Oilman Jim's Letter - 15 October 2023
88E.AX 88E.L PANR.L PTHRF EOG.V ECO.L NHE.AX HE1.L IVZ.AX IVCTF BNL.AX BSNLF HELI.V FHELF RHC.V RHCCF XOP.CN COPL.L TCF.CN TRLED UKOG.L PRD.L UPL.L TBN.AX TBNNY ALV.V ALVOF BRU.AX EXR.AX GGE.AX GRGUF
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This newsletter is now covering small cap oil, natural gas, helium and hydrogen companies trading in Australia, Canada, the United Kingdom and the United States. If you prefer just to focus on British quoted companies, visit Exploration News.
On with last week’s announcements, 88 Energy (AU 88E, UK 88E, US EEENF) issued an Alaskan portfolio update. The immediate priority is Project Phoenix, in particular the upcoming flow testing of Hickory-1 in early Q1 2024. The rig is contracted and long lead orders are underway. As highlighted by 88E, Pantheon Resources (UK PANR, US PTHRF) has declared material, independently certified, contingent resource for the Lower Basin Floor Fan reservoir on neighbouring acreage and announced on 27 September the re-entry of its Alkaid-2 well with the objectives of gathering the best possible reservoir fluid samples for pressure-volume temperature analysis, determining the initial reservoir pressure and testing improvements in the frac design. The objective is not to target maximum flow rates, indeed Pantheon will deliberately restrict the flow rates to minimise gas production into the well bore and allow optimum data collection, thus negative news from Pantheon is unlikely. Few understand the geological differences between the two companies’ land tracts and fewer are going to explain it, so although having to wait a few months for its own flow test, 88 Energy is likely to benefit significantly from any positive sounding news from Pantheon in the meantime. Current market capitalisation of 88 Energy is A$133 million, £72 million, US$86 million; and of Pantheon £315 million, US$331 million.
Eco (Atlantic) Oil & Gas (CA EOG, UK ECO) announced board changes. Alice Carroll, currently the company's head of corporate sustainability, joins the board as an executive director; Selma Usiku, an experienced exploration geologist with a history of working in South Africa and Namibia, joins the board as a non-executive director. Eco recently acquired from Tullow an additional 60% interest in the Orinduik block, Guyana, and now has a 75% interest, becoming operator. The company says it intends to drive the exploration process and focus on its strategy to attract new partners to join the licence and proactively engage in drilling. The other current project is Block 3B/4B, offshore South Africa in which Eco now has a 20% stake. A new competent persons report released by the operator earlier this year confirmed that the block contains estimated P50 prospective resources of approximately four billion barrels of oil equivalent and an application has been made to drill one well and one contingent well in the north of the block. Like Orinduik above, funding for the drilling again relies on a farm-out. Current market capitalisation of Eco is C$62 million, £44 million.
Noble Helium (AU NHE) announced that its drilling rig is now repaired. Spud of the Mbelele-1 helium exploration well in Tanzania is imminent. Helium One Global (UK HE1, US HLOGF), with whom Noble has a cooperation agreement, has also experienced difficulties and had to suspend drilling due to a component failure the previous week. Repairs are expected to be completed this coming week and drilling of its first helium well, Tai-1, resumed. Both companies have two well programmes, which as a result of the delays should be back in sync. The news announcements from Noble Helium and Helium One, drilling two helium wells each more or less in parallel, are likely to feed each others share prices. Current market capitalisation of Noble Helium is A$77 million; and of Helium One £59 million, US$55 million.
Invictus Energy (AU IVZ, US IVCTF) announced a Mukuyu-2 drilling update. The well spudded on 20 September and drilling / evaluation was estimated to take approximately 50 to 60 days to complete. It’s the second well in IVZ’s Cabora Bassa Basin exploration program. The first, Mukuyu-1, which proved a working petroleum system and multiple hydrocarbon bearing reservoirs, de-risked future drilling. Per Invictus, Mukuyu-2, if successful, could be transformational for the company, Zimbabwe and much of southern Africa’s future energy needs. Per last week’s update, the early signs from Mukuyu-2 are encouraging and the company has observed higher background gas and better reservoir quality. Operations are said to be progressing smoothly and the well remains on track to be completed in the forecast 50 to 60 days. Current market capitalisation of Invictus Energy is A$205 million, US$129 million.
