for this laterally extensive discovery measuring approximately 80 km2 as defined by the seismic amplitude anomaly.

Egyptian Vulture sits in an area of significant infrastructure and export opportunities both for oil and gas. The well was drilled 20 km from the Åsgard field and 23 km from the Kristin field, both of which are also operated by Equinor and which offer development options for Egyptian Vulture.

Helge Hammer, Chief Executive of Longboat, commented: 

“We are very pleased to have made a material light oil discovery in our second exploration well, Egyptian Vulture, following the Rodhette discovery announced only two weeks ago. The large areal extent and oil-in-place volume range demonstrates the very significant upside potential of this exciting discovery. We now look forward to working with the operator to mature the forward appraisal plan for Egyptian Vulture.

Egyptian Vulture is the second well in our seven well drilling programme with the third well, the Aker BP operated Mugnetind exploration well in the Southern North Sea, also well underway. The fourth well in the programme, Ginny/Hermine, is also anticipated to spud before year end.”

As I suggested in my last comment on LBE it looks as if the company has assembled quite a rich package of wells to drill as this, the second well, comes in, this time looking like a potentially very substantial discovery and of light oil. With operator Equinor being a naturally cautious beast I think LBE investors can read lots of upside into CEO Helge Hammer’s remarks. With plenty of exploration, appraisal and now potentially development, Longboat has started life as it means to carry on and surely will at a very minimum test the 100p issue price and then some more.

President Energy/Atome

President has noted the public announcement made today by Atome Energy, its green hydrogen and ammonia production company. ‘Steps continue to be made with regard to the spin-out of ATOME from the Company and the intended separate flotation of ATOME on the AIM market of the London Stock Exchange’. It is expected that
further announcements will be made during the course of November both in respect of ATOME and
also the referred to dividend in specie in respect of President’s shares in ATOME.

Atome is an international company, headquartered in Leeds, UK, targeting the multi-trillion-dollar potential of green hydrogen and ammonia with the objective of commencing first phase production by end 2023. It has two geographically spread projects ramping up to 350MW capacity mid decade.
ATOME to be spun-out from President which has incubated and financially supported ATOME to date and prior to flotation intends that President’s entire institutional and private client shareholder base of circa 600 investors will become shareholders in ATOME by way of a dividend ‘in specie’.

ATOME’s planned large-scale 350MW projects are situated in Iceland and Paraguay, both countries having available baseload green generated electricity on tap 24/7. Key MOUs and Co-operation Agreements are already in place with Power Purchase Agreement discussions advancing.
Other preparations include the green credentials for main Board of Directors with local management and subsidiaries in place and ATOME can access President’s proven engineering and infrastructure expertise.

President believes that strong government support is available in its project areas with existing supply of baseload green electricity (hydro and geothermal) 24/7 coupled with a supportive fiscal environment. Land and water resources identified, and in-principle procured near originating power sources (low transmission costs) with access to transportation.
It has available domestic-end markets with export potential in EU and Mercosur countries and ATOME is technologically agnostic, and can take advantage of improved technology and lower equipment prices in the future as more equipment suppliers come on the scene.

Peter Levine, Chairman, commented:

“The significant steps being taken with ATOME is just one of the group’s workstreams which include the day to day running of our production business, the progressing to a conclusion of the farm-out in Paraguay and the drilling of a minimum of three new oil wells in Salta Province, Argentina.
“Mindful of the need not to drop any of the balls currently in the air, with our work teams we maintain focus and ensure each of them will be brought to a successful conclusion.
“In relation to ATOME, this is a very exciting company with projects having special advantages benefiting from experience and in country management. We believe that in what we are doing we have a venture which in material ways sets us apart from the rushing herd in hydrogen and ammonia and is a real value creator. I commend investors to consider the announcement made by ATOME and stand by for further announcements in due course”

To say that President has a number of balls in the air is indeed an understatement but if anyone can handle them all it is Peter Levine. I have said for a long time that the core business is significantly undervalued but whilst my expertise doesnt run to hydrogen I know a potential disrupter when I see one and if Jim Ratcliffe is putting money down it’s good with me.

Lamprell

Lamprell has announced that its oil & gas business unit has been awarded a major rig conversion contract from BW Energy (BWE). This medium-sized project (deemed to be between $6m-50m) will commence immediately and is scheduled for completion in 2022.  The scope of work involves the conversion of BWE’s Hibiscus Alpha jack-up rig into an offshore production facility.

