WTI (July) $81.57 +$1.24, Brent (Aug) $85.33 +$1.08, Diff -$3.76 -16c
USNG (July) $2.91 +12c, UKNG (July) 81.25p +0.6p, TTF (July) €34.58 +€0.48

Oil price

The oil rally continues, the market remains tight and the geopolitical front is tightening so ahead of the EIA stats, delayed due to today’s USA holiday for Juneteenth Day the API stats were disappointing ahead of the market, closed today in WTI. 

Arrow Exploration

Arrow has provided an update on operational activity, particularly at the multi horizon, Carrizales Norte (“CN”) field on the Tapir Block in the Llanos Basin of Colombia where Arrow holds a 50 percent beneficial interest.

CNB HZ-1

Arrow has put on production the first of four Ubaque horizontal wells planned for 2024.  The first horizontal well on the Carrizales Norte “B” pad (CNB HZ-1) is exceeding expectations and is being restricted to a current flow rate of 3,150 BOPD gross (1,575 BOPD net to Arrow) with less than 1% water cut while still recovering load fluid.  Please note initial production flows are not necessarily indicative of long-term performance or ultimate recovery and a stabilized production rate will be determined in the first few weeks of operations, in keeping with conservative reservoir management. Further updates will be provided in due course.

CNB HZ-1 was spud on May 14, 2024, and reached target depth on 8,448 feet (true vertical depth) on June 7, 2024.  The well was drilled to a total measured depth of 11,680 feet with a horizontal section of approximately 2,042 feet. The pay zone is a clean sandstone exhibiting consistent 28% porosity and high resistivities, similar characteristics to those seen in previous wells. Initial reservoir analysis exhibits multi-darcy permeability. An electric submersible pump (ESP) has been inserted in the well and is running at its minimum setting. The well is flowing and has been choked back in keeping with conservative reservoir management as well as ongoing development of adequate water disposal capabilities.

Upcoming Drilling

The rig has been moved to the second cellar on the Carrizales Norte B Pad where the Company plans to drill a dedicated water disposal well (CNB-2).   Thereafter, the Company expects to drill three additional horizontal wells on the B pad, followed by the Baquiano-1 exploration well, which is on trend with the Carrizales Norte field.  The three follow up wells will have longer horizontal sections, which are expected to result in enhanced rate and ultimate recovery.

Water Disposal Update

The RCE-1 water disposal well conversion on the Rio Cravo Este pad is complete and the disposal well is operational.  During the conversion process, some production from the RCE pad was temporarily restricted, however, that production has now been restored.

The conversion of the CN-4 well to a water disposal well is progressing.  The well is being equipped while waiting on regulatory approval. The Company has temporarily cut back production (approximately 250 BOPD net) from the existing wells at Carrizales Norte until the new water handling capability is in place.  The CN-4 and CNB-2 water disposal wells are expected to be capable of disposing of sufficient water volumes to enable the entire Carrizales Norte field development.

Oso Pardo and Capella Update

The Morsa 1 well in the Oso Pardo field, which experienced downhole equipment failure, is back on production, adding approximately 75 BOPD net.

The Capella field remains shut in, and the third-party operator is continuing to assess plans to restart the field.  Net shut in production from the Capella field is approximately 230 BOPD.

Canada Update

Due to exceptionally low natural gas prices in Canada, the East Pepper and West Pepper wells have been temporarily shut in.  These wells will restart once favorable economic conditions return.  Net gas shut in is approximately 250 BOE/d net.

Corporate Update

Current net corporate production is approximately 3,600 BOE/D, inclusive of CNB HZ-1. Once the imminent additional water handling capacity is available, the existing wells on both the RCE and CN platforms will be produced more aggressively. Existing wells were curtailed waiting on water handling capacity.

Arrow’s cash position was approximately $12.1 million USD on June 1, 2024.  Although Arrow has an aggressive capital program, the Company has maintained a healthy balance sheet with no debt.

Marshall Abbott, CEO of Arrow commented:
“The initial success of the first horizontal well at the CNB pad, which is currently exceeding expectations, is an important milestone in the development of the hydrocarbon-dense Ubaque formation. The horizontal technology proven by this well can now be used to exploit further prospects on the Tapir block, and potentially the Oso Pardo block.”

 “The CNB HZ-1 well was drilled, completed and brought on production under budget. Although initial production flows are not necessarily indicative of long-term performance, the Company is excited about the initial results of the well and the potential to grow reserves and production.”

“The information obtained from the vertical development program in Q1 2024 at the Carrizales Norte field, such as Ubaque reservoir extent, uniformity, thickness and depth, has been instrumental in the planning and execution of the horizontal well program.”

