WTI (Jan) $68.00 -72c, Brent (Feb)* $72.59 +41c, Diff -$4.59 +3c
USNG (Jan) $3.37 +16c, UKNG (Jan)** 122.44p +5.35p, TTF (Jan) €48.955 +€2.45

Oil price

Oil is a tad better today after a mixed end to last week. With markets closed on Thursday and half of Friday traders were under orders to keep books flat as the month ended and Brent January expired that night. UKNG also expired and both it and TTF have been quite firm, up on the week whereas WTI was down $3.24 and Brent fell $2.58 in the shortened week. 

There was some albeit muted confidence from China where data was better for the first time for a while but markets will want more concrete proof that factory activity and PMI numbers are better to stay. Finally, rearranged Opec+ meets on Thursday, my views are unchanged.

PetroTal

PetroTal has announced that it has closed the acquisition of a 100% working interest in Peru’s Block 131, as originally disclosed on May 8, 2024, pursuant to which the Company acquired all of the issued and outstanding shares of CEPSA Peruana, S.A.C, which represents the entire Peruvian business unit of Compañía Española de Petróleos S.A.

Manuel Pablo Zúñiga-Pflücker, President and Chief Executive Officer, commented:
“The acquisition of Block 131 represents an important milestone for PetroTal, and a pivotal step in the Company’s growth strategy. Importantly, Block 131 diversifies our production base within Peru, establishing a new platform for future production and reserves growth.

PetroTal’s technical team has already identified numerous synergies between the Block 131 assets and our existing operations at Block 95. Similar to the strategy we have already successfully employed at Bretaña, we plan to apply modern drilling techniques at the Los Angeles field, which has significant unutilized facility capacity. We are currently finalizing our development plan for the assets and look forward to providing more details at the appropriate time.”

With the completion of this deal, which was announced a little while ago, comes an important ‘step in the Company’s growth strategy’ and the opportunity to bring on board extra reserves and production primarily from the Los Angeles field. 

It is thought that the field could boost its current production as it has masses of headroom facilities wise and of course its production is light oil that has the potential to be mixed with the heavier crude from Bretana so it has potential synergies and of course lowering operating costs.

The growth adds value overall to PetroTal and I would expect in due course the shares to move a good deal higher, they now offer greater value and of course better economics should read through to higher returns to shareholders. The shares remain a powerful member of the Bucket List.

Key Highlights of the Acquired Assets

The Los Angeles field at Block 131 has produced an average of 817 barrels of light oil per day (“bopd”) from January 1 to September 30, 2024. The on-site facility infrastructure site was built to accommodate throughput of up to 5,500 bopd, providing a clear runway for production growth and improved unit operating cost structure. The produced oil is 45°API, which offers potential for marketing synergies with PetroTal’s heavy Bretaña crude. Additional highlights include:

• Visibility for low-cost, light oil production and reserve additions in the near-term, with upside resource potential in deeper, unproduced zones.
• PetroTal estimates remaining Proved recoverable reserves are 2.0 million barrels (“bbls”) of light oil, and 4.2 million bbls of Proved plus Probable reserves. PetroTal sees upside to reserve bookings given multi-horizon reservoir potential and improved geophysical interpretations.
• Blending of Block 131’s light oil production may allow PetroTal to increase sales of heavy Bretaña crude to the Iquitos refinery, at improved differentials to the Brent benchmark.

Asset Background

The Los Angeles oil field at Block 131 was discovered by CEPSA Peru in 2013. As of September 30, 2024 the field has produced a total of approximately 7.8 million bbls. Block 131 is held under an exploration and production license agreement expiring in 2038, subject to a 23.48% royalty rate at field production levels under 5,000 bopd, with a similar scaling factor to Block 95 above 5,000 bopd. All produced oil is currently sold to PetroPeru, Peru’s state-owned oil company, at Pucallpa. The oil is then transported by barge along the Ucayali River (passing PetroTal’s Bretaña oil field) to the Iquitos refinery.

Seascape Energy

Seascape has announced the successful farm-out of a 42.5% participating interest in the Block 2A Production Sharing Contract to INPEX CORPORATION. Following completion of the Transaction, Seascape will retain a 10% participating interest in the PSC through its wholly owned subsidiary, Topaz Number One Limited.

