WTI (Mar) $77.36 +$2.27, Brent (Mar) $82.43 +$2.39, Diff -$5.07 +12c
USNG (Feb) $2.57 -19c, UKNG (Feb) 67.85p -2.9p, TTF (Feb) €27.115 -€1.54

Oil price

Today one more factor was added to the oil and gas price scenario. The White House has announced that there will be a pause in any further approvals for LNG plants in the USA. This is allegedly as an ‘existential statement for our time’ but for me Sleepy Jo is worried about his votes in the younger end of the electorate. 

Elsewhere it has been much of a muchness, attacks continue in the Yemen and oil will be a nearly 5 dollars up on the week. The Peoples Bank of China has loosened policy and the political chiefs have slapped down Iran for causing more grief in the Middle East.

With Opec upcoming next week albeit they are unable to change much, economic data and thoughts about rates will more likely affect the market.

Jadestone Energy

Jadestone has announced that it has signed a Heads of Agreement with PetroVietnam Gas Joint Stock Corporation for the Gas Sales and Purchase Agreement relating to the Nam Du and U Minh (“NDUM”) gas fields development offshore Vietnam.

Overview

• A signed HoA is the first step in the commercialisation of the NDUM fields, located in the Block 46/07 and Block 51 Production Sharing Contracts in shallow water offshore southwest Vietnam.
• The HoA stipulates a daily contract quantity of 80 mmscfd under a take-or-pay arrangement over a targeted minimum plateau period of 55 months, with an earliest possible first gas date in late 2026.
• Initial wellhead gas price in the HoA is comparable to the price of recent Vietnam pipeline gas imports, and subject to annual escalation.
• The NDUM fields, in which Jadestone currently has 100% working interests, contain gross aggregate 2C resources of 171.3 bscf of gas and 1.6 mmbbls of liquids, as evaluated by ERCE as of December 2017.
• Jadestone estimates significant upside potential surrounding the existing discoveries, with any future resource additions likely to represent straightforward tie-backs to the NDUM core facilities. 

This HoA forms the basis for detailed negotiations over a fully-termed GSPA. It is also the precursor which allows the submission of an updated Field Development Plan for the Nam Du and U Minh fields, the approval of which is key for progressing to a Final Investment Decision of this material project for Jadestone. The Company is preparing to submit an updated FDP in the near future, which will specify the development concept for the ND/UM fields, associated capital and operating cost estimates, and a schedule to first gas.

The Company has uploaded a short presentation to its website at www.jadestone-energy.com summarising its Vietnam assets and the proposed NDUM development concept.

Paul Blakeley, President and CEO commented:
“Securing a signed Heads of Agreement is a crucial step which helps to restart the commercialisation of our Vietnam discoveries, and regain momentum for the development of this very important asset within our portfolio.  While there remains significant work ahead to deliver a GSPA and a detailed project plan and development schedule to first gas, this is a clear signal of intent from the Government to see this resource developed.  The Nam Du and U Minh gas fields would deliver significant medium-term production growth for Jadestone, further diversifying our asset base and increasing our gas volumes while decreasing our GHG emissions intensity – all key elements of our strategic aim to be a leading Asia-Pacific upstream company.

The likely timing of FID at Nam Du/U Minh would result in capital expenditure occurring no earlier than mid-2025, thereby supporting an organic funding solution through Jadestone’s cash flow generation, available debt and the added potential of bringing in partners during the development phase.

Nam Du/U Minh production will also help reduce Vietnam’s reliance on expensive gas imports, which have a higher GHG emissions intensity than domestic gas. It would also contribute to the country’s energy transition and stated goal of Net Zero greenhouse gas emissions by 2050, as well as creating local jobs and economic benefits. I would like to thank PV Gas, PetroVietnam and our team in Vietnam for their efforts to bring us to this point, and we will now focus on preparation of the FDP.”

Without doubt this is a game-changer for Jadestone as it goes about putting in place the rebuilding of the portfolio and more importantly with something capable of substantial contribution to assets and revenues over the period of the development.

The deal has all the right box ticks for me, it has significant 2C resources of 171.3 bscf of gas and 1.6 mm bbls of liquids, importantly with a great deal of exploration upside and perhaps best of all costs don’t start until halfway through next year and a year later it will be producing. 

The market has pushed the share price up by a mere 6% today, with everything that Jadestone has done in recent weeks I think that it is time to look for a decent rerating, something that couldn’t happen whilst Montara was uncertain and growth could not be visible without resorting to raising money, a no-no at current levels. Maybe that time has come, management is proving that there are good things to come for shareholders.

Predator Oil & Gas

Predator has announced that the commencement of the rigless testing programmes is now expected to occur on or about 29 January 2024.

The testing programme is forecast to last for up to 14 days.

Predator has also provided a corporate update.

Further to the announcement of 12 January 2024 in respect of an operations update, the Company is publishing today an Independent Technical Report (“ITR”) by Scorpion Geoscience Ltd. for the Guercif block and resource potential of the Moulouya Sub-Area following an evaluation of the 2023 drilling programme results.

https://wp-predatoroilandgas-2020.s3.eu-west-2.amazonaws.com/media/2024/01/Guercif_ITR_20240124.pdf

Gas resources

Table 1 Unrisked Contingent and Prospective Gas-in-Place and (Recoverable Resources) BCF (billion cubic feet of gas) net to PRD.

