Oilman Jim's Letter - June 27, 2024

Serica Energy (SQZ.L SQZZF A3P.F) announced an operations and financial update. Production guidance is unchanged at 41,000 to 46,000 barrels of oil equivalent per day and operating costs for the year to date are consistent with the target of $20 per barrel of oil equivalent. Average net production for the year to date is 43,781 barrels of oil equivalent. Bruce Hub production has been steady year to date and the well intervention to reinstate production from the Keith field has also been successfully completed. The reservoir section of the B1z sidetrack (re-named as the B6 well) on the Bittern field has been drilled successfully and initial well logging has given good indications of high quality, oil filled reservoir, consistent with pre-drill expectations. The forward plan is to complete the well and to commence testing in August 2024 after the planned Triton summer shutdown. Following completion of the B6 well, the COSL Innovator rig will move to the Gannet E field in order to drill the GE-05 well. Production from this well is expected to start in November 2024. At 26 June 2024 the company held cash and cash equivalents of £301.6 million and debt drawings of $231.0 million (£182.0 million).. This is after 2023 final tax payments of £58.3 million, capital spending of £80.0 million, asset acquisition costs of £17.3 million (including completion of the Greater Buchan Area transaction and BKR transaction related payments) and the share buyback of £15.0 million. Following the sanction of the Belinda development, estimated cash spend on capital items during 2024 as a whole is currently estimated at about £200 million pre-tax. I first bought SQZ in 2015 at under 5p per share It’s now 135p, having been as high as 454p since then and paid out dividends along the way. You can see what I said at the time on Twitter (now X) where I post as @Oilman_Jim For those who don’t know me, I have been involved in the public markets, UK and North America, for over 40 years now. Along the way, I’ve also been a director of a number of publicly traded oil, gas and mining companies.

Moving on, Longboat Energy (LBE.L 8YG.F) announced a summary of the competent persons report in respect of Block 2A offshore Sarawak in eastern Malaysia. In anticipation of a farm-out process, Longboat commissioned ERC Equipoise to undertake a CPR on the main Kertang prospect located in Block 2A, in which Longboat holds a 52.5% interest and is operator. Kertang is a well-defined, large, four-way dip closed structural high with over 220 km2 of closure. Four target intervals have been evaluated comprising of Cycle I and Cycle II/III Oligo-Miocene reservoirs, representing the primary targets and shallower Cycle V/VII reservoirs representing the secondary targets. The prospect is covered by high-quality, wide-beam 3D seismic shot by CGG in 2015. The CPR confirms the giant scale of the Kertang prospect, assigning total gross, unrisked mean prospective resources of 9.1 trillion cubic feet of gas plus 146 million barrels of natural gas liquids across the four target horizons. Preliminary work undertaken by Longboat indicates that all target horizons are capable of being tested by a single exploration well. Following recent increased interest levels in exploration for world-scale fields, multiple large companies have approached Longboat regarding Block 2A. Having consulted with PETRONAS, the company now intends to run a farm-out process during H2 2024 to identify a suitable partner…more

CGX Energy (OYL.V CGXEF GXCN.F) and Frontera Energy (FEC.TSX FECCF 3PY3.F), joint venture partners in the petroleum prospecting license for the Corentyne block, offshore Guyana, announced that the joint venture has submitted a notice of potential commercial interest for the Wei-1 discovery to the Government of Guyana, which preserves the joint venture's interests in the license. In 2023, the joint venture successfully drilled the Wei-1 well, its second well on the Corentyne block. The well fulfilled the obligation under phase two of the second renewal period of the original 10-year license and served as an appraisal well for the Kawa-1 appraisal programme with the Government of Guyana. The joint venture, with support from investment bank Houlihan Lokey, continues to actively pursue strategic options to unlock the potential of the Corentyne block.

Desert Mountain Energy (DME.V DMEHF QM01.F) announced the commencement of operations at its helium processing plant on the West Pecos Field in New Mexico. The plant is currently separating helium from the natural gas stream and transferring it to an offtake trailer. The startup procedure will involve optimization and potential programming improvements, with an estimated duration of 60-90 days. The company is producing from specific wells and will add flow rates to the plant during the next 120-180 days. The gaseous mixture varies from well to well and includes helium, n-pentane, n-butanes, hexanes, and condensate oils, besides the normal methane and associated mixtures. The plant system permits the company to capture, recycle and enrich the overall final grade of helium from the plant to maximize return on investment. The plant was initiated at approximately 960 thousand cubic feet of gas per day and will gradually increase to the maximum capacity. The initial truckloads will contain a mix of various helium grades, and the company will receive payment accordingly. The commencement of plant operations enables the company to pivot towards increasing production levels. Geological assessments have pinpointed zones with higher-grade helium in wells, with an emphasis on reducing any formation water produced, which will be integrated into the existing inventory. A team has been assembled to operate the company’s workover rig, targeting wells with elevated helium levels to enhance production from current sources.

Now, all the potentially transformational upcoming drills, plus all the essential information about them. I have been publishing this 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. It is valuable information and has different values to different people, so I’m giving you the opportunity today to name your price

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.