WTI (Apr) 77.58 +$1.09, Brent (Apr) $82.53 +91c, Diff -$4.95 -18c
USNG (Mar) $1.66 +6c, UKNG (Mar) 57.85 +0.6p, TTF (Apr)* €23.70 +€0.65
* Denotes March contract expiry

Oil price

As International oil week rumbles on and glue manufacturers do incredible business and today sees insurance companies being invaded whilst oil is flat. Products are firmer than crude as Russia tinkers with the market. But yesterday’s retail gasoline prices fell by a couple of cents after a few weeks of rallying. 

But in the Middle East and in particular the Red Sea, the Houthi Rebels haven’t read the script, yesterday attacking a US flagged fuel tanker, stand by for a retort from Sleepy Joe. 

Finally Exxon and CNOOC are apparently thinking about exercising right of first refusal to buy Hess out of Guyana where Chevron has already put $53bn on the table…

Union Jack Oil

Union Jack has offered a positive update in respect of planned future drilling and the potential development at West Newton PEDL183, in which the Company holds a 16.665% economic interest.

West Newton is located onshore UK in East Yorkshire, within the Western Sector of the Southern Zechstein Basin which contains the significant West Newton A1, A2 and WNB-1z discoveries.

Following several months of technical evaluation, the West Newton Joint Venture partners, Union Jack, Reabold Resources plc and Rathlin Energy UK Ltd, have agreed a revised drilling programme utilising the West Newton A drilling site.

HIGHLIGHTS

• A proposed well (“WN-A3”) planned to be drilled during late 2024 will be twinned with the West Newton A-1 discovery well (“WN-A1”), which was not tested
• WN-A1 is interpreted as having a 27 metre gas column within the Kirkham Abbey formation (“KA Formation”) as indicated on the logs of the WN-A1 well
• WN-A3 will be directional, offering significant cost savings compared with a horizontal well
• An additional material secondary target in the deeper Permian Rotliegend Sandstone will also be evaluated during drilling of the WN-A3 or by the re-entry of WN-A1
• A feasibility study is underway for a single gas well development plan at WN-A3 well to follow successful testing and well completion
• Planning is already in place to drill and produce from the WNA Site whilst other associated approvals are being accelerated
• Revised drilling plan is cost-effective with an above average chance of success, offering a rapid early-stage development scenario with access to significant early cash flows if successful

Discovery in the Kirkham Abbey Formation Principal Target

The WN-A1 well, drilled in 2013, is interpreted as having encountered 27 metres of potential gas pay at the top of the KA Formation. This figure was calculated from the Computer Petrophysical Interpretation (“CPI”), using electrical and mud logs over the interval.

The KA Formation was perforated and cleaned using 15% hydrochloric acid.  After removal of the acidising work-string and during preparation to run the production work-string the well started to flow fluid and the blind rams were closed for safety reasons to establish control of the well.

After numerous clean up attempts failed, WN-A1 was subsequently shut-in and suspended under normal operational and safety procedures.

The conclusion drawn from these well operations was that due to severe damage to the KA Formation it was not possible to obtain a valid hydrocarbon production test to surface of the 27 metre pay-zone shown on the CPI log.

Deeper Material Rotliegend Zone Secondary Target

A re-evaluation of the downhole logs of WN-A1 by the Joint Venture’s technical teams also indicates a possible seven metre gas column in the Permian Rotliegend Sandstone, the main reservoir for the prolific Southern Gas Basin gasfields.

The gas is sourced from the underlying Westphalian and Namurian sediments trapped in structures sealed by the overlying Zechstein evaporites.

Preliminary mapping of the base Zechstein at West Newton indicates low-relief structures as observed offshore.

The nearest offshore Rotliegend field was the Amethyst complex centred on block 47/14a within the Southern Gas Basin, containing 1.2 trillion cubic feet of gas in place, producing approximately 795 billion cubic feet of gas and 5.4 million barrels of condensate, from a series of low-relief structures trending South-East to North-West.

Within the UK onshore, the Caythorpe field, approximately 30 kilometres north of West Newton produced 6.67 bcf of gas with associated condensate from the Rotliegend, displaying porosities up to 19% and permeability up to 500md, with gas also being produced from the overlying Zechstein.

Calculations for the Rotliegend zone in WN-A1 indicate similar porosities to those seen at Caythorpe. Core was not cut from the WN-A1 well, however, the logs indicate drilling mud invasion over the Rotliegend interval which is taken to indicate effective permeability.

