WTI (Apr) $78.01 -92c, Brent (May) $82.08-88c, Diff -$4.07 +4c
USNG (Apr) $1.81 -1c, UKNG (Apr) 64.9p -0.4p, TTF (Apr) €25.9 -€0.57

Oil price

Oil was down on the week with economic malaise and US rate uncertainty kept oil quiet. The rig count was down and US rates appear likely not to change until around June. 

Chariot

Chariot has announced the completion of the Feasibility Study for the large-scale green hydrogen project “Project Nour” in Mauritania which has now been presented to the Government of Mauritania. Project Nour is equally owned through a 50%/50% partnership between Chariot’s fully owned subsidiary Chariot Green Hydrogen and TE H2, a company co-owned by TotalEnergies and EREN Group, and is being developed with the support of Mauritania’s Ministry of Petroleum, Energy and Mines.

Highlights:          

• Further definition of the scale and viability of the project, building on the Pre-Feasibility Study completed in 2022 which confirmed that with up to 10 GW of electrolysis installed, Project Nour could become one of the largest green hydrogen projects globally
• Intention to execute a phased development with a first phase renewable capacity of 3 GW, powering up to 1.6 GW of electrolysis capacity, to produce 150 kt of green hydrogen per annum
• Offtake possibilities: domestic use for green steel production and export of green ammonia
• Geographical proximity to Europe and existing deep-sea port at Nouadhibou provides favorable export options
• Sustainable economic development with local content plan aimed at maximizing employment and business opportunities in Mauritania
• Completed in compliance with Equator Principles and IFC Performance Standards
• Next steps include completion of investment framework, engineering conceptual study and offtake negotiations 

H.E. Minister Nani Chrougha of the Mauritanian Ministry of Petroleum, Mines and Energy, commented: 
“With the completion of the feasibility study of Project Nour, Mauritania has just taken an important step forward on the path to realising its green hydrogen ambitions. We are fully committed to the development of this sector, our aim is to be the largest producer and exporter of hydrogen on the African continent and we believe that Project Nour could support this objective.

We are pleased to have recently received considerable, high-level support from the European Commission, with Mauritania being selected as a key partner in the EU’s Global Gateway initiative for future hydrogen exports and green steel production. This highlights opportunities that will be mutually beneficial in the long term. Our will is firm to continue to coordinate with our partners and encourage the industry through the development of major energy projects such as Nour.”

Laurent Coche Chariot Green Hydrogen CEO commented,
“This Feasibility Study further corroborates how important this project stands to be within the context of the future green hydrogen market. Nour’s size and scale has the potential to have a material impact both as a domestic and export producer and we are proud to have set the development along this path. With TE H2 and the Government we will continue to look at how best to bring it into production to maximise value in the near and long term for the benefit of all stakeholders.”

So, this is the project that comes from the partnership between Chariot and TotalEren and is proving that the feasibility study can show the significant potential of the green hydrogen market, here in Mauritania with the support of the Ministry of Petroleum, Energy and mines.

Chariot has said that they would develop their renewables concept and this is one of the first to come out of the lab, once more are underway they expect to be largest producer and exporter of hydrogen in Africa and with the Project Nour they have a multi phase, development in renewables. 

Chariot have proved that they can get to the forefront of the transition to renewables projects in Africa and this announcement can be seen to be proof of that. With this and so much news coming up across the company over the next few months Chariot looks set to deliver in many areas of the industry. 

San Leon Energy

San Leon has provided the following corporate update.

Refinancing update 

On 8 January 2024, San Leon announced that, following delays to Tri Ri Asset Management Corp. delivering funds pursuant to the terms of its contractual arrangements with San Leon, the Company was in discussions with a new potential financing partner. These discussions have continued and the Company has also engaged with other prospective funders.  Over the last two months the Company has received acceptable commercial terms from two prospective funders and the Company is now in the final stages of negotiation and hopes to sign full documentation with one of these funders in the relatively short-term.  Should loan documentation be signed in the near future the Company expects funds to be received by the end of March 2024. Receipt of funds will allow the Company to: i) undertake its further investment in Energy Link Infrastructure (Malta) Limited, as detailed in the announcement made on 10 October 2023; and ii) settle, in full, the Company’s outstanding creditors. San Leon notes that Since October 2023, ELI’s funding requirements have increased and the Refinancing has been negotiated with that in mind.

