WTI $69.21 +47c, Brent $73.41 +71c, Diff -$4.20 +24c, NG $4.30 -8c, UKNG (Oct) 124.0p 

Oil price

After a recovery week in which oil took into account firstly a crude shortage after an explosion on a Mexican platform and then of course hurricane Ida which also took just under 2m b/d off the market things are already settling down. The hurricane is still very lively and is moving up the eastern seaboard but has probably taken some 2m b/d off refining capacity and the colonial pipeline was also affected.

So there might be a  bigger knock-on effect for gasoline and whilst it is only in one part of the country it should be remembered that this is a crucial week for demand coming as it does in the final week of the driving season which traditionally come to an end on Labor Day which is this upcoming weekend.

The Fed meeting didn’t give a firm time for the tapering operation but the hawks are still talking October if they can get away with it. There has been a small piece of advice from sleepy Joe to the Opec+ meeting tomorrow in which he wants them to keep the extra 400/- b/d coming in order to keep energy and of course gasoline prices down but not as in your face as The Donald would have been.

Retail gasoline prices remain high as the aforementioned season has been a bumper one, but after the weekend we will be looking at other product pricing as we move towards distillates and space heating.

Jersey Oil & Gas

JOG has provided an update on, inter alia, the electrification potential for its Greater Buchan Area (“GBA”) Development Project. There has been significant stakeholder interest in working collaboratively to enable the GBA Development to become an integral part of an area-wide electrification project and regional electrification offers many potential benefits to both GBA Development stakeholders and owners of neighbouring facilities, through possible reductions in both capex and opex.

The GBA Development’s pre-FEED offshore work programme, which includes environmental, geotechnical and geophysical surveys of the cable route for power from shore and pipeline route data requirements has been progressed with the data acquisition stage now completed.

FEED entry, together with previously advised Final Investment Decision and first oil milestone dates, will be re-phased once near-term studies on regional electrification have progressed to provide sufficient definition of the options available whilst the Company’s GBA Development farm-out process remains ongoing.

The Company’s management maintains its view of the importance of acting in a responsible manner in pursuit of the industry’s sustainability goals and it is therefore deemed essential for JOG to work collaboratively with all stakeholders in order to deliver an optimum and sustainable development solution to support the UK’s economy, as the UK progresses through its targeted energy transition. As such, JOG has furthered engagement in multi-party conversations on the topic of electrification with the UK’s Oil and Gas Authority, oil and gas industry parties and potential third-party funding providers (infrastructure funding businesses).

We are excited by the potential for the GBA Development to be the first new development in the UKCS to be fully powered by electricity and firmly believe it can play a regional electrification role in collaboration with other asset owners and producers. Such collaboration could materially reduce capex and opex through shared investment, thereby further enhancing the economics of our planned GBA Development.

Accordingly, JOG has elected to re-phase FEED entry, FID and first-oil milestone dates in due course in order to allow sufficient time for the incorporation of regional electrification studies in collaboration with other offshore operators/owners into our FEED workflows.

In parallel, JOG has continued to progress its pre-FEED work programme which includes environmental, geotechnical and geophysical surveys of the cable route for power from shore, jacket and piling data and pipeline route data requirements. The data acquisition stage of such surveys was completed on 14 August 2021 with analysis of the acquired data ongoing, which will form inputs into our environmental impact assessments for the GBA Development.

Andrew Benitz, CEO of Jersey Oil & Gas, commented:
“Our GBA Development represents a major opportunity in the UK Central North Sea to extract locally sourced hydrocarbons profitably and at low-cost, with basin-leading low carbon emissions.  The UK will continue to require responsibly produced hydrocarbons to support its planned energy transition for some time to come.  We are determined to play as responsible a role in this as possible recognising that industry underinvestment risks driving prices higher, thereby making energy less affordable for consumers.”

Union Jack Oil/Reabold Resources

Much has and is being said about West Newton but today’s RNS certainly strikes me as a strong case for the defence. On West Newton B-1z a significant hydrocarbon column of approximately 118 metres demonstrated on completion of drilling at the B site proving material volumes of hydrocarbons remain in place.

The operator has perforated 44 metres of the Kirkham Abbey formation with good quality gas recovered and incinerated at surface, consistent with gas flowed from WNA-1 and WNA-2 wells. The gas analysis report indicates approximately 90% methane, 4.5% ethane and importantly no H2S (Hydrogen Sulphide) and liquid hydrocarbons were recovered to surface.

The Kirkham Abbey formation was naturally fractured, confirmed by imaging log, core, SEM photomicrographs and most significantly fluid injection rates   of 5.7 barrels per minute (8,208 barrels per day). These showed similarities between “fingerprints” of liquids recovered from WNA-1 and WNA-2 wells and indications are that the formation is sensitive to fluid/water, specifically in matrix.

Consequently, during drilling and completion operations, the Kirkham Abbey formation is suspected to have been subject to near well bore formation damage preventing optimum hydrocarbon flow and the WNB-1z is currently shut in with gauges in hole recording data and pressure build up, which is already being observed, into early October 2021.

