WTI (Sep) $82.82 +$1.27, Brent (Oct) $86.24 +$1.10, Diff -$3.42 -17c
USNG (Sep) $2.57 +1c, UKNG (Sep) 74.0p -2.0p, TTF (Sep) €29.715 -€0.08

Oil price

Oil rose for the 6th week in a row after the Opec meeting rubber stamped the KSA and Russian production cuts. This and the monster draw in crude inventories left oil in a pretty handy state but all is not entirely happy in the market.

Whilst Chinese economic data is mixed and Indian numbers better the news elsewhere is far from bright. The US jobs data disappointed and in the Eurozone both business activity fell and this morning the German industrial numbers didn’t make estimates.

The Baker Hughes rig count saw overall numbers fall by 5 units to 659 while in oil they were. down by 4 to 525. Aramco reported results today which despite being down beat the whisper and with global demand ‘resilient’ the divvi was increased again.

Finally I heard this morning that industry guru Jeff Currie is ‘retiring’ from G Sachs, I hope that it is a move of choice, I have followed him for many years and enjoyed his work.

Beacon Energy

Beacon has announced an update on the Schwarzbach-2(2.)  drilling operations.

Drilling is currently underway in the deviated mechanical sidetrack. The well is on track to achieve the primary objectives of testing the reservoir targets and completing this well as a producer as part of the development of the Stockstadt Mitte segment of the Erfelden field.

The Company expects to reach TD in the coming days and will provide a further update on progress of the SCHB-2(2.) well as appropriate.

I suppose that it’s good to know that the well is still underway given the delay but apart from that there’s nothing really to draw from this announcement, still it saves the management from getting calls about the progress…

Trinity Exploration & Production

Trinity has announced that the Jacobin-1 Oil Discovery has confirmed virgin oil found in a super-mature basin. This will have material impact on Palo Seco acreage and the new Buenos Ayres Block.

Highlights

• Jacobin-1 was successfully drilled to a total depth of 10,021 feet and is one of the deepest wells drilled in recent times within the prolific Palo Seco area, onshore Trinidad.
• Over 290 feet of net oil pay encountered in the Jacobin well, including 63 feet of net oil pay in the deeper exploration targets.
• A comprehensive logging and pressure sampling programme has confirmed virgin pressures in these deeper zones.
• Results validate the geological model and are within pre-drill range for a commercial discovery.
• Flow testing is now planned to confirm the deliverability of these reservoirs, which is expected to commence during September.
• Oil produced during well testing is expected to immediately be sold to Heritage within the PS4 licence area as operated by Trinity, demonstrating the speed at which the well will be able to generate revenue post completion of drilling.
• The Jacobin-1 well was spudded on 15 May 2023 with an objective to appraise and explore the potential of Lower Cruse sandstones within the Palo Seco area of the prolific Southern Basin.

Drilling samples, wireline logs and pressure testing indicate that the well encountered significant reservoir and hydrocarbon accumulations in the Lower Forest, Upper Cruse and Lower Cruse. The exploration section of the well encountered net reservoir thicknesses varying between 45 to 190 feet.  An aggregate of 63 feet of net hydrocarbon pay was identified in the deeper exploration section of the well. Reservoir pressures appear to be high (up to 7,500psi) and indicate virgin pressures.

In addition, and as previously announced, 228 feet of net pay was found in the secondary target section, adding to the commercial attractiveness of the well.

Data acquired from the well are being analysed further by Trinity’s reservoir and petroleum engineering teams through dynamic modelling to design an optimal completions strategy for the stacked pay encountered within the exploration section.

The well has been cased to 10,021 feet and is being prepared for a series of production tests that is likely to commence with the deepest oil-bearing reservoir, and first production is expected during September. This timeline is driven by the demobilisation of the drilling rig from the site and installation of a heavy-duty workover rig to run the completion, perforate and tie the well into production facilities.  A further update on production rates, fluid properties, as well as future plans will be provided at that time.

The Jacobin results validate both the structural and stratigraphic model demonstrating the existence of a deeper turbidite play across Trinity’s entire Palo Seco area, and the recently awarded Buenos Ayres block. The integration of the onshore 3D seismic over the Lease Operatorship blocks purchased in 2021 has been key to the understanding of the sub-surface. Data from the well will now be used to de-risk and re-rank the remaining “Hummingbird” prospects across the Palo Seco blocks and those recently mapped within the Buenos Ayres block.

Jeremy Bridglalsingh, Chief Executive Officer of Trinity, commented:
“This is a very significant and material achievement by the Team. To find virgin oil in our mature acreage points to a step-change in our understanding of the hydrocarbon system, the remaining resource potential and how we can approach the exploitation of these resources.

“I would like to congratulate the Trinity Team on this success. We have demonstrated a true competitive advantage by the hard work in, building our geological understanding, working through the many aspects of planning and delivering a complex well and critically, safe execution of drilling operations.

“I would also like to thank our partner Heritage, for their valued help and assistance in facilitating the drilling of this well. The next step is to undertake a full production testing programme, that is expected to commence during September. We look forward to updating shareholders on our progress.”