The Company has now concluded that funds will not be forthcoming from TRAM (details of which were announced on 10 October 2023) and it is considering its options in relation to its contractual position with TRAM.  Importantly, the Refinancing, if completed, is expected to enable San Leon to effect all of the actions previously contemplated following the announcement of the proposed TRAM investment.

Operations update

Production at OML18 has improved since last year’s difficulties with the Nembe Creek Trunk Line and production recently has been in the region of 10,000 barrels of oil per day (bopd) alongside gas production. Should the Refinancing complete and the Company makes its planned investments in ELI, the Alternative Crude Oil Evacuation System’s infrastructure (which comprises a 47-kilometre secure undersea pipeline from OML 18 to the floating storage and offloading unit ELI Akaso terminal) is expected to bring a material increase to OML 18’s production.  With a throughput capability of 200,000 bopd (ACOES pipeline plus barging combined) and a storage capacity of two million barrels of oil in the FSO ELI Akaso terminal, the ACOES will enhance crude oil commercialisation for OML 18 and other regional producers, primarily through the reduction of downtime and crude losses associated with the existing export routes.  Completion of the ACOES is anticipated to be around four months following the Company completing its further investments in ELI (which is conditional on the Refinancing completing), although barging of oil to the FSO ELI Akaso terminal could be commenced within weeks of San Leon making its further investments in ELI.

Creditor update

With the ongoing delay in obtaining new funds, the Company has numerous outstanding trade creditors (around US$25 million in aggregate) and these creditors have been exerting increasing pressure on the Company including, in some cases, sending legal letters before action.  San Leon continues to liaise with its creditors and the expectation of funds from the Refinancing is providing some reassurance to a number of its creditors.

A significant constituent of the overall creditors’ position is comprised by a confidential settlement agreement with the Minister for the Environment, Climate and Communications in Ireland that has been recently signed by the Company. The settlement agreement relates to certain decommissioning liabilities of Island (Seven Heads) Limited (“Island”)  for the Seven Heads gas field disposed of by the Company in 2014, which have not been settled by Island.  Consequently, a guarantee signed by the Company at that time has now been called upon by the Minister. The settlement totals c.US$7.7 million and is payable in instalments over the next eight months, with an initial installment of c.US$3.3 million due this month. The payment of the settlement over this period of time has been agreed with the Minister to enable San Leon to attempt to recover the entire settlement from Island, as it is entitled to do under the terms of the applicable disposal agreement. 

Pending conclusion of the Refinancing, the US$5.0 million loan from funds managed by Toscafund Asset Management LLP, which was announced by San Leon on 8 August 2023, also remains outstanding and continues to accrue interest at 10 per cent. per annum. San Leon is in regular correspondence with Toscafund in relation to the timing of repayment of this loan and Toscafund continues to be supportive of the Company’s progress.  Release of the security held by Toscafund, that comprises both a debenture issued by the Company as well as assignments and pledges over all of its group companies’ loan and equity interests in ELI, will be effected once the Refinancing has been completed.

The outstanding creditor position equates to around twenty per cent. of the unaudited book value of San Leon’s financial assets, the principal amounts being US$126 million due from Midwestern Leon Petroleum Limited (guaranteed by Midwestern Oil & Gas Company Limited), US$32 million due from ELI and US$7 million due from Decklar Petroleum Limited.  Notwithstanding this material asset base, the Board believes that, should the Refinancing not be completed this month, the Company’s cashflow and creditor position will become increasingly unstable and, to protect the interests of its creditors, the Company continues to manage its cost base tightly and, with the exception of efforts being made on the Refinancing, is not undertaking any new projects or incurring any new costs (aside from general running costs).

Ongoing suspension

The Company’s Ordinary Shares of €0.01 each remain suspended from trading on AIM, pending San Leon publishing: i) its audited accounts for the year ended 31 December 2022, as required by Rule 19 of the AIM Rules for Companies; ii) its unaudited interim results for the six months ended 30 June 2023, as stipulated by Rule 18 of the AIM Rules for Companies; and iii) an AIM admission document in relation to the further investment in ELI, details of which were announced by San Leon on 10 October 2023.

If, as expected, the Refinancing completes by the end of March 2024, the Company expects to publish the 2022 Accounts and the 2023 Interim Accounts around two months after receiving funds and the Admission Document around a month following the publication of these accounts.  The Company has already put plans in place to progress all of these requirements following the conclusion of the Refinancing.

