Oilman Jim's Letter - 8 October 2023
BEY PANR EOG I3E ORCA SCIR AEX PRD HE1 NHE.AX IVZ.AX GHY.AX BNL.AX HEVI.V PLSR.V HELI.V and more
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Catching up with some old “favourites” first, Barryroe Offshore Energy (BEY) (formerly Providence Resources) bit the dust, as least as far as the public shareholders are concerned. Larry Goodman takes full control, investing €1.05 million of equity into Barryroe on condition that all existing shares are cancelled. He thinks he can do something with the project - and he probably can. As with all these things, it’s rarely worth it for shareholders to hold on to the bitter end. I’ve been highly critical in the past about Providence / Barryroe and the promotion of its shares (check out the archives). I was hard on it, but right.
I sometimes receive communications from companies who are not happy with what I’m saying and in that vein I recently received an email from Pantheon Resources (PANR), who want to convince me that they are not the type of company they suspect I think they are. I’m happy to talk with them and have sent them my contact details. They’re proposing a meeting with the Chairman, David Hobbs. I’ll report back.
On to more positive matters, Europa Oil & Gas (EOG) and i3 Energy (I3E) announced Serenity updates. The licence for the Tain discovery (previously held by RSRUK and Rockrose Energy) recently lapsed and the Tain acreage is therefore unlicenced and available to be re-licenced in the future. Europa and i3 have been working for some time to advance a solution for the Blake / Tain / Serenity area, but made little progress while the previous Tain licensees were unable to approve additional investment. With the acreage now unlicenced, additional options for the area may now come available and i3 and Europa are commencing discussions with the NSTA and other interested parties to explore the remaining potential of the wider area. EOG owns 25% and is capitalised at £11 million; I3E owns 75% and is capitalised at £179 million. Both have other assets, but should the project move forward, EOG offers the better exposure.
Orcadian Energy (ORCA) announced a £350,000 equity financing and updated regarding the 33rd licencing round. The subscription was at 12p per share and proceeds will cover the costs involved in progressing the proposed Pilot field farm-in agreements with an as yet unnamed North Sea operator. Under the terms in the HoA, Orcadian will retain an 18.75% carried interest in the Pilot development with the Operator paying 100% of the pre-first oil scope of work, plus up to US$3.2 million cash to ORCA. The company made three licence applications in the 33rd licencing round (two in partnership with other companies and one on its own) and anticipates that it will hear as to whether its licence applications have been successful before the end of this year. The ORCA share price is up around 10 times in the last couple of months. I have to disclose a slight bias here, since Orcadian’s CEO, Steve Brown, said that the short book I wrote (now the Core Information section on the website) should be required reading before buying any oil and gas junior.
Scirocco Energy (SCIR) announced a Ruvuma transaction update. The divestment of its 25% interest in the Ruvuma asset has been approved by the Tanzanian Minister of Energy and all conditions precedent to the transaction are satisfied. Scirocco and ARA Petroleum Tanzania can now complete the transaction. It cleans up the ownership situation too for Aminex (AEX), whose 25% interest is carried to a maximum gross capital expenditure of US$140 million, which is expected to see the company through to the commencement of commercial gas production from the Ntorya gas field at zero cost to AEX. The Ntorya-2 well test is expected soon, along with a rig contract for the drilling of the Chikumbi-1 well and the workover of Ntorya-1, so there’s a good flow of positive news coming up here.
Predator Oil & Gas (PRD) announced a Morocco operations update. It’s changing the arrangements for the flow test yet again. Now it’s MOU-3 that will be tested first and it’s back to using conventional perforating guns. The flow test is currently forecast to begin on or before 16 October, but that date is also subject to other matters. It all still remains vague, with the company now talking about “re-purposing” funds raised in the placing for follow-up appraisal drilling. The share price has now more than halved since the high reached following the MOU-4 result (which was 10 times the low price when I was first covering it weekly in the Private Letter) and illustrates once again that it’s rarely worth holding for the development part.
