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CAMBAY FIELD, ONSHORE GUJARAT, INDIA
» Gujarat State Petroleum Corporation (GSPC) has agreed to sell its 55% participating interest (PI) in the Cambay PSC to Oilex for the purchase price of US$2.2 million. A binding sale and purchase agreement has been signed and payment via a bank guarantee in favour of GSPC is being arranged. Following Government of India (GoI) approval, which is expected in the coming months, Oilex will hold a 100% participating interest in Cambay.
» The GoI and GSPC have approved the Cambay PSC Work Program and Budget (WP&B) for Indian financial year (April 2021 to March 2022). The program, which is subject to securing the necessary financing, includes an appraisal/development drilling program, and the restart of low-rate production at the currently shut-in Cambay production facility.
EAST IRISH SEA, UNITED KINGDOM CONTINENTAL SHELF
» Oilex holds a 100% participating interest in the Doyle-Peel exploration licence (P2446) in the East Irish Sea (EIS), offshore the United Kingdom. Technical studies are underway ahead of a licence stipulated drill or drop decision due before September 2021 – in this regard, the Company has requested the UK regulator to approve a 12 month extension to the license and the associated drill or drop deadline.
WEST KAMPAR, INDONESIA
» Progress continues to be made towards the Company’s strategic objective to regain a participating interest in the West Kampar PSC in Indonesia, which is expected to lead, subject to financing, to recommencing production from the Pendalian Oilfield.
BHANDUT FIELD, ONSHORE GUJARAT, INDIA
» During the Quarter the Company announced the sale of its PI in the Bhandut PSC was completed.
CORPORATE
» On 16 June, the Company announced the appointment of Roland Wessel as CEO, and subsequent to the quarter end, on 1 July 2021 Colin Judd was appointed to the position of CFO. Joe Salomon, Managing Director, assumed the position of Executive Chairman.
» On 8 June, the Company held its General Meeting of Shareholders, all resolutions put to the General Meeting were decided by a poll with all resolutions passed.
» Cash resources at 30 June 2021 were A$4.31 million, including the US$2.2 million reserved for the Cambay PSC purchase consideration.
MANAGING DIRECTOR’S REPORT TO SHAREHOLDERS FOR THE QUARTER
OVERVIEW
The Company’s primary objective is to maximise shareholder value from its principal asset in the Cambay Basin, located onshore Gujarat State in India, whilst also continuing to review other opportunities to create value and diversify risk by adding new assets to the Company’s project portfolio which have to date focussed on the Cooper-Eromanga Basins in Australia (now sold to Armour Energy Limited), Indonesia and the United Kingdom Continental Shelf (UKCS).
To that extent, Oilex continues to evaluate and implement a range of technical programme options to progress its main objective of accessing the significant gas resource potential present in siltstones in the EP-IV reservoir at the Company’s Cambay PSC. North American unconventional drilling, completion, and stimulation technologies have been applied by the Cambay JV over the last six years with positive but commercially modest results and work is underway to optimise results for future work programmes. The current work programmes are focused on:
· Finalising the purchase of GSPC’s 55% PI in the Cambay PSC , and to potentially further develop the asset with a new partner, or on a sole basis;
· Preparing detailed work programmes, including new wells for implementation under the approved Field Development Plan (FDP);
· Arranging the necessary funding to implement the planned work programme; and
· Evaluating the Company’s new ventures in the UKCS and interests in Asia.
HEALTH, SAFETY, SECURITY AND ENVIRONMENT
All work was undertaken safely, without environmental incident and in accordance with COVID-19 related protocols during the quarter.
CAMBAY FIELD, GUJARAT, INDIA
(Oilex: Operator and 45% interest)
Oilex holds a 45% PI in the Cambay Field, with GSPC holding the remaining 55% PI, pending its purchase by Oilex. The Company’s plans at Cambay are well advanced and include the drilling of up to two vertical wells, subject to, inter alia, securing the necessary funding.
