Oilman Jim's Letter - 22 October 2023
PANR.L PTHRF 88E.AX 88E.L EEENF IVZ.AX IVCTF BNL.AX BSNLF HEVI.V HE1.L HLOGF NHE.AX TBN.AX TBNRF FO.V FOG.L SEI.V SEUSF HHR.AX ANGS.L EOG.L UJO.L ZPHR.L ZPHRF
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This newsletter covers small cap oil, natural gas, helium and hydrogen companies trading in Australia, Canada, the United Kingdom and the United States.
I mentioned two weeks ago that I had received an email from Pantheon Resources (UK: PANR, US: PTHRF), who want to convince me that they are not the type of company they suspect I think they are. We’ve exchanged a number of emails so far and isolated the issues prior to our discussion, which I expect will take place very soon. I’ll report the outcome.
In the meantime, Pantheon Resources has announced the validation of its revised frac design and successful fluid sampling. The company reported that testing operations have been successful at demonstrating producible oil from the SMD horizon in the Aphun field and the strategy to move to regulatory approvals for the Ahpun field development and to proceed with a hot tap into the TAPS main oil line is said to have been reinforced. The plan targets final investment decision by the end of 2025 with first production to follow in early 2026. Estimated costs to first production are conservatively estimated at $120 million. I believe the company has a good chance of being able to finance this, since with a current nine figure market capitalisation and a large investor audience, convertible debt would be viable for a lender/financier.
I said last week that 88 Energy (AU: 88E, UK: 88E, US: EEENF) was likely to benefit from Pantheon’s upcoming announcement and so it turned out to be. 88E was up 23% at one stage and PANR down 15%. This upset some people (one in particular a lot), but markets can be strange things unless you understand them.
Invictus Energy (AU: IVZ, US: IVCTF) announced a further Mukuyu-2 drilling update. Elevated gas shows up to 70 times above background and elevated log while drilling resistivity has been encountered in the Upper Angwa primary target reservoirs. Higher total background gas was observed in the well along with heavier hydrocarbons (C4 and C5) in mud gas increasing with depth and the company now is preparing to drill ahead to the planned total depth of 3,750m following a drill bit change out. The well spudded on 20 September and drilling / evaluation was estimated to take approximately 50 to 60 days to complete. It is 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 the update, the well remains on track to be completed in the forecast 50 to 60 days and, once total depth is reached, a comprehensive wireline logging programme to evaluate results will follow, with the aim of confirming the presence of moveable hydrocarbons in multiple zones.
Blue Star Helium (AU: BNL, US: BSNLF) announced an A$7 million equity raise at A$0.021 per share to fund its Voyager project into first production. There’s also an opportunity for existing eligible shareholders to participate via a share purchase plan targeting a further A$2 million. Development of the company’s Voyager helium production plant, its maiden development, is targeted for completion this quarter. Blue Star’s 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. Further developments are upcoming.
Helium Evolution (CA: HEVI) announced that its farm-in partner, North American Helium, has served the company notice of its intention to drill a joint well on the lands it earned pursuant to last year’s farm-out agreement. The joint well is expected to spud before the end of November and is the second confirmed joint well in addition to the eight previously announced wells. HEVI has confirmed that it will participate in the drilling of Joint Well #2 at its 20% working interest, which is estimated to cost it approximately $0.4 million net. Funding is supported by the company’s working capital position which totalled $8.8 million at end June. The company’s previous announcement was that it and North American Helium had successfully drilled and cased the first joint well to encounter helium on lands within Block 1 at Mankota in Saskatchewan. HEVI also has a 20% working interest in Joint Well #1. North American has indicated its intention to proceed with completion and production testing in the coming weeks, after which Helium Evolution will provide an update on the well’s performance. In addition, Test Well Area #1 is scheduled to be spud by North American on or before 1 November, subject to surface conditions. HEVI again retains a 20% working interest in the well. Helium Evolution claims to hold the largest helium land rights position in North America among publicly-traded companies, with 5.6 million acres of land under permit near proven discoveries of economic helium concentrations.
