WTI (Dec)* $88.08 -$1.21, Brent (Dec) $92.16 -22c, Diff -$4.10 +$1.09
USNG (Nov) $2.90 -5c, UKNG (Nov) 121.0p -8.5p, TTF (Nov) €49.0 -€2.3
*WTI November contract expiry

Oil price

I think my comments on Friday remain valid, the Middle East has cooled very slightly as the borders reopen for the aid convoy and some hostages have been released. But markets correctly remain jittery for all the reasons above potentially being short lived and also with the Fed fannying around getting the 10 yr US Treasury to a yield of over 5% still concern.

The Baker Hughes rig count firmed very slightly, up two overall to 624 with oil up one at 502.

US Oil stocks
I mentioned last week that stock market valuations had left oil companies adrift and vulnerable to M&A activity and this morning that was proven again when Chevron came in with an agreed bid for Hess worth some $53bn.

Europa Oil & Gas

Europa Oil & Gas has announced its final audited results for the 12-month period ended 31 July 2023.

Financial performance

·    Revenue remained stable at £6.7 million despite a lower oil price and weaker pound (2022: £6.6 million)

·    Gross profit increased 53% to £3.4 million (2022: £2.2 million)

·    Pre-tax loss of £0.9 million after non-cash impairment loss of £1.7 million (2022: pre-tax profit £1.4 million)

·    Net cash generated in operating activities: £2.8 million (2022: £2.5 million)

·    Cash balance: £5.2 million (2022: £8.3 million)

Operational highlights – Building a balanced portfolio of exploration and production assets

Onshore UK – net production increased 8% to 265 barrels of oil per day (“bopd”) (2022: 245 bopd) following excellent Wressle performance

Wressle continued to exceed expectations

• Gross production averaged 710 bopd throughout the period (2022: 597 bopd), with Europa’s net share equating to 213 bopd (2022: 179 bopd) 
• Three microturbines were connected at the Wressle site during January and February 2023, resulting in a 10% increase in oil production
• New seismic interpretation across the Wressle field has highlighted a potentially significant increase in reserves from the Ashover Grit
• Gas monetisation project under development with potential for significant oil production gains as a result
• Total net production of 265 bopd was produced from Europa’s UK onshore fields during the year with Wressle contributing roughly 81% of this and the remainder coming from the three older fields
• Future potential for West Firsby to continue delivering revenue is being assessed and studies are underway to identify activities which could utilise the existing connection to the local power grid so that the site can be repurposed to generate emission-free renewable energy. This is directly in line with the Company’s ESG strategy
• A reassessment of  the estimated decommissioning liability for Crosby Warren resulted in a reversal of amounts previously impaired of £177k.

Offshore Ireland – lower risk / very high reward infrastructure-led exploration in proven gas play in the Slyne Basin

• The seismic reprocessing of the FEL 4/19 data has resulted in a marked improvement in the imaging of both the Inishkea West and Inishkea prospects, with the Inishkea West structure now being mapped as a large 4-way closure, with a prospective resource Pmean of 1,554 BCF
• The reprocessed seismic has materially improved the subsurface imaging and provided more confidence in the quality of the seal and trap at Inishkea West, which in turn has increased the chance of success of the prospect. In addition, Inishkea West is prognosed as a shallower structure by some 900 meters which means that the reservoir quality will be better than at Inishkea
• Inishkea West is within easy tie-back range of the Corrib gas field situated some 18 kilometres to the southeast. This proximity to the Corrib infrastructure, the mapped 4-way closure, the large prospective resource and the reduced seal risk means that the Inishkea West prospect has become the primary exploration target on the FEL 4/19 licence.
• Given the significant improvement seen in the reprocessed data, it is expected that the subsurface imaging can be further enhanced by reprocessing the data at 30Hz.
• The farm-out process has been paused until the further reprocessing has been completed.
• In November 2022, DECC gave consent to extend the first phase of our 100% owned FEL 4/19 licence to 31 January 2024. Given the nature of the reprocessing it has taken longer than expected to complete the work programme and as a result we have since applied for a further extension to allow us to continue with the reprocessing work and then find a suitable partner to drill an exploration well.

