WTI (Nov)* $71.00 -60c, Brent (Nov) $74.49 -39c, Diff -$3.49 +56c
USNG (Oct) $2.44 +9c, UKNG (Oct) 84.25p +1.63p, TTF (Oct) €35.295 +€1.56
*Denotes expiry of WTI October contract

Oil price

Oil has been very quiet today, up on the week by $2.35 for the expiring WTI and $2.88 for Brent. All about the Fed and the greenback and of course Israel and the Lebanon.

Union Jack Oil

Union Jack has announced its unaudited results for the Half Year ended 30 June 2024.

Financial and operational highlights

• Net profit of £788,996 (2023: £572,263)
• Gross profit of £1,338,776 (2023: £1,608,973)
• Basic earnings per share 0.74 pence (2023: 0.52 pence)
• Oil revenues £2,338,710 (2023: £3,584,866)
• The Company continues to be debt free
• Post Balance Sheet date, a dividend of 0.25 pence per ordinary share was paid during July 2024
• Positive set of results confirms the Company is in a strong position with revenues and profitability being delivered from the UK and USA
• Wressle Competent Person's Report upgrades recoverable Reserves by 263%
• Planning consent received from North Lincolnshire Council ("NLC") for the further development of Wressle
• Acquired a balanced portfolio of USA Mineral Royalties for approximately US$1,000,000 generating a 20%+ return on capital invested to date
• Successful early drilling campaign with Oklahoma, USA based, Reach Oil & Gas Company Inc ("Reach"), resulting in the discovery of the Andrews field
• Acquisition of a 45% interest in the Rogers secondary recovery project
• Moccasin, Taylor and Diana-1 wells planned to be drilled during Q4 2024
• Share trading facility obtained on the OTCQB Venture Market in the USA

David Bramhill, Executive Chairman, commented:
"The Board's confidence in Union Jack's continued growth is evidenced by the Company's solid and profitable 2024 Half Yearly financial results, confirming its resilience, both financially and operationally.

"Union Jack's entry into the USA has to date vindicated the Board's decision to secure complementary international growth projects, designed to supplement existing domestic cash flow, without the punitive tax regime now being seen within the UK.

"The Board is optimistic that in the medium-term, Union Jack will experience exceptional growth assisted by its expanding portfolio of multiple cash-generating projects in the UK and USA.

"In the UK, Union Jack remains focused on the continuing development of its flagship project, Wressle, where the Operator and partners have enterprising, near-term expansion planned. The Board is of the opinion that, within Wressle, where planning consent is in place, there remains significant material upside which will support the Company with revenues for at least another decade. West Newton and Keddington also continue to rank highly within the Company's portfolio of UK assets.

"However, it is not difficult to be confident of the opportunities presented in Oklahoma, the scene of our rapid growth strategy, where we are already seeing income from our 45% interest in the Andrews field and the start of a three well drilling campaign, planned for Q4 2024.

"Union Jack's success in the USA, from a standing start in early 2024, highlights the ease of entry and ability to execute business there, justifying the Board's decision to seek further growth opportunities internationally to bolster the Company's flagship production and appraisal assets in the UK.

"The foundations of Union Jack's growth plan in the USA are being laid swiftly and unhindered.

"The Board has confidence in the significant increase in drilling, appraisal and development activity now planned in the pursuit of growth from our balanced UK and USA portfolios where each has the potential for significant value creation for shareholders. We believe our heightened drilling and development activity and the expected additional news-flow generated, combined with effective investor engagement on both sides of the Atlantic, will continue to attract the ongoing support of our existing shareholders and the attention of new investors, broadening the appeal of the Company to a wider audience.

"The future of Union Jack remains bright."

I have to agree with Chairman David Bramhill, there is much to be excited about at Union Jack and a great deal of that is down to the very wise call to diversify away from the UK and build a meaningful and exciting portfolio in the USA.

But the UK is not without exciting prospects, particularly at Wressle where recent news has been that planning approval looks like pushing on near term development and as Mr Bramhill says, provide revenues for another decade. Add West Newton and Keddington to that and the UK half of UJO has significant promise.

But it is difficult not to feel that the Government’s approach to the energy industry is at best blinkered, at least in that they cannot see that domestic oil and gas, particularly onshore, cannot be up there with the best in low carbon development and way better that imported alternatives.

Which means that shareholders should be mighty pleased with the US acreage and what it might bring to the party. But they should also be happy with what is likely to be a very proactive dividend and buyout policy which makes UJO a share with substantial upside in both capital and income perspectives.

Arrow Exploration Corp

Arrow has provided an update on operational activity.