¹ Second phase of rigless testing using Sandjet will evaluate these intervals to determine whether the NuTech petrophysical interpretation indicating the presence of gas can be verified for some or all of these intervals.

As previously announced the Company’s proposed 2024 work programme of rigless well testing and discretionary appraisal and exploration drilling, subject to regulatory consent and approvals, is designed to incrementally add potential resources for scalable CNG development funded expeditiously through managing organic cash flow.

Today’s announcement of the expected commencement of rigless testing on or about 29 January 2024 is the first step in the process focussed on evaluating specific sands within the broader Ma and TGB  2 intervals in MOU-1 and MOU-3. For guidance only gas flow rates in the range 1 to 3 mm cfgpd from each of these wells in a success case would potentially be sufficient to support a future CNG pilot development option.

Depending on the rigless testing results, in particular whether or not there is any evidence for any rate of reservoir pressure depletion with time, well test data may be capable of being extrapolated to support the 2C and, potentially 3C, gas volumetrics shown in Table 1 for the Ma and TGB sand intervals. Test results and the composition of the test products may also help to calibrate other sands within these intervals that NuTech petrophysical logs suggest may be gas-bearing.

In the event the rigless test results are in alignment with the possible range of 2C and 3C recoverable resources, then a scoping CNG gas profile of 20 mm cf/day maintained for 6 years to recover a gross volume of 43.8 BCF may be achievable from 4 production wells (2 infill wells to be drilled at an appropriate time after production has been established and the rate of reservoir pressure depletion has been measured). Additional infill drilling may be required depending on well deliverability performances over time.

Based on this profile the ITR gives, using a flat industrial gas market price of US$12 per mcf, an unrisked scoping NPV@10% of US$108 million and an IRR of 138% with undiscounted positive cash revenues of US$ 207.504 million for the net Predator economic interest, equivalent to an unrisked and undiscounted US$6.345 million per BCF of CNG production.

Timing of “First Gas” depends on a number of third party factors including government and environmental consents and approvals and the long lead time for the purchase or leasing of CNG trailers and gas compressors. Once the rigless testing results become available the CNG services and equipment market can be evaluated with greater certainty in respect of delivery times.

The ITR summarises, amongst other matters: the geological risks; the impact of potential well formation damage; and the possible origins of the gas sampled to date pre-testing. It is intended that as far as is possible these risks will be addressed by the first phase of rigless testing.

These risks are enhanced in the case of several zones shown in Table 1 identified in MOU-1, MOU-3 and MOU-4 for rigless testing using Sandjet. Prudently therefore the Company does not assign any potential resources to these intervals at this time. Any gas resources confirmed within any of these intervals would be available for CNG development upscaling for very low additional development costs. 

The ITR recognises additional prospectivity for gas in the Jurassic (both carbonate and clastic reservoirs) in structural and stratigraphic traps which include the up to 177 km² feature the edge of which was tested by MOU-4. If successfully proved up by future drilling it would require, once the demand in the industrial market had been satisfied, a gas-to-power marketing strategy to underpin a development case and/or an export market through the Maghreb gas pipeline, located just 9 kilometres from the area of current geological focus for the Company.

The Company is fully funded to complete its entire planned rigless testing programmes at Guercif. 

Ireland

The Company has received since its last operations update a communication from the GeoScience Regulation Office (“GSRO”) at the Department of the Environment, Climate and Communications informing the Company that consideration of its application for a successor authorisation to Licensing Option 16/26 Corrib South is hoped to be concluded during Q1 2024 and that the GSRO would be writing to the Company shortly in relation to this matter. 

Paul Griffiths, Executive Chairman of Predator, commented:
“We are pleased to be finally making progress on the rigless testing programme. The initial phase is important to us for designing and implementing the Sandjet rigless testing programme which will follow on after the Sandjet operational planning work is completed.

Sandjet rigless testing will be focussing on the Moulouya Fan and multiple zones at other levels which NuTech petrophysical logs suggest may contain hydrocarbons but which require validation by other means.

Cory Moruga planning work is being progressed in Trinidad this week to put in place a small operations teams to implement the proposed workover operations after planning is complete and environmental approvals have been received.

Ireland has taken us by surprise. We remain cautiously optimistic that we potentially have a partner for Corrib South in the event a successor authorisation is awarded. There is no guarantee that the conclusion of the GSRO DECC process would necessarily result in a positive outcome for the Company. Corrib South is a quality exploration asset adjacent to the Corrib gas field infrastructure and was formerly held by Shell under a Reserve Licence authorisation.”

Shareholders will be delighted that after a long wait the rigless testing programme is about to start and all being well will be followed, should rate of reservoir depletion permit, the well test data may be capable of proving the well to be gas bearing. 

 Work also continues in Trinidad where preparations are under way to do the workover required when appropriate approvals come through. As the Chairman states, Ireland has been as a surprise and as always offers huge potential.

KeyFacts Energy Industry Directory: Malcy's Blog