Offshore UK – 25% interest in the Serenity discovery in the North Sea

• Progress continues with the development of the Serenity oil discovery in the Central North Sea alongside our partner i3 Energy plc
• Despite drilling an appraisal well in October 2022 that failed to encounter hydrocarbons, the partners believe that a one-well development in the eastern area of the field around the discovery well is economically viable. However, we believe that the Serenity field is geologically connected to the neighbouring Tain field and together with i3 Energy we are assessing the feasibility for unitisation of the two fields
• A number of potential development scenarios are available given local infrastructure, with a future development potentially resulting in approximately 1,000 bopd net to Europa’s 25% interest

UK offshore licensing round

• Europa participated in the UK Government’s 33rd offshore oil and gas licensing round

Board

• Simon Oddie retired as CEO in March 2023, but remains on the Board as a non-executive director
• William Holland was appointed as CEO in March 2023, having been CFO since April 2022
• William Ahlefeldt retired as non-executive director in April 2023
• Alastair Stuart was appointed as COO and executive director in April 2023, having been a technical consultant to the Company since 2012

Post reporting period events

• Operations to install a jet pump for artificial lift on the Wressle-1 well are underway. The original completion was removed from the well and a new completion, including the sub-surface pump, has been successfully run in the well as of early October 2023. All that remains is for the required surface pump and associated flowlines and electrics to be installed, which is expected to be completed before the end of October.
• PEDL 181 was relinquished during September 2023. The asset was not deemed to be adequately attractive. It had zero carrying value on the balance sheet.
• Applied to DECC to extend licence FEL 4/19 from 31 January 2024 to undertake further reprocessing and secure a farm-in partner.

William Holland, CEO of Europa, said:
“Europa made significant progress, both operationally and financially, during the 2022/23 financial year, including continued development work at our flagship asset, the Wressle oilfield, which consistently performs above initial expectations. As planned, we have initiated multiple projects designed to increase oil production and gas monetisation from the field, and in the first half of the year, we executed the initial phase of the gas utilisation project, which has led to a c. 10% increase in oil production. Even though Wressle is already exceeding expectations, having produced 710 bopd during the financial year, we remain focused on realising the full potential of the field, with the completion of these additional projects and drilling the Penistone horizon being one of Europa’s priority medium-to-long-term projects.

In the year, we delivered revenue from operating activities of £6.7 million and generated net cash from operating activities of £2.8 million, demonstrating the financial resilience of the Company and maintaining our strong track record of positive cash generation. It has been a year of considerable administrative transition for Europa: we set up a new London office, strengthened our in-house technical and managerial capabilities with new staff members and expanded our business development activity levels; all with the purpose of delivering our strategy faster and more efficiently.

We have impressed on both the Irish Government and Europa stakeholders the significant role our offshore Ireland FEL 4/19 licence could play in minimising Ireland’s dependence on costly and carbon-intensive gas imports and enhancing the country’s strategic energy security. FEL 4/19 contains an estimated prospective resource of 1.55 TCF of gas, and in June 2023, I hand-delivered a document detailing our licence’s potential to senior Irish Government officials during an exclusive energy summit hosted by the Taoiseach Leo Varadkar. We have continued to be proactive in both executing advanced technical reprocessing work and seeking a suitable farm-in partner for our FEL 4/19 licence and remain committed to continuing our efforts to work constructively with the Department of the Environment, Climate and Communications to progress FEL 4/19 to drilling. In October 2023 we announced the results of our seismic reprocessing which has materially improved the subsurface imaging and provided more confidence in the quality of the seal and trap at Inishkea West, which in turn has increased the chance of success of the prospect whilst also increasing the size of the prospect to 1.55 TCF. In addition, Inishkea West is prognosed as a shallower structure by some 900 meters which means that the reservoir quality will be better than at Inishkea and as a result this has become our primary prospect on the licence.

