Easter Blog, 17 April 2022
88E IOG CHAR PET PTAL I3E ZPHR LBE EME ECO PANR AEX SCIR PXEN UOG CORO IGAS EDR
Catching up on the last three weeks, 88 Energy (88E) announced the not entirely unexpected non-commerciality of its Merlin-2 well. Drilling failure is par for the course at this Australian exploration (and now production) company, yet it has consistently remained one of the most reliable earners from a stock market trading perspective. Numerous times over the years, all one has had to do is buy post the placing which raises the drill funds (often at a discount to the placing price) and de-risk/take profits as the spud date approaches. It’s usually good for 100% or more each time. It’s also a regular private blog trading favourite. Obviously, one does not hold for the result.
IOG (IOG) announced initial production numbers. Elgood has flowed continuously at a stable rate in excess of 50 million cubic feet of gas per day and Blythe has flowed at rates in excess of 40 million. Drilling at Southwark is expected to resume any day. The company’s operational start has certainly come at the right moment; with heightened energy security risks across Europe, there has perhaps never been a better time to bring new UK gas resources on stream. IOG has been covered in the private blog each week from as low as 9p. It’s now over four times that price at 39p.
Petrel Resources (PET) announced that the High Court injunction over the 32,086,538 shares previously held by the Tamraz Group has been lifted, following the acquisition of the shares by John Teeling and James Finn for £300,000. John Teeling has acquired 21,086,538 shares at a price of 0.935p per share, following which he is the beneficial owner of 26,501,538 shares, representing 16.88% of the issued share capital and James Finn has acquired 11,000,000 shares at a price of 0.935p per share, following which he is the beneficial owner of 12,785,385 shares, representing 8.14% of the issued share capital. After all the shenanigans with Tamraz, the share price is back to 1.65p and perhaps ready to run again. I highlighted PET as a favourite several times in 2019 at around 1p and it went as high as 26.5p thereafter, up over 25 times.
PetroTal (PTAL) announced social and operational updates. Peruvian government officials have reached an agreement with the Asociación Indigena de Desarrollo y Conservación de Bajo Puinahua to end the social protest, which has been blocking PetroTal's loading dock. PTAL has oil barge support ready to arrive within hours of the loading dock's formal reopening and the first priority is to unload approximately 90,000 barrels of crude oil stored at the field, following which production will be ramped back up. In the first quarter, PetroTal produced over 1 million barrels of oil, despite being significantly production constrained for most of March. I mentioned PTAL positively when it was 7.6p. It’s now over five times that price at 39.5p.
Chariot (CHAR) announced progress with further transitional energy projects, the latest being a memorandum of understanding with the Port of Rotterdam, a global energy hub and Europe's largest seaport, which handles a significant portion of Europe's total energy demand. This represents a first step towards establishing supply chains to import green hydrogen and ammonia to meet expected demand in the Netherlands and other countries in Northwest Europe. The two parties will work together to connect with off-takers and secure contracts for specific volumes. Chariot has been covered in the private blog from as low as 5p. It’s now over four times that price at 23.9p.
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i3 Energy (I3E) announced record corporate production and reserves. i3 exited the first quarter with weekly average production of approximately 20,312 barrels of oil equivalent per day and the company now forecasts full-year 2022 net operating income of $192 million. The before-tax net present value of cash flows attributable to the company's reserves, discounted at 10%, has been determined to be $354 million, $444 million, and $775 million for its P50 PDP, 1P and 2P reserves, respectively. Forecasted year end unencumbered cash is $66 million, which the company says could support additional shareholder distributions or share buybacks. Zephyr Energy (ZPHR) also announced a production update for its Williston Basin portfolio. First quarter operational production rates averaged 1,643 barrels of oil equivalent per day.
Longboat Energy (LBE) announced a significant discovery at its 10% owned Kveikje exploration well. The preliminary estimate of recoverable resources is 28 to 48 million barrels of oil equivalent gross, above the pre-drill expectation. The discovery is said to have excellent reservoir quality and is close to existing infrastructure allowing for a simple development through multiple export options. In the meantime, drilling operations have commenced at the 25% owned Cambozola exploration well, which is one of the largest gas prospects to be drilled in Norway in 2022. Gross unrisked mean prospective resources for the Cambozola prospect have been estimated at 159 million barrels of oil equivalent. The well is expected to take up to 14 weeks to drill.
Empyrean Energy (EME) announced the commencement of drilling at the Jade prospect. The independently assessed geological chance of success is 32%; the company claims it should be higher at 41%. Audited mean in place potential is 225 million barrels of oil with a P10 in place upside of 395 million barrels of oil. Should the well encounter hydrocarbons in the main target zone, Empyrean will run additional logs to confirm any oil pay zones and if an oil pay zone is confirmed then the plan is to carry out flow testing operations. The challenge will be that the company isn’t funded yet for the flow test, previously estimated by EME as costing an additional $7.4 million.
Eco (Atlantic) Oil & Gas (ECO) announced the successful completion of an oversubscribed equity fundraise. The company raised gross proceeds of approximately £19.5 million through the issue of 64,885,496 new shares at a price of 30p. Proceeds of the fundraise are intended to be used primarily to fund Eco's share of the drilling of the Gazania-1 well on Block 2B, offshore South Africa. It is expected that drilling of Gazania 1 will commence this September. Pantheon Resources (PANR) announced interim results together with operational highlights. Storms have halted the company’s operations and it has made the decision to conclude operations for the season.
Aminex (AEX) announced a Tanzania operations update. Seismic operations continue and the target spud date for the CH-1 well is in November. The company, with a 25% non-operated interest, is carried throughout the ongoing work programme to a maximum gross capital expenditure of $140 million ($35 million net to Aminex), which is expected to see AEX through to the commencement of commercial gas production from the Ntorya gas-field, scheduled for the end of 2024, at zero cost to the company. Scirocco Energy (SCIR) also owns a 25% interest (not carried) and issued a similar announcement regarding operations. Scirocco says it is continuing with its ongoing discussions regarding possible farm-down and divestment options, while simultaneously progressing funding options in the event that it retains a 25% interest in Ruvuma at the time of the CH-1 well.
Prospex Energy (PXEN) announced completion of the Selva acquisition from United Oil & Gas (UOG). The gas field is scheduled to come into production by the second quarter of next year from the suspended Podere Maiar-1 well in Italy, which was drilled in December 2017. With the strong European gas market backdrop, Prospex is potentially looking at net annual cash flows in excess of €8 million per year for the first five years of the production profile. Coro Energy (CORO) announced the resumption of production at Sillaro. Based upon current prices, the company expects to generate more than €5 million per annum of free cash flow from its Italian portfolio.
IGas Energy (IGAS) announced its response to the Government announcement on UK shale. The company says it welcomes the opportunity to demonstrate how shale gas can provide safe, secure and affordable energy for the UK and believes it can make this supply of energy available to consumers and businesses in a short timeframe. Egdon Resources (EDR) also issued an announcement welcoming the review. The company holds a significant portfolio of shale gas licences covering an area of 151,742 net acres (614 square kilometres) with estimated mean volumes of undiscovered gas in place of 37.6 trillion cubic feet. Egdon's primary focus is the Gainsborough Trough, where it says the results from the 2019 Springs Road-1 well highlighted a potentially world class resource in the Gainsborough Shale.
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