WTI (Sep) $74.73 -$1.08, Brent (Sep)$78.63 -$1.15, Diff  -$3.90 -7c
USNG (Sep) $2.13 +9c, UKNG (Sep)* 86.5p +7.59p, TTF (Sep) €35.845 +€1.23
* Denotes August contract expiry

Oil price

With little or no geopolitical news lately oil has drifted on dodgy data from China, until today that is…

News overnight that Israel had struck back and killed a political leader of Hamas, since then late last night oil has rallied sharply. The API inventory stats also helped, crude drew 4.495m barrels, gasoline was down 1.917m b’s and distillates even managed a sympathetic draw of 322/- b’s.

Zephyr Energy

Zephyr Energy plc (AIM: ZPHR) (OTCQB: ZPHRF), the Rocky Mountain oil and gas company focused on responsible resource development and carbon-neutral operations, will hold its Annual General Meeting (“AGM”) at 11am today, at the offices of Memery Crystal, 165 Fleet Street, London, EC4A 2DY.

At the AGM today, Rick Grant, Zephyr’s Non-Executive Chairman, will make the following statement:
“We continue to make strong progress in pursuit of our primary goal of unlocking the next prolific onshore U.S. oil and gas play.

“Our operated upstream assets in the Paradox Basin offer asymmetric growth potential, growth which is funded by cashflows generated from our low-risk, high-margin non-operated interests in the Williston Basin.  In the near-term, we will commence the next phase of our Paradox project operations on the State 36-2R LNW-CC well, and we look forward to keeping shareholders updated on progress over the coming weeks.            

“In the meantime, I would like to extend my appreciation to the entire Zephyr team and our contractors for their ongoing hard work, and I would also like to extend my gratitude to my fellow Directors, leadership team, and advisers.  Most importantly, I would like to give thanks to our shareholders for their continued support.

“We look forward to the future with a high degree of confidence. We have an exciting period ahead of us and I believe we have all the pieces in place to enable us to deliver on our strategic objectives successfully.”

Not much I can add after all the news of recent weeks and of course the interview with Coilin Harrington on Monday, repeated below. 

Salt Wash helium project update

The Company is also pleased to announce that the State of Utah’s Department of Natural Resources has approved the Application for Permit to Drill for the proposed Salt Wash Field helium project.

Zephyr remains in conversations with multiple industry participants and other investors regarding the potential to fund the cost of the commitment well at the asset level, with the Company seeking to maximise value for shareholders.

 Core Finance CEO Interview: Colin Harrington, CEO of Zephyr Energy

Arrow Energy

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-3

The second of the Ubaque horizontal wells planned for 2024 is now on production.  The second horizontal well on the Carrizales Norte “B” pad (CNB HZ-3) is exceeding expectations and is being restricted to a current flow rate of 3,038 BOPD gross (1,519 BOPD net to Arrow) with less than 6.5% 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-3 was spud on July 4, 2024, and reached a target depth of 8,457 feet (true vertical depth) on July 18, 2024.  The well was drilled to a total measured depth of 12,320 feet with a horizontal section of approximately 3,050 feet. CNB HZ-3 came on production on July 26, 2024, with the use of an electric submersible pump (ESP) and, based on initial results, has displayed the same reservoir characteristics as CNB HZ-1.

CNB HZ-1

The CNB HZ-1 is continuing to perform above expectations and is being restricted to a current flow rate of 2,220 BOPD gross (1,110 BOPD net to Arrow) with approximately 34% water cut.

CNB HZ-1 average production for the first 30 days of production (IP30) was 2,650 BOPD gross (1,325 net).

Drilling Time and Costs

From spud to rig release the CNB HZ-1 took 30 days and cost approximately $4.9 million gross ($2.45 million net to Arrow).  The CNB HZ-1 well paid out in under 30 days.  Drilling operations at the CNB HZ-3 well took 21 days from spud to on production and cost approximately $4.0 million gross ($2.0 million net to Arrow).  The improvement represents the learnings taken from CNB HZ-1 as the operations team continues to focus on  improving capital and operating costs and creating further shareholder value.

Upcoming Drilling

The rig has been moved to the fourth cellar on the Carrizales Norte B Pad where the Company has spud the third horizontal well (CNB HZ-4).   Thereafter, the Company expects to drill the fourth horizontal well on the B pad, followed by the Baquiano-1 exploration well, which is on trend with the Carrizales Norte field.  Following the drilling program at Baquiano, Arrow plans to return to the CNB pad for two additional horizontal wells.

Water Disposal Update

The conversion of the CN-4 well to a water disposal well is complete and injection has commenced. The CNB-2 water disposal well has been completed and is awaiting stimulation work and regulatory approval prior to starting injection.