Residual gas is also calculated below the base of the seven-metre gas column in the Rotliegend Sandstone.

West Newton Early Production Plan

A feasibility study is being undertaken by independent energy consultants CNG Services Limited on a single well development and gas export plan associated with WN-A3 to follow successful testing (“West Newton Gas Export Feasibility Study”).

The scope of the West Newton Gas Export Feasibility Study is to determine the technical and economic viability of a single well development plan, with production from WN-A3, processed from a modular plant and a 3.5 kilometre pipeline from the WNA Site to the National Transmission System, at an existing above-ground installation.

Commercial gas production could be brought to market within months of a successful production test, resulting in a materially reduced capital investment which provides significant early cash flow whilst additional activity is carried out on the further development of the West Newton project.

Executive Chairman of Union Jack, David Bramhill, commented:
“Together with our Joint Venture partners at West Newton, we have embarked on delivering a viable drilling programme, planned to be executed in late 2024, with the potential for an early single gas well development following successful testing.

“We plan to expedite the drilling of West Newton with the deviated WN-A3 appraisal well as soon as all remaining regulatory permissions have been granted. Discussions are already underway with the relevant authorities and work has commenced to progress drilling.

“Our revised drilling plan offers significant cost-savings without compromising any aspects of the project.  The objective is to develop what we know to be a material onshore gas resource located in an area with excellent access to local and national infrastructure and an attractive domestic gas off-take market.

“The secondary, deeper Rotliegend sandstone target also provides potential material upside to the value of the West Newton Project.

“Going forward, the West Newton drilling plan is cost-effective with an above average chance of success, offering a rapid early-stage development scenario with access to significant early cash flows, if successful.”

Both companies have provided detailed analyses of the situation at West Newton, I suppose that they have had plenty of time to present the data and have looked carefully at different options open to the partners. Indeed this is an advantage as in todays transitionary world, timing of the model is paramount and from what I can see here is that West Newton is now planned to be a quicker, cheaper and earlier staged development with attendant benefits.

Within the two reports each one has a slightly different edge, in my view the rocks team at UJO who I rate very highly indeed, have singled out the secondary, deeper Rotliegend sandstone target, ‘which also provides potential material upside to the value of the West Newton Project’.

Given the amount of work that has been done to bring West Newton to a potentially satisfactory conclusion has been substantial and I feel that with the funding in the hands of Reabold, maybe with some help and the excellent teamwork by the geologists particularly at Union Jack, then at long last the project will at long last go ahead. 

Reabold Resources

Reabold has provided the following operational and corporate update.

Reabold aims to improve Europe’s energy security by unlocking potential sources of near-term domestic gas supply, at a time when Europe is exposed to potentially significant gas supply disruptions.  In this regard, the Company identified, matured and sold the strategic Victory gas project to Shell U.K. Limited for £32m (£12.7m net to Reabold). Reabold’s current focus is on its two key gas assets that have strong parallels with Victory, namely West Newton in the UK and Colle Santo in Italy, where the Company plans to apply the same successful strategy demonstrated with Victory.

Following the receipt of the final tranche payment from Shell for the sale of Victory in January 2024, Reabold now holds £9.1m net cash and is therefore financially well positioned to progress these key assets, as well as distributing excess cash to shareholders. 

West Newton

Highlights

• A proposed well (“WN-A3”) planned to be drilled during 2024 will be twinned with the West Newton A-1 discovery well (“WN-A1”) which was not tested
• The WN-A1 well is interpreted as having a 27 metre gas column within the Kirkham Abbey formation (“KA Formation”), indicated on well logs
• The WN-A3 well will be drilled as a directional, high angle well, offering significant cost savings compared with the previously planned horizontal well
• An additional material target in the deeper Permian Rotliegend Sandstone (“Rotliegend”) will also be evaluated
• Feasibility study underway for a single well development plan for possible development of WN-A3 well to follow successful testing and well completion
• Planning is already in place to drill and produce from the A Site and other approvals are being accelerated
• Revised drilling plan is cost-effective with a high chance of success, offering a rapid early-stage development scenario

Drilling of a first development well (WN-A3) at West Newton (56.3% economic interest net to Reabold), potentially one of the largest ever UK onshore gas discoveries, is planned for 2024, subject to the operator, Rathlin (UK) Energy Limited, securing sufficient funding to drill and test the well. There is an active process underway to assess options to source funding for Rathlin’s share of the cost, including through a farmout, or through further investment from Reabold, which, following the receipt of the proceeds from Shell, the Company could potentially provide, in addition to funding its own share.

