Oilman Jim's Letter - 14 April 2024

DNV announced an interesting survey reporting optimism still prevailing in the global energy sector. While rising costs and supply chain disruptions are threatening the viability of many projects, dampening short-term optimism for electrification and renewables with the cost of the energy transition cited as the biggest barrier to meeting Paris Agreement targets, the oil and gas sector is witnessing a resurgence in confidence, reflecting the industry's pivotal role in meeting global energy demand.

Moving on to the week’s company news, Union Jack Oil (UJO.L UJOGF 1UJ0.F) announced a drilling update for the Andrews 1-17. The main objective for this well, the Hunton Limestone, is confirmed to be present and was penetrated at approximately 4,200 feet, showing high porosity and elevated gas readings, with good reservoir quality being interpreted on the wireline logs. The Dan D2 drilling rig has now been demobilised and completion and production testing of the Andrews 1-17 well is scheduled to commence within the next 14 days. Drilling and completion costs have already been paid for from the company's cash resources.

Trillion Energy International (TCF.CN TRLEF Z62.F) announced an operational update for the SASB gas field. The company is starting the SASB revitalization project now as all relevant equipment and supplies for the start of the operations arrive mid-April 2024. A total of 49 metres of new gas pay will be perforated in Guluc-2, South Akcakoca-2, West Akcakoca-1 and Akcakoca-3 prior to the installation of the artificial gas lift. Previously, the SASB artificial lift program consisted of PCP pumps, ESP pumps and velocity strings. That has now changed to predominantly velocity strings and a pump to prevent future water loading.

Helix Exploration (HEX.L) announced the admission of its ordinary shares to trading on the AIM market of the London Stock Exchange. The 10p per share placing was oversubscribed with demand over £22 million and raised gross proceeds of £7.5 million. Net proceeds of the fundraise will be used to fund scoping studies and appraisal drilling at the Ingomar helium project in Montana, United States. An anticlinal closure has been mapped at surface over 16,512 acres with P50 gross unrisked prospective helium resources of 2.3 billion cubic feet. Historic drilling has identified gas in all target horizons in a stacked reservoir system. Ingomar Dome is ready to drill with no further geological work required ahead of drilling and Helix is now fully funded from proceeds of the IPO to drill, log and test an appraisal well.

Noble Helium (NHE.AX NBHEF) announced that its plans to monetise the helium potential of its North Rukwa Project in Tanzania have received a boost with Mbelele’s shallow, free gas cap zone showing commercial production potential. Per the company, review and analysis of mud-gas readings obtained during the drilling of Mbelele-1 indicate helium readings significantly above background from around 75m to 125m. Furthermore, recently completed reservoir modelling demonstrates the potential for commercial flow rates from this part of the Mbelele structure. Laboratory results have previously confirmed high helium concentrations up to 2.46%. The next step is to perform a low-cost test on Mbelele-1’s shallow section, where downhole samples using the Modular Dynamic Tester could not previously be acquired. Results, they say, will inform both early commercialisation opportunities and future, deeper, potentially richer targets.

Star Energy (STAR.L K1P3.F) announced the closing of a new €25 million secured facility to support its transition strategy into geothermal energy and enable continued investment in the oil and gas business utilising its existing cash flows. The company says this is an important milestone, allowing Star Energy to use cashflows from its existing oil and gas business to optimise near-term conventional production (with quick pay-backs) and deliver its transition strategy, developing and monetising Star’s geothermal business in both the UK and Croatia.

Pantheon Resources (PANR.L PTHRF P3K.F) announced results of the updated Independent Expert Report by Netherland Sewell & Associates, which includes approximately 43,000 acres of the leases on which the Company was the successful bidder in December 2023, located on its 100% owned Kodiak Field on the North Slope of Alaska. NSAI's best estimates of Kodiak's contingent recoverable resources now sum to 1.2 billion barrels of marketable liquids (oil, condensate and natural gas liquids) and 5.4 trillion cubic feet of gas, which will be important as additional support for a proposed agreement with Alaska Gasline Development Corp to bring gas to south-central Alaska markets.

Helium One Global (HE1.L HLOGF 9KE.F) announced a Rukwa project update. The Itumbula West-1 extended well test remains on track for early Q3 2024, an environmental and social impact assessment study has commenced as part of the mining licence conversion process, a production facilities management company has been appointed to commence a design study for a helium production plant at Rukwa, the company is continuing to work with the Tanzanian Government and the Mining Commission to move the Rukwa project towards commercialisation, and the company's technical team is being expanded and strengthened in order to progress the Phase III work programme.

Chariot (CHAR.L OIGLF C62.F) announced that following receipt of all necessary Moroccan governmental and regulatory approvals, the partnership agreements with Energean (ENOG.L EERGF 1YE.F) have fully completed. Energean now holds 45% and 37.5% of the respective interests in, and is operator of, the Lixus and Rissana licences, offshore Morocco. Chariot retains 30% and 37.5% of the respective interests in these licences, with ONHYM maintaining a 25% stake in each. Chariot has now received the US$10 million upfront cash consideration from Energean. In addition, a rig contract has been signed with Stena Drilling for the use of its Stena Forth drill ship for the Anchois-East appraisal and development well and an optional well, located within the Lixus licence. This drilling and testing campaign will be conducted in Q3 2024 which will further appraise the existing gas sands, including flow testing, and target undrilled prospective resources to look to increase the Anchois gas development to over 1 trillion cubic feet.