Commenting on the award, Chief Executive Christopher McDonald said:

“We are honoured to have been selected by BW Energy for this major rig conversion. Lamprell offers many decades of experience executing such work scopes and we look forward to working with our client to deliver a first-class asset safely over the coming months.”

I have said many times that I like Lamprell, it is an excellent operational and engineer, one of the best in its field. It can have a somewhat lumpy order book and the cash flow is a truly feast or famine one. Right now I think it is in pretty good position and once it sorts out the balance sheet I think we are in an upswing and shareholders will be pleasantly rewarded.

Arrow Exploration

‘Arrow Exploration Corp. (AIM: AXL ; TSXV: AXL), the high-growth operator with a portfolio of assets across key Colombian hydrocarbon basins, is pleased to announce the admission of its entire issued and to be issued share capital to trading on the AIM market of the London Stock Exchange plc (“Admission”), in conjunction with a fundraising of approximately £8.8 million (C$15.0 million)’.  

Admission will take place, and dealings in its common shares of nil par value (“Common Shares”) on AIM will commence, at 08:00 a.m. today under the TIDM “AXL” and ISIN code CA04274P1053.

AS readers know I dont write up companies that I have not met and all being well I am catching up with them this afternoon so may be able to comment before long.

Zenith Energy

Zenith has announced that the workover of the Robbana-1 well (“ROB-1”), located within the Robbana concession in Tunisia has been successfully completed.  As announced on October 12, 2021, prior to the commencement of workover operations by Zenith, ROB-1 had not undergone any form of work since 2012, at which time an unsuccessful well intervention had been performed and the well was producing approximately 20 BOPD.

During the course of the workover, significant deposits of paraffin and wax were encountered plugging many of the lower perforations. These have now been cleared by way of reverse circulation of fluid. The wellbore of ROB-1 was cleaned out to the total depth of 2,225 metres and scraping of the casing, which was found to have good integrity, was performed. Once this work was finalised, a new tubing anchor and sucker rod pump supplied by Weatherford were installed. It was discovered that the previous sucker rod pump was functioning at only 20% capacity and that the well did not have a tubing hanger installed, in contradiction of the 2012 well report.

The Company can now confirm that a Weatherford team has successfully installed a new sucker rod pump in ROB-1, which has been tested on surface and adjusted. A period of 36-72 hours is now required to pump out the well killing fluid and water emulsion from the wellbore before oil production will begin to be received.

 Andrea Cattaneo, Chief Executive Officer of Zenith, commented:

 “We are very pleased with the successful outcome of the ROB-1 workover which has been our inaugural operational engagement in Tunisia. Our team successfully executed the workover and garnered significant insight into the potentially very material upside potential of the Robbana concession.

Third party geophysical analysis suggests that the Robbana concession has potentially only produced 5-10% of its reserves potential to date. We intend to report flow rates from ROB-1 shortly, once they have stabilised, and we remain cautiously optimistic about the relatively sizeable production uplift we may be able to achieve from ROB-1 against a backdrop of a highly favourable oil price environment.”

Whilst this is still early days for Zenith at Robbana it looks pretty promising and Tunisia may well be a good place for them to be operating. It is a while since I have properly looked at the company and it has been through a number of transformations since I last had any significant involvement. I think it is probably time to catch up with Andrea and hear the up to date story, a meeting I am getting in the diary. 

And finally…

What can be said about the Prem from the weekend except that Solskjaer must go, indeed as I write this at lunchtime the only surprise is that he is still there. So, wins for Chelsea with 7 Up against the Canaries and the Noisy Neighbours joining Liverpool and the Hammers who beat Spurs in the top 4 of the table.

I have always loved jump racing but the time has come for it to get its house in order. This is no time for trainers celebrating dead horses or women jockeys being mentally and physically bullied going about their business, where were the senior pros when this was going on?

The cricket T20 World Cup is under way for real and whilst Australia just held off South Africa whilst England crushed the Windies. Also under the cosh were India who lost by 10 wickets to Pakistan yesterday whilst Sri Lanka came back against the Bangas. Today Scotland are playing Afghanistan.

Much better news than expected from the cricket world where Ben Stokes announced that he was fit again and is joining the Ashes party for the winter down under.

Another great GP, this time Max held off Lewis right at the end in Austin Texas, the next two are at altitude which apparently benefits Red Bull.

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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