The priority will be to implement the drilling and stimulation recommendations from the Baker Hughes-GE study in the EP-IV zone where a gas accumulation is confirmed by historical flow tests and up until recently, low-rate cyclic production from two wells from the same reservoir section. Any early production will utilise the existing processing and storage facilities, which will be upgraded as required to provide a low-cost path to commercialisation. Assuming success, a more extensive drilling programme will follow, with the aim of aggregating sufficient production volumes to connect to the high-pressure pipelines which would offer greater offtake stability and improved gas prices.
The re-commencement of field operations is, amongst other matters, dependent on finalisation of the purchase of GSPC’s 55% PI which is currently being finalised. Furthermore, u pon the removal of the applicable Covid-19 restrictions in India, the Company will review the planned work programme and update the market at that time.
Following a submission by the Oilex team in India, the Indian regulator (DGH) has recommended Cambay Eocene to ER committee for incentive under ER policy. Further information will be provided as the committee considers this.
GSPC Divestment Process for Cambay PSC
During the Quarter, the Company announced that GSPC had provided notification that GSPC and the State Government of Gujarat had approved the sale of its 55% PI in the Cambay PSC to Oilex for the purchase price of US$2.2 million (‘Purchase Price’) (the ‘Transaction’). Following completion of the Transaction, Oilex will hold a 100% PI in the Cambay PSC.
The completion and transfer of GSPC’s PI to Oilex is subject to the approval of the GoI. The GoI has been kept appropriately informed at all stages of discussions with the aim of securing approvals for the PI transfer in a favourable time frame. It is expected this approval will be forthcoming in the coming months.
Oilex will benefit through receipt of GSPC’s share of the historic cost recovery pool, the total (100%) being approximately US$125 million. Oilex also expects to assume GSPC’s US$2.8 million share of the historic abandonment liabilities.
Environmental Clearance
The Company is presently in the final stages of obtaining a new environmental clearance from the Ministry of Environment and Forest and Cabinet Committee to supersede the previous clearances already obtained under the previous regulatory requirements. The clearances are necessary to recommence production at Cambay and in support of the planned drilling programme at Cambay. Presently, an Environmental Impact Assessment has been prepared by the Company’s independent consultants and is pending submission to the applicable authorities and following public hearings. The public hearings are delayed due to the continued effect of Covid-19.
Following receipt of the necessary environmental clearances, production from well C-73 and C-77H are on standby for re-commencement.
BHANDUT FIELD, GUJARAT, INDIA
(Oilex: Operator and 40% interest)
The sale of the Company’s 40% PI in the Bhandut Production Sharing Contract (Bhandut PSC) was completed during the quarter following the receipt of US$290,000 from the buyer Kiri and Company Logistics Private Limited (Kiri).
Joint Venture Management
During the quarter, Oilex received a payment of US$27,575 towards outstanding cash calls from its Joint Venture partner.
COOPER-EROMANGA BASINS
Divestment of Cooper Eromanga Basin Assets
Oilex holds approximately 17 million shares in Armour Energy (AJQ) received as part of the sale proceeds for Oilex’s Cooper Basin asset package. As at 26 July, these had a market value of approximately A$528,000.
UNITED KINGDOM CONTINENTAL SHELF
East Irish Sea Licence P2446 (UK jurisdiction) (Oilex: Operator and 40% interest)
Blocks 113/22a (Doyle) and 113/27e (Doyle and Peel) have been merged into a single licence being P2446. Block 113/22a was awarded in the UK Offshore 31st licensing round whereas block 113/27e was awarded in the 30th round.
P2446 provides an attractive entry into a proven gas fairway in the centre of the East Irish Sea Basin. The licence is in shallow water near existing infrastructure reducing the complexity, risk and cost of development. The EIS is a prolific basin which has produced around 8 TCF of gas to date with considerable existing gas production, gathering, processing and transportation infrastructure. The depth to the target reservoirs is less than 2,000 metres thus providing modest drilling costs.