Discovery in the Kirkham Abbey Formation Principal Target

The WN-A1 well, drilled in 2013, is interpreted as having encountered 27 metres of potential gas pay at the top of the KA Formation. This figure was calculated from the Computer Petrophysical Interpretation (“CPI”), using electrical and mud logs over the interval.

The KA Formation was perforated and cleaned using 15% hydrochloric acid.  After removal of the acidizing work-string and during preparation to run the production work-string, the well started to flow fluid and the blind rams were closed for safety reasons to establish control of the well.

The WN-A1 well was subsequently shut in and suspended in accordance with normal operational and safety procedures after numerous attempts to clean up were unsuccessful.

The conclusion drawn from these well operations was that due to the severe damage to the KA Formation, it was not possible to obtain a valid hydrocarbon production test to surface of the 27 metre pay-zone shown on the CPI log.

Deeper Material Rotliegend Zone Secondary Target

A re-evaluation of the downhole logs of the WN-A1 well by the Joint Venture’s technical teams indicate a possible seven metre gas column in the Rotliegend, the main reservoir for the prolific UK Southern North Sea Gas Basin gas fields.

The gas is sourced from the underlying Westphalian and Namurian sediments and is trapped in structures sealed by the overlying Zechstein evaporites.

Preliminary mapping of the base Zechstein at West Newton indicates low-relief structures as observed offshore.

The nearest offshore Rotliegend field is the depleted Amethyst complex centred on block 47/14a within the Southern North Sea Gas Basin, which contained 1.2 tcf of original gas in place, and produced approximately 795 bcf of gas and 5.4 mmbbl of condensate, from a series of low-relief structures trending South-East to North-West.

Within the UK onshore, the Caythorpe field, approximately 30 kilometres from West Newton produced 6.67 bcf of gas with associated condensate from the Rotliegend, displaying porosities up to 19% and permeability up to 500md, with gas also being produced from the overlying Zechstein.

Calculations for the Rotliegend zone in the WN-A1 well indicate similar porosities to those seen at Caythorpe. Core was not cut from the WN-A1 well, however the logs indicate drilling mud invasion over the Rotliegend zone, which is taken to indicate effective permeability.

Residual gas is also calculated below the base of the seven-metre gas column in the Rotliegend Sandstone.

West Newton Early Production Plan

A feasibility study is being undertaken by independent energy consultants CNG Services Limited for a single well gas development and gas export plan associated with the WN-A3 well, subject to successful testing and completion.

The scope of this West Newton Gas Export Feasibility Study is to determine the technical and economic viability of a single well development plan, with production from the WN-A3 well, processed from a modular plant and a 3.5 kilometre pipeline from the West Newton A Site to the National Transmission System, at an existing above ground installation.

The Company expects that gas production could be brought to market within months of drilling and testing with a materially reduced capital investment, providing significant early cash flow whilst additional activity is carried out on the further development of the West Newton project.

This early production plan is envisaged as a precursor to the conceptual development plan pursuant to the Company’s announcement of 21 June 2022, and which had an associated pre-tax NPV(10) of US$222m, net to Reabold’s interest [1].

Colle Santo

Reabold has a 26.1% equity ownership in LNEnergy Limited (“LNEnergy”), which, in turn has an option to acquire a 90% interest in Colle Santo, a highly material gas resource located in central Italy, with 65bcf of 2P reserves[2]. The field is development ready, subject to approvals, with two wells already drilled and tested. No additional drilling is required prior to commencing development and LNEnergy believes that the field has the potential to generate an estimated €11-12m of gross post-tax free cash flow per annum.

The approval process continues to progress for both the full field development and for the well testing operations. Approval of the full field development will allow for an estimated 20-year production life using a micro LNG development solution which has strong environmental credentials, and includes CO2 capture and hydrogen production, whilst increasing energy security in Italy, a political priority in country. Further to the Company’s announcement of 20 December 2023, an Environmental Impact Study for the development plan was filed with the Ministry of Environment and Energy Security (“MASE”) and the link to this submission can be found at https://va.mite.gov.it/it-IT/Oggetti/Info/10561.

In addition, progress has been made on sourcing vendor financing from the project’s Italian EPC contract operator, Italfluid.

