Oil price

With the US market shut today oil is effectively rangebound and will consolidate the gains of last week which were considerable. Whilst hurricanes and inventories bolstered prices many were worried about PMI’s particularly in Europe but the Non-Farm-Payrolls in the US on Friday coming in at 187/- and unemployment run rate kept rate rises under pressure.

SDX Energy

SDX has announced that it has commenced drilling the Ksiri-21 (“KSR-21”) well in Sebou Central of the Gharb Basin, Morocco. 

The vertical development well will be drilled to a planned total depth of approximately 1,950 metres. Using existing 3D seismic, the well is targeting a well-defined prospect within the main Hoot formation, which is the main producing sand in the area. SDX has drilled over 20 production wells in the same basin. As such, this new well presents a low-risk step-out location. The well can be immediately brought into production, supplying gas to existing customers, under the improved gas price announced on 5 June 2023. 

The Company will make further announcements as appropriate.

Daniel Gould, Managing Director, commented:
“Commencement of drilling signifies an early milestone in SDX’s new roadmap in Morocco, which the Company will present imminently. As part of re-energising the Company’s upstream production, we will assess the feasibility of drilling additional wells, back to back. This type of programme would reduce capex per well, ensure operational efficiency, and prove sufficient reserves of ‘gas-behind-pipe’ to meet both existing and future demand.”

The arrival of Jay Bhattacherjee and team at SDX has at least on the surface given the impression of moving on up and today they announce the spud of the first in the ‘new roadmap’ in Morocco. It should be remembered that SDX has a unique position as the only gas producer in country at the moment so it should come as no surprise that they plan to increase the number of wells and hopefully add to reserves to supply the ‘insatiable demand’. 

There is much going on in Morocco at the moment and SDX is leading the drive from their existing producing position but there are a number of UK companies on their coat tails with a number of significant projects. This is because as SDX say, there is insatiable demand but also that prices are high and the fiscal terms are excellent, finally ONHYM is very keen for partners. 

Late in October there is a Summit in Marrakesh to which most companies are presenting, it looks like being that rare thing, a genuinely important conference, I will be there and writing the blog from Morocco including interviews with the key movers and shakers.

Sound Energy

Sound on Friday advised that it has received conversion notices to issue 22,222,221 Ordinary Shares at a conversion price of 2.25 pence per Share under an existing £2,500,000 Convertible Loan Note Agreement, the terms of which were announced on 13 June 2023 (“Partial Conversion”). The Partial Conversion reduces the amount owing on the Convertible Notes by £500,000, with £1,500,000 remaining.

An application has been made for the Shares to be admitted to trading on AIM (“Admission”). The Shares will rank pari passu with the existing ordinary shares in issue and it is expected that Admission will occur on or around 8.00 a.m. on 6 September 2023.

Following Admission, the Company’s enlarged share capital will comprise 1,907,567,127 ordinary shares of 1p each, each with voting rights. This figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, securities of the Company under the Financial Conduct Authority’s Disclosure and Transparency Rules.

Nothing to add to this, merely a funder converting at Sound. 

Empyrean Energy

Empyrean has announced its final results for the year ended 31 March 2023. The full Report and Accounts will be made available on the Company’s website in the coming days.

Block 29/11, Pearl River Mouth Basin, China (EME 100% reverting to 49% upon commercial discovery)

Reporting period 

• LH 17-2-1 Jade well spudded and reached final total depth of 2,849 metres Measured Depth (“MD”) during April 2022. No oil pay was encountered in the target reservoir and demobilisation operations were completed. As a result, Empyrean has provided for impairment against Jade prospect costs and the dry hole costs associated with the Jade drilling program.
• Empyrean decided to enter the second phase of exploration with the aim to drill the larger Topaz prospect following post-well analysis at Jade that confirmed the reservoir quality to be better than pre-drill estimate and an initial CNOOC-assisted migration pathways assessment.

Post-Reporting period

• Joint regional oil migration study with CNOOC team to be completed which will map oil migration from the proven source rock south-west of Block 29/11 that charges the four CNOOC oil discoveries (immediately west of Block 29/11 and Topaz) and extend this into Block 29/11 and map these potential migration pathways to Topaz.
• Simultaneous 3D seismic inversion project to determine whether light oil pay in the target reservoir can be discriminated from a water bearing reservoir to be completed at Topaz with a specialist seismic consultancy with expertise in seismic inversion.
• Topaz Drill Program targeted to commence in 2024.  

Duyung PSC Project, Indonesia (EME 8.5%)

Reporting period

• Updated Plan of Development (“Mako POD”) submitted to the Indonesian Ministry of Energy and Mineral Resources for approval in September 2022 and subsequently approved in November 2022.
• Updated Mako PoD based upon Contingent Duyung PSC Resources of 384 billion cubic feet gross within the Duyung PSC area which represents some 297 billion cubic feet net attributable* to 100% of the Duyung PSC Joint Venture.
• The operator, Conrad Asia Energy Ltd (“Conrad”), has continued to advance Gas Sales Agreement (“GSA”) negotiations. Prevailing strong gas prices in the region are expected to influence the ultimate terms reached in the binding agreement.

Post-Reporting period

• Negotiation of key terms of the Mako GSA between a Singaporean buyer and the Indonesian regulator (SKKMIGAS) are expected to be finalised in the near term.
• Conrad engaged a global investment bank to lead a farm-down process for the divestment of a portion of its interest in the Duyung Production Sharing Contract. Bids are expected to be received shortly after a binding terms sheet for the GSA is consummated.
• Mako is one of the largest gas discoveries in the West Natuna Sea and the largest undeveloped resource in the area.

Sacramento Basin, California USA (EME 25-30%)

• No work was conducted on the project during the year.

