Oilman Jim's Letter - June 28, 2024

Reconnaissance Energy Africa (RECO.V RECAF 0XD.F) announced an operations update with respect to Petroleum Exploration Licence 73, onshore northeast Namibia, and a joint venture update. All camp, rig and equipment moves have been completed with all major equipment now on site of the Naingopo exploration well. Third party service contractor teams are either on site or expected to mobilize to the site in the next week ahead of the expected spud date of July 7, 2024. On Prospect P, debushing and road access activities are ongoing with major civil works including well pad construction expected to commence in the next month. This prospect is expected to spud immediately after completion of the Naingopo exploration well. The company continues to progress its farm out joint venture process which is expected to conclude soon. There’s a lot more on RECAF here and an interview with Brian Reinsborough, President and CEO, here

SM Energy (SM SJL.F) announced that it has entered into an agreement to acquire the Uinta Basin oil and gas assets owned by entities affiliated with XCL Resources, a private company backed by EnCap Investments and Rice Investment Group, for an unadjusted purchase price of $2.55 billion. Concurrently, Northern Oil and Gas (NOG 4LT1.F) will acquire an undivided 20% of the oil and gas assets of XCL for $510 million, resulting in a $2.04 billion purchase price net to the Company for an undivided 80% interest of the assets. SM Energy intends to serve as the operator. The assets comprise: around 37,200 net acres (around 99% operated), increasing SM’s core net acreage by around 14%; 43,000 barrels of oil equivalent per day/38,000 barrels of oil per day, increasing the company's 2025 estimated net production to around 195,000 barrels of oil equivalent per day and oil mix to greater than 50%; around 390 net locations with breakevens of between $43 – $57/barrel, increasing the company's inventory life by 2 years to 12+ years; $50.45/barrel of oil equivalent 2025 estimated cash production margin, increasing the company's 2025 estimated cash production margin by around 11%; and 107 million barrels of oil equivalent preliminary proved reserves, increasing the company's estimated net proved reserves by around 18%^. SM Energy plans to finance the acquisition through a combination of debt and cash on hand. To assist in financing this all-cash transaction, the company has received firm commitments from J.P. Morgan, Bank of America and Wells Fargo for an aggregate $1.2 billion 364-day unsecured bridge facility.

Condor Energies (CDR.TSX CNPRF WQ6.F) announced the initiation of a multi-well workover campaign for the eight gas-condensate fields it operates in Uzbekistan. This initially includes installing proven artificial lift equipment to yield higher gas flow rates and increase well uptime, perforating newly identified pay intervals, performing downhole stimulation treatments, and isolating identified water intervals. With over 100 wells associated with the project, both existing and shut-in wells will continue to be evaluated for optimization opportunities. The company has also started construction of the first in-line flow separation unit, which separates water from the gas streams in the field, rather than at the production facility, thereby reducing pipeline flow pressure that can lead to higher reservoir flow rates. Per the company, since assuming operations on March 1, 2024, it has flattened the project’s natural production decline rates, which previously exceeded 20% annually, while producing an average of approximately 10,000 barrels of oil equivalent per day in the second quarter to-date. This has been achieved by introducing downhole surfactants that lift produced water more effectively, performing well choke-size optimizations, implementing facility upgrades, and introducing new operating methodologies.

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.