Oilex Ltd (OEX.ASX.L) September 2021 Quarterly Report

CAMBAY FIELD, ONSHORE GUJARAT, INDIA

» The Company is focussing on re-establishing a field program including a re-frac of the existing C-77H well to increase production and to develop a reliable fraccing methodology that can be applied to future wells. In this respect the Company is planning two new horizontal wells (C-78H and C-79H), subject to securing the necessary funding, for H2 2022 and has issued a Request for Quotation for well management services for the execution. Funding requirements may be mitigated by a successful farm out on the Cambay PSC.

» Government of India approval for the transfer of the 55% interest in Cambay which the Company purchased from GSPC is expected in the coming months, following which Oilex will hold a 100% participating interest in Cambay.

EAST IRISH SEA, UNITED KINGDOM CONTINENTAL SHELF
» During the Quarter, the Company relinquished its UK P2446 exploration licence, which incorporated the Doyle and Peel structures in the UK East Irish Sea.

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, subject to financing, is expected to lead to recommencing production from the Pendalian Oilfield.

UNITED KINGDOM CONTINENTAL SHELF CCS
» The Company has made an application via the OGA’s nomination process for Carbon Capture and Storage (“CCS”) on two UKCS depleted gas fields, Esmond and Forbes

CORPORATE
» Cash resources at 30 September 2021 were A$0.78 million.

» In accordance with ASX Listing Rule 3.13.1, the Company advised that the Annual General Meeting (“AGM”) of the Company will be held on Friday, 26 November 2021. A Notice of Meeting for the AGM is being prepared by the Company and will be announced to ASX and provided to Shareholders by the end of October 2021.

» During the Quarter the Company advised that it is establishing an opt-out unmarketable parcel sale facility (“Facility”) for shareholders on the ASX register who hold less than A$500 worth of fully paid ordinary shares in the Company (“Unmarketable Parcel”). The ASX Listing Rules define an Unmarketable Parcel as those with a market value of less than A$500. The Facility will only be available to shareholders who hold their shares on ASX, and not AIM Depository Interest holders.

» The Report is for the period 1 July 2021 to 30 September 2021 (“Quarter”)

CHIEF EXECUTIVE OFFICER’S REPORT TO SHAREHOLDERS FOR THE QUARTER

OVERVIEW
Following a strategy review, Oilex Ltd (“Oilex” or the “Company”) is currently focused on developing its current primary asset in the Cambay Basin, India, and applying to acquire mature gas producing assets and instigate carbon capture and storage (“CCS”) projects in the UK. The focus of the Company will be centred on gas production and CCS with a view to becoming a carbon-neutral gas producer.

The Company elected to relinquish its P2446 exploration licence in the East Irish Sea, UK since this exploration licence did not fit with the Company’s strategy, which will now be directed at acquiring existing mature gas filed production in conjunction with CCS projects.

The Company aims to restart gas production cycling between two existing production wells in its Cambay PSC in the near future. The agreement to purchase the Gujarat State Petroleum Company’s 55% participating interest in the Cambay Production Sharing Contract has enabled it to accelerate field development of the Cambay field’s c.930 BCF gas resources. Oilex plans to re-frac the existing C-77H well to demonstrate a reliable fraccing methodology for two new wells planned for H2 2022, subject to securing the necessary funding. The Company will also seek to identify a new joint venture partner for the Cambay PSC in order to mitigate the funding requirement.

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 100% interest pending Government of India ratification)

Oilex currently holds a 45% PI in the Cambay Field, which will increase to 100% PI once the Government of India ratifies the GSPC acquisition. The bank guarantee of US$2.2 million (in favour of GSPC) to secure the acquisition was arranged during the Quarter, decreasing the Company’s cash balance.

The Cambay field development is centred on the successful exploitation of the gas resources held in the Eocene EP-IV reservoir which extends across the field and has been penetrated by over 30 wells. The EP-IV reservoir comprises low permeability (“tight”) siltstones and requires frac stimulation to provide economic gas production rates.

Whereas two horizontal wells (C-76H in 2011 and C-77H in 2014) were successfully and efficiently drilled to total depth in the EP-IV reservoir, the fraccing and completion of the wells were disappointing. In advance of drilling two new horizontal wells, the Company has decided to re-frac the existing C-77H well to not only increase production but to also develop a reliable fraccing methodology that can be applied to future wells. C-77H had initial production levels of up to 1.0 mmscfd. The Company believes that a successful re-frac stimulation will increase production levels by 3 to 5 times.