Blue Star Helium (AU BNL, US BSNLF) announced a suspension from trading pending the release of an announcement in relation to a capital raising. The previous week, Blue Star had announced execution of a lease agreement to secure the generator package for its proposed Voyager development and an update on site preparation for the development processing facility. Voyager is Blue Star’s maiden development project. Its BBB #1 well tested the Voyager prospect in November 2021 and encountered a calculated air-free gas concentration of 8.8% helium in a 134 feet gas column. Voyager is located only 6 miles from the historic Model Dome analogue production, which produces a similar high helium gas composition averaging 8% concentration and an independent 2C resource estimate of 643 million cubic feet of helium net to Blue Star has been announced. Current market capitalisation is A$43 million, US$27 million.
First Helium (CA HELI, US FHELF) announced its plans to drill an existing proven undeveloped light oil location as well as re-enter an existing well bore to test multiple zones for oil and gas with potential helium content. Successful results at the two planned Worsley locations are expected to augment the company's current oil production and cash flow to help facilitate ongoing exploration priorities. Worsley is a historically active oil & gas exploration area, attractive for multi-product exploration, including oil, helium, and natural gas, with the area geology providing multi-zone and multi-product target exposure with each drill. To date, it has enjoyed a 100% success rate in drilling its first two oil discoveries and these, along with the 15-25 helium discovery, help confirm the exploration model. In conjunction with the plan, the company intends to complete a non-brokered private placement to raise up to C$2.5 million. All securities issued will be subject to a four-month hold period in accordance with applicable Canadian securities laws (UK readers note: no forward selling or flipping in these jurisdictions!). The company also has disclosed (again not something seen in the UK) its investor relations agreement with Native Ads for 6 months for an upfront fee of US$50,000 and a further amount of US$50,000 to be paid during the term of the agreement. First Helium holds over 60,000 acres along the Worsley Trend in Northern Alberta and 276,000 acres in the Southern Alberta Helium Fairway near existing helium production. It’s capitalised at C$9.1 million, US$7.1 million.
Royal Helium (CA RHC, US RHCCF) announced that the Company has completed commissioning of its Steveville helium purification facility and has commenced the start-up of the facility. Royal will begin ramping up towards full commercial production, making the company the first publicly listed helium producer operating in Canada. The plant is engineered to process 15,000 mcf/day of raw gas fed by two of the 100% owned helium wells with an output capacity of approximately 22,000 mcf of 99.999% helium per year. Offtake agreements are at an average price of USD $538 per mcf (CAD $730/mcf). The facility has an ultra-low operating cost due to it being self-powered by fuel gas co-produced from the two helium wells. The plant also benefits from carbon credits, which will provide a material additional cash flow stream. Royal controls over 1 million acres of prospective helium permits and leases across southern Saskatchewan and southeastern Alberta. Market capitalisation is C$80 million, US$60 million.
Canadian Overseas Petroleum (CA XOP, UK COPL) announced the receipt of US$4 million from the issue of shares at 2.6p to conclude the financing announced earlier this month, the collective impact of which is to fully fund the business through Q1-2024 and reduce 2023 and 2024 liabilities by in excess of US$13.5 million. The company says that if it can bring production back above 2,000 barrels per day on average for 2024 that will allow it to fully fund COPL America for the entire year. Canadian Overseas operates the Cole Creek Unit, Barron Flats Shannon (Miscible) Unit and holds Barron Flats Federal (Deep) in addition to non-unitized lands, all in Wyoming. Market capitalisation is C$25 million, £19 million.
