Oilman Jim's Letter - July 3, 2024

Capricorn Energy (CNE.L CRNCD FKG0.F) announced an operational and trading update. Per CEO Randy Neely, the company enters the second half of 2024 offering a clear value opportunity against the backdrop of an improving fiscal landscape and re-start of drilling operations in Egypt, and the potential to grow a non-operated production base to capitalise on its advantaged legacy position in the UK North Sea. Up to the end of June 2024, working interest production across the four main concession areas in the Western Desert averaged 25.4 thousand barrels of oil equivalent per day (45% liquids), consistent with the full year guidance range for 2024 of 20-24 thousand barrels of oil equivalent per day. Two new wells, completed at the start of the year in the Badr El Din concession (Capricorn 50% working interest), have recently been brought online and delivered rates at the upper end of expectations. Drilling activity recommenced at the end of June with three rigs under contract. A drilling sequence for the remainder of the year has been approved by Capricorn and is expected to deliver seven development wells in the Badr El Din concession area. In addition, drilling will also target development opportunities in the Alam El Shawish concession (Capricorn 20% working interest).

Touchstone Exploration (TXP.TSX TXP.L PBEGF PNW1.F) announced that its wholly owned Trinidadian subsidiary has entered into exploration and production (public petroleum rights) licences for the Cipero and Charuma blocks effective July 1, 2024. These were awarded pursuant to the Trinidad and Tobago 2022 onshore and nearshore competitive bid round. Touchstone’s subsidiary has an 80% operating working interest under each licence, with the National Gas Company of Trinidad and Tobago holding the remaining 20% working interest. Similar to the company's Ortoire licence, the new licences initially have a six-year term and may be extended by an additional 19 years for areas that have a MEEI approved commercial discovery.

Blue Star Helium (BNL.ASX BSNLF) announced a status update on flow rates at the State 16 SWSE 3054 helium discovery at its Galactica helium project in Las Animas County, Colorado. Independent engineering consultants have advised that the State 16 well is capable of a maximum rate of 441 thousand cubic feet per day with more stabilised rates constrained for production optimization projected to be between 250 - 350 thousand cubic feet per day. The well is currently completed for tie-in to production facilities. Commercial discussions with interested buyers for purified product have been ongoing since Q4 2023. Additionally, the company’s application for a new oil and gas development plan for 5 additional wells at Galactica has passed the completeness and technical review of the Colorado Energy and Carbon Management Commission, who have set a hearing date of 4 September 2024. These wells are expected to commence drilling in Q4 2024 and tie-in to production facilities is also targeted for Q4 2024. The wells are located to the south and southwest of the State 16 well toward the proposed Galactica plant site and are expected, together with State 16, to form part of the initial gas gathering into the Galactica helium production facility. Work continues to de-risk the greater Galactica/Pegasus development which is said to have been further derisked by the successful third-party commercialisation of the adjoining Red Rocks helium project.

Helium One Global (HE1.L HLOGF HE1.F) announced an update on progress at its Rukwa project area ahead of its extended well test at Itumbula West-1. The company says it is on track to deepen the Itumbula well and commence an extended well test in July. The rig is claimed to be on-site and ready for third party services to rig up ahead of spud. It is said that long lead items are arriving at site for a July spud, that a contract has been executed with SLB for provision of cementing, drilling and completion fluids services, and surface well test equipment and services, and that GeoLog has been contracted for mud-logging services. The directors have awarded themselves a further 259 million options.

U.S. Energy Corporation (USEG) announced that the company has closed a transaction with Wavetech Helium for the acquisition of operated acreage targeting helium production across the Kevin Dome structure in Toole County, Montana. Additionally, the company has executed a non-binding letter of intent with Synergy Offshore to acquire offsetting operated acreage, forming a largely contiguous acreage position across the Kevin Dome of approximately 164,000 net acres. The Wavetech asset includes approximately 140,000 net acres with multiple prospective helium pay zones consisting primarily of inert nitrogen and carbon dioxide heavy zones. The Synergy asset includes approximately 24,000 net acres, highly contiguous to the Wavetech acreage with multiple prospective helium pay zones, initially targeting carbon dioxide heavy zones. Two drilling locations are planned and permitted on the Wavetech asset and these wells are expected to be spud in late July and early August 2024. Under the terms of the agreement, Wavetech will assign to U.S. Energy 82.5% of their interests in the asset for $2 million in cash, 2,600,000 shares of U.S. Energy restricted common stock and a $20 million carried working interest for which U.S. Energy commits to pay Wavetech’s exploration, drilling, and completion costs attributable to Wavetech’s 17.5% retained working interest. Under the terms of the Synergy LOI, Synergy will assign to U.S. Energy 87.5% of their interests in the Synergy asset for $2 million in cash, 4,845,900 shares of U.S. Energy restricted common stock, warrants to purchase 6,250,000 shares of USEG common stock (at $0.01 per share), contingent on achieving future helium sales, a $12.5 million carried working interest for which U.S. Energy commits to pay Synergy’s exploration, drilling, and completion costs attributable to Synergy’s 12.5% retained working interest, 18% of future amounts realized by U.S. Energy in connection with tax credits obtained for carbon sequestration, and an area of mutual interest under which Synergy will have the right to participate for its proportionate interest of 12.5% in any new leases. The company does not anticipate raising outside capital to execute on this asset move, with cash on hand, cash flow, and anticipated proceeds from non-core asset sales expected to fund considerations and near-term development.

Kosmos Energy (KOS KOS.L KOS1.F) announced the successful start-up of oil production at the Winterfell development in the Green Canyon area of the U.S. Gulf of Mexico. Winterfell (Kosmos 25.04% working interest) is a phased development with the initial two production wells of the first phase now online and ramping up production. A third well is currently being drilled and is expected to be online by the end of the third quarter of 2024. The three initial wells are expected to deliver gross production of approximately 20,000 barrels of oil equivalent per day. The first phase of the development, with five wells in total, is expected to deliver around 100 million barrels of oil equivalent with upside from subsequent phases. The other partners in the Winterfell unit are Beacon Offshore Energy (operator), Westlawn Americas Offshore, Red Willow, Alta Mar Energy, and CSL Exploration.

On to the potentially transformational upcoming drills and what you need to know about each of them. I have been publishing this information privately each week for over five years now, expanding it to cover public companies trading in all the English speaking markets: Australia, Canada, the United Kingdom and the United States. There are always exciting and profitable opportunities available. Endless opportunities in fact, since new drills come along all the time. The secret is getting in to the right ones at the right time. Accurate and informed information is key. Upcoming drills are the best plays to trade and we have seen gains of up to 750% this year. This is valuable information and has different values to different people, so pay what you want, just click subscribe

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