The Company notes that LNEnergy’s application for concession has been recognised by MASE, as a project that meets the requirements of the Italian government’s National Integrated Plan for Energy and Climate (PNIEC) and National Plan for Economic Recovery (PNRR), for which €12 billion in grants and economic incentives have been made available by executive decree.

Investor Presentation

The Company has published an updated corporate presentation, which shall be used at the AJ Bell Live Investor evening in Edinburgh on 27 February 2024, as announced by the Company on 20 February 2024, and is available on Reabold’s website.

Stephen Williams, Co-CEO of Reabold, said:
“After receiving the final tranche of the payment from Shell, Reabold is now financially well positioned to progress it’s two key assets, and in doing so, contribute significantly to  European gas supply and energy security. 

“We are excited by the new phased capex plan at West Newton which could see production and cash flow much sooner than previously expected, and with considerably reduced initial capital investment. We anticipate a funding solution for the drilling of WN-A3 being finalised in the near future, and this first development well being drilled this year. We are also encouraged by progress in the approval process at Colle Santo and look forward to updating shareholders with further updates in due course.”

Looking at how Reabold look at the situation in different ways is highly constructive as they also have a smart way of invigorating the interest in West Newton, in particular by creating a broader interest which may mean that a twin double early phase production plan might beat the historical horizontal option.

There is no doubt that the ideal backstop solution is without any external capital required but as described above both companies are more than capable of making West Newton look attractive to farm-in and with the lure of earlier production and less capex that could change the economics of the field. 

Having said that the other key difference in the two approaches today, Reabold say that ‘there is an active process underway to assess options to source funding for Rathlin’s share of the cost, including through a farmout, or through further investment from Reabold, which, following the receipt of the proceeds from Shell, the Company could potentially provide, in addition to funding its own share.

Back to the start, both partners have brought to the market a quicker, cheaper earlier stage development without the horizontal drilling that might appeal to potential farminees via a higher commitment from the partners plus some upside from the Rotliegend, what’s not to like?

United Oil & Gas

United Oil & Gas announced on 26 February 2024 details of a fundraising to raise funds through the issue of new ordinary shares of £0.00001 each in the capital of the Company at a price of £0.002 each  to be completed by way of an accelerated bookbuild process which was managed by Tennyson, acting as sole book-runner.

The Company is pleased to confirm that the Bookbuild has been completed and the Company has, conditionally, raised gross proceeds of £1.0 million through an oversubscribed placing of 457,500,000 New Ordinary Shares with new and existing shareholders via the Bookbuild and 42,500,000 New Ordinary Shares by way of subscriptions directly with the Company. Accordingly, a total of 500,000,000 New Ordinary Shares will be issued pursuant to the fundraising, representing 76.18 per cent of the Company’s issued ordinary share capital.

A necessary raise for UOG as they keep their head above water keeping the lights on in Jamaica.

The Directors participated in the Placing and the details of their anticipated shareholdings are shown below subject to the Placing becoming unconditional:

The New Ordinary Shares will be issued and credited as fully paid and will rank in full for all dividends and other distributions declared, made or paid after the admission of those New Ordinary Shares and will otherwise rank on Admission pari passu in all respects with each other and with the existing ordinary shares in the Company.

The Placing and the Subscription (together “Fundraising”) are conditional upon, amongst other things:

• the Placing Agreement having become unconditional (save for Admission) and not having been terminated in accordance with its terms prior to Admission; and
• the GM has passed all the resolutions (“Resolutions”) associated with the Fundraising.
• Admission taking place by no later than 8.00 a.m. on 18 March 2024 (or such later date as the Book-runner may agree in writing with the Company, being not later than 8.00 a.m. on the long stop date. If any of the conditions are not satisfied, the Placing Shares will not be issued, and Admission of the New Ordinary Shares will not take place.

The total issued share capital of the Company, as increased by the New Ordinary Shares, immediately following Admission (and excluding any issues of shares between the date of this Announcement and Admission) will be 1,156,353,969 ordinary shares.

The Company expect to send a circular shortly to shareholders to convene a General Meeting to propose the resolutions to shareholders and it will be available on the Company’s website.

Indicative Timetable

Terms used but not defined in this Announcement have the same meaning as set out in the Company’s Announcement released at 4:45 p.m. on 26 February 2024.

KeyFacts Energy Industry Directory: Malcy's Blog