Transaction Highlights

Full, uncapped carry for Seascape’s Retained Interest (10%) through the remaining exploration phase which includes one firm wildcat well and one contingent appraisal well (subject to a commercial discovery);

• A cash consideration of US$10 million payable in full at Transaction completion;
• A further contingent cash consideration of US$10 million payable on a commercial discovery;
• Reimbursement of certain historic costs associated with the PSC totalling ~US$0.5 million;
• Partnered with INPEX CORPORATION, Japan’s largest exploration and production company, which is expected to take over as operator of the PSC with existing, synergistic operations in deepwater Sarawak

The Transaction is subject to partner and regulatory approvals and anticipated to complete at the end of Q1 2025.

Block 2A Highlights

Block 2A is located offshore Sarawak, eastern Malaysia in the North Luconia hydrocarbon province covering approximately 12,000 km2 in water depths between 100 -1,400 metres. Block 2A contains the world-class Kertang prospect, located across four Oligo-Miocene reservoirs, which is:

• Well-defined, large, four-way dip structural high with over 220 km2 of closure;
• Covered by high-quality, wide-beam 3D seismic shot by CGG in 2015;
• Exhibits direct hydrocarbon indicators (DHIs) including an overlying gas cloud feature and amplitude brights;
• CPR undertaken by ERCE on Kertang in 2024 assigns total gross, unrisked mean prospective resources of 9.1 TCF plus 146 mmbbl of NGLs (~1.7 billion boe);
• CPR chance of success of ~20%;
• Bintulu LNG, one of the world’s largest LNG facilities, is located onshore Sarawak;

Based on regional offset wells, third-party high-level cost estimates for a successful Kertang exploration well in excess of US$70 million (gross).

Following completion of the Transaction, Seascape will retain a material exposure to the Kertang prospect with net unrisked mean prospective resources of ~910 bcf and ~15 mmbbl of NGL (~166 mmboe). A summary of the CPR published in June 2024 can be found on the Company’s website: https://seascape-energy.com/presentations-reports/.

Block 2A was originally awarded to Seascape Energy in February 2023 as part of the Malaysian Bid Round 2022 (MBR 2022) by PETRONAS Malaysia Petroleum Management (“MPM”). MPM acts on behalf of PETRONAS in the overall management of Malaysia’s petroleum resources throughout the lifecycle of upstream oil and gas assets.

Nick Ingrassia, CEO of Seascape, commented:
“The successful farm-out of Block 2A marks an important turning point for Seascape Energy Asia following its strategic pivot in the middle of 2024. Attracting a high-quality partner into the world-class Kertang prospect, alongside the recent award of 12 gas discoveries in the DEWA PSC, highlights the vital role that nimble, forward thinking, independent E&P companies have to play in the Southeast Asian upstream ecosystem.

“The commercial terms of the transaction allow Seascape to retain material exposure to the significant upside associated with drilling the 9 TCF Kertang prospect at nil ongoing cost while also providing capital to be reinvested into the business – including bringing the DEWA cluster through to development.

“I am enormously proud of our team which has worked tirelessly over the past few months to deliver a transaction which not only secures Seascape’s future – but also creates a platform for growth. We look forward to working with our new partner, INPEX CORPORATION, along with PETRONAS and Petros to bring the transaction to a successful completion during Q1 2025.”

Placing and Subscription

Seascape has further announced a fundraising by way of a direct subscription by certain Directors, senior management and certain shareholders, and an institutional placing of new Ordinary Shares to follow on from the successful conditional farm-out of a 42.5% participating interest in the Block 2A Production Sharing Contract to INPEX CORPORATION.  The Fundraising raised gross proceeds of £2.0 million (£1.8 million net), through the successful Placing and Subscription of 5,710,810 new Ordinary Shares, in each case at an issue price of 35 pence per new Ordinary Share.

Background to the Fundraising and Use of Proceeds

Following a strategic review of its operations during 2024, the Board and management of Seascape announced on 17 June 2024 the Company’s exit from Norway and its focus on building a full-cycle E&P business in Southeast Asia, where the supportive attitude of the host governments towards small-and-medium sized E&P companies offers significant growth opportunities to the Company.

Seascape entered Malaysia in the Malaysian Bid Round 2022 by being awarded operatorship of Block 2A, offshore Sarawak. Block 2A was awarded along with high-quality 3D seismic data at nil cost. Following a further acquisition in December 2023 (the Topaz acquisition), the Company’s working interest in Block 2A increased to 52.5%.

Block 2A contains the giant Kertang prospect, which is believed to be one of the largest undrilled structures in Malaysia. The CPR undertaken by ERCE in June 2024 confirmed the giant scale of the Kertang prospect assigning total gross unrisked mean prospective resources of 9.1 TCF as well as 146 mmbbls of NGLs (1.7 billion boe) (approximately 900 BCF as well as 15 mmbbls, on a net basis) (approximately 165 mmboe) across four target horizons.