Corporate Update

Current net corporate production is approximately 4,560 BOE/D, inclusive of CNB HZ-1 and CNB HZ-3.

Arrow’s cash position was approximately $11 million on July 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 continued success of the horizontal well program at the CNB pad, has led the Company to plan two additional horizontal wells which Arrow intends to drill before the end of 2024, depending on technical aspects and regulatory approvals.  This will result in a total of six horizontal wells at Carrizales Norte in 2024 with additional horizontal wells being planned in 2025 from a third pad.  The horizontal program continues to exceed expectations and to add production and reserves from the hydrocarbon-dense Ubaque formation. The Arrow team strives to reduce the time and costs needed to drill horizontal and vertical wells.  Internally generated development drilling and completion strategies will be used to exploit further prospects on the Company’s land holdings.”

“The production rates from the CNB HZ-1 well are exceeding the simulation results and the CNB HZ-3 well was drilled, completed and brought on production under budget. The Company is excited about the initial results of the well and the potential to further grow reserves and production.”

“Production infrastructure including water disposal wells, dispersion fields and roads continue to be developed to increase production and prepare for the 2025 capital program.”

This is yet more amazing news from the Carrizales Norte field where the horizontal drilling programme is yielding up many, many prizes. The announcement states that the CNB-HZ3 well has started production with restricted flowrates of 3,038 b/d and the well is still cleaning up, it could be much better…

The rig has already moved to start drilling the third well in the programme and after that another, the fourth horizontal well. In the meantime the company has converted ‘my’ CN-4 well into a water disposal well which has started its process. Things as they say can only get better and given that the CNB HZ-1 well paid out in under 30 days the company are proving to be fast learners.  

For Example, ‘drilling operations at the CNB HZ-3 well took 21 days from spud to on production and cost approximately $4.0 million gross ($2.0 million net to Arrow)’.  The improvement represents the learnings taken from CNB HZ-1 as the operations team continues to focus on  improving capital and operating costs and creating further shareholder value. This has made the financial position very strong indeed, FCF generation continues, they are clearly funding their own story and have managed to strengthen the balance sheet whilst drilling, a rare thing indeed.

I remain all in on Arrow who continue to deliver in spades, they hold many other cards in the deck too, I decided to get more realistic about Target Prices in my note of 28/6/24 and so I think that 75p is a not unrealistic place to travel to. Arrow should outperform most in the sector and are holding up the Bucket List.

Jadestone Energy

Jadestone has provided the following update on the Akatara gas development project onshore Indonesia.

Since 22 June 2024, when the Company announced mechanical completion of the Akatara Gas Processing Facility and the introduction of reservoir gas into the Facility, raw gas production has ranged between 3-8 mmscfd, allowing for commissioning of the Facility’s systems and the start of condensate production, which has totalled c.4,700 bbls to date.

On 31 July 2024, following successful packing of the 17km export pipeline from the Akatara field, commercial gas sales into the regional trunkline in Sumatra commenced at a rate of c.4 mmscfd, or approximately 20% of the daily contracted quantity (“DCQ”) under the Akatara gas sales agreement.  LPG production is expected to start imminently.

Jadestone will issue a further announcement once full DCQ (c.20 mmscfd) sales gas production is achieved, which is expected within the next two weeks.   

Paul Blakeley, President and CEO commented:
“The Akatara project has now met the key major milestone of first contractual gas sales, just over two years since the original investment decision was made and just five weeks after introducing reservoir gas into the processing facility.  Successfully commissioning a major new processing plant, producing gas, condensate and LPGs in a relatively remote location in Indonesia, is no small task and represents a significant achievement for Jadestone.  Over 7.5 million manhours without an LTI and over 40% of that delivered through local contractors only magnifies what we have accomplished.

On behalf of our shareholders, I want to thank all of the Jadestone employees and our contractors who have worked around the clock over the past months to address the challenges and issues that are entirely normal when commissioning a facility of this nature.  The work doesn’t stop there, as we will be laser focused on refining the processes and procedures at the Akatara processing plant to deliver the highest levels of uptime.

This is a major milestone for our company, a new low-cost production base in Indonesia which will provide significant cash flow to the company, and benefit local economies with cleaner, lower carbon energy, jobs and potential for further investment and growth to come.  We look forward to ramping up in short order to full DCQ production within the next couple of weeks.

I was spitting daggers this morning when I saw this and thought that why oh why did they produce the update with the guidance downgrade two days before first contractual gas from Akatara? IR has since told me that it was  to do with Aim regulations on guidance so that’s me back in my box…

As for the news today, it’s obviously fantastic and the company should be congratulated on delivering what I agree is ‘no small task’. With all the other positive drivers coming through in short, medium and the long term Jadestone covers all bases and is now recovering fast.

KeyFacts Energy Industry Directory: Malcy's Blog