WTI $65.46 -$1.13, Brent $68.23 -80c, Diff -$2.77 +33c, NG $3.85 +2c, UKNG 109.23p -6.81p

Oil price- Taper tantrums…

The oil price continues to fall, the recent dip can be attributed to Chinese data showing its economy to be struggling with further Covid numbers and other markets are also effected in this way. I’m convinced that if there is any supply/demand imbalance will reduce that overproduction level pretty rapidly.

In the US the Fed say that they are still happy with the economy although market feel is that Tapering of asset purchases may start later in this year. That spooked the market and everything went risk-off. The EIA inventory stats were pretty good, a big drop in crude oil and distillates was slightly offset by a small build in gasoline stocks.

Finally the IAEA nuclear checkers state that in Iran uranium enrichment has risen again, will John Kerry be able to overlook that as usual…?

Helium One Global

Helium One has announced the commencement of drilling operations at the Tai-2 exploration well at its 100% owned Rukwa Project in Tanzania, the second exploration well targeting the Tai prospect. The exploration well targets prospective Lake Bed stratigraphy, which was identified but not fully evaluated in Tai-1.

Tai-2 is located ~20m from Tai-1 and utilises the same drill pad, saving time and money in relocation compared to mobilising from one site to another.

Tai-1 has de-risked the Rukwa Basin by proving a working helium system. With 3,500km2 of untested licences in the Rukwa area, Helium One is excited to continue exploration in this highly prospective helium basin.

With confirmation of a working helium system, Tai-1 supports ongoing exploration with helium shows identified at multiple stratigraphic intervals.  The drilling at Tai-2 will test one of several targets highlighted for additional exploration following positive results from Tai-1.

David Minchin, Chief Executive Officer, commented:
“Having proven a working helium system with Tai-1, Helium One have substantially de-risked the Rukwa basin.  Demonstration of seal and reservoir, as well as helium shows at multiple stratigraphic levels, indicates a working system in which free helium gas is waiting to be discovered.  Helium One maintains 100% ownership of licences at Rukwa covering approximately 3,500km2 in what must now be considered the world’s premier basin for helium exploration.

“We are delighted to have started drilling activity at Tai-2, testing shallower targets that were not fully evaluated in Tai-1.  Tai-2 is approximately 20m from Tai-1, is on the same drill pad and uses the same infrastructure, therefore saving time and money by drilling here rather than moving on to a new location.

 ”We are excited to continue with our 2021 exploration campaign with drilling at Tai-2.”

Catching up, in my short absence I missed a few announcements, this is what slipped through:

Diversified Energy Company announced the completion of the Tanos acquisition along with its co-investment with funds managed by Oaktree Capital Management, to acquire certain Cotton Valley and Haynesville upstream assets and related facilities in the states of Louisiana and Texas from Tanos Energy Holdings III  as previously announced on 5 July 2021.

Commenting on the Acquisition, CEO Rusty Hutson, Jr. said:
“We are pleased to have closed our third acquisition within the Central Region. We are already at work with the former Tanos employees who join the Diversified family to integrate the assets and strategically implement our Smarter Asset Management program. We are also actively pursuing the operational and administrative synergies afforded by aggregating assets within a defined area much like we currently enjoy in Appalachia. Collectively, these efforts enhance the already significant free cash flow from the Central Region assets that complement our ESG, dividend distribution and debt reduction commitments to stakeholders.

“We are excited about Oaktree’s co-investment in these assets as we continue to jointly pursue additional value-accretive opportunities in both Appalachia and the Central Region. With our enlarged credit facility and healthy balance sheet, we are well positioned to use our financing capabilities to fund additional growth.”

Ahead of the Capital Markets Day in October I would only point out that at 105p the stock yields the best part of 11% and I think it will return both capital and income as it continues to grow with imaginative deals like this one. Rusty and his team are first rate and now have been let loose in Texas and Louisiana should have much to bring to shareholders.

Scirocco Energy

Scirocco has reported that the Ruvuma joint venture has received an extension to its licence under the Ruvuma PSA from the Ministry of Energy of Tanzania.  Scirocco holds a 25% working interest in the Ruvuma Licence. The operator, ARA Petroleum Tanzania Limited secured the extension, which is valid for two years from 15 August 2021, and allows for the completion of the acquisition of 200 square kilometres (surface coverage) of 3D seismic data, drilling of the Chikumbi-1 well and conclusion of negotiations of the Gas Terms for the Ruvuma PSA.