Helium One Global (UK: HE1, US: HLOGF) announced that drilling has restarted on the Tai-3 well. The replacement rig component was sourced and installed and HE1 is now drilling ahead through the primary reservoir targets to total depth of 1,100m. The company will make a further announcement once total depth is reached and wireline tools are ready to run in the hole. Civils work is continuing for the second well in the drilling campaign, Itumbula-C, on its well pad and access road and Helium One remains on track to drill this well prior to the wet season commencing. Recent soil gas surveys over the Itumbula prospect have yielded helium concentrations above background levels. Noble Helium (AU: NHE), which is also drilling two helium exploration wells in Tanzania announced the previous week that its rig is now repaired and announcement of the spud of its first well, Mbelele-1, is expected imminently.
Tamboran Resources (AU: TBN, US: TBNRF) announced that the Amungee NW 3H well in its 38.75% owned exploration permit EP 98 has reached a total depth of 3,837m, including a 1,100m horizontal section. Drilling took 17.9 days (spud to total depth), 20 days faster than the Amungee 2H well, demonstrating the improved efficiency of the new super-spec FlexRig. Cost was around 30 per cent lower compared to the A2H well. Tamboran announced the previous week its intention to re-domicile from Australia to the United States, de-listing from the ASX. Directors believe the scheme will best position Tamboran for the next phase of its growth by better positioning the company in a deeper capital market 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 and improving access to lower-cost US debt and equity capital markets. The arguments apply to many companies of this nature and size. Ireland based Falcon Oil & Gas (CA: FO, UK: FOG) also has an interest in EP98 and issued a similar announcement regarding the Amungee NW 3H well.
Sintana Energy (CA: SEI; US: SEUSF) announced an update regarding PEL 83, offshore Namibia, in which it holds an effective 5% carried interest. The operator, Galp, has entered into a contract with SFL Corporation for the semi-submersible rig Hercules. The 115-day contract, prior to any extension option exercise, is for two wells plus optional well testing. The rig is expected to move on to the first location with an expected spud date in the middle of November. The initial drilling campaign is targeting the Mopane complex with JV-estimated mean oil-in-place of up to 10 billion barrels.
Hartshead Resources (AU: HHR) announced that the pipeline route survey covering the offtake pipeline route for the Anning and Somerville field developments has been successfully completed with all objectives achieved. The company owns 40% of North Sea licence P2607, having farmed out a 60% interest to Rockrose Energy. The license contains multiple gas fields, some of which have been only partially developed and multiple exploration prospects with a combined resource base of around 0.8 trillion cubic feet of gas across the first three phases of the field development programme. The aim is to take a final investment decision on the development this year and achieve first gas in 2025.
Angus Energy (UK: ANGS) announced an updated Saltfleetby CPR and a Balcombe oil field update. The updated CPR was commissioned on the basis of the company’s decision to drill two new wells in 2025-2026, for a total of five wells producing from the Westphalian main reservoir, along with potential for conversion for gas storage or CO2 injection in the future. The P90 NPV10 valuation is £57.1 million and the P50 NPV10 valuation £64.5 million, post tax and including the full impact of the Energy Profits Levy. Regarding Balcombe, the High Court has upheld its right to test the existing well and testing operations can now be restarted according to normal oilfield practice to determine the commercial viability of the discovery. Angus presently has a 25% interest in the licence and is in discussions with the 75% majority partner regarding that interest and the work programme with regard to the project's various stages.
Europa Oil & Gas (UK: EOG) and Union Jack Oil (UK: UJO) announced Wressle updates. Workover operations on the Wressle-1 well to install a downhole jet pump and recomplete the well have successfully concluded and the re-instatement of production operations is expected this coming week. EOG holds a 30% economic interest in Wressle, UJO holds 40%.
Zephyr Energy (UK: ZPHR, US: ZPHRF) announced a Paradox project update plus an agreement to further expand the project by farming-in to the Salt Wash Field, a previously producing asset with proven oil, gas and helium reserves located directly to the south of the company's White Sands Unit in Utah. Preparations for re-drill of the State 36-2 well have commenced; timing is dependent upon securing an appropriate rig. Additionally, Zephyr plans to drill a second well in the Paradox Basin in the first half of 2024 and it is expected that a single rig contract may cover the drilling of both wells, providing efficiencies and reduced costs. The second well is to be drilled on the Salt Wash Field, referred to above.
There’s more in the Private Letter.