CNB HZ-5

The fourth horizontal well on the Carrizales Norte “B” pad (CNB HZ-5) is now on production. The well has a current flow rate exceeding 2,700 BOPD gross (1,350 BOPD net to Arrow) and production is continuing to increase.  Currently the well, which has been cleaning up over time, has an 11% water cut.  Management’s expectations are that the CNB HZ-5 well will achieve production rates similar to the Company’s first three horizontal wells, and similar payback schedules of less than 2 months. 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-5 was spud on August 22, 2024, and reached a target depth of 8,472 feet (true vertical depth) on September 7, 2024.  The well was drilled to a total measured depth of 13,350 feet with a horizontal section of approximately 4,070 feet. CNB HZ-5 came on production on September 15, 2024, with the use of an electric submersible pump (ESP) and, based on initial results, has displayed comparable reservoir characteristics to the other horizontal wells drilled on the CNB pad.  

The CNB HZ-5 is the second Arrow well to use Autonomous Inflow Control Devices (AICDs) which are designed to limit the water cut in horizontal wells. The results of CNB HZ-4 and HZ-5 are being closely monitored to determine if these technologies, or others, will enhance production and ultimate recovery in the Ubaque reservoir.

CNB HZ-4, HZ-3 and HZ-1

The first three horizontal wells (CNB HZ-1, HZ-3 and HZ-4) on the CNB pad continue to perform above expectations with the following flow rates and water cuts: 

Upcoming Drilling

The Petroworks rig is being moved to the sixth cellar on the Carrizales Norte B Pad where the Company plans to spud the fifth horizontal well (CNB HZ-6). Thereafter, the Company expects to drill one additional horizontal well on the B pad, followed by the Chorreron-1 (formerly known as Baquiano-1) exploration well, which is on trend with the Carrizales Norte field.

Corporate Update

Current net corporate production is approximately 5,835 BOE/D, inclusive of CNB HZ-5.

Arrow’s cash position was approximately $15 million on September 1, 2024.  Arrow has maintained a healthy balance sheet with no debt. 

Marshall Abbott, CEO of Arrow Exploration Corp., commented:
“The horizontal wells at the CNB pad continue to surpass expectations.  Arrow’s focus for the remainder of 2024 will be the completion of the six well horizontal well program at Carrizales Norte as well as a low-risk exploration well at the Baquiano prospect.”

“Arrow has begun the planning and construction of roads and pads in the Tapir block in order to accelerate the 2025 capital program which is expected to include the drilling of low-risk exploration wells at Mateguafa Oeste, Capullo, and Mateguafa Attic. In 2025 the Company is also targeting further horizontal Ubaque and vertical C7 development drilling at Carrizales Norte, and Baquiano. The Company is also planning to drill further development vertical wells at Rio Cravo Este, commencing at the end of 2024 and continuing in 2025 with a second drilling rig.”

“This enhanced capital program underlies the prolific setting of the Tapir Block in the Llanos Basin in Colombia. The block displays significant hydrocarbon density in multiple oil-bearing zones down to 10,000 feet total depth.”

“Arrow continues to improve drilling metrics on both horizontal and vertical wells, using internally generated development drilling and completion strategies.”

Yet again Arrow has delivered another exceptional horizontal well, CNB HZ-5 has come up trumps with a great flow rate of some 2,700 b/d+ gross and still increasing. The water cut of 11% is good and it looks like the well will be like the others and that means payback in less than two months…

Interestingly more has happened even since my interview of last week with CEO Marshall Abbott (Attached link below) and that is early indications of construction of infrastructure n terms of roads and pads to enable a number of wells to be drilled in 2025. These will be both vertical and horizontal and what I particularly wanted to hear and that is confirmation of bringing in a second drilling rig. 

But almost everything I wrote last week stays very much in place, Arrow is going places with increased production, revenue and of course cash flow, so I remain very happy with my 75p Target Price which might prove to be rather conservative quite soon.

Core Finance CEO Interview: Marshall Abbott of Arrow Exploration

Challenger Energy Group

On 6 March 2024, Challenger Energy (AIM: CEG) announced that it had entered into a farmout agreement for the AREA OFF-1 licence in Uruguay with Chevron. Completion of the farmout is subject to required regulatory approvals in Uruguay.

The Company is pleased to announce that on 19 September 2024, the Board of Directors of ANCAP (the Uruguayan state-owned oil company with regulatory responsibility for offshore licences) approved the farmout. Following this approval, and in accordance with Uruguayan legal requirements, the process has progressed to its final stage, which consists of the farmout being notified to the Uruguayan Ministry of Industry, Energy and Mining, and at the same time the requisite Consortium Agreement between the Company and Chevron being submitted to the Uruguayan Ministry of Economy and Finance for registration. Once a 20-day notification period has elapsed and the Consortium Agreement is registered, the farmout can be completed.