Remedial action will be informed by pressure data recorded, results from WNA-2 test and an independent technical review and following remedial interventions the WNB-1z well is expected to be suspended as a potential producer.

At West Newton A-2 an Extended Well Test is to recommence and equipment is now being mobilised to the A site. With a significant hydrocarbon column of approximately 65 metres demonstrated on completion of drilling at WNA-2 and material volume of hydrocarbons in place further work should be beneficial.

The previously completed zone at WNA-2 has been shut in for circa two years with very little fluid head on the perforated interval in comparison to WNB-1z, minimal fluid was lost to the formation.

Stephen Williams, co-CEO of Reabold, commented:
“Testing at West Newton continues to provide valuable data to inform how to best develop this extremely significant oil and gas resource. Evidence of permeability and the extensive hydrocarbon column, in addition to the returns of gas and oil to surface, are extremely encouraging.  Suspected formation damage at the B-1Z well also forms a key input into the development methodology for the West Newton field.  We are fortunate in being able to progress the A-2 test whilst we undergo the pressure build up at B-1Z, and look forward to continuing to better understand how to optimally exploit this unique UK oil and gas resource.

Executive Chairman of Union Jack, David Bramhill, commented:
“We are highly encouraged by these initial results from an ongoing multi-well appraisal testing and drilling campaign at West Newton that has confirmed there are significant hydrocarbons in place and an active hydrocarbon system present.

“Our enthusiasm is borne out by the return of hydrocarbons to surface at this ongoing and early stage testing of the Kirkham Abbey formation, natural fracturing and significant fluid injection rates of 5.7 barrels per minute (8,208 barrels per day). “Following these promising initial results at the B1z well equipment is currently being mobilised to the A-2 well site for the recommencement of testing.

“The Joint Venture partners are resolved to unlocking West Newton`s inherent value and generating a successful return on capital invested. “We look forward to reporting on progress at both wells going forward.”

So, both Reabold and Union Jack are highly confident and between them in their own words express with some intent that the project is very much under way and continues testing this potentially substantial project.

Both Reabold and Union Jack remain fully funded for the intended well test programme yet to come.

Sound Energy

Sound has announced the completion of the Company’s acquisition, as announced on 14 June 2021, from Schlumberger Holdings II Limited of the entire issued share capital of Schlumberger Silk Route Services Limited.

SSRS holds a 27.5% participating interest in the Anoual and Greater Tendrara exploration permits in Eastern Morocco (the “Exploration Permits”), together with a 27.5% indirect interest in the Tendrara Concession (the “Concession”) through its contractual relationship with the Group. Sound Energy plc now controls operated working interests of 75% in the Exploration Permits and in the Concession.

Commenting, Graham Lyon (Executive Chairman) said:
“This accretive transaction has now completed and underlines Sound Energy’s position as the leading gas developer in Morocco. Following the recently announced Gas Sales Agreement with Afriquia Gaz, Sound Energy is now moving inexorably forward to the Final Investment Decision for its Micro LNG project.”

The Chairman is right and Sound is now moving swiftly to consolidate its position in Morocco, once it has completed the next process and the FID is done then it will have substantially increased its size and prospects for the company will be enhanced and the rating should significantly improve.

Hurricane Energy

Hurricane Energy plc and Hurricane GLA Limited (the Offeror) announce today the Offeror’s invitation to holders of Hurricane’s U.S.$230,000,000 7.50 per cent. Convertible Bonds due 2022 bearing ISIN: XS1641462277 (the Bonds) (of which U.S.$230,000,000 in aggregate principal amount are outstanding), to tender their Bonds for purchase by the Offeror for cash (the Offer).

The purpose for the Offer is to utilise a portion of the Group’s available cash balances to purchase Bonds prior to their maturity as part of a proactive liability management exercise on the Group’s outstanding debt. The Offer will also provide liquidity and certainty of outcome to those holders whose Bonds are accepted in the Offer, given the range of future dynamic factors and uncertainties which are outside the Company’s control.

As of 29 August 2021, Lancaster was producing 11,100 bopd from the P6 well alone with an associated water cut of 31%. The 24th cargo of Lancaster oil, totalling approximately 505 Mbbls, was lifted in late-August 2021.

Lamprell

Further to the announcement on 3 August 2021, Lamprell provides an update on progress with its balance sheet recapitalisation plans.

The Group continues detailed discussions with three regional banks on USD 90 million of Export Credit Agency backed working capital facilities for the completion of the two IMI rigs. These facilities are expected to be comprised of two equal tranches and conclude in Q3 2021 and Q4 2021 respectively.

The Board remains confident in the successful completion of the ongoing debt discussions and is also evaluating alternative ways of monetising existing assets and investments to minimise the size of the equity raise.

As previously announced, the Group expects to raise a minimum of USD 30 million through equity in Q4 2021. The details of any potential equity raise are subject to market conditions and will be announced in due course.

In the meantime, management of working capital remains the Group’s priority.  Net cash at 28th August was USD 79.3 million (USD 81.1 million at end of June 2021) and the Group continues to take a disciplined approach towards cash collection, with significant contract receipts received in August and further receipts expected from ongoing projects throughout the rest of the year.

