Sunday Blog, 14 November 2021
EME ZPHR ZPHRF TLOU TOU DELT CNE ZOL WCAT SOU UOG PTR AST BLOE FOG PHAR TXP ZEN NTOG MSMN DEC DECPF GBP BLVN
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Empyrean Energy (EME) announced execution of the drilling contract for the Jade prospect with a targeted well spud date in late December 2021. The cost estimate is $12.3 million, plus a success-based testing cost estimate of $7.4 million. Empyrean is paying a deposit now of $1.23 million and the well site survey will commence as soon as there is a good weather window. Important to note is that the drilling of the Jade prospect remains subject to further funding being secured by the company, although Empyrean says it is currently in negotiations with potential counter-parties and is aiming to finalise the necessary arrangements in the coming weeks. The prospective resources at Jade are significant with an audited mean in place potential of 225 million barrels and a P10 in place upside of 395 million barrels. More on EME in the private blog.
Zephyr Energy (ZPHR ZPHRF) announced that the first hydrocarbons have been produced at the State 16-2LNCC well. Average flow rates of 420 barrels of oil equivalent per day have been recorded, although the company cautions that the production testing phase remains ongoing and further announcements will be made once the well testing is completed and well flows become representative of longer-term reservoir performance. This represents the first production generated from a horizontal well in the Paradox Basin using modern hydraulic stimulation, but it's important to remember that production testing remains ongoing and key parameters such as fluid mix are still variable and volatile.
Tlou Energy (TLOU TOU) announced a hydrogen production project. At Lesedi, the company and Synergen Met (due to list itself on the ASX in the coming months) are working on combining natural gas reserves with solar energy to produce green hydrogen. Production is planned for 2022 and the prototype hydrogen production unit is being transported to Lesedi in the first half of next year, when production trials will commence. The successful production of hydrogen and solid carbon products could allow Tlou to achieve early stage revenue ahead of gas to power revenue under the 10 megawatt power purchase agreement with Botswana Power Corporation. The construction of transmission lines to connect Lesedi to the existing power grid is expected to be completed in 2023. Slowly, it all appears to be starting to come together.
Deltic Energy (DELT) announced completion of the farm out of five Southern North Sea gas licences to Cairn Energy (CNE), which has paid Deltic a consideration of $1 million by way of contribution towards historic back costs. Cairn now holds a 60% interest in licences P2428 and P2567 and a 70% interest in licences P2560, P2561 and P2562, funding 100% of an agreed work programme for each of the five licences up to the point of making a drill or drop decision. Following a drilling decision being made on either of P2428 and P2567, Cairn will fund 70% of the costs of whichever well is drilled first, subject to a gross well cost cap of $25 million. In the meantime, Deltic continues to develop its “conveyor belt of Southern North Sea gas prospects towards drilling” and its Pensacola well (being drilled in partnership with Shell) is scheduled to be spud in Q2 2022. More on DELT in the private blog.
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On to the other small cap oil and gas company news, Zoltav Resources (ZOL) updated regarding a transaction between shareholders (the new purchase price per share equates to approximately 15 pence), Wildcat Petroleum (WCAT) announced the appointment of a geological adviser (Christopher Matchette-Downes, who is stated to be an expert on the petroleum geology of East Africa), Sound Energy (SOU) announced a directorate change (Richard Liddell has tendered his notice), United Oil & Gas (UOG) announced the spudding of the AJ-13 development well in Egypt (it will take approximately 65 days to drill and complete).
Petroneft Resources (PTR) announced an operational update ( a contract has been signed for the provision of fracking services on the Lineynoye and Arbuzovskoye fields in Licence 61 during the forthcoming winter season), Ascent Resources (AST) announced signature of Slovenian claim funding (a binding damages-based agreement with Enyo Law to commence arbitration proceedings against the Republic of Slovenia under the Energy Charter Treaty and the UK-Slovenia Bilateral Investment Treaty). Block Energy (BLOE) announced a drilling update (WR-B1a is currently producing 50 barrels of oil per day and the second well of the campaign, the side-track of JKT-01, is due to spud before the end of November).
Falcon Oil & Gas (FOG) announced preliminary petrophysics and mud gas composition from the Velkerri 76 S2-1 well (there are positive indications from the B shale of the Amungee member), Pharos Energy (PHAR) updated on the TGT infill development drilling programme (three of the wells are already on production and the fourth well is presently being completed before being perforated and brought onto production), Touchstone Exploration (TXP) announced operating and financial results for the three months ended September 30 (a net loss of $51,000 in the third quarter of 2021 with quarterly average production volumes of 1,333 barrels per day, a 2 percent increase relative to the third quarter of 2020) plus a light oil discovery in the first of three Royston-1 tests (a discovery in the lowermost section of the well).
Zenith Energy (ZEN) announced an update on the profitability of Italian operations (the continued favourable energy pricing climate has resulted in net revenues of approximately EUR 181,500 per month) and the publication of a new UK prospectus (to enable admission for a total of 1,467,751,863 common shares), Nostra Terra Oil & Gas (NTOG) announced an operations update (a 19% increase in production in the third quarter), Mosman Oil & Gas (MSMN) announced a Winters-2 and Stanley-5 update (Winters-2 flowed 48 to 96 thousand cubic feet of gas per day, minor amounts of oil and 240 to 480 barrels per day of water; Stanley-5 is waiting on the delivery of required equipment) and an EP 145 update (the company undertook a SEEBASE interpretation project with Geognostics Australia).
Diversified Energy (DEC DECPF) announced the monetisation of its Haynesville acreage (divestment of a working interest in predominantly undeveloped land in Texas for an estimated total cash consideration of approximately $37.3 million net), Global Petroleum (GBP) announced the appointment of an advisor, PVE Consultants, to assist in the farm out of its licence PEL 0094, offshore Namibia (the company says it has become evident that potentially interested parties are awaiting the outcome of the drilling programme in Namibia's Orange Basin, to be undertaken by Total and Shell), Bowleven (BLVN) announced full year results (a loss of $2 million, although the company claims its interest in the Etinde project continues to hold an estimated value of $150 million, well above its £10 million market capitalisation).
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The big advantage I have is that I know whether these companies are stock promotions or real projects, which enables the approach to be tailored accordingly. I have 40 years experience in the markets from both sides of the fence and my track record in assessing these companies speaks for itself.