Savannah Energy

Further to the Company’s announcement on 29 September 2023, the Company continues to advance the various workstreams required to complete the acquisition of PETRONAS International Corporation Limited’s energy business in South Sudan. In this regard, a further extension to the Company’s cancellation date has been granted to 1 February 2024. Further updates will be provided as and when appropriate.

Challenger Energy Group

Challenger Energy (AIM: CEG), the Caribbean and Americas focused oil and gas company, with a range of oil production, development, appraisal, and exploration assets in the region, is pleased to provide the following update in relation to its Uruguayan assets:

• On 11 December 2023, the Company submitted AREA OFF-1 geotechnical reports to ANCAP, the Uruguayan regulator, as part of its minimum work programme obligation. Subject to final ANCAP review and approval of these reports, the Company has now fully discharged the minimum work programme obligations for the first exploration period of the AREA OFF-1 licence (which commenced in August 2022 and runs until August 2026), as well as also having completed various additional discretionary work items designed to enhance the technical understanding, 
• On 12 December 2023, contracts for the previously advised award of four offshore exploration licences in Uruguay (AREAs OFF-2, OFF-5, OFF-6 and OFF-7, to Shell, YPF and APA Corporation) were executed at a group signing ceremony in Montevideo, Uruguay (to which the Company was also invited, and attended). ANCAP has indicated that the signing of the contract for AREA OFF-4 (an APA-Shell consortium block, adjacent to the Company’s AREA OFF-1 block) is expected to follow shortly, and has indicated that signing of the contract for the Company’s AREA OFF-3 licence, the last remaining offshore block in Uruguay awarded to the Company in May 2023, will follow soon thereafter.
• The minimum work programmes committed to by the newly signed licence-holders in respect of the initial exploration period of those licences is significantly greater in estimated work scope and cost than that applicable to the Company’s AREA OFF-1 and AREA OFF-3 blocks, and includes 3D seismic acquisition and reprocessing, and in the case of APA Corporation’s OFF-6 block, one deepwater exploration well.
• The signing of contracts for these licences also paves the way for seismic acquisition companies to commence permitting and approval processes for potential 3D seismic acquisition programmes in Uruguay.  Subject to permitting and approvals, a survey could occur as early as the late 2024 or early 2025 seismic acquisition windows.
• The completion of the Company’s minimum work programme for the initial exploration period of AREA OFF-1, the finalisation of contracts for the aforementioned licences to global majors / NOC, and the ability of seismic vendors to now progress potential 3D seismic acquisition programmes in Uruguay also constitute important milestones relevant to a successful conclusion of the Company’s ongoing AREA OFF-1 farm-in process, which continues to proceed well, with anticipated finalisation in Q1 2024.

Eytan Uliel, Chief Executive Officer of Challenger said:
“This week has been extremely significant for the emerging Uruguayan offshore exploration sector, and highlights how exciting we think the next few years will be. Challenger has now completed AREA OFF-1’s minimum work programme, well ahead of schedule. At the same time, the finalisation of contracts with global industry heavyweights for multiple offshore blocks has defined Uruguay’s operator landscape, provided certainty as to their upcoming, substantial exploration programmes, and has also laid out the pathway to a potential 3D seismic shoot in late 2024 / early 2025, including coverage of prospects of interest on AREA OFF-1. These are all important commercial, technical and operational inputs relevant to our ongoing AREA OFF-1 farm-in process which, given developments this week, we now expect to be able to successfully conclude in the first quarter of 2024.”

Excellent news from CEG, I will speak to Eytan and update in due course, shareholders can expect an exciting ride in 2024, Bucket List certainty…

Beacon Energy

Beacon Energy (AIM:BCE), the full-cycle oil and gas company with a portfolio of onshore German assets through its wholly-owned subsidiary, Rhein Petroleum GmbH (“Rhein Petroleum”), announces a production update on the Erfelden field following the installation of a rod pump on the Schwarzbach-2(2.) (“SCHB-2(2.)”) well.