As announced by the Company on 1 July, tendering for the acquisition of 3D seismic has been completed and APT awaits approval from the Tanzanian authorities for the issue of the seismic acquisition contract. It is still expected that acquisition will commence in the third quarter of 2021. Drilling of the Chikumbi-1 exploration and appraisal well is expected to commence early in the third quarter of 2022

Commenting on the update, Tom Reynolds, CEO of Scirocco, said:
“This is a very positive update for the Ruvuma JV partners as the licence extension adds significantly more clarity to the project going forward.  It also reflects the quality of the Operator and its status in country which is critical for the future success of the project.  Most importantly for Scirocco, it provides clarity of licence tenure to potential acquirers within our ongoing discussions regarding the sale of Scirocco’s   interest in Ruvuma.  With a clear licence position, work programme and associated timeline, we are able to present a well-defined pathway to development to prospective purchasers.  We look forward to progressing those discussions and providing updates to the market as appropriate.”

Things are beginning to look up for Scirocco on a number of fronts. Regarding the above it continues to clear a runway to sale of its interests at Ruvuma and I suspect that there are a number of parties interested, after all drilling in 2022 doesnt sound so bad right now does it?

Also today’s announcement from Helium One Group shows how well Sirocco has done with that legacy investment, as a microcosm of the group strategy it has been realising value in order to reinvest, something again I expect soon and I understand that its average sale price of HE1 shares is still around 20p…With the next well underway there may well be further opportunities to take some money off the table.

SDX Energy

SDX Energy announced that the HA-1X well at South Disouq was dry.

Mark Reid, CEO of SDX, commented:
“Whilst the result of this well is disappointing, I remain positive about the remaining prospectivity in the area which has not been materially impacted. In particular, I am encouraged by the proof of reservoir quality sands in the Qawasim Fm in the South Disouq area as this derisks further close by prospectivity. The Company will now be working towards moving these prospects to drill-ready status for a 2022 campaign and looks forward updating the market on its campaigns in West Gharib and in Morocco in the remainder of the year.”

Jadestone Energy

Jadestone Energy announced that H1 2021 Group production was slightly ahead of plan at 9,934 bbls/d and that average full-year 2021 production guidance of between 11,500–13,500 boe/d remains unchanged maybe slightly below expectations which they outline in the statement.

This includes 9,000–10,500 bbls/d from the Australia assets, reflecting H1 2021 performance, and the revised contributions from the Montara H6 infill well and the Skua 10 and 11 subsea well workovers, due to the late arrival of the Valaris 107 drilling rig and longer than expected drilling at the Montara H6 well causing a circa one month delay in the work programme.

There have been slight delays to Stag workovers due to COVID restrictions on people and equipment; and includes daily production from the Peninsular Malaysia assets of a little over 6,000 boe/d, post-closing on 1 August 2021 net to Jadestone and consistent with production levels at the time of the announcement of the acquisition, with some potential upside, equivalent to 2,500–3,000 boe/d annualised production.

Paul Blakeley, President and CEO commented:
“2021 marks the return to a phase of active investment across our producing assets, following an extraordinarily challenging 2020, and we welcome the relative stability and more favourable investment climate our industry is seeing this year.  Further, we remain well positioned to capitalise on the growing number of acquisition opportunities in our core areas, without sacrificing our rigorous sub-surface screening and clear focus on returns.

“With more than half of 2021 behind us, we have updated our guidance to reflect the delayed timing of work programme activities and Maari closing, offset by the recent Peninsular Malaysia transaction. Full year production guidance remains unchanged at 11,500 – 13,500 boe/d.

“We have removed the impact of the Maari transaction for this year, reflecting ongoing uncertainty in the timing of New Zealand government approval.  While the government seems more focused on new legislation to provide clarity around decommissioning security, we have, in the meantime, provided all the information requested by the relevant regulator in seeking their approval.  Importantly, removing Maari from guidance is more than offset by the inclusion of the Peninsular Malaysia acquisition from 1 August.

“The quality of the opportunity set across our asset portfolio remains unchanged and the incremental cashflow from rising production will benefit the business in the last quarter this year and throughout 2022, rather than during last year’s depressed price environment.  I look forward to the successful completion of the Montara activity programme and the full benefit of the Peninsular Malaysia assets increasing Jadestone’s production towards 20,000 boe/d.”

KeyFacts Energy Industry Directory: Malcy's Blog