Seascape commenced a farm-out process to identify the right partner for Block 2A and following intense interest from major global energy companies, announced earlier this morning a farm-out agreement with INPEX, Japan’s largest E&P company, in return for a cash and carry consideration on the Company’s retained interest (10%) in the PSC. Completion of the farm-out is anticipated at the end Q1 2025.

Under the terms of the Block 2A farm-out, Seascape will receive:

• An uncapped carry for Seascape’s retained interest (10%) through the remaining exploration phase including one firm wildcat well and one contingent appraisal well (subject to a commercial discovery);
• US$20 million cash consideration including:

- US$10 million payable in full at completion of the Block 2A farmout (the “Initial Farmout Consideration”); and
- US$10 million contingent cash consideration to be paid following confirmation of a commercial discovery; and

• Reimbursement of certain historic costs associated with the PSC totalling approximately US$0.5 million.

In October 2024, Seascape announced the award at nil cost of a 28% participating interest in a small field asset production sharing contract over the DEWA Complex Cluster, off the coast of Sarawak. The DEWA PSC is comprised of 12 shallow water gas fields and discoveries dating from the 1980s, with approximately 500 BCF GIIP[1] on a gross basis (83 mmboe) that were overlooked by previous operators which had been focused on oil production.

DEWA provides Seascape with an immediate portfolio of gas fields, with net estimated resources of approximately 85-100 BCF (14-17 mmboe)[2], unlocked by new favourable Small Field Asset fiscal terms, with approximately 50% profit for the contractor (increased from approximately 30% prior to the new fiscal terms).

Given the shallow water depths and nearby infrastructure, the partners in the DEWA PSC are targeting a low-cost development plan utilising existing technology, which could support a potential production plateau of up to 100 mmscfd (17 kboped). DEWA has a low-cost initial work commitment of approximately US$0.6 million net to Seascape, to conduct a detailed resource estimate and deliver a Field Development and Abandonment Plan (“FDP”) within two years, currently targeting first gas in 2027.

The farm-out of Block 2A marks an important milestone in the transformation of Seascape into a fully funded, Southeast Asian focused E&P business with a combination of firm value in discovered resources on the DEWA PSC and significant upside associated with its retained interest in the world-class Kertang prospect.

Since refocussing its activities on Southeast Asia, the directors have substantially reduced the ongoing costs of the business and the Company previously announced that it has sufficient cash until Q1 2025. Seascape has existing cash of approximately £1 million[3] and costs of approximately £250 thousand per month, including forecasted spend at DEWA and minimal spend on Block 2A prior to completion of the farm-out. While the Initial Farmout Consideration is substantial, the timing of completion is uncertain and the Directors believe that it is appropriate to ensure that the Company has sufficient financing to enable the Company to execute the Block 2A farm-out, progress DEWA towards FDP and pursue further growth opportunities in Malaysia and across Southeast Asia. With the Company’s share price having appreciated approximately 204% per cent. since 17 June 2024[4], the Fundraising will be conducted within the Company’s existing shareholder authorities, keeping dilution to a minimum, while also introducing several new shareholders into the register with deep knowledge of the oil and gas industry.

Fundraising Highlights

Certain Directors, senior management and certain shareholders of the Company have subscribed for a total of 2,370,121 new Ordinary Shares, at the Issue Price, pursuant to the Subscription. In addition, a total of 3,340,689 new Ordinary Shares have been placed with new and existing institutional investors pursuant to the Placing by Stifel, at the Issue Price.

A total of 5,710,810 new Ordinary Shares will therefore be issued pursuant to the Fundraising. The Fundraising Shares represent in aggregate 10 per cent. of the Company’s existing Ordinary Shares. The Issue Price represents a discount of approximately 4.1 per cent. to the closing mid-market price of 36.5 pence on 29 November 2024 (being the latest practicable date prior to the date of this Announcement).

The Fundraising Shares will, when issued, be credited as fully paid and will rank pari passu in all respects with the existing Ordinary Shares, including the right to receive all dividends or other distributions made, paid or declared in respect of such shares after the date of issue of the new Ordinary Shares.

James Menzies, Executive Chairman of Seascape, commented:
“Whilst we are today announcing an important transaction in the farm-out of Block 2A offshore Sarawak, we are simultaneously announcing a small fundraising. This funding will ensure that the Company is able to close the farm-out deal, work on our DEWA project and continue to work on new opportunities, without stressing the balance sheet.