SUMMARY

• The rod pump has now been installed on the SCHB 2(2.) well and, having produced at much higher rates initially, production has now stabilised at a rate of approximately 40 barrels of oil per day (“bopd”).
• The low production rate indicates that the reservoir near the wellbore has been invaded with drilling fluids which are restricting flow rates. This is not uncommon in situations where hole stability issues have occurred during drilling due to the use of high-density drilling fluids to stabilise the hole.
• The well continues to clean-up, albeit currently at a slow rate.  Even at these low flow rates, production is commercial with field revenues exceeding field operating costs.
• The Company will undertake industry-standard well stimulation in the fourth week of  January 2024, which is expected to improve production.
• The Company is fully funded to undertake the planned well stimulation in an operation that will take approximately 1 week and which has an estimated cost of less than €500,000.
• To date, over 1,600 barrels of oil have been produced through the Schwarzbach facility since the installation of the rod pump.
• A planned pressure build-up test is currently underway using a downhole pressure memory gauge that will be recovered prior to the well stimulation operation. The data from this test will inform our understanding of  both formation pressure in the oil-bearing reservoir and the “skin” effect, caused by fluid invasion around the wellbore during drilling, and which is impeding flow.
• As previously announced, as a result of the SCHB 2(2.) well, the Company has recently increased its Best Estimate of recoverable reserves on the Erfelden field from 3.8 million barrels to 7.2 million barrels.
• The Company continues to estimate that given the excellent reservoir properties and the light oil recovered, and in the absence of an invasion zone which restricts flowrate, the SCHB 2(2.) well could achieve production in the region of 900 bopd.
• At those flow rates, the Company would expect to deliver operating cash flows in the order of US$1.5 million per month (assuming $80/bbl Brent).

Company production, including the contribution from the Company’s interest in the Lauben field, is approximately 70 bopd which makes a material contribution towards operating costs and G&A.

The Company expects to provide further updates on the clean-up operations, the well stimulation, and the installation of the ESP as appropriate.

Beacon Energy Chief Executive Officer, Larry Bottomley commented:
“After an extended flow test to allow the well to clean-up and provide us with the critical data to inform next steps, the SCHB-2(2.) well is now in commercial production but at lower flowrates than expected given the quality and thickness of oil-bearing reservoir encountered in the well.  It is not uncommon for wells to take extended periods of time to clean up and we remain confident that the well will produce at higher rates either through natural clean-up during production or once we execute the remedial works.

“The SCHB2(2.) well encountered excellent oil-bearing reservoirs with thickness and properties in excess of pre-drill prognosis, but operational challenges encountered while drilling has left a legacy of drilling fluids that have invaded the reservoir near the well bore. These fluids are currently impeding production. From our analysis, this invaded zone is likely to be less than 3 metres around the wellbore which we intend to tackle with industry standard well stimulation techniques. 

“The principal implication for the lower than expected flowrate is the delay to the development of the Erfelden field. The SCHB-2(2.) well has demonstrated a material reserve in the Erfelden field, ranging from 4.7 – 7.2 – 10.2 million barrels in the Low, Best Estimate and High case respectively in the Company’s assessment. We see a significant positive valuation in the region of $140 million NPV10 in the Best Estimate Case (management estimate, assuming $80/bbl Brent) which justifies our continued efforts to realise the value of this asset.

“As previously announced, based on standard oil-industry analysis the Company estimate that given the excellent reservoir properties and the light oil recovered, and in the absence of an invasion zone which restricts flowrate, the SCHB 2(2.) well could achieve production in the region of 900 bopd. The challenges currently being experienced do not alter our belief in the ultimate production potential from this well. At those flow rates, the Company would expect to deliver operating cash flows in the order of US$1.5 million per month (assuming $80/bbl Brent). 

“We remain fully focused on establishing optimal production from the SCHB-2(2.) well as quickly as possible through the rod pump, undertaking well stimulation and ultimately the installation of the ESP.

“We look forward to providing an update on the work-over programme in due course.”

Plenty of upside at Beacon as they continue to work on the field which is by no means in the share price.

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