Progress continues with the development of the Serenity oil discovery in the Central North Sea, and we are collaborating with our partner i3 Energy to determine the best strategic direction for the prospect, with a variety of development scenarios being diligently considered including a development incorporating the Tain discovery that could be tied back to the Blake field or potentially developed with low-cost infrastructure as a standalone field. 

In July 2023, we assumed operatorship of our onshore UK licence PEDL343, which holds the Cloughton gas discovery. Our technical team has already performed an audit of the existing subsurface data and established a range of gas in place volumes with a Pmean of 192 bcf gross. Our team is now working on a conceptual development plan for the field, which we expect will demonstrate the material potential value of the licence. Concurrently we are engaged with stakeholders to secure the necessary permits and approvals required to drill an appraisal well, which we believe will demonstrate the reservoir can deliver the production rates required for a commercial development of the field.

We are continually assessing opportunities to further diversify our asset portfolio. We are encouraged by the reaffirmation of UK Government support for offshore and onshore hydrocarbon exploration and production and remain optimistic about our future growth prospects.”

Obviously these are historic annual results but it is clear that there has been plenty going on at Europa and across the portfolio and whilst Wressle has taken the kudos, and rightly so, other projects have been moved forward.

The effect of the success at Wressle has been to significantly strengthen the balance sheet and all the considerable amount of work being done there will be more than covered and there will be no need to raise equity for the development campaign there.

Trinity Exploration & Production

Trinity Exploration & Production plc (AIM: TRIN), the independent E&P company focused on Trinidad and Tobago, provides an update on operations for the three-month period ended 30 September 2023 (“Q3 2023” or “the Period”).  The information contained herein has not been audited and may be subject to further review and amendment.

Jacobin-1 Discovery
Following the Jacobin oil discovery in the Palo Seco area onshore Trinidad, announced on 7 August 2023, the well was cased to 10,021 feet in preparation for production testing.

A heavy-duty workover rig, Rigtech Rig #9, mobilised to the wellsite and perforated the lower-most of three oil-bearing zones on 30 September 2023.  The well came on at an encouraging rate during the initial clean-up phase but in doing so produced sand which has temporarily plugged the well.  We recovered a high quality, light oil (35o API) from this lower reservoir.  The reservoir and wellhead pressures, in addition to the rate achieved, are highly encouraging and we continue with operations to bring on production from this deep and highly pressurised reservoir.

The well flowed a total of 113 barrels (34 bbls oil and 79 bbls completion fluid) over a seven-hour period prior to a sand plug forming in the well.  If sustained, this would be a highly encouraging result however the period is too limited to provide a reliable indication of the potential production flow rates from this zone.

The post-perforation closed-in wellhead pressure was 2250psi, which matches our pre-perforation expected pressures based on a reservoir pressure of 7500psi.  Flowing pressure on 4/32″ choke was 1800psi.

Trinity is deploying a coiled-tubing unit to clean-out the well and bring it back into production.  We expect work to unplug the well to be followed by a period of production optimisation as we adjust the choke to achieve sustained flow.

Trinity plans to carry out extensive testing of all three discovered oil-bearing horizons in the deeper exploration section of Jacobin to establish reliable and meaningful data over an extended period.  The Company will provide details of the flow test data when this information is available.

The oil produced was sold to Heritage Petroleum Company Limited under the current sales arrangement within the PS4 Lease Operating Agreement.

Given that the well has taken longer to drill and the well testing programme now contemplates three zones, we expect that the total cost for drilling, completion and testing will exceed the previously guided capital expenditure ranges for Jacobin.  A final update on the costs associated with Jacobin, will be provided once finalised.

Q3 2023 Operational Highlights

• Q3 2023 sales volumes averaged 2,705 bopd (Q2 2023: 2,824 bopd).  Production was lower than planned over the quarter due to extended downtime on a key well in the Trintes field which is now back online.
• Production Sales Guidance for the full year 2023 is updated to 2,800 bopd – 2,900 bopd (previously 2,800 – 3,100 bopd).

Annual and Quarterly Sales by Region

During Q3 2023:

• 37 workovers (Q2 2023: 16; Q3 2022: 32) were completed.
• there were no recompletions (“RCPs”) in the Period (Q2 2023: 1; Q3 2022: 5).
• swabbing operations continued across onshore and West Coast assets.