“Construction of the Baquiano pad is complete and the Company plans to move the Petroworks 1500 HP rig to the Baquiano pad once the current drilling program has been completed at the CNB pad.”

This horizontal well into the Ubaque has been waited for with tremendous excitement and the fact that it has exceeded expectations is about as good as it could have got for Arrow and its band of followers of which I am a very keen one. 

I will put it all together tomorrow, but this is worth considering for potential valuation purposes as the group production is now c.3,600 b/d and with three more horizontal wells on this pad to be followed by the Baquiano-1 exploration well, which is on trend with the Carrizales Norte field, the world is indeed the company’s lobster with apologies to Arthur Daley.

I have pointed out several times that these horizontals are of increasing value a number of times, indeed pre-drill estimates of, say, 2/- b/d at a cost of $5-7m per well totally change the economics but at this early stage this drill looks even better. Next time they will be longer, produce higher flow rates and exceed ultimate recovery and there is the Baquiano to dream about.

As I say I will add more tomorrow but think doubling production, at better economics and as the company reminds us the balance sheet is very strong, there is no debt and the extensive drilling campaign is fully funded. More tomorrow…

Diversified Energy Company

Diversified Energy Company PLC (LSE: DEC) announced on April 10, 2024 a dividend in respect of the fourth quarter ended December 31, 2023 in the amount of 29 cents per share (the “Q4 2023 Dividend”.)  The Company will pay the Q4 2023 Dividend on June 28, 2024 to those shareholders on the register on May 24, 2024.

The Company announces that shareholders who have elected to receive their dividends in GBP sterling will receive an equivalent  dividend payment of 22.833 pence per share, based on the June 14, 2024 exchange rate of GBP 0.78734=US $1.00.

This was announced yesterday and I repeat it because of its importance to many shareholders and of course the yield on a stock this good is such an additional benefit it should not be forgotten.

Petro Matad

Petro Matad has announced its audited final results for the year ended 31 December 2023. All monetary values are expressed in United States dollars unless otherwise stated.

2023 Operational Highlights

• The Company continued to push the Mongolian government and authorities to register Block XX Exploitation Area as State Special Purpose land and secured Cabinet approval for the certification in July. Continued bureaucratic delays in the government's regulatory processes to complete the certification led the Company to seek local level approvals in parallel.
• The Company raised $6.6 million to finance exploration drilling in Block V and its renewable energy joint venture focused on projects in Mongolia.
• The Velociraptor-1 wildcat well was drilled in Block V in mid-2023. Although the well was plugged and abandoned as a dry hole, it penetrated good quality reservoirs and source rocks and provides an excellent data point to high-grade other exploration areas in Mongolia. The operation also demonstrated that very low-cost exploration drilling can be done in-country with truck mounted equipment and a very small environmental footprint.
• Close cooperation and community support in Block V demonstrated that the Company's community outreach is fit for purpose.
• Petro Matad was chosen as the preferred contractor for the two new Production Sharing Contracts for which it had applied in the Mongolian Exploration Licensing round.
• The company formed the Sunsteppe joint venture with an experienced developer to pursue opportunities in the Mongolian renewable energy sector.

Mid-2024 update

• Local land access approvals are now in hand allowing operations to go ahead on Block XX in 2024 whilst the State Special Purpose Certification process is completed in parallel.
• Preparations are being finalised for completion of the Heron 1 well and the contractor has indicated that it should be ready to mobilise in July.
• Progress is being made on the exclusive green energy development projects that the Sunsteppe joint venture has high-graded at Choir (50MW Battery Storage) and at the major Oyu Tolgoi mine (24MW renewable energy supply for green hydrogen production).

Mike Buck, CEO of Petro Matad, said:
“2023 proved to be a frustrating year on Block XX, where the significant step of Cabinet approval of State Special Purpose Certification for the area did not translate into a rapid renewal of Petro Matad’s licence to operate. Whilst that certification is still to be finalised and is having to wait until after the imminent Mongolian parliamentary elections, the fact that we were recently able to secure locally approved land use agreements for the areas in which our next operations are planned, ends a very long wait. We share our shareholders’ relief and excitement that the completion operations on Heron 1 will go ahead with contractors planned to mobilise in July to prepare the well for production. Negotiations with PetroChina for oil transport, processing, export and sale are ongoing with the support of the industry regulator.

Our shareholders’ patience and support are much appreciated as is the dedication and motivation of our staff. The Company will be focussing maximum effort on moving the Heron development forward through the second half of 2024 and I look forward to updating you further.”

There is little more to add, more than most the results are historic and nothing happened during the period. After the period end approval was received for block XX and Heron -1 may be back in business, there is also more after that but let’s take it a step at a time…