Lamprell is an old favourite and wouldn’t be the same without having cyclical hurdles to jump just when you thought the winning post was in sight. And as is always the case it will come out of the recapitalisation ready to go for the next few years in a strong position and it can get on with its operational upside.

Eco (Atlantic) Oil & Gas

Eco has announced that the Sapote-1 well on the Canje Block, offshore Guyana has been spudded. Eco was officially informed today by its investee company, JHI Associates Inc. (“JHI”), about the spudding of the well. The Sapote-1 well is designed to test Upper Cretaceous reservoirs in a stratigraphic trap.  Drilling of the well is expected to take up to 60 days. The well is approximately 225 km northeast of Georgetown in 2,550 meters of water and is being drilled with the Stena DrillMax drillship. 

Eco holds an indirect interest in the Canje Block as a result of its transaction to acquire up to 10% interest in JHI, and JHI is fully funded for the ongoing program on the Canje Block, including for the Sapote-1 well and any additional potential wells considered for this year.

The Sapote-1 prospect is located in the south eastern section of Canje, approximately 50 km north of the Haimara discovery in the Stabroek Block which encountered ~207 feet (63 meters) of high-quality, gas-condensate bearing sandstone reservoir and approximately 60 km northwest of the Maka Central discovery in Block 58 which encountered ~164 feet (50 meters) of high-quality, oil-bearing sandstone reservoir.

The Canje Block is operated by ExxonMobil and is held by Working Interests partners Esso Exploration & Production Guyana Limited (35%), with TotalEnergies E&P Guyana B.V. (35%), JHI Associates (BVI) Inc. (17.5%) and Mid-Atlantic Oil & Gas Inc. (12.5%).

Gil Holzman, President and Chief Executive Officer of Eco Atlantic, commented:
“With other drilling targets in the region having yielded significant discoveries, now totalling billions of barrels of oil and oil equivalent, we are excited about the potential of the Sapote-1 well and look forward to receiving the well results in due course. We also are keen to deliver additional drilling success with our next exploration campaign on our neighbouring Orinduik block in the Basin and the follow-through potential of ExxonMobil’s recently announced multiple well pre-permitting on the Canje Block next year. We are entering a very busy period of drilling and updating drilling plans and we look forward to updating the market in the coming months on our progress of the Orinduik Block and on the Sapote-1 results.”

Held up by Tullow when it should have been drilling elsewhere, the Eco management has cleverly engineered a handy little farm-in which actually looks like it might deliver something potentially very large to keep the kettle boiling so to speak. The fact that it is operated and partnered with some proper grown-ups will make a pleasant change in those meetings and now in addition to Total in Orinduik they have ExxonMobil to chat to…

Zenith Energy

Zenith has announced that it has entered into an exclusivity agreement with Noble Hill-Network Limited, a private Nigerian oil and gas company, that holds 100% of the Risk Service Contract (“RSC”) for the development of the North-West Corner of OML 141 (“NW OML 141”).

NW OML 141 covers an area of approximately 105 square kilometres in the swamp area of the Niger Delta region.  The NW OML 141 RSC contains two discovered fields and one prospective field with an estimated 232.7 million barrels of discovered oil (Degeconek 2019 CPR) with the potential to grow to more than 500 million barrels of Contingent and Prospective Resources with several TCF of prospective natural gas and condensate. 

The discovered fields include the potentially highly productive Elepa South and Barracuda oilfields, which are both categorised as discoveries under SPE-PRMS rules and are ‘drill-ready’ with the first well location having already been purchased and the necessary civil works having already been performed.  The prospective field, Curlew Channel, is a large multi TCF natural gas and condensate prospect containing the deeper “U” and “X” reservoirs identified both on the Northern boundary of the Risk Service Contract Area (“RSCA”) in NW OML 141 and the nearby Shell OML 33. NHNL plans to commence drilling activities before the close of 2021 and start production through an Early Production Facility shortly thereafter.

Under the terms of the Exclusivity, Zenith has a period of 90 days during which to conduct due diligence and to evaluate the opportunity to participate in the RSC via the potential purchase of an equity stake in NHNL, the sole holder of the RSC.

The Company wishes to underline that no terms for any possible transaction have been discussed at this point.

Andrea Cattaneo, Chief Executive Officer of Zenith, commented:
“We are very pleased to begin our evaluation of the opportunity to participate in NHNL’s RSC for the development of the North-West Corner of OML 141 in Nigeria directly with the exclusive holder of this agreement following the signing of the Exclusivity.  

The RSC for NW OML 141 would represent a very exciting opportunity for Zenith to enter the Nigerian oil and gas space and to exploit an undeveloped, potentially highly prolific selection of oil and gas fields.

This opportunity is in line with our strategy of identifying assets, which are ‘drill-ready’ and with significant near-term production potential, that will position the Company to achieve its goal of becoming an oil and gas company with a well-balanced portfolio producing more than 10,000 bopd.”