WTI (Mar) $78.59 -47c, Brent (Apr) $85.38 -20c, Diff -$6.79 +27c
USNG (Mar) $2.47 -9c, UKNG (Mar) 135.51p +2.51p, TTF (Mar) €53.450 -€0.005

Oil price

Oil drifted after a funny set of industry inventory stats could have hit the market badly but it was attributed to a ‘data adjustment’. the IEA added to the demand numbers like Opec did yesterday, this time by +100/- b/d to 2m b/d.

Challenger Energy Group

Challenger has provided the following update on its 2023 strategy and work program:

Uruguay: The Company's focus in 2023 will be to rapidly progress its Uruguay asset, given recent increased industry interest in Uruguay generally, and in the Company's AREA OFF-1 block in particular, following conjugate margin drilling success by Shell (the Graff well) and TotalEnergies (the Venus well) and the award of offshore Uruguayan licences to majors including Shell, APA Corporation (formerly, Apache) and YPF. The Company anticipates completing its work commitment for the initial 4-year exploration period early in Q2 2023 (2D seismic reprocessing and various technical studies). In parallel, the Company is seeking to advance a farm-out for the block, with the dual objective of realising upfront cash and funding at least an accelerated 3D seismic acquisition program. The Company is also evaluating various business development options in that country, including offshore green energy opportunities on or proximate to the AREA OFF-1 block.

Trinidad and Tobago: The Company's 2023 strategy is to focus on its core operations, being the Goudron and Inniss-Trinity fields in the south-east of Trinidad, from which most of the Company's production is derived and where almost all equipment / resources are deployed. Various options to expand activity in this core area are being considered, including new licence applications, M&A, and joint programs with neighbouring operators. In parallel, the Company is seeking to monetise assets not in this core area, so as to maximise cash and offset risk and work program commitments, but at the same time retain upside exposure. In line with this approach on 20 December 2022 the Company announced the conditional disposal of the Cory Moruga licence, and on 14 February 2023 the disposal of Caribbean Rex (in both cases, with back-in rights retained). The disposal of these non-core assets represents less than 10% of current production. Trinidad in-country costs have been reduced and certain management changes have been implemented.

Suriname: The Company has secured an extension to the initial exploration term of the Weg Naar Zee PSC in Suriname, whereby, subject to completion of an agreed technical study by the end of April 2023, the Company will have a further 12 months (until April 2024) in which to undertake drilling and testing of a pilot well. While the technical study is being completed, the Company is considering various farm-out / partnering options.

The Bahamas: The Company continues discussions with the Government of The Bahamas in relation to the extension of the Company's licences into a third, three-year exploration period. At the same time, the Company is seeking alternative means of achieving value from its considerable historic investment in The Bahamas.

Cash and funding requirements: The Company's cash balance as at the start of 2023 was approximately US$2.7 million (inclusive of US$0.5 million restricted cash held in support of a performance guarantee supplied in Uruguay). The Company has no material debts, and as a result of the recently announced transaction related to the South Erin licence, no drilling obligations in Trinidad in 2023. The Company thus anticipates that all planned 2023 Trinidad field activities, including routine maintenance, heavy workovers and enhanced oil recovery programs, can be supported from local operating cashflows. Subject to completion of the recently announced transactions, the Company expects cash inflows through 2023 of more than US$3 million (additional inflows may also result from transactions involving other non-core assets, and from a successful farm-out of the Uruguay asset), and expects corporate overhead cost for 2023 to be under US$2.5 million.

Eytan Uliel, Chief Executive Officer of Challenger Energy, said:
"During 2022 we reset Challenger Energy's business following earlier non-commercial exploration drilling outcomes. We cut costs, reassessed priorities, reshaped operations, recapitalised, and settled legacy creditors. Now, as we start 2023, the focus is on those areas that offer the best scope for near-term value upside. Uruguay is most obvious, and the plan for AREA OFF-1 is to complete our initial low-cost work program and then proceed rapidly to farm-out the asset, as well as build a broader business in the country. In Trinidad, the goal is to drive profitability from the main producing assets, while seeking to monetise non-core assets which add no or little production but carry significant commitments, ideally whilst retaining exposure to any upside. The two transactions recently announced are consistent with this approach.

Overall, Challenger Energy starts 2023 in a strong place. Existing cash and identified inflows mean we are not under funding pressure. The business in Trinidad has been refocussed on its core producing assets while the risk and cost of non-core assets are being passed to others, but we still retain exposure to success upsides. In Uruguay, we have an asset that through 2022 became increasingly more valuable, and where the objective for 2023 is clear: to capitalise on that value. I look forward to providing updates as the year progresses."