Eytan Uliel, Chief Executive Officer of Challenger Energy, said:
“The farmout of our AREA OFF-1 block in Uruguay is transformational for Challenger Energy. Since entering into the farmout agreement we have been diligently working through various regulatory approval processes, culminating in ANCAP now having formally approved the farmout, which is the key approval required. We do not anticipate that remaining procedural processes will take long to complete, so we expect full completion of the farmout within the next four to eight weeks. This in turn will enable Chevron, as incoming operator of the block, to move forward with 3D seismic acquisition on an accelerated basis, targeting commencement in early 2025. The coming months will thus be a busy and exciting time for our Company – we will keep shareholders advised of continued progress.”

This is exceptionally good news for Challenger and I remain very excited indeed about its prospects under the brilliant management of Eytan Uliel and team. This is only the first of the blocks to be farmed-out and when Chevron moves into the AREA OFF-1 the CEG team will move faster on the other one although I know they are working hard already.

Up until now I have been very bullish but have had no TP for CEG, I am now very confident that this deal is imminent and another one not far behind. Accordingly I am going to put a Target Price on Challenger of 25p and know that there is uber upside for the shares under this management.

Petro Matad

Petro Matad has announced that on 21 September it spudded the Gobi Bear-1 exploration well in the Tamsag Basin of eastern Mongolia. The well is being drilled by DQE International rig #30609 and is located c. 12km southwest of the Heron-1 oil discovery well in the Block XX Exploitation Area.

Gobi Bear-1 is targeting reservoir quality sandstones in the Cretaceous Lower Tsagaantsav Formation which is the main producing horizon in the Tamsag Basin and which was proven to be oil bearing in Petro Matad’s nearby Heron-1 and Gazelle-1 wells. Based on seismic interpretation, the primary reservoir target in Gobi Bear-1 is anticipated to be reached at a depth of c. 1,400m within a combination structural/stratigraphic trap at the southern end of the proven prolific Toson Uul sub-basin in which c. 2 billion barrels of oil in place have been discovered in the last 20 years. The Gobi Bear prospect is estimated to have mean oil in-place potential of 307 million barrels and the well is planned to drill to a total depth (TD) of c. 1,800 metres. The well is expected to take c. 20 days to drill to TD following which wireline logging will be conducted to determine if it merits testing. In the event of encouragement, well testing will be performed using the same contractor engaged for the operations planned at the nearby Heron-2 well.

Mike Buck, CEO of Petro Matad, said:
“Gobi Bear-1 is an important well within Block XX. The prospect has significant resource potential which can be rapidly exploited in the event of success as it is located within an already approved Exploitation Licence Area.

The well cost is estimated to be $1.5 million, making this a very high impact/very low cost, near-field exploration well. It also has the potential to de-risk other prospects and leads identified within Block XX.

Gobi Bear-1 will also provide important geological information on the characteristics of the Lower Tsagaantsav Formation reservoir where petrophysical parameters may be improved at the relatively shallow depths of burial that are prognosed.”

Further updates will be provided as the 2024 work programme progresses.

Mike Buck’s head must be spinning, there hasn’t been so much going on in Mongolia fora very long time. Shareholders must be sure not to get a rush of blood to the head and of course lots of work has to be done before the winter closes the place down. But it is great news for him, the team and the very patient shareholders…

Petrofac

Petrofac Limited is holding its Annual General Meeting today. Alongside this event, the Company provides the following update.

Extension of forbearance agreement

The Group confirms that it has extended its existing forbearance agreement in respect of the non-payment of the interest coupon on its senior secured notes from 20 September to 18 October 2024.

The forbearance agreement is entered into by an ad hoc group of noteholders representing approximately 47% of the outstanding senior secured notes and certain other acceding noteholders. It provides assurance that these noteholders will not take action in respect of the non-payment of the coupon until at least 18 October 2024, allowing additional time for the Group’s financial restructuring to be progressed.

Further announcements will be made as appropriate.

Nothing to add to my previous thoughts, it’s not looking too clever for the equity shareholderrs as they negotiate the path through the debtors…

Borders & Southern

Borders & Southern Petroleum plc (AIM: BOR) announces its unaudited half year financial statements for the six months to 30 June 2024. The accounts contained within this report represent the consolidation of Borders & Southern Petroleum plc and its subsidiary, Borders & Southern Falkland Islands Limited.

Highlights

• Operating loss for the period was $578,000 (30 June 2023: $558,000)
• Cash balance on 30 June 2024 was $0.756 million (31 December 2023:  $1.9 million)
• Appointment of Harry Baker as CEO
• Appointment of Dr Sean Guest as Non-Executive Director

For further information, please visit www.bordersandsouthern.com

Just the sort of interim report that I like, stand back, there is nothing to see.

But instead of that, learn about Borders & Southern by watching this message…

Core Finance CEO Interview: Harry Baker of Borders & Southern