Oisin Fanning, Chief Executive Officer of San Leon, commented: 
“The delays in receiving funds from TRAM have been a frustration for all of us at San Leon, but it is another reminder of the underlying quality of our assets that, in spite of this setback, we have continued to attract further prospective funding partners.  I am confident that the difficulties of this past year will soon be behind us as our forthcoming Refinancing will enable us to fulfil our long-held strategy of becoming the majority shareholder in ELI. I have said it before but the commissioning of the FSO Akaso Terminal will be a game changer, not only for OML 18 but for the entire industry in that region. We are confident that the ACOES (comprising the FSO and the pipeline) will be a significantly profitable and cash-generative project from which San Leon expects substantial upside.”

It seems that while TRAM are not delivering as promised, SLE has moved on and is in meaningful discussions with new partners which does as they say, show the underlying class of the asset and will hopefully provide funding. 

The project looks to be ‘significantly profitable and cash generative and the shares when back from suspension should prove a wise investment. 

Zephyr Energy

Zephyr has provided an update on its operated project in the Paradox Basin, Utah, U.S.

Zephyr continues to progress planning for the forthcoming redrill of the State 36-2 well. The Company retains full well control insurance and expects to recover a substantial majority of the costs associated with the redrill.

At the well pad, all surface hole location preparations have been completed to enable rig mobilisation.

The Company plans to mobilise a spudder rig to the well pad over the next two weeks to drill and set conductor pipe and once these operations are complete, the location will be ready to accept a drilling rig in early April.

The Company is in the final stages of execution of a rig contract with the intent to begin full drilling operations in mid-April 2024.

In addition, Zephyr has now received vendor bids for substantially all remaining well services, and has sourced all casing and long lead items required for the well.  As previously reported the Company has received all regulatory approvals required to proceed with the spud of the well.

Colin Harrington, Zephyr’s CEO, commented: 
“We are looking forward to commencing drilling operations on the 36-2R well.  After a highly intensive period of planning, preparation, and vendor selection, we are confident the next few months offer significant potential for the Company and will keep the market updated as drilling commences and progresses.”

Preparations for the re-drill at the Paradox basin are almost complete and the well should spud next month and paid for to a great degree by the insurance claim from the first well. 

I can’t believe that there is much that the operational team at Zephyr don’t know about the drilling conditions that they expect to encounter at the well and whilst that might be a touch optimistic it helps that after the problems last time to be on guard against potential pitfalls. 

I’m planning to have a chat with Colin this week to be able to update myself fully on the upcoming operations.

Union Jack Oil

Union Jack has announced, further to its announcement dated 6 February 2024, that the Company has been informed by the Operator, Reach Oil & Gas Company Inc, that a drilling contract has been signed with a local contractor, groundworks have been completed and a spud date on or around 20 March 2024 is anticipated in respect of the drilling of the Andrews-1-17 well to test the West Bowlegs Prospect, located in Seminole County, Oklahoma, USA.

Union Jack holds a 45% working interest in the Andrews-1-17 well.

• Andrews-1-17 well has a geological chance of success estimated by the Operator to be 75%
• Approximate ten-day drilling period to a depth of 5,200 feet
• Completion time is swift; approximately eight days including perforating and flow-back if successful

The target for this well is the Hunton Limestone, one of the main hydrocarbon reservoirs in Oklahoma.  The Hunton Limestone is unconformably overlain by the main oil-prone source rock, the Woodford Shale and is in an excellent position for the migration of oil.  Oil-filled porosity is encountered within a basal Oolite limestone formation in wells within a mile of the first drill location for the Andrews-1-17 well and this is believed to be the main reservoir within West Bowlegs.

West Bowlegs is associated with a remnant of the Hunton Limestone and is expected to be at original pressure with the seal for the reservoir being the Woodford Shale and lateral seal against the underlying Sylvan Shale.

Primary oil recovery is expected to be by solution gas drive with any gas recovered to surface being sold into the local network.

Reach is an accredited operator in the USA, owning and operating oil and gas production facilities in Seminole and Pottawatomie Counties in Oklahoma.  All prospects are generated by Reach which owns modern seismic equipment, supplied by a UK based company Stryde Limited.

David Bramhill, Executive Chairman, commented:
“I am delighted to be able to announce the imminent spudding of our first drilling venture with Reach, in Seminole County, Oklahoma, USA.

“The Andrews-1-17 well has a high chance of success and if proven commercial could be in production within literally weeks from spudding.  Similar low-cost development wells nearby, typically produce initially at approximately 150 barrels of oil and over 200 thousand cubic feet of gas per day and can provide rapid pay-back within six months.

