Good morning shipmates, today’s blog comes from the Sky Princess somewhere in the Southern North Sea.

Oil took a bath that I mentioned yesterday as the Middle East has quietened down, for the time being. TTF natural gas stayed firm as its November contract expired. 

Union Jack Oil

Union Jack has announced that it has been informed by the Operator, Reach Oil and Gas Company Inc that the spudding of the Taylor-1 well, located in Seminole County, Oklahoma, USA is expected on or around 31 October 2024.  Union Jack holds a 45% working interest in this well.

The Taylor-1 well is an untested 3D seismic supported Hunton Remnant prospect with secondary targets in the Misener and Wilcox sands.

Wilcox structures to the north and the east of Taylor were prolific in 1920s, producing in the thousands of barrels of oil per day.

Historically, there have been several regional, high-profile fields such as the Bowlegs field that produced 195 million barrels of oil from the Hunton, Wilcox and Misener reservoirs.

Reach estimates the geological chance of success to be 40%.

Taylor will be followed as soon as possible by the drilling of the Moccasin well in which Union Jack hold a 45% working interest.

Moccasin is an untested 3D seismic supported Hunton and Wilcox structure with secondary targets in Pennsylvanian Channel Sands and Base Pennsylvanian Unconformity Sand.  The Moccasin structure is a compressive feature, associated with the regional Wilzetta Fault.  This strike-slip fault was active through the Ordovician to early Carboniferous periods and is responsible for several large oil accumulations.

The Moccasin structure lies close to the Woodford Shale, the main source for light oil across the region.

In the area of the Moccasin well, a deviation in the fault has caused compressive forces forming numerous dome and fault structures which have led to proven oilfields, such as the adjacent North-East Shawnee and North-West Redhill fields that have produced more than 6 million barrels of oil.

Reach assesses a high chance of finding movable hydrocarbons in the Base Pennsylvanian Sands and an approximate 50% chance of success in other target zones.

Taylor and Moccasin drilling and completion costs are being funded from the Company`s existing cash resources.

David Bramhill, Executive Chairman of Union Jack, commented:
“The management decision in late 2023, to focus on opportunities in the USA has already delivered rewards in a short period and I am pleased to report the imminent spudding of the Taylor well that has a good chance of success.

“One year on, our entry into the USA is already generating cash flow from the Andrews field and Mineral royalty portfolio where returns of 20%+ are being seen in respect of our original capital investment.

“The successful, now predominantly gas producing Andrews 1-17 and 2-17 wells, forming the Andrews field, in which Union Jack hold a 45% working interest, have to date produced 8,765 barrels of oil and 20,221,000 cubic feet of gas.

“In the UK, the Company is pleased to report cumulative revenues of over US$21,000,000 from Wressle, net to its 40% interest, where the view of management is that the most productive phase of development awaits.

“Also in the UK, ongoing site improvements to the Keddington production asset, where Union Jack holds a 55% interest, are progressing well and production is expected to re-commence during late 2024.

“Despite the current fiscal uncertainty that overshadows the UK upstream, Union Jack remains profitable and the Board is committed to delivering on its stated growth strategy in both the USA and UK.”

With the Taylor-1 well in Seminole County, Oklahoma slated to spud later this week all eyes return to the USA where, with its highly successful diversification away from pedestrian Britain has already been a winner. This well has a meaningful geological chance of success of some 40% and be followed by another well. 

I’ve said it before and will do so again, I dont believe that the UJO management have been sufficiently lauded for this move to the States which few saw as being so successful at the time. The shares remain excellent value with plenty of upside.

Serica Energy

Serica has announced that production via the Triton FPSO has been interrupted owing to a problem with the single gas compressor in operation.

A potential dry gas seal failure was identified in the ‘A’ gas compressor during operations on 26 October. This did not result in a leak of hydrocarbons. The FPSO operator, Dana Petroleum, is working to identify and execute the necessary repair.

As indicated in the announcement of 2 October, the Company’s ability to maintain full year production guidance of towards the bottom of the 41,000 to 46,000 boepd range was dependent on sustained production levels of around 50,000 boepd in Q4. Given the outage of production from Triton, Serica’s production for 2024 is now expected to be slightly below this previous guidance.

As previously stated, actions are being taken to reduce the operational vulnerability of the Triton FPSO by bringing the second compressor into service. The date for this is likely to be delayed by the corrective work on the ‘A’ compressor and is now expected to be in Q1 2025.

Production from Serica’s other assets is currently in line with expectations, with cash flow aided by the recent level of gas prices. The average month to date market gas price is 97.9 pence per therm, the strongest so far in 2024.

Serica will issue a trading and operations update in mid-November, by which time production on the Triton FPSO is expected to have resumed. The addition of production from the GE-05 well on the Gannet field (SQZ: 100%) is expected shortly after the resumption of production.

A slight disappointment from Serica as the Triton FPSO has been shut down due to a problem with its -only- compressor. Operator Dana is working flat out to get flow back by mid November but the lack of production will mean that current guidance of 41-46 kboe/d will be missed slightly. 