Trillion Energy (CA TCF, US TRLED) announced entering into a contract for acquisition of 2D seismic data and commencement of the oil exploration seismic program for the first of the three Cudi-Gabar farm-in blocks. Equipment and staff are being mobilized into the M47 c3 & c4 license areas to drill 3,750 twelve meters deep holes which will then be used to shoot dynamite based seismic over the East to Northeast half of the M47 block covering roughly 15,000 hectares. This is critically important, as seismic has never occurred in the area where the new lines will be shot and the location is in close proximity (11 to 12 km. distance) to the recently discovered Sehit Aybuke Yalcin and Sehit Esma Cevik oil fields. Acquisition will commence mid-November, concluding December, followed by processing and interpretation which will take an estimated 5-6 months. A second seismic acquisition program for oil exploration blocks M46C and M46D is planned for 2024 following the completion of the seismic program on the M47 block. Trillion Energy is focused on natural gas production for Europe and Turkey with natural gas assets in Turkey and Bulgaria, owning 49% of the SASB natural gas field, one of the Black Sea’s first and largest-scale natural gas development projects and a 19.6% interest in the Cendere oil field. The company recently farmed into the three oil exploration blocks in NE Turkey. Market capitalisation is C$58 million, US$42 million.
Also exploring in Turkey, UK Oil & Gas (UK UKOG) announced that following the temporary suspension of Pinarova-1 testing operations, larger and more powerful 7-inch perforating guns, capable of fully penetrating Pinarova-1's 9.625 inch casing and cement (and, crucially, available for import into Turkey), have now finally been sourced. Downhole pressure gauge data showed that the original 4.5 inch perforating guns, the only size guns available in-country, did not establish direct contact with the formation. Therefore, tests to date did not assess the potential of the zones associated with the 12 hours of strong crude oil odour and oil at surface as previously reported on 3 May. New geochemical analyses now demonstrate that both the Pinarova mud-pit oil sample and oil samples from the nearby shallow seismic shot-hole seep are a geochemical close match and most likely originate from the same Mesozoic age oil source rock, located beneath the general area of the shallow Pinarova structure. Should further testing be positive, consideration is being given to the acquisition of a small 3D seismic programme to identify a possible deeper oil pool, seepage from which being the most likely primary source of both the seep and Pinarova oils. Pinarova-1, located 6 km. north of the Basur-1 oil discovery, was designed to test a working hypothesis, supported by well and seismic data, that the active 42˚ API light oil seep found last summer in a seismic shot hole above the Pinarova structure, is directly fed by and connected to an underlying light oil accumulation lying within the Germik and/or Hoya limestones. UKOG holds a 50% non-operated interest in Pinarova-1 and the surrounding 305 sq. km. Resan licence, which also includes the as yet undeveloped Basur-1 light oil discovery. Market capitalisation is £7 million.
Predator Oil & Gas (UK PRD) announced the issuance of share options: six million exercisable at 12.5p. Three million go to director, Alistair Jury and three million go to Carl Kindinger, 50% vesting upon the release of a RNS in respect of the rigless testing results for Guercif and 50% upon the release of an RNS in respect of the completion of the acquisition of TRex Holdings Trinidad and the Cory Moruga project. There are quite a number of options and warrants now in issue and if all were to become exercisable and then exercised in accordance with their terms, gross proceeds received by Predator would be £5,982,951. Announcement of the MOU-3 flow test should be imminent. The previous announcement stated it was forecast to begin on or before 16 October (tomorrow). Market capitalisation of the company is £66 million.
Upland Resources (UK UPL) announced it has now signed a letter of intent for the provision of well planning and drilling services in 2024 with an established and proven upstream partner, NRG Group. In addition, the company says it is now in the final stages of rig identification for Block SK334, onshore Sarawak. According to Upland, preliminary estimates suggest that the block contains similar resources to those found in the neighbouring billion-barrel Seria field. Drilling remains conditional on a farm-out. On the PR side, Bolhassan Di, Chairman and CEO, says that Upland looks forward to increased market engagement as it scales up operations. Market capitalisation is £36 million.
Tamboran Resources (AU TBN, US TBNRF) announced its intention to re-domicile from Australia to the United States. The company will de-list from the ASX and become a wholly owned subsidiary of Tamboran US HoldCo, with shareholders retaining an equivalent proportional economic interest in Tamboran US HoldCo as they previously held in the company. Directors believe that the scheme will best position Tamboran for the next phase of its growth as Tamboran seeks to accelerate the commercialisation of the Beetaloo Subbasin by better positioning the company in a deeper capital market in the United States where shale investors are more active, providing access to a broader US investor pool, which is more familiar with shale developments and was previously unable or unlikely to invest in non-US securities, improving the valuation of the company, improving liquidity in the trading of the shares and improving access to lower-cost US debt and equity capital markets, which are larger and more diverse than Australian capital markets, enabling Tamboran to fund future growth at a lower cost and with less dilution to existing shareholders and simplifying Tamboran Group's corporate structure for potential future merger, sale or acquisition transactions, which may increase Tamboran Group's attractiveness as a potential target to strategic and merger partners, sellers or acquirers. The arguments apply to many companies of this size. Current market capitalisation of Tamboran is A$240 million, US$160 million.