Touchstone Exploration (TXP.TO PBEGF TXP.L PNW1.F) announced an operational update. The Cascadura-3ST1 delineation well was drilled to a total depth of 8,252 feet and open-hole logs plus drilling data indicated a total sand thickness of approximately 900 feet in the targeted Herrera Formation. The well has been cased and production testing is scheduled to commence in the third quarter of 2024 directly into the Cascadura natural gas facility. The CO-374 development well on the company’s CO-1 block was drilled to a total depth of 5,684 feet, with openhole logs and drilling data indicating a sand thickness of approximately 400 feet in the Forest Formation and approximately 300 feet in the Cruse Formation. The well has been cased for crude oil production and will be completed once the CO-375 development well has been drilled and the rig is moved from the location. The latter well was spud on April 3, 2024 and is targeted to be drilled to a total depth of 6,500 feet. Average net sales volumes for Touchstone were 7,015 barrels of oil equivalent in the first quarter of 2024.

Predator Oil & Gas (PRD.L 1EM.F) announced its financial statements for the year ended 31 December 2023. The interesting and relevant part is this statement by Paul Griffiths, Executive Chairman: “Like many listed companies of our size we are extremely disappointed with the over-regulated London public markets and their poor appreciation of the value of businesses and opportunities that several companies have created and further developed. Many of our shareholders, including the executive directors, seek to re-set the valuation of our assets through means other than the intra-day share price. This will be the top priority for 2024 and will focus on entities that understand the true value of natural resources in oil and gas commodity sector, as has been proven cyclically time and time again and which continues to support the global economy and is the catalyst for promoting viable economic growth.” It sounds like Predator may be following a number of companies recently and planning to delist.

PetroTal (TAL.V PTALF PTAL.L SER1.F) announced Q1 2024 operations and corporate updates, reporting a 23% increase in production, quarter over quarter, to 18,518 barrels of oil per day and unrestricted cash liquidity of $63 million at March 31, 2024. Production during the past 30 days has averaged around 20,500 barrels of oil per day. Currently, PetroTal is continuing with its 2024 development program and is drilling well 18H, which is expected to commence production in May 2024. Per Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, the company has achieved its strongest annual start to a year in PetroTal's history.

Longboat Energy (LBE.L 8YG.F) announced audited full year results to 31 December 2023. The cash balance was £3.7 million as at 31 December 2023 with no consolidated exploration finance facility borrowings due to the balances of Longboat JAPEX no longer forming part of the consolidated balance sheet. Loss for the period was £4.2 million. The company's strategy is to build Longboat into a full-cycle E&P company with Norway remaining the core area and a focus on SE Asia. The Lotus exploration well, where Longboat has a 15% retained and fully carried interest, is expected to spud in Q3. The well will be targeting analogous injectite sands to the sand encountered in Kveikje.

Hartshead Resources (HHR.AX) announced a further operational update for the UK Southern Gas Basin. The P2607 Joint Venture continues to work on the development of the Anning and Somerville Gas Fields assuming various possible fiscal scenarios. The JV is said to remain committed to progressing the project, subject to certainty regarding future fiscal policy and the 2024 JV budget remains in place. Hartshead therefore is continuing discussions on project finance, with discussions on infrastructure funding currently underway aimed at reducing upfront CAPEX, and a dialogue is ongoing with various political stakeholders seeking clarity on the future fiscal regime.

GeoPark (GPRK G6O.F) announced it has submitted a binding offer to acquire a non-operated working interest in unconventional blocks in the Neuquen Basin in Argentina. The offer has been accepted by the seller and the parties are working on an exclusive basis towards execution of definitive agreements. The potential acquisition is said to be consistent with the company’s strategy of continued expansion in the leading proven oil and gas basins in Latin America. Upon closing, the assets would immediately contribute more than 5,000 net barrels of oil equivalent per day of production. The agreed acquisition price is around US$200 million, plus an additional carry of US$110 - 120 million gross over a two year period, associated to certain exploration activities. GeoPark intends to fund the acquisition through a combination of cash on hand, available credit facilities and new financing. The company expects to sign definitive documentation within the coming weeks, in which case closing of the transaction would occur in the third quarter of 2024.

Finally, Central Petroleum (CTP.AX CNPTF C9J.F) announced a further Northern Territory update. The company and its Mereenie joint venture partners have entered into an as-available supply agreement with Power and Water Corporation for the supply of up to 8.6 Petajoules of gas (2.1 Petajoules net to Central) to the end of 2024. Per Leon Devaney, Central’s Managing Director and Chief Executive Officer, “the Northern Territory gas market is changing, and I believe production from the Amadeus Basin will play a key role as the Northern Territory’s only onshore source of domestic production. We are seeking additional customers and firm gas transportation so that we can increase production from our existing fields in the Amadeus Basin through new production wells.”

More through the week…

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