Q3 2023 Financial Highlights
The Group reports its consolidated financial information half yearly, in its Annual Report & Accounts and Interim Results, in accordance with UK adopted International Accounting Standards and the London Stock Exchange’s AIM Rules for Companies.  Quarterly, the Company provides unaudited information for guidance.

• Average realisation of USD 72.5/bbl for Q3 2023 (Q2 2023: USD 63.7/bbl, Q3 2022: USD 84.3/bbl).
• EBITDA, pre-hedging1, in Q3 2023 of USD 4.6 million (unaudited) (Q2 2023: USD 4.5 million (unaudited); Q3 2022 USD 8.7 million).
• Operating break-even2, pre-hedging1, Q3 2023 of USD 42.27/bbl (Q2 2023 of USD 34.8/bbl; Q3 2022 USD 32.2/bbl).  This increased Q3 operating break-even is due mainly to lower Q3 sales volumes and this is expected to be temporary.

1 The Company has no hedging in place in 2023.
2. Operating break-even is the realised price/bbl where the adjusted EBITDA/bbl for the Group is equal to zero.

• Cash balance of USD 8.4 million (unaudited) at 30 September 2023 versus USD 11.3 million (unaudited) at 30 June 2023 and USD 16.5 million (unaudited) at 30 September 2022.
• The Group had drawn borrowings (overdraft) of USD 2.0 million at 30 September 2023 (USD 2.0 million at 30 June 2023 and USD 2.7 million at 30 September 2022).

Outlook

Galeota Concept Screening Study
Trinity commissioned Petrofac to undertake a study to take a fresh look at development concepts for the Galeota Block, using the latest subsurface information and marrying that with Petrofac’s global low-cost marginal field track record to develop a concept that can be taken forward into Conceptual Engineering, Front End Engineering and Project Sanction.

The study has been completed and has helped to confirm that lower capital intensity projects, when compared to the previous ‘Echo’ Field Development Plan, are feasible and should result in lowering both the risk and quantum of up-front capital required to exploit the significant reserves and resources in Galeota. The Company is conducting scoping economic analyses of the key recommended options.   An update will be provided in due course within the Company’s next Corporate Presentation.

Fiscal Changes
On 2 October 2023, the Government of Trinidad and Tobago’s 2023 Budget Statement announced proposed reforms to the Supplemental Petroleum Tax (“SPT”) regime for shallow marine areas similar to reforms that have been made previously to onshore activities.  In addition, the proposed review of the capital expenditure write-off regime, seems intended to be in favour of operators such as Trinity.  The Statement also included a proposal to increase the Sustainability Allowance from 20% to 25%.

The proposed SPT changes, which are subject to further definition through the legislative process and Parliamentary ratification, will meaningfully improve the economics and value of the Company’s East Coast and West Coast shallow marine licences.

Jeremy Bridglalsingh, Chief Executive Officer of Trinity, commented:
“During the period, we made significant progress at our important Jacobin well, perforating the lower-most of three oil-bearing zones on 30 September.  We had encouraging flow during the initial clean-up phase but, in doing so, produced sand which has temporarily plugged the well. Work to resolve that issue is in train. The oil quality and pressure in the well are very positive.

The results of the Galeota concept screening study have served to help validate our approach to reducing the capital intensity of projects that will help to improve economics, which will be further improved by the recently proposed changes to SPT.

I look forward to providing a further update on our progress on Jacobin, which is of paramount importance to our shareholders, as we progress our well testing programme.”

With production edging down, albeit offset by higher realisations, and FY guidance also falling Trinity have little to look forward to and are also exposed if oil falls at all. With the Jacobin costs overrunning ahead of production testing it needs to be pretty good which would definitely help. 

With a number of concepts for the engineering of Galeota being assessed that part of the portfolio could be moving forwards although somewhat slowly and will be very expensive so it’s a shame to see the company paying out dividends from reserves that could be used to build up the business. 

KeyFacts Energy Industry Directory: Malcy's Blog