It can be seen that there is much going on as the restructuring of CEG continues apace. Uruguay which I identified some months ago as having considerable potential is now firmly in the starting blocks as the work programme moves into farm-out phase. 

In Trinidad there is further slimming down and as has happened at Cory Moruga and recently at Caribbean Rex disposal has been made whilst still keeping some of the upside potential. Finally in Suriname an extension has been granted and in the Bahamas a similar route is being trodden albeit here more of a withdrawal seems to be on the cards. 

Bit by bit CEO Eytan Uliel is fixing the roof and rebuilding CEG to be prepared for times with growth across a number of areas where there are definite signs of potential upside for shareholders. 

Reabold Resources

Reabold has announce that a copy of a Competent Person’s Report prepared by RPS Group on UKCS Licence P2478 on behalf of the Joint Venture partnership with Baron Oil plc and Upland Resources (UK Onshore) Limited (each with a 32% working interest) (the “JV”), in which Reabold is the Licence Administrator with a 36% working interest, can be viewed on its website at the following link: www.reabold.com/investor-relations/reports-and-presentations/

The CPR has been prepared in accordance with the June 2018 Petroleum Resources Management System (“SPE PRMS”) as the standard for reporting. The key points from the CPR and a summary of the gross and net technically recoverable prospective resources are set out below.

Key Points

• 201 mmboe1 aggregate gross unrisked2 Pmean Prospective Resources on licence P2478
• The Dunrobin West prospect (“Dunrobin West”), agreed by the JV to be the proposed location of the first exploration well on the licence, would target 119 mmboe aggregate gross unrisked Pmean Prospective Resources3
• 34% Chance of Geologic Discovery (Pg ) on Dunrobin West Jurassic primary target
• Secondary Triassic target at Dunrobin West, which along with the Jurassic can be tested by a single vertical borehole, included in formal resource assessment for the first time with a Pg of 12%
• Dunrobin West dry hole drilling costs to a total depth of 800 metres estimated by the JV to be £8.6 million gross
• The Company believes that Dunrobin West is geologically analogous to the Beatrice field, which produced 164 mmboe
• Success at Dunrobin West would significantly de-risk Dunrobin Central & East and Golspie analogous prospects
• Reabold’s acquisition of, inter alia, licence P2478 from Corallian Energy Limited as announced on 4 May 2022, for £250,000, has provided the Company with additional net unrisked Pmean Prospective Resources from P2478 of 72 mmboe

1. The CPR reports oil and gas Prospective Resources. The oil equivalent value of the gas resources has been estimated by the Company using a factor of 5.8bcf per mmboe.
2. The unrisked aggregation was performed by the Company and assumes that all prospects at all levels are successful. 
3. The unrisked aggregation of Dunrobin West was performed by the Company. The volumes were presented for each reservoir in the CPR and, at the Company request, were not aggregated probabilistically.

Stephen Williams, Co-CEO of Reabold, commented:
“We are pleased that the CPR has confirmed the western part of the Dunrobin complex provides us with an exciting drillable prospect where a relatively low-cost exploration well can target more than 100 mmbbl of gross Pmean Prospective Resources with low geological risk.

We believe that the results from this CPR for P2478 alone strongly supports our decision to acquire, inter alia, licence P2478 from Corallian Energy for £250,000. Reabold has retained four other licences from that acquisition that we continue to progress technically and commercially.

The publication of this CPR adds further validity to the technical work carried out by Reabold and supports the ongoing farmout campaign being formally run by us for the Reabold North Sea portfolio, which has already attracted industry interest.”

This looks, as management said recently an opportunity for Reabold to deliver to its shareholders a cheap, potentially substantial in comparison to its current market cap. I’m sure it will happen even if value is created by trading the asset but the company needs to deliver for sure.

Longboat Energy

Longboat yesterday provided an operational update and to announce its entry into Malaysia.

Norwegian Portfolio

Norway remains Longboat’s key focus area. Having made four potentially commercial discoveries in less than 18 months, the Company is now focussed on maturing these assets towards development and realising the value that has been created.

On 11 January 2023, the Company announced that it had been awarded the Lotus prospect (Longboat, 30%) in the Norwegian 2022 APA Licensing Round. Lotus is located immediately adjacent to Longboat’s Kveikje discovery (Longboat, 10%) and adds significantly to the materiality of Longboat’s acreage position in this area.