“This is also an opportunity to bring new institutional investors onto the share register, who appreciate our Southeast Asian strategy and who will be supportive long-term holders. This fund raising, together with proceeds from the Block 2A farm-out announced today, will put the Company in a strong position to deliver near-term growth through our portfolio of assets in Malaysia and across the wider Southeast Asian region.”

Today’s announcements from Seascape confirm a fantastic farm-out of Block 2A offshore Sarawak, Malaysia to Inpex Corp whilst also landing a useful raise which will take the company through the completion of the deal and take them through to operational activity which in my view will make Seascape a hugely valuable company.

The mechanics of the twin announcements today make a great deal of sense and by releasing a good farm-out along with a raise that includes existing and new shareholders as well as a very decent injection from directors shows their confidence and giving skin in the game. 

Seascape has impressed with its first rate relationships in South East Asia which have led to being awarded this very hot acreage when other, larger, more financially powerful companies may have expected to have been chosen. To have now made this strong deal with Inpex rewards the trust shown by the Government and will bring in a powerful partner whilst allowing Seascape to keep a stake in a potentially huge field and thus reward shareholders significantly.

To put this in perspective Seascape has a free carry on a huge well at no cost to them, costs are uncapped so they have no worries about costs going above budget and if the well should come in there is every chance that their 10% of a discovery could be a massive, company game-changer and that could see the company valued at a huge premium, either by the market or by one of the many E&P companies circling in the area. Also with such a good start, more deals or licences in such a good post code might be just the start for Seascape.

Readers will know that when James Menzies announced that the was establishing a long SE Asia/ short Norway policy back in June that I went all in, advising shareholders not to wait for any shilly shallying around and that a ten bagger was the very minimum from the 6p level then.

Now, having raised money at 35p my view will have to be changed as a run to 60p and that ten bagger is looking like too conservative a target. So, if the well was to come in I would expect a very minimum of 600p possibly more and so will set a shorter term target of 350p being a ten bagger from here. 

Sintana Energy

I don’t normally write about stocks not quoted in London but I have followed Sintana from the start as it is drilling with Galp in the exciting Orange Basin in Namibia. For followers of Eco Atlantic this is worth watching. I would like a copy of the map with their acreage superimposed….

Sintana has provided the following further update regarding the second campaign on blocks 2813A and 2814B located in the heart of Namibia’s Orange Basin. The blocks are governed by Petroleum Exploration License 83 (“PEL 83”) which is operated by a subsidiary of Galp Energia (“Galp”) of Portugal. Sintana maintains an indirect 49% interest in Custos Energy (Pty) Ltd. (“Custos”), which holds a 10% working interest in PEL 83. NAMCOR, the National Petroleum Company of Namibia, also maintains a 10% working interest.

We refer to press releases from Galp (available at galp.com) and Custos (available at newsdirect.com) noting that the PEL 83 Joint Venture partners have successfully drilled, cored, and logged the Mopane-1A appraisal well(Well #3) which spud on October 23rd and completed drilling on November 28th.

Mopane well 1A encountered light oil and gas-condensate in high quality reservoir- bearing sands, once again indicating good porosities, high permeabilities, and high pressures, as well as low oil viscosity characteristics with minimum CO2 and no H2S concentrations.

Together with the Mopane-1X (Well #1) and Mopane-2X (Well #2) findings, this appraisal well confirms the extension and quality of AVO-1. Galp and its partners will continue to analyse and integrate all newly acquired data, while progressing with the upcoming activities, which include additional exploration and appraisal wells, and a high-resolution proprietary 3D seismic campaign set to start in December 2024.

This appraisal well is the first of an up to four well program consisting of two exploration wells and two appraisal wells. This second campaign builds off an initial two well program completed in Q2 of 2024 the results of which included the discovery and appraisal of AVO-1, as well as other discoveries. This second campaign is intended to provide additional insights into the scope and quality of the Mopane complex.

“The quality and scale of the Mopane complex continue to be demonstrated with this successful appraisal by the Mopane-1A well. We look forward to the exploration and appraisal activities anticipated in 2025 to further unveil the potential of Mopane.” said Robert Bose, Chief Executive Officer of Sintana.

“The ongoing campaign at PEL 83, with additional wells to come, is part of the next chapter of progress on our world class portfolio at the heart of Namibia’s Orange Basin.” said Knowledge Katti, Chairman and Chief Executive Officer of Custos, and a Director of Sintana.

KeyFacts Energy Industry Directory: Malcy's Blog