Oilman Jim's Letter - 30 April 2024

Sintana Energy (SEI.V SEUSF) announced that Chevron Namibia Exploration Limited, an affiliate of Chevron Corp., has executed an agreement that provides for their entry into Petroleum Exploration License 82 with the assumption of an 80% working interest and operatorship.  NAMCOR, the National Petroleum Corporation of Namibia, and Custos Energy (Pty) Ltd. will each maintain a 10% carried interest in PEL 82.  Sintana maintains an indirect 49% interest in Custos. PEL 82 governs blocks 2112B AND 2212A located in the Walvis Basin, offshore Namibia and is one of the Walvis Basin’s most attractive opportunities. Approximately 70% of the total block area is covered by existing seismic – over 3,500 km of 2D and 9,500 km2 of 3D data. Previous drilling activity on PEL 82 includes the Murombe-1 and Wingat-1 wells, the results of which confirmed the regional extension and presence of the Barremian-Aptian oil-prone source rock (Kudu shale). The Murombe-1 penetrated the Baobab sands returning approximately 20% porosity. The Wingat-1 well recovered 38-41 degree API oil to surface.

Aminex (AEX.L AEXFF) announced that it has agreed a funding facility with its largest shareholder, Eclipse Investments. The facility is for US$3 million, available for up to 24 months and the first US$1.5 million tranche is guaranteed, with the remaining tranche available at Eclipse's discretion. Any advances drawn down will be set-off against the Company's US$35 million carry in respect of the Ntorya development at Eclipse's discretion. If not already set-off against the carry, Eclipse can demand repayment, but not before 31 December 2026. There is no security granted against the facility and no arrangement fees payable by Aminex. The company had sufficient funds until the end of 2024, when revenues from the Ntorya gas discovery had originally been expected, however, first revenues are now estimated in mid-2025 and Aminex believes it is prudent to arrange this funding now. Final results, also announced, confirmed the following planned for 2024 upon receipt of the development licence: contract a rig operator to undertake the drilling of the Chikumbi-1 appraisal well and, if successful, to complete the well as a gas producer; re-enter and repair a tubular leak in NT-1 to enable the well to be completed as a gas producer; undertake further testing on NT-2, currently suspended as a gas producer, using a mobile test unit and refine the design of in-field gas processing facilities; and support the Tanzanian authorities in the construction of a spur pipeline to take gas from Ntorya to the Madimba Gas Plant and accommodate gas extraction from the field.

Deltic Energy (DELT.L 7RC0.F) announced a Pensacola update. Following commitment to the appraisal well in December 2023, operational planning has continued to progress according to plan. Long lead items have been ordered, the geophysical site survey over the proposed well location has been completed and the final geotechnical site survey is scheduled to take place in May/June 2024. The rig contract was entered into in February which secured the Valaris 123 heavy duty jack-up drilling unit to drill both the Selene exploration well and Pensacola appraisal well, with the Pensacola well due to be drilled immediately following completion of Selene operations. Subject to the timing of the completion of Selene, the Pensacola well remains on track to be drilled in Q4 2024. However, fiscal uncertainty created by the current government, along with recent rhetoric emanating from the Labour Party, have had a severely negative effect on the ability of UK exploration and production companies to commit to long term investments in the North Sea. Against the hostile political environment, Deltic have not yet been able to secure a farm-out partner for Pensacola and there is a risk that a farm-out may not be secured before the end of May 2024. The difficult state of UK equity markets, especially for smaller companies, coupled with the impact of the political and fiscal regime on UK E&P company valuations and investor sentiment means that accessing traditional equity capital is unlikely to be a viable option to allow Deltic to meet its 30% share of the Pensacola well (currently estimated to be roughly GBP£15 million net to Deltic). This is frustrating for the company as a recently commissioned Competent Person's Report by RPS Energy assessed Pensacola as having a 2C NPV10 of approximately US$200 million net to Deltic, representing a multiple of the company's current market capitalisation. Unfortunately, if an industry and/or funding solution is not in place by the end of May 2024, being the point  at which Deltic will be required to demonstrate its capacity to fund its share of costs, Deltic will be required to withdraw from the Pensacola licence and transfer its interest in Pensacola to the joint venture partners.

Canacol Energy (CNE.TO CNNEF) announced that the company has sold its entire 21.01% holding in Arrow Exploration (AXL.V AXL.L) for gross proceeds of approximately US$13.8 million. In respect of usual business, the Chontaduro 2 appraisal well, located on the 100 percent operated VIM21 exploration and production contract, was spud on April 18, 2024, and reached a total depth of 10,026 feet measured depth on April 27, 2024. The well encountered 88 feet true vertical depth of net gas pay with average porosity of 23 percent within the primary Cienaga de Oro sandstone reservoir target. The well is currently being completed within the CDO reservoir and is expected to be tied into permanent production at a rate of between 10 and 12 million cubic feet per day within one week. Separately, Arrow Exploration announced its annual audited financial statements and management's discussion and analysis. The company saw a significant 79% growth in total oil and gas revenue to US$44.7 million, net of royalties, and recorded a net loss of US$1.1 million inclusive of an impairment loss of US$11.8 million. So far in 2024, Arrow has drilled six development wells on the Carrizales Norte field in the Tapir Block, which are all currently producing at restricted rates (ramping production up slowly prevents early water breakthrough in each well) and is currently mobilizing the drilling rig to the Carrizales Norte B (CNB) pad to start drilling the first horizontal well.

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