Kveikje and Lotus, on success, are likely to form part of the new Equinor operated Ring Vei Vest (“RVV”) cluster development project. The RVV project will develop multiple oil discoveries made west of the Troll field in recent years. This includes the Rover Sør oil discovery announced last week by Equinor, which further increases the size of the multi-hundred-million-barrel RVV development project.

Following a short hiatus in anticipation of the APA award, Longboat is actively pursuing monetisation options for its position in the area. This process has attracted significant interest and Longboat anticipates being able to provide the market with a further update during the first quarter of 2023.

The Transocean Norge rig is booked for the high-impact Velocette exploration well (Longboat, 20%), which is expected to spud in Q3 2022 and is targeting a large gas prospect with gross mean volumes of 177 mmboe. The well has attracted considerable attention and was recently featured on Westwood Global Energy Group’s list of “Key wells to watch in 2023”. The chance of success associated with the Velocette prospect is 30%.

The Company is working to confirm up to two additional wells for its 2024 drilling programme alongside the firm well commitment on the Lotus prospect which is expected to be drilled in H2 2024.

Kveikje and Oswig are among the five largest discoveries made in Norway in 2022 and in recognition of this excellent exploration achievement, Longboat has been awarded the Norwegian “Explorer of the Year Award” by GEO365 for 2022.

Malaysian Bid Round

Under the Malaysian Bid Round (‘MBR’) 2022 Longboat, via its subsidiary Longboat Energy (2A) Limited, has been awarded by Petroliam Nasional Berhad (‘PETRONAS’) a Production Sharing Contract (“PSC”) for Block 2A, a large exploration block offshore Sarawak with material gas resource potential. MBR is an annual licensing round organised by Malaysia Petroleum Management (MPM), PETRONAS as the custodian of petroleum resources in Malaysia.

Longboat will become operator with a 36.75% interest in the PSC alongside partners Petronas Carigali Sdn. Bhd (40%), Petroleum Sarawak Exploration & Production Sdn. Bhd. (7.5%) and Topaz Number One Limited (15.75%).

Block 2A is offshore Sarawak, north-west of the prolific Central Luconia hydrocarbon province, outboard of recent gas discoveries. The Block covers approx. 12,000km2 and is located in water depths of between 100-1,400 metres. One of the world’s largest LNG facilities, the Bintulu LNG plant, is located onshore on the coast of Sarawak.

A number of large prospects across multiple plays have been identified across Block 2A. The main prospect is a large anticlinal structure called Kertang with a closure of over 100km2 at multiple levels and significant volume potential representing multiple trillions of cubic feet of gas in stacked reservoirs. Seismic indicators for the presence of gas can be observed in the area and over the crest of the prospect. These indicators, together with geochemical analysis of sea floor samples over the main prospect provide strong evidence of the area being gas-prone.

PETRONAS is actively supporting new entrants in the region and the Company believes establishing a presence in the Malaysia via the Block 2A PSC will open-up further opportunities in the future.

Helge Hammer, Chief Executive of Longboat, commented: 
“Our immediate focus remains on progressing and monetising the exploration successes achieved to date in Norway. We are encouraged by levels of interest in the Kveijke discovery which has been re-invigorated by the recent award of the adjacent Lotus asset. As well as the high-impact Velocette well scheduled for Q3 this year, we are looking to establish up to a three well programme for 2024. 

“We are delighted to have been awarded Block 2A which marks our entry into Malaysia, where our management team and partners have extensive past experience. This potentially significant opportunity has been acquired without a material initial cost obligation and with three years until a drill decision. By establishing a presence in Malaysia and building a relationship with PETRONAS we are significantly expanding Longboat’s opportunity set.”

As noted recently here Longboat has realised that for 2023 progress in Norway will be by trading assets and in the second half an exploration well. Accordingly the move into Malaysia as at present no such assets exist for the likes of LBE. 

This deal is highly welcome, coming as it does without material upfront costs and yet with good long term opportunities, in that Longboat have surely done the right thing by adding Malaysia as a geography to invest in. And was the worst kept secret in the market….

Capricorn Energy

Talks with NewMed Energy terminated after the new Board sat and decided to pursue a  new strategy for the company. If Capricorn  was a horse it would have been put down by now, I see no reason why the same fate should not be meted out the the whole lot of them who have done nothing sensible, starting with the Tullow cave-in.

KeyFacts Energy Industry Directory: Malcy's Blog