Oilman Jim's Letter - 17 April 2024

Baron Oil (BOIL.L GHA.F) announced an update on operational activities and plans at the TL-SO-19-16 Production Sharing Contract, offshore Timor-Leste. All operational work related to the site survey has been successfully completed and the well will now be situated 5.1km from the site of the original Chuditch-1 discovery well in a water depth of 68m. Based on 3D seismic mapping and the results of Chuditch-1, the planned vertical appraisal well drilled at this new location is expected to encounter gas-charged reservoirs 16m shallower than at the initial location and, as a result, the company now predicts a taller 149m gas column in the reservoir target versus 133m predicted at the initial location. Drilling planning has continued at a good pace and the process of tendering for essential materials that have long procurement times has commenced. Design work on a Chuditch-2 well test is ongoing and the company is in discussions with drilling rig contractors and other third-party service providers in support of well construction plans. The company is also liaising closely with other operators in the region that are expected to drill wells in locations relatively nearby. Discussions with a number of potential funding partners are ongoing.

3D Energi (TDO.AX) announced regulatory approval of the Sauropod 3D seismic environmental plan by the National Offshore Petroleum Safety and Environment Management Authority, covering 3,447km2 of the WA-527-P petroleum exploration permit, offshore Western Australia. The exploration plan provides for an acquisition window of 2024 or 2025 between January-May inclusive. Approval of the seismic environmental plan represents an important step forward for the project. The company says it continues discussions with interested farm-in parties and is collaborating with CGG around vessel availability. A 2 year suspension and extension of the primary term, which now ends 28 December 2025, also has been granted.

Getech (GTC.L GETPF 3AS) announced a joint natural hydrogen exploration agreement and two further natural hydrogen exploration contracts. The first is a strategic joint venture exploration agreement with a new customer partner, while two additional contracts have been secured with existing exploration clients. All three contracts are aimed at locating natural hydrogen resources for commercial development. Combined, the three transactions are expected to generate £390,000 of revenue over 3 years, with additional potential upside. The joint exploration agreement is with a major European headquartered global industrial and energy company. In addition to earning fees for its exploration services, under the terms of the agreement, Getech will also earn a 5% equity interest in any licenses obtained within a designated area and will be carried through the exploration phase, including field sampling, exploration drilling and well-testing.

Blue Star Helium (BNL.AX BSNLF) announced a Las Animas helium projects update. Drilling of the company’s maiden helium development well at the Galactica/Pegasus project is on track to be undertaken during the current quarter and will be funded from Blue Star’s existing cash reserves. The well is located 3 miles southeast from the Red Rocks project that is currently producing from the Lyons Formation being targeted by Blue Star. The driller is expected to mobilise to site during May. At the Voyager project, following analysis of the BBB #33 and Bolling #4 development well results, the company has determined that commercialisation should not proceed as originally planned. Blue Star will now undertake a full review of potential commercialisation pathways.

Union Jack Oil (UJO.L UJOGF 1UJ0.F) announced a Wressle update and notice of results and dividend. In excess of US$19 million has been generated net to Union Jack since the recommencement of production at Wressle in August 2021 and the field remains materially cash generative. Production for Q1 2024 averaged circa 530 barrels of oil per day (gross) with an average water cut of 24.3%, which is said to be easily disposed of at a nearby facility at negligible cost. Planning permission has been submitted to the North Lincolnshire Council in respect of the drilling of two additional back-to-back development wells and gas export facilities to the national grid to allow for the monetisation of the significant gas reserves associated with the Penistone Flags formation. The new drilling and development campaign will commence at the earliest opportunity. The company is also optimistic about the potential positive implications of a new seismic interpretation and mapping exercise across the Wressle field that has highlighted a possible significant increase in resources from the Ashover Grit formation. Audited results for the year ended 31 December 2023 will be announced on 20 May 2024 and the board also expects to announce the payment of a dividend.

Royal Helium (RHC.V RHCCF RD31.F) announced that the company and Sparrow Hawk Developments (the economic development corporation for Peepeekisis First Nation) have entered into an economic participation agreement and a letter of intent for a C$25 million joint venture investment by Sparrow Hawk in the development of Royal Helium’s Val Marie helium project located in southwestern Saskatchewan. Under the terms of the agreement and the letter of intent, Sparrow Hawk will invest C$25 million into the drilling and completion of new wells, as well as the construction of the associated helium purification facility. Pursuant to the terms, Sparrow Hawk will have an approximate 57.5% non-operating working interest in the wells and an approximate 46% non-operating interest in the processing facility.

Zephyr Energy (ZPHR.L ZPHRF VD5N.F) announced a State 36-2R well drilling operations update. The Helmerich & Payne Rig 257 has begun rigging up to spud the initial, surface section of the well in the coming days. All necessary ancillary service providers have also arrived on site to support the company's drilling operations. The new well will target the same Cane Creek reservoir and the over pressured, gas bearing natural fracture system that was proven during the drilling of the original well. Drilling operations are expected to take approximately 30 days from the date of spud. After reaching total depth, a completion and well test crew will be mobilised to complete the short horizontal section and test any productive natural fracture system intersected by the new well. 

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