Helium One Global (HE1) announced an operational update. The drilling rig has suffered a component failure and to undertake the necessary repairs, operations have had to be suspended for around two weeks. It’s hardly the death knell for the two well drilling programme, but the share price has been hit hard, falling at one point to under 4p. There was a placing only one month ago at 6p, that placing itself an interruption of the usual pre-spud run, where the share price was already up to over 10p before forward selling of the then unknown 6p placing kicked in. Unsurprisingly, investors have lost trust in HE1 management, who misled regarding the need for a placing before the drill and whose current PR seems to be more about their own virtue signalling than delivering shareholder friendly announcements. Hence the overreaction and a current share price which effectively already assumes failure of the first drill.
Noble Helium (NHE.AX), with whom HE1 has/had a cooperation agreement, also reported challenges. Its rig up is close to complete, but damage to the mast was discovered, which is expected be repaired over the weekend. Its first helium well should spud soon, with a second well to follow. HE1’s delay actually is quite convenient in ensuring that the two companies, drilling two helium wells each, will do so in parallel and that their drilling announcements will feed each others’ share prices.
Some other interesting Australian companies also reported news last week. Invictus Energy (IVZ.AX) 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. Last week’s update confirmed the 50 to 60 days time estimate.
Gold Hydrogen (GHY.AX) announced results of its AGM, following its annual report and Ramsay project update the previous week. The company started trading on the ASX in January after raising A$20 million to progress its exploration for, and discovery of, natural hydrogen in South Australia. Initial exploration efforts have been focussed on the 100% owned Ramsay project, which encompasses a large area of the Yorke Peninsula, as well as the whole of Kangaroo Island. The company is on target to commence drilling in the coming weeks, planning to twin the historical Ramsay Oil Bore 1 drilled in 1931 near Minlaton on the Yorke Peninsula, which encountered natural hydrogen of up to 89% purity on an air-corrected basis. Site operations and construction of the Ramsay 1 well site drilling pad are underway and the company says it is on track to spud mid-October.
Back to the helium companies, Blue Star Helium (BNL.AX) 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.
Moving on to some Canadian companies, Helium Evolution (HEVI.V) announced the previous week that the company and its farm-in partner, North American Helium, successfully drilled and cased the first joint well to encounter helium on lands within Block 1 at Mankota in Saskatchewan. HEVI has a 20% working interest in the Joint Well #1. The partner has indicated their 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 the partner 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. Market capitalisation is C$13 million (£8 million).
Pulsar Helium (PLSR.V) announced the previous week signature of a drill rig contract for an appraisal well at the Topaz helium project in Minnesota, USA. The program is for one well, with the option to drill a second at the company’s discretion. The well, Jetstream #1, is scheduled to commence on or about 10 December and will be drilled to a vertical depth of 2,200 feet. The collar location is anticipated to be within 65 feet of the original discovery well, LOD-6, that flowed 10.5% helium. During drilling, a gas chromatograph and mass spectrometer will be on location to provide real-time gas composition measurements including helium concentration and on reaching total depth, an open-hole logging suite will be acquired to evaluate the reservoir zone. The company only recently listed on the TSXV and says it will continue to provide consistent news flow for investors.
First Helium (HELI.V) announced a corporate update. The company says it is moving on to the next phase of installing a helium processing facility to bring its 15-25 Worsley helium well into production. Additionally the company says, its exploration team continues to be active, generating new, high potential, oil, helium and natural gas drilling opportunities at Worsley and preparing for further activity in Southern Alberta. Worsley is a historically active oil & gas exploration area that is attractive for multi-product exploration including oil, helium, and natural gas and the geology of the area provides multi-zone and multi-product target exposure with each drill. The company is open about being promotional and reports an investor relations agreement with Native Ads for 6 months (with a possible extension to 12 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 highly prospective Worsley Trend in Northern Alberta and 276,000 acres in the Southern Alberta Helium Fairway near existing helium production. It’s capitalised at C$8.7 million (£5.2 million).
As can be seen, there are now quite a number of helium companies out there and the ones above are only those which recently issued news. I’ll be continuing coverage of the Australian and North American companies involved in oil, natural gas, helium and hydrogen, plus of course all the UK ones too.
There’s more in the Private Letter which will be sent out this evening (it contains my actual trading ideas so check it out). There’s also further information about me on the About page.