Oilman Jim's Letter - 29 May 2024

VAALCO Energy (EGY EGY.L) announced that it has drilled, completed and brought online four long lateral wells in Canada. All were 2.75 mile lateral development wells. Strong initial production rates of approximately 500 barrels of oil per day were recorded for three of the four wells, with production of approximately 350 barrels of oil per day for the fourth well, prior to it being shut in for a pressure build up. Average cycle time for the four wells was about 65 days from rig release to first production. The company now is targeting an appraisal well in the third quarter of 2024. Based on experience to date, VAALCO now is drilling 2.5 to 3-mile laterals almost exclusively in Canada.

Gran Tierra Energy (GTE GTE.TO GTE.L) announced an operational update. Regarding the Arawana-J1 oil discovery, the company has run production casing, cemented and perforated the Basal Tena oil zone and begun production testing. A jet pump was run and the well has produced at stabilized rates over 48 hours at 1,174 barrels oil per day , 20-degree API gravity oil, less than 1% water cut, and a gas-oil ratio of 258 standard cubic feet per stock tank barrel. The well continues to clean-up and over 12 hours the well has produced at stabilized rates of 1,358 barrels of oil per day of 20-degree API gravity oil, less than 1% water cut, and a gas-oil ratio of 239 standard cubic feet per stock tank barrel. Upon completion of drilling the Arawana-J1 well, the rig was moved on the same well pad and commenced drilling the Bocachico Norte-J1 exploration well (a follow-up to the successful Bocachico-J1 exploration well) to test both the deeper T-Sandstone and Basal Tena prospectivity. The Bocachico-J1 well had initial 90-day production rates in the Basal Tena of greater than 1,100 barrels of oil per day, continues to produce at approximately 850 barrels of oil per day, 20-degree API oil, and has less than 1% water cut. At Charapa, the 20 km 2D seismic commitment was successfully completed and the data is now being processed. The 238 km2 3D program is 13% complete and will be finished shooting in mid-June. The processed 3D dataset is expected to be delivered by the third quarter of 2024 and will be used to high-grade multiple structural leads identified on vintage 2D seismic lines, which are expected to be drilled in 2025. As for the remainder of the 2024 Ecuador exploration program, upon completion of the Bocachico Norte-J1 exploration well, the rig will be moved to the Charapa block to drill three exploration wells and finally back to the Chanangue block to target two Zabaleta exploration wells to test the Basal Tena up dip from Arawana-J1, and test additional deeper U- and T-Sandstone units on the structural high. The directors will utilize Gran Tierra's strong cash flow, solid balance sheet, and new production to fund development.

Zephyr Energy (ZPHR.L ZPHRF) announced the receipt of additional grant funding from the U.S. Department of Energy for upcoming operations on the State 36-2R LNW-CC well at its project in the Paradox Basin, Utah, and provided a further update regarding current drilling operations on the well. A further grant of $250,000 has been received (taking total grant funding received to $3.65 million) to fund a detailed evaluation of the State 36-2R production data from the forthcoming production test. Meanwhile, drilling operations continue to proceed safely and in line with management's expectations. The 8 ½ inch section is currently drilled to a depth of 9,940 feet, with the planned section total depth of 10,075 feet to be reached imminently.  After reaching the section total depth, a casing string will be set and cemented in place, just above the final Cane Creek reservoir target. After casing and cementing, drilling will re-commence on the final reservoir section. The objective for this short section is to safely and successfully land the well within the Cane Creek reservoir and drill approximately 270 feet horizontally to intersect the productive natural fracture system encountered in the original well. After reaching planned final total depth and setting a production liner, the drilling rig will be demobilised, and the well will be prepared for production testing.

Challenger Energy (CEG.L BSHPF) announced that the investment in the company by Charlestown Energy Partners has completed and that Robert Bose, Managing Member of Charlestown, has joined the Challenger board. Charlestown has advanced a £1.5 million loan to Challenger and on closing of the farm-out of the Uruguay AREA OFF-1 licence to Chevron (CVX), and subject to the prior completion of an agreed share consolidation, this loan (and interest) will convert into new ordinary shares in Challenger at a fixed price of 0.168 pence per share, a premium to the current share price. The investment will underpin accelerated commencement of technical activity on the company's AREA OFF-3 licence offshore Uruguay and Robert Bose (a member of the Charlestown oversight committee and Chief Executive Officer of Sintana Energy (SEI.V SEUSF) has been appointed as a non-executive director of Challenger with immediate effect.

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