“The rate of progress from generating a drillable prospect, obtaining permission to drill and putting a rig onsite in Oklahoma is remarkable.

“I look forward to updating shareholders on drilling progress at the Andrews-1-17 well over the course of the next few weeks.”

As I have said before this is an ideal investment programme for Union Jack, their success in a very positive drilling area whilst not guaranteed has a very high chance of success and I have always liked the fact that the wells pay back very quickly, a pleasant change from the delay and political problems in the UK. 

And it is not as if the company has a dearth of problems in its UL portfolio, with Wressle continuing to deliver they. are looking forward to action at West Newton later in the year. 

Challenger Energy Group

Challenger has announced the formal signing of its AREA OFF-3 licence, offshore Uruguay.

The AREA OFF-3 licence was awarded to the Company on 2nd June 2023 under the Open Uruguay Round process and, following final regulatory approvals being granted, was signed in Montevideo on 7th March 2024. Accordingly, AREA OFF-3’s first exploration period will commence on 7th June 2024, and will run for four years, until 6th June 2028.

The AREA OFF-3 licence covers an area of 13,252 km2 located in relatively shallow water depths (from 20 to 1,000 meters) approximately 100 kms off the Uruguayan coast. The block has substantial existing 2D and 3D seismic coverage, with two previously identified material prospects possessing currently estimated gross resource potential of up to ~2 billion barrels of oil and up to ~9 trillion cubic feet gas.

During the initial exploration period, the Company’s minimum work obligations on the AREA OFF-3 block are relatively modest, comprising licencing and reprocessing of 1,000 kms of legacy 2D seismic data, and undertaking two geotechnical studies. The Company intends to follow a similar strategy to that successfully adopted for the AREA OFF-1 licence (the farm-out of which to Chevron was announced on 6th March 2024), specifically to accelerate its technical work programme including additional discretionary work, with the objective of high-grading existing prospects and identifying new plays and prospects, and ultimately with a view to introducing a strategic partner at an early stage.

Eytan Uliel, Chief Executive Officer of Challenger Energy, said:
“Following on from our recently announced farm-out of the AREA OFF-1 licence to Chevron (pending regulatory approvals), we are very pleased to announce that the AREA OFF-3 licence has now been formally signed, cementing Challenger Energy’s position as a significant industry participant in Uruguay’s offshore. AREA OFF-3 represents a successful expansion of the Company’s business in Uruguay, a country that has fast become one of the world’s frontier exploration hotspots. We believe that AREA OFF-3 has strong technical merit and offers an exciting value-creation opportunity. Therefore, like with AREA OFF-1, our immediate strategy for AREA OFF-3 is to commence accelerated technical work, in support of seeking an early farm-out. We look forward to keeping shareholders informed of our progress”.

After the shares rose by around 50% last week on the farm-out of AREA OFF-1 to Chevron, CEG are rapidly moving on and today have announced the signing of the AREA OFF-3 with the Government.

Having moved so fast around the time of the pandemic, Challenger are already reaping the rewards of that smart, aggressive licensing and in AREA OFF-3 they see a substantial offshore area which already has significant existing 2D and 3D seismic coverage, ‘with two previously identified material prospects possessing currently estimated gross resource potential of up to ~2 billion barrels of oil and up to ~9 trillion cubic feet gas’.

CEG have proved to be a very smart acquirer of assets in their formative stages and do a great deal of work before preparing to farm-out and retain a significant stake thus potentially creating value for shareholders. I am interviewing CEO Eytan Uliel next week and look forward to the discussion. 

Coro Energy

Coro has announced that it has submitted an application to the Philippines Department of Energy for a second c.100MW Wind Energy Service Contract.

Following a successful pre-application process, Coro has now submitted a second application for a WESC for its next wind turbine project, located in Oslob, Cebu. This second area of interest neighbours the Company’s first project site and would be in respect of an additional installed capacity of circa 100MW. The recently installed and operational 130 metre meteorological mast installed by the Company in the Philippines will also serve this second project, gathering data over the next twelve months and determining the wind resource available.

Coro continue to push on in the Philippines and with it this a second application for another wind turbine project in Oslob, Cebu. It would add significant bulk to the Coro capacity in the area and Coro are moving strongly and with purpose in the wind resource area.

KeyFacts Energy Industry Directory: Malcy's Blog