This is undoubtedly a great find by Trinity, over 290′ of net pay in the well and deeper targets is not to be sneezed at. They say that there is a ‘significant reservoir and hydrocarbon accumulation in the Lower Forrest and the upper and lower Cruse’ which sounds good.

However at present there are no flow rates, the drilling rig is being replaced with a heavy duty workover rig in order to not only test but also run the completion, perforate and tie the well into production facilities. This means I guess that the company are certain of the well flowing but I would just prefer to see the flow rates before giving it a definitive value. 

Egdon Resources

Egdon has advised that it has exercised the option to farm-in to onshore Production Licence PL081 under the terms of the Farm-out Option Agreement with York Energy (UK) Holdings as previously announced on 6 February 2023.  In addition, Egdon and York have signed a Letter Agreement with Cuadrilla North Cleveland Limited the 100% licensee of PEDL347, which would result in a farm-in and equalisation of interests between the two licences. 

The PL081 and PEDL347 licences contain the Weaverthorpe Prospect which is a shallow (c.1000 metres) Sherwood Sandstone (Triassic) conventional prospect located immediately up-dip of interpreted gas pay in the Fordon-2 well (drilled by BP in 1974). During the six-month option period with York, Egdon has completed the reprocessing and interpretation of 214 kilometres of 2D seismic data and further technical and operational studies which have de-risked the opportunity and confirmed a material, commercially viable prospect.

Under the terms of the FEQ Agreement Egdon, York and Cuadrilla shall procure that legal and beneficial interests in both PL081 and PEDL347 are assigned between them so that both licences are held Egdon 52.5%, Cuadrilla 25% and York 22.5%. Egdon would be appointed as the operator of the Licences. Following recovery of Egdon’s costs of the farm-in it will assign a further 2.5% interest in both the Licences to York.

The Parties have agreed to use their best endeavours to conclude the FEQ Agreement within six weeks, and to negotiate and agree a Joint Operating Agreement covering the Licences within a further six weeks. 

As consideration Egdon will pay 100% of the costs associated with the planning, drilling, logging, and either short term testing and completion or plugging and abandonment of a well to optimally test the Weaverthorpe Prospect within the Licences (the “Work Programme”). Egdon will have a period of three years to complete the Work Programme.

Under the terms of the original Farm-out Option Agreement Egdon undertook and paid for the work during the Option Period, is liable to pay 100% of any 2023 licence fees for PL081 and will pay York a cash sum of £100,000, less any licence fees that are due or have been paid for 2023.

Egdon will pay the regulatory and reasonable legal costs associated with the transfer of the Licence interests and operatorship.

The assignment of the Licence interests to Egdon, York and Cuadrilla and the transfer of operatorship to Egdon will be subject to the usual NSTA approvals.

Commenting on the Agreement Mark Abbott, Managing Director of Egdon, said:
“Our technical, commercial and operational due diligence has confirmed our previous view that Weaverthorpe is a robust and commercially attractive conventional gas prospect, spanning the PL081 and PEDL347 Licences. 

This has triggered the exercise of the Option on PL081 and an agreement with Cuadrilla in respect of PEDL347, which when concluded, will cover the entire prospect area and allow the optimal appraisal and development of Weaverthorpe on behalf of the new Joint Venture.

Indigenous gas resource like Weaverthorpe provide local employment and generate taxes whilst having compelling environmental and security of supply benefits by reducing the UK’s increasing reliance on imports of LNG which carry significantly higher pre-combustion emissions. Producing gas from Weaverthorpe would be fully aligned with the Government’s Energy Security Strategy and Net Zero targets.

We look forward to working with York, Cuadrilla and our wider stakeholders on delivering the planned work programme over the coming period.”

Confirming this previously announced deal is good for all parties and is another perfect example about why these sort of developments should be encouraged. Like a number of others onshore UK such as Cloughton, which I discussed last week, this resource at Weaverthorpe should be encouraged as part of the Government’s policy of energy security. 

Reabold Resources

Reabold has provided an update on developments in the approvals process for the onshore Colle Santo gas field in Abruzzo, Italy.

As announced on 9 May 2023 and 12 June 2023, Reabold has acquired a 16.2% equity interest in LNEnergy, whose primary asset is an exclusive option over a 90% interest in the Colle Santo gas field. The Colle Santo gas field is a highly material gas resource with an estimated 65Bcf of 2P reserves[1], with two production wells already drilled and the field is development ready, subject to approvals and permits. LNEnergy believes that the field has the potential to generate an estimated €11-12m of post-tax free cash flow per annum.

As part of the approvals process, LNEnergy has recently received a letter from the head of the Italian National Bureau of Hydrocarbons and Georesources (“UNMIG”), the minerals division of Italian Ministry of Environment and Energy Security (“MASE”), which gives permission to carry out well integrity and well service testing on the two existing wells and to start work on the installation and commissioning of the monitoring network at the Colle Santo gas field. The letter is a positive indication of support for the development of the Colle Santo gas field and the next stage is to receive a formal decree from MASE to conduct the work.