Corporate

Reporting period

• Placement to raise US$2.25 million (£1.83 million) completed in May 2022.
• Convertible Loan Note Debt restructured.

Post-Reporting period

• Placement to raise US$1.88 million (£1.52 million) completed in May 2023.
• Convertible Loan Note Debt restructured to reduce face value of the note and secure extended moratorium on interest.

Empyrean CEO Tom Kelly said, 
“Following the disappointing result at Jade earlier in reporting year, Empyrean’s post well analysis has been able to combine our excellent quality 3D seismic data with the confirmed well data from Jade to improve the validity of the Topaz prospect as a robust and large drilling target of approximately 891 million barrels in place (P10).  Based on this work, in June 2022 Empyrean made the decision to enter into an agreement for the second phase of exploration on Block 29/11 with the aim to drill Topaz before June 2024.

Empyrean now intends to conduct two further key projects that capitalise on the excellent quality 3D seismic acquired by the Company over the permit, shared regional 3D seismic that CNOOC has and additional physical well data of both Empyrean and CNOOC. These projects, consisting of a regional oil migration study and a simultaneous 3D seismic inversion project, are designed to help address and mitigate the remaining primary geological risk at Topaz, being oil migration into the Topaz trap.

In Indonesia, Empyrean welcomed the approval by the Indonesian Ministry of Energy and Mineral Resources of the updated Plan of Development for the Mako Gas Project within the Duyung PSC. This was a significant milestone on the pathway to developing this significant pipeline quality methane gas resource at the project. We now look forward to the conclusion of GSA negotiations and to developments on the sell down process of the Mako Gas Field. The macro environment for gas in South East Asia, and Singapore in particular, is expected to continue trending favourably with the region transitioning from coal to gas as the preferred energy source.

On the corporate front, the Company has successfully raised funds as needed during and post year end and was pleased to renegotiate the Convertible Note post year end, which resulted in a reduction in the face value of the Note and secured an extended moratorium on interest.

The Company continues to assess other financing and strategic alternatives to provide it with additional working capital as and when required, including through the sale or partial sale of existing assets, through joint ventures of existing assets, as well as further equity funding.

The Board and management of Empyrean are excited about the prospects of the Company, having secured recent funding and with some important value catalysts on the horizon from both the projects in Indonesia and China. In 2024 the Company hopes to take the learnings from the Jade well and the studies it is now conducting to further de-risk and ultimately drill the Topaz Prospect, which in itself could be a transformational result for Empyrean and its shareholders.”

I haven’t heard from Tom Kelly for a while but then at the moment although there is a lot going on at EME it is all in the preparations for the Topaz Prospect which the company need to de-risk and obviously finance before the drill bit is finally spinning. 

As for the Mako Gas Project at Duyung things are going very slowly and given the history I wouldn’t hold my breath waiting for things to get to the key final run-in for the sale.

As ever there is masses of upside for EME shareholders but if I were one of them I wouldn’t be expecting anything to happen anytime soon. 

Chairman’s Statement
While we were all disappointed with the Jade well outcome, work continued at Empyrean and extensive post well analysis led to the Company electing to proceed with planning and further de-risking work with the aim to ultimately drill the Topaz prospect in 2024. These activities, largely focused on oil migration into Topaz, continue and are expected to be concluded during the 2023 calendar year.

In parallel the Company awaits two key events in Indonesia, firstly the conclusion of the GSA negotiations and secondly the completion of the sell down process of the Mako Gas Field. With a strong underlying macro environment for gas in South-East Asia, and Singapore in particular, Empyrean is optimistic of favourable outcomes that will strengthen the Company’s balance sheet and support the planned drilling at Topaz.

On the corporate front, the Company has raised equity funds to support the activities above and provide working capital, and it was pleasing to renegotiate the Convertible Note to hopefully allow for the completion of the GSA and sell down processes and timely repayment of the Note. 

I would like to thank the Board, management and staff for their persistence during the year, following the setback at Jade.  The Company now eagerly awaits good news from Indonesia and is enthusiastic about its plans to drill the Topaz Prospect in China.

Patrick Cross, Non-Executive Chairman

Trinity Exploration & Production

Trinity has secured Terms of Reference for its proposed Environmental Impact Assessment for the Buenos Ayres block, onshore Trinidad from the Environmental Management Authority of Trinidad.

Trinity’s successful application for the Buenos Ayres block, offered in the 2022 Onshore and Nearshore Competitive Bid Round, was announced on 13 June 2023.

A Certificate of Environmental Clearance is a prerequisite for drilling activity and the EIA is required for the CEC.

Trinity’s CEC application is for 10 surface drilling locations.

The EIA needs to acquire data from both wet and dry seasons. Trinity has expedited securing the Terms of Reference for this survey, ahead of the formal award of the licence, to collect wet season data this year which gives us the best opportunity to allow drilling to begin on the Buenos Ayres block in the second half of 2024.

Jeremy Bridglalsingh, Chief Executive Officer of Trinity, commented:
“Buenos Ayres is a cornerstone of our revitalised onshore strategy focused on our broader Palo Seco operating interests. Our confidence in the Palo Seco play has increased with our progress on Jacobin thus far.

“In June, we referenced our intention to rapidly exploit our competitive edge onshore Trinidad. Starting the acquisition of the Buenos Ayres EIA ahead of the formal award of the licence is evidence of Trinity’s commitment to progress this strategic option with pace.”

Putting an RNS out for the securing of ‘Terms of Reference’ for the EIA at the Buenos Ayres block is about as spurious as it comes, this is just part and parcel of the process and the block is a long way down the road as it has only just been awarded. 

KeyFacts Energy Industry Directory: Malcy's Blog