Project Overview
The license lies on the west dipping graben edge of the Tynwald Fault Zone on the structural trend with the Rhyl and North Morecambe producing gas fields. Historical production from the primary Triassic Ormskirk reservoirs on this trend show excellent deliverability characteristics with a very effective seal in the overlying evaporites and mudstones of the Mercia Mudstone group which attains a thickness in excess of 1,000m across the basin. Gas charge comes from the Carboniferous Coal Measures which underlie much of the basin. A secondary reservoir-seal pair is provided by the Permian Collyhurst sandstone and overlying evaporites.
Two prospects named Doyle and Peel are tilted fault blocks closed on the up dip east side by the north-south trending boundary fault of the Tynwald Fault Zone, which juxtaposes the reservoir against the Mercia Mudstone salts and shales forming a very effective cross fault seal. There is a clearly defined east-west fault bounding the southern extent enhanced by igneous dykes providing the seal mechanism. The prospects both display seismic amplitude responses with similarities to the surrounding fields.
The commitment work program has been completed by undertaking a rock physics study, reprocessing of 3D seismic data, and obtaining 2,500 kms Aeromagnetic data. Technical studies of the magnetics and gravity and the 3D seismic data are nearing completion. The seismic data has been processed using a process called Seisnetics which is an artificial intelligence pre-interpretation reprocessing exercise. While the current term expires with a drill or drop decision before September 2021, a request has been placed with the UK regulator for a 12 month extension to the current year which if granted, moves the licence term out to September 2022.
JPDA 06-103, TIMOR SEA
(Oilex: PSC Terminated 15 July 2015 – Operator and 10% interest)
In August 2020, on behalf of its Joint Venture Participants, Oilex announced a Deed of Settlement and Release (Deed) with the Autoridade Nacional Do Petroleo E Minerais (ANPM).
Under the terms of the Deed, Oilex has committed to a settlement of US$800,000 payable up to financial year 2024. A total of $US$211,843 has been paid to date, including US$123,627 settled during the quarter. Under an unsecured loan facility agreement that the Company has entered into with two of its joint venture partners, the balance of US$588,157 is due for settlement prior to 17 August 2023.
WEST KAMPAR PSC, CENTRAL SUMATRA, INDONESIA
During the quarter, the Company continued with its strategic objective to regain a participating interest in the West Kampar PSC in Indonesia, which is expected to lead, subject to financing, to recommencing production from the Pendalian Oilfield.
The Government of Indonesia (GoI) has advised that our Proposed Direct Bid, through the Joint Study of the West Kampar Region, is declared administratively complete and has recorded it as a proposal for a Direct Offer through a Joint Study as stipulated in ESDM Regulation No. 35 of 2008.
This confirmation from the GoI, which is exclusive to Oilex, provides a pathway to progress the proposed development of West Kampar and provides certain preferential rights in the award of the West Kampar PSC by the GoI. Oilex’s interest in the study and ultimate potential award of the PSC will be on a 50-50 joint basis with its local Indonesian partner, PT Ephindo.
Technical work carried out by Oilex and its advisors estimate that the field can be quickly brought back online at 350 to 400 bopd and that significant additional production potential may be possible from infill drilling and also water injection support. The return to production will require careful execution in the field given that it has been shut in since 2016. The oil occurs in five good quality, stacked reservoirs with some stratigraphic complexity, and the application of 3D seismic data which has been acquired but not interpreted should provide a significant improvement in the understanding of the reservoir distribution and future development planning. Access to the data is to be negotiated with the seismic company that acquired it. The oil is of good quality with no or little gas. It is believed that previous production costs can be reduced. A number of exploration opportunities are present both close to the Pendalian field and in the more distant parts of the block, these require further review evaluation.
CORPORATE AND FINANCIAL
Board Changes
On 16 June 2021, the Company announced the appointment of Roland Wessel as Chief Executive Officer and as a Director of the Company.
Joe Salomon, the outgoing Managing Director and interim Chairman, has assumed the position of Executive Chairman for an interim period before moving to a Non-Executive Chairman role, concurrent to Roland Wessel’s appointment.