The development of well programs for two new horizontal wells (C-78H and C-79H) is at an advanced stage and the Company has issued a Request for Quotation for well management services for the execution of the two new wells which is planned, subject to securing the necessary funding, for H2 2022. Funding requirements may be mitigated by a successful farm out on the Cambay PSC.

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 and carry out future development activities at Cambay. Following receipt of the necessary environmental clearances, production from wells C-73 and C-77H are on standby for re-commencement.

An Environmental Impact Assessment has been prepared by the Company’s independent consultants and has been submitted to the applicable authorities. Public hearings are scheduled for the end of October 2021. The environmental permit will be required for the drilling of C-78H and C-79H.

Joint Venture Management

During the Quarter, Oilex received a payment of US$543k towards outstanding cash calls from its Joint Venture partner.

UNITED KINGDOM CONTINENTAL SHELF
East Irish Sea Licence P2446 (UK jurisdiction)

During the Quarter, following an unsuccessful request to the UK Oil and Gas Authority to extend the initial term of the P2446 exploration licence, the Company relinquished its UK P2446 exploration licence. The extension was requested due to COVID-19 related delays in completing the initial phase work programme. The remaining technical uncertainties and the Company’s new strategy to focus on mature gas field acquisitions and CCS opportunities were the main drivers behind the Company’s decision.

Acquisition of Mature Gas Field Assets

During the Quarter, the Company commenced its search for mature gas assets that may be suitable for CCS projects in the future.

Carbon Capture and Storage

The Company believes that natural gas will form a vital component of the energy mix for the foreseeable future, however, it also recognises the adverse impact of ongoing CO2 emissions. The Company has significant gas storage credentials and is seeking to exploit that expertise to implement CCS projects, initially in the UK, where there is a mature carbon allowance structure.

To this end, the Company has made an application for a CO2 storage licence on the Esmond and Forbes depleted gas fields in the southern sector of the North Sea via the OGA nomination process. The Esmond field alone has the potential to store greater than 50 million metric tons of CO2.

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 committed to a settlement of US$800k payable up to the financial year 2024. A total of US$50k has been drawn down to date on the US$800k loan facility provided by two of the joint venture partners to fund the settlement, leaving an undrawn balance of US$750k on the loan facility. US$212k has also been credited to the loan facility to date, resulting in a credit on the loan facility of US$162k at quarter end. The balance of US$588k on the loan facility is due for settlement prior to August 2023 (for further details of the loan refer to the “FINANCIAL” section below).

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.

CORPORATE AND FINANCIAL
2021 Annual Report to Shareholders

During the Quarter the Company released its 2021 Annual Report to Shareholders, Corporate Governance Statement and Appendix 4G. The Annual Report can be accessed via the Company website https://www.oilex.com.au/investors/financial-reports.

2021 Annual General Meeting of Shareholders

In accordance with ASX Listing Rule 3.13.1, the Company advised that the Annual General Meeting (“AGM”) of the Company will be held on Friday, 26 November 2021. A Notice of Meeting for the AGM is being prepared by the Company and will be announced to ASX and provided to Shareholders shortly.

Board Changes

On 25 August 2021, the Company announced the appointment of Suzie Foreman as Company Secretary of the Company. Mark Bolton stepped down as Company Secretary and continues as a Non-Executive Director of Oilex.

Unmarketable Parcel Sale Facility for ASX Shareholders

On 7 September 2021, Oilex advised that it is establishing an opt-out unmarketable parcel sale facility (“Facility”) for shareholders on the ASX register who hold less than A$500 worth of fully paid ordinary shares in the Company (“Unmarketable Parcel”). ASX Listing Rules define an Unmarketable Parcel as those with a market value of less than A$500. The Facility will only be available to shareholders who hold their shares on ASX, and not AIM Depository Interest holders.

As at market close on Friday 3 September 2021 (“Record Date”), the closing price of the Company’s shares on ASX was $0.003 and on this basis, an Unmarketable Parcel is less than 166,667 shares.

In accordance with the Company’s Constitution and ASX Listing Rules, all shareholders holding an Unmarketable Parcel of shares as at the Record Date have been informed of the Facility and provided with a Share Retention Form should they decide to opt out of the Facility.

The Company values all of its shareholders, however, it incurs significant administrative costs maintaining such a large number of Unmarketable Parcels. By facilitating this sale, the Company expects to reduce the administrative costs associated with maintaining a large number of very small holdings.

A summary of key dates in relation to the Facility are as follows:

 

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Board of Directors

Roland Wessel

CEO and Director

Joe Salomon

Executive Chairman

Mark Bolton

Non-Executive Director

Paul Haywood

Non-Executive Director

Peter Schwarz

Non-Executive Director


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