Alvopetro Energy (CA ALV, US, ALVOF) announced that the company has completed drilling the 183-A3 well on its 100% owned Murucututu natural gas field. Based on open-hole logs, the well encountered potential net natural gas pay across two separate formations totaling 127.7 metres, with an average porosity of 10.3%. The results significantly exceeded pre-drill expectations and have the potential to open up a large stacked multi-zone development opportunity. The company plans to complete the well and put it on production directly to the adjacent field production facility. Alvopetro aims to become a leading independent upstream and midstream operator in Brazil, with a strategy to unlock the on-shore natural gas potential in the state of Bahia. Market capitalisation is C$267 million, US$196 million.
Buru Energy (AU BRU) announced the appointment of Miro Capital as advisor to assist in its current strategic partner selection process for the appraisal and development of its 100% owned Rafael conventional gas and condensate resource in Western Australia’s Canning Basin, plus the award of a pre-front end engineering design study to GHD. The initial Rafael well was drilled in 2021 on a large structure, with gas encountered in three zones. A test of a portion of the lower Ungani Dolomite zone was successfully flow tested at 7 million cubic feet of gas per day, confirming the conventional discovery. An independent resources report by ERCE Australia in 2022 has estimated that there is a potential 3C gas and condensate accumulation in excess of 1 trillion cubic feet of recoverable gas and over 20 million barrels of condensate, which is sufficient to support a phased project development strategy. This includes a first phase Kimberley gas to power project for domestic consumption, followed by a larger scale petrochemical or liquified natural gas development based on resource appraisal outcomes. A contract has been executed with Terrex Seismic to undertake a 3D seismic survey commencing in August 2023 and, in parallel, Buru is progressing preparations for well planning, rig selection and long lead item procurement in support of 2024’s appraisal drilling activities. Market capitalisation is A$63 million.
Elixir Energy (AU EXR) announced that it has now raised A$8.7 million in the recent placement and share purchase plan. Proceeds will be part used by the company to fund the drilling, completion, stimulation and flow testing of the Daydream-2 appraisal well, which is due to spud by around the end of this month. Construction of the well pad and upgrade of access roads has commenced and drilling of an on-site water well is underway. This well has a target depth of 1,200 metres and will provide all the water needs for the upcoming drilling and stimulation programs, not only for Daydream2, but also for future wells in the same area. All key long lead items for Daydream-2 have now been procured. In addition, all contracts have been awarded for drilling fluids, cementing, wireline & mud logging, measurement while drilling and drill bits. Further announcements can be expected soon. Market capitalisation is A$67 million.
Grand Gulf Energy (AU GGE, US GRGUF) announced the engagement of a leading North American upstream oil and gas consultancy, Walsh Engineering, to assist with its Red Helium Jesse development programme. Walsh have managed multiple successful helium projects in the area, including the prolific Tocito Dome helium field. Walsh is advanced in reviewing the Jesse-1A completion and Jesse-3 new drill well plans. There is a good short-term availability of rigs in the area and bids have been received from multiple drilling contractors. Grand Gulf’s Red Helium project is located in Utah, in the proven helium producing Four Corners area of the United States. The project has an independently estimated, gross unrisked P50 prospective resource of 12.7 billion cubic feet of recoverable helium, with over 29,000 acres leased. Its pure-play helium exploration well Jesse-1A discovery was made in June last year returning 1% helium to surface, exceeding pre-drill expectation. The Jesse-3 well and Jesse-1A re-completion are planed for this year, targeting the Leadville and McCracken formations, with the ability for near immediate production and monetisation of a commercial success, based on an existing gathering system and binding helium offtake agreement. Market capitalisation is A$13 million, US$31 million.
There’s more in the Private Letter which will be sent out this evening.