LNEnergy is seeking a two-year, long-term production test permit which would significantly de-risk the full concession permit approval to allow for 20+ years of production. The Company expects a decision to be made on the two-year permit later in 2023.

Sachin Oza, Co-CEO of Reabold, commented:
“It is encouraging to note the favourable indication from UNMIG that early work on testing and monitoring can begin at the Colle Santo gas field. Our focus now turns to finalising this stage of the approvals process with a view to commencing operations later this year once all necessary permits are in place. We look forward to updating our shareholders with further progress on the project throughout the year.”

There is a great deal that I don’t understand about Reabold at the moment and top of that list is this investment. Granted I know that I am known for some indifference for investing in Italy which has lasted for some 40 years but given that mostly its been right I remain somewhat cautious.

Also that whilst Reabold is not yet awash with cash I can’t understand why they are banking on an asset that will likely consume cash, albeit very slowly, when West Newton sits awaiting development.

I am hoping to be able to ink in a long awaited meeting with Reabold soon, after which I am sure that any misgivings I may have will have been dispersed. After all it is unusual for the company to get involved in something like this given their history. Let’s wait and see…

Prospex

Prospex has announced that Po Valley Energy Limited has successfully completed the ramp-up and commissioning process at the Podere Maiar-1 (“PM-1”) gas facility of the Selva Field.

Po Valley Operations Pty Limited, a wholly owned subsidiary of Po Valley Energy, is the Operator of the Selva Malvezzi production concession with a 63% working interest, while Prospex has the remaining 37% working interest.

Highlights

• The four-week ramp-up and commissioning programme at the PM-1 production facility was completed during the week ending 4 August 2023
• A seamless ramp-up and commissioning process has concluded with slick line rig removal of data gathering memory gauges from the lower C2 production zone as part of a three-day scheduled shut down
• Production at PM-1 has recommenced with forecast daily production levels of 72,000 standard cubic metres per day (scm/d) until all data analysis is complete
• Gas produced during the ramp-up period is estimated to be approximately 1,800,000 scm with 100% of this gas sold to BP Gas Marketing under the 18-month supply agreement
• Detailed analysis of well data is currently underway with results expected within three weeks
• Further upside potential at the Selva Malvezzi Production Concession (Figure 3), as Po Valley Energy, the operator, intends to advance other projects within the concession.

Mark Routh, Prospex’s CEO, commented:
“I am very pleased that Po Valley Energy has completed the ramp-up and commissioning process at the PM-1 gas facility of the Selva field. The final transition to ongoing production at PM-1 is underway which marks a major milestone for both Po Valley and Prospex. The ongoing production from PM-1 is an outstanding platform from which the Joint Venture can actively pursue the exploration and development of nearby lookalike wells.

“I would also like to take the opportunity to congratulate Po Valley Energy and their team on the ground, for the highly effective management of the start-up phase of the PM-1 gas facility during July. The necessary and prudent data acquisition programme of downhole pressures and temperatures has been completed and will be analysed in order to develop the optimum ongoing production strategy.

“We have now delivered a key step in the Company’s strategy to become a diversified energy producer with multiple producing assets principally in lower risk, onshore European markets with ready access to infrastructure. We are proud to be supporting the European Energy sector with producing assets in both Italy and Spain and look forward to updating shareholders on our continued progress.”

Mark Routh deserves congratulations for the successful ramp-up and commissioning of PM-1 in the Selva field where gas is now being produced and sold to BP Gas. 

PVO announced early this morning that the ramp-up and commissioning phase of its PM-1 gas facility in the Selva Malvezzi Production Concession, located in the Po Valley plains of northern Italy, is complete.

The ramp-up and commissioning process progressed in a seamless manner and concluded with a scheduled three-day shut down and removal of memory gauges from the lower C2 production zone. A slick line rig attended site during the last day of the shut-down period to complete this successful work programme with memory gauge removal and acquisition of pressure / temperature gradient data after which production at the PM-1 facility recommenced.

Analysis and understanding of data from the memory gauges removed from the well and pressure / temperature gradient are important data points for long term reservoir behaviour and determining associated production levels. This data is being analysed in order to determine optimal and long-term production levels.  It is expected that this analysis will take approximately three weeks. In the interim period, stable production at PM-1 will continue at approximately 72,000 scm/d.

Gas produced during the ramp-up period is estimated to be 1,800,000 scm, however, this amount is subject to final reconciliation with commercial stakeholders via standard commercial processes. PM-1 sold 100% of this gas to BP Gas Marketing under the 18-month gas supply agreement (announced on 14 February 2023).

The ramp-up and commissioning at PM-1 incorporated steady increases in volume starting at ~35,000 scm/d moving to ~50,000 scm/d.  Thereafter, a step up in volume of 10,000 scm/d occurred on a weekly basis with production in the final week at ~80,000 scm/d prior to the scheduled three-day shut down.

With gas production commencing 4 July 2023 and ramp-up and commissioning concluding 4 August 2023, PVE and Prospex can look forward to initial gas production cashflows before the end of August 2023.

The Company will update shareholders on the production rates in the coming months.

KeyFacts Energy Industry Directory: Malcy's Blog