Oilman Jim's Letter - 21 January 2024

Pulsar Helium (PLSR.V PSRHF Y3K.F) announced that drilling of the Jetstream #1 appraisal well at its Topaz helium project is scheduled to commence on 2 February 2024. Drilling is anticipated to be completed within one month, with flow testing to commence immediately following demobilisation. Jetstream #1 will be drilled to a depth of 686m (2,250ft) with contingency in place to extend to 762m (2,500ft). A mass spectrometer will be onsite providing gas composition every 100 seconds with gas samples to be collected when zones of helium gas response are encountered. Upon reaching total depth, a comprehensive suite of open hole wireline logs will be acquired by Baker Hughes. Following the wireline data acquisition, the well will be completed and the rig will be released and demobilised. A well testing package will then mobilise and rig up on the Jetstream #1 well and execute a flow testing and pressure build-up program, plus collect pressurised gas sample data.

I commenced coverage of Pulsar Helium in the International Letter on 26 November 2023 at C$0.20. It hit C$0.44 just six weeks later, notwithstanding a placing in between at C$0.23. This is the sort of move no longer being seen in the UK with these plays. One of the reasons for the superior performance is that pursuant to Canadian laws, all securities issued in the placing are subject to a hold period of four months plus one day. Similar, but longer periods apply in the United States. If you’re UK centric and want to keep making money in the markets, expand your focus to North American.

To understand why it’s stopped working in the UK, look at Helium One Global (HE1.L HLOGF 9KE.F). These London companies now have negative holding periods, where the placees are selling before the placing, driving down the share price and in the process generating huge and guaranteed profits. The shares received in the placing are regarded as junk and since the surplus shares have been acquired for nothing they’re simply dumped. This greed is killing the golden goose for UK directors, brokers and PR folk. The companies are going to have to start making it on commercial merit and not just live off endless placings.

Few can do that, but one which could is Deltic Energy (DELT.L 7RC0.F). The company announced last week a Pensacola update and Competent Person's Report. RPS Energy estimates the Pensacola structure to contain gross P50 hydrocarbons initially in place of 326 million barrels of oil equivalent and 2C contingent resources, net to Deltic, of 21.8 million barrels of oil equivalent (combined gas and oil development case) and 15 million barrels of oil equivalent (gas only). Based on the two development scenarios assessed, RPS estimates a 2C post tax NPV10 of US$205 million net to Deltic in the combined case and US$199 million net to Deltic in the gas only case. The project NPV10 valuations equate to approximately 169p - 174p per Deltic share, compared to a current market price of around 24p. According to the company, progress continues to be made on both the Pensacola and Selene farm-out processes with a significant level of interest from industry.

Another is Longboat Energy (LBE.L 8YG.F), which announced last week the award of a new licence under the Norwegian 2023 APA Licensing Round to its Norwegian joint venture, Longboat JAPEX, together with partners Equinor (operator) and DNO. The licence is in an area in which Longboat JAPEX has built a significant presence since 2021, including the Kveikje discovery, the Kjøttkake/Lotus exploration well, which is expected to spud in Q3 2024, and the Jasmine and Sjøkreps prospects, which were recently subject to a successful farm-down by Longboat JAPEX to Concedo. In addition to its Norwegian interests, Longboat also holds an operated 52.5% interest in Block 2A, offshore Sarawak, Malaysia, with multiple TCF potential.

Zenith Energy (ZEN.L ZENAF ZCL.F), a London listed company with limited viability, has already started to diversify away and recently bought control of a US OTC corporation, Cyber Apps World (CYAP), which has acquired as its first transaction a 5% royalty interest in a package of seven producing wells located in the Eagle Ford shale. It’s now changing its name to Leopard Energy. Further acquisitions are planned and per ZEN’s CEO, Andrea Cattaneo, CYAP will attract financial support from the US capital markets. CYAP should not be confused with CYRB (Cyber App Solutions) which has acquired Proton Green, the holder of a 170,500 acre property in Arizona with a 33 billion cubic feet helium reservoir, 9 trillion cubic feet CO2 reservoir and a basin with the potential to store 1 billion metric tons of CO2. Executive Chairman there is David Hobbs, also Executive Chairman of Pantheon Resources (PANR.L PTHRF P3K.F), which is in the process of moving its listing to the United States.

The attractions of such a move are well set out by Tamboran Resources (TBN.AX TBNRF), which announced last week that it has successfully completed the retail component of its accelerated non-renounceable pro rata entitlement offer. Tamboran is re-domiciling from Australia to the United States, delisting from the ASX. Directors believe this will position the company in a deeper capital market where shale investors are more active, providing access to a broader US investor pool, which is more familiar with shale developments and was previously unable or unlikely to invest in non-US securities, improving the valuation of the company and also improving access to lower-cost US debt and equity capital markets. The arguments apply to many other companies in many other areas of activity.

Finally, Arrow Exploration (AXL.V AXL.L C1JT.F) announced an operations update. It’s keeping busy in Columbia, where the rig has arrived at the Carrizales Norte field and is currently being erected. Arrow expects the CN-4 well, targeting the Ubaque formation, will spud in the latter half of January. CN-4 will be followed by CN-5, which is expected to spud in February. Following CN-5, the rig will remain and continue development of the field targeting the C7 formation. At Mateguafa Attic, the plan is for the first well to spud in late Q1 or early Q2 using an additional rig. The company expects the Baquiano prospect to be drilled later in 2024. Arrow describes its holdings as a portfolio of premier Colombian oil assets that are underexploited, under-explored and offer high potential growth. Attractively, it’s self financing.

These are opinions only of the individual author.  The contents of this piece do not contain investment advice and the information provided is for educational purposes only and no discussions constitute an offer to sell or the solicitation of an offer to buy any securities of any company.  All content is purely subjective and you should do your own due diligence.  No representation, warranty or undertaking, express or implied, as to the accuracy, reliability, completeness or reasonableness of the information contained in the piece is made.  Any assumptions, opinions and estimates expressed in the piece constitute judgments of the author as of the date thereof and are subject to change without notice.  Any projections contained in the information are based on a number of assumptions and there can be no guarantee that any projected outcomes will be achieved.  No liability is accepted for any direct, consequential or other loss arising from reliance on the contents of this piece.  The author is not acting as your financial, legal, accounting, tax or other adviser or in any fiduciary capacity.