Following the end of the quarter Colin Judd was appointed to the position of CFO. Refer ASX/AIM Announcements dated 16 June 2021 and 5 July 2021 for further details on Roland Wessel and Colin Judd. Mark Bolton, the outgoing CFO, will continue as a Non-Executive Director and Company Secretary of Oilex.
The new appointments have strengthened Oilex’s board and management as it applies a focus on natural gas preparing for the next phase of drilling in Cambay and the capture of further opportunities in the UK. Given the current energy transition the Company will aim to be carbon-neutral with carbon capture and storage being one future area of focus. The strategy includes enhancing access to the Company’s UK/European based shareholder base.
Capital Raising
(1) On 7 April 2021, the Company issued 234,348,086 Shares pursuant to the exercise of unlisted options, with exercise prices ranging from £0.0008 to £0.0011 for conversion proceeds of £265,125. The proceeds from the unlisted options were applied to the repayment of the Series D Loan and the Company’s working capital requirements.
(2) On 14 May 2021 and 22 June 2021, the Company issued 1,882,398 and 19,918,844 Shares respectively as consideration in lieu of Non-Executive Directors’ fees, approved by shareholders on 16 December 2020 and 8 June 2021 respectively.
(3) During May and June 2021, the Company undertook an equity capital raising of totalling £2.4 million (A$4.3 million) in two tranches, resulting in the issue of 405 million fully paid ordinary shares for Tranche 1 and 603,403,361 fully paid ordinary shares for Tranche 2 of the capital raise. In addition, each fully Share issued as part of Tranche 2 was also issued with an option, resulting in the issue of an aggregate of 603,403,361 options. The options are exercisable at £0.00476 each, on or before 30 June 2022. The issue of the options was approved by shareholders at the Company’s General Meeting held on 8 June 2021.
Payments Made to Related Parties and Their Associates
The attached Appendix 5B includes an amount of A$136k in items 6.1 and 6.2 (total) which constitutes payments to director for salaries, consultancy fees and superannuation.
General Meeting of Shareholders
On the 8th of June 2021, the Company held its General Meeting of Shareholders. All resolutions put to the General Meeting were decided by a poll with all resolutions passed.
FINANCIAL
The Series D loan funding facility (GBP £ 185,000) was fully repaid in April 2021.
At 30 June 2021, Oilex retained cash resources of A$4.31 million. The Company has no debt.
Capital Structure
The shares and options on issue as at 30 June 2021 were as follows:
Ordinary Shares
5,685,971,571
Unlisted Options (Exercise Price, Expiry):
£ 0.00476, 30/06/2022
603,403,361
Qualified Petroleum Reserves and Resources Evaluator Statement
Pursuant to the requirements of Chapter 5 of the ASX Listing Rules, the information in this report relating to petroleum reserves and resources is based on and fairly represents information and supporting documentation prepared by or under the supervision of Mr Joe Salomon, Executive Chairman employed by Oilex Ltd. Mr Salomon has over 32 years’ experience in petroleum geology and is a member of the Society of Petroleum Engineers and AAPG. Mr Salomon meets the requirements of a qualified petroleum reserve and resource evaluator under Chapter 5 of the ASX Listing Rules and consents to the inclusion of this information in this report in the form and context in which it appears. Mr Salomon also meets the requirements of a qualified person under the AIM Note for Mining, Oil and Gas Companies, and consents to the inclusion of this information in this report in the form and context in which it appears.
Board of Directors
Roland Wessel, CEO
Paul Haywood, Non-Executive Director
Joe Salomon, Executive Chairman
Peter Schwarz, Non-Executive Director
Mark Bolton, Non-Executive Director
(1) Oilex has signed a binding agreement to acquire GSPC’s 55% equity and the purchase price is being arranged by Oilex under a bank guarantee. Following GoI approval Oilex will hold 100% equity.
(2) Bhandut PSC has been sold to and Kiri and Company Logistics Private Limited.
(3) PSC terminated 15 July 2015.
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