It is ironic and somewhat irritating that the partners had predicted this compressor problem and a second is already scheduled to be fitted in Q1 2025. Frustrating news but no hydrocarbons have been lost and of course with UK natural gas prices above 100p/therm in recent days, revenue has been rising.

Challenger Energy Group

Challenger has announced that the farmout of a 60% interest in the AREA OFF-1 block, offshore Uruguay, to Chevron Mexico Finance LLC, Sucursal Uruguay (“Chevron”) (a wholly-owned subsidiary of Chevron Corp, has today been completed, with all required approvals from the Uruguayan regulatory authorities having been received, and the farmout taking legal effect.

As an immediate result, the Company has received a cash payment of US$12.5 million while retaining a 40% non-operating interest in AREA OFF-1. Chevron has assumed operatorship of the block and going forward will carry 100% of the Company’s share of the costs associated with a 3D seismic campaign on AREA OFF-1 (up to a maximum of US$15 million net to Challenger Energy). Thereafter, should Chevron decide to drill an initial exploration well on the AREA-OFF 1 block, Chevron will also carry 50% of the Company’s share of costs associated with that well (up to a maximum of US$20 million net to Challenger Energy).

The Company is working closely with ANCAP, the Uruguayan regulator, and Chevron to ensure a smooth transition of operatorship, as well as participating in the detailed planning for an upcoming 3D seismic campaign, targeted to commence in the next available shoot window (H1 2025). Further updates will be provided as planning and execution of the seismic campaign progresses. 

Eytan Uliel, Chief Executive Officer of Challenger said:
“Completion of the AREA OFF-1 farmout is a game-changer for Challenger Energy. We’ve achieved an outcome that introduces Chevron, a recognised industry leader, as operator of the block, who will now commence with executing a considerable value-creating work program. The cash received and farmout terms will ensure that our Company is fully funded for the foreseeable future. And, just as important, this farmout validates our capabilities in terms of securing early-access to promising exploration blocks, and progressing them rapidly via high-quality technical work. In the coming months we expect to communicate plans for 3D seismic acquisition on AREA OFF-1, and at the same time we will be fully engaged in a technical work program for our second Uruguay licence, AREA OFF-3, applying the learnings from work on AREA OFF-1 – our objective is to be in a position to kick off a farm-out process for that block in mid-2025. The next year will thus be an exciting and busy time for Challenger Energy.“

I have applauded Eytan and his team a number of times in recent months for this audacious move into Uruguay and don’t intend to stop now. As he says this is a company make, game changer, call it what you will and it goes back to genuine oilmen getting out on the road and finding potentially huge prospects. 

Prospects that have meant that mighty Chevron, market cap $275m is going to operate with 60% against CEG with 40% and a market cap of £12.5m and also commit to and pay for a substantial work programme starting with 3D seismic in coming months. If promising Chevron will pay for 50% of a well, likely to be drilled in 2026 with huge promise.

But that’s not all, whilst in Uruguay Eytan also picked up AREA OFF-3 where they are working and building up a work programme there and who’s to say that they won’t do the same again. Challenger shares are grossly undervalued and I mean ten bagger or more and should be tucked away with so much more news to come.

Jadestone Energy

Jadestone has announced the appointment of Andrew Fairclough as Chief Financial Officer (“CFO”) and Executive Director of the Company, effective 29 October 2024. Mr. Fairclough will join the Company’s Disclosure Committee and will relocate to Singapore in the coming months.

Bert-Jaap Dijkstra, who has stepped down as CFO and Executive Director with immediate effect, will remain with the Company for a handover period prior to his planned departure in early November 2024.

Mr. Fairclough has nearly 30 years of corporate finance, capital markets and senior management and board experience across multiple geographies, including corporate strategy, debt and equity structuring and capital raising, mergers and acquisitions, capital management, financial planning, budgeting and financial reporting.

From 2020 to 2023, Mr. Fairclough was CFO of Serinus Energy Plc, an AIM quoted exploration and production (E&P) company with operations in Romania and Tunisia. Before that, he was CFO and Corporate Secretary of Whalsay Energy Limited, a private company focused on upstream appraisal and development on the UK Continental Shelf. Mr. Fairclough is currently a Non-Executive Director of Corcel Plc, an AIM quoted oil and gas E&P company focused on Angola and Brazil.

Following a career in the UK military and prior to his upstream CFO roles, Mr. Fairclough had a 17 year career in investment banking, with experience in both corporate finance and corporate broking across several sectors, principally at Rothschild and Merrill Lynch. Mr. Fairclough holds a LLB Laws degree from University College London.

Paul Blakeley, President and CEO commented:
“I am delighted to welcome Andrew to the company and on behalf of everyone at Jadestone, wish him success in his new role. With his investment banking background and recent executive and board roles with upstream companies, he has the ideal blend of skills and experience required to help us execute on our strategic aims.”

Good news from Jadestone as a senior, experienced finance chief is hired, with some Xciting periods behind him. There is much to be done as the company seek to get back to its previous rating with organic and inorganic activity.

Original article   l   KeyFacts Energy Industry Directory: Malcy's Blog