Well Watch 2021 – The small oilers waiting on big drill news in the coming year

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Small-cap oil and gas investors are promised a busier year in 2021 as some explorers play catch up after 2020’s disruptions.

Last year was not entirely a blowout. Touchstone Exploration (LON:TXP), Falcon Oil & Gas (LON:FOG), Union Jack Oil (LON:UJO) and Mosman managed to execute important field programmes through the disruptions and challenges of 2020.

Nonetheless, amid collapsed crude prices and COVID restrictions, other projects either slowed or temporarily stalled – to re-emerge on the slate for 2021.

Here are some of the wells to watch out for in 2021:

United Oil & Gas (LON:UOG)

Starts field development drilling at the Abu Sennan project in Egypt, first well starts in late 2020. At least two more wells are slated to follow.

In early December, the company contracted a rig and said it will kick off with the ASH-3 development well, slated ‘in the coming weeks’.

It is expected that the programme will continue after ASH-3 with follow-on targets seen in a low-risk exploration well along with a further ASH development well.

The aim is to build the production profile which presently, for United’s 22% stake, is on-target to exceed prior guidance for the second half of 2020, which had been pitched at 2,300 barrels oil equivalent per day (boepd).

Bahamas Petroleum (LON:BPC)

After an update on December 1, BPC was set-up with AIM’s busiest well schedule for 2021.

Already on the books was the hotly anticipated Perseverance exploration well, in the Bahamas, which having slid to the back-end of 2020 – baring any further complications – has just spudded.

Pivotal, high-impact results will emerge in the first quarter and can be a major share price catalyst.

Elsewhere, BPC has added a 17-well campaign aimed at boosting production in Trinidad and Suriname.

Unlike Perseverance – a comparatively expensive and high-risk / high-reward venture – these wells will be cheaper and are intended to deliver fairly rapid development and production.

The plan is to ramp-up some US$35mln of annual revenues by the end of 2021. The target is to establish production at a rate of 2,500 bopd, up from around 500 bopd at present.

Drilling is slated to start in February in both Trinidad, at the Saffron field, and in Suriname, at the Weg Naar Zee block.

Westmount Energy (LON:WTE)

The oil and gas investor has an indirect interest in the Canje block, offshore Guyana, where ExxonMobil is looking to expand its remarkable success rate in the Stabroek Block next-door – the US oil major has drilled eighteen successful well out of twenty over the past five years.

Exxon’s ‘Bulletwood’ exploration well is due to spud before the end of December, with results due in the first quarter of 2021.

The well is targeting a 500mln barrel prospect. Westmount is exposed to the exciting prospect through its shareholding in privately owned Canadian company JHI Associates which in turn has a 17% stake in the Canje block.

Westmount also owns a shareholding in Eco Atlantic Oil & Gas, which is next on the well watch list.

Eco Atlantic Oil & Gas (LON:ECO)

It is not quite set in stone that a Tullow-led exploration project will see drilling in 2021, but, for Eco that’s the ideal outcome.

Eco has guided that it believes fresh drilling in the Orinduik block, offshore Guyana, will come in the second half of 2021 though firm details are not yet available.

Eco is partnered with Tullow and it is expected that the next wells will target light oil cretaceous layers.

In November, Eco told investors that two wells will be pursued as soon as practical.

Zephyr Energy (LON:ZPHR)

The explorer is focused on the ‘dual-use’ State 16-2 well, which will be drilled as a collaboration with a state-backed research project.

For Zephyr, the well will provide valuable data and insights into the company’s acreage in Utah’s Paradox basin.

Drilling kicked off on December 18 and will take 30-40 days – with full results anticipated up to three months following completion.

The well is being drilled as a “mildly deviated” well (at a maximum inclination of 8 degrees) down to a vertical target depth of 9,815 feet.  The company aims to acquire up to 100 feet of continuous core from the targeted Cane Creek reservoir.

The State 16-2 well will subsequently be plugged back at around 6,450 feet, from which point there would be an opportunity to re-use the vertical well bore to host a new sidetrack or horizontal appraisal well.

This approach could shave around US$3mln off the cost of a second well, Zephyr said.

Falcon Oil & Gas (LON:FOG)

Details have yet to be pinned down, though a new initiative from the Australian government promises to accelerate drilling activity in the Beetaloo sub-basin where Falcon and partner Origin Energy have some 4.6mln acres worth of permits.

A grant programme proposes to cover 25% of eligible exploration costs, capped at A$7.5mln per well and a maximum of three wells are eligible per venture.

Without giving precise details of potential plans, Falcon chief executive Philip O’Quigley said: “We look forward to continue working with our partners, Origin, and the state and federal governments and other stakeholders towards the successful development of the sub-basin.”

88 Energy (LON:88E)

A December farm-out deal fired a starting pistol on a rapid countdown to the Merlin-1 well, at Project Peregrine. 

The well is slated to spud in February and the new partner, a special purpose vehicle set-up by private US oil investors, will fund the first US$10mln of well costs.

A rig contract has been signed for both the Merlin and Harrier well will be drilled down to a depth of around 6,000 feet to target the prospective Nanushuk top-set horizons.

“Drilling at Project Peregrine is moving ahead as planned and we are only 3 months away from spud on what will be a potentially company making prospect for our shareholders,” said managing director Dave Wall.

Deltic Energy Plc (LON:DELT)

Shell recently repeated its commitment to its AIM-quoted exploration partner, repeating its pledge to drill the Pensacola prospect in 2021.

Pensacola is estimated to contain up to 982bn cubic feet of gas initially in place, with recoverable resources seen at 309bn cubic feet.

Finer details and timings had yet to be disclosed at the time of writing. Success will be a game-changer for Deltic.

Block Energy (LON:BLOE)

In November, the Georgia-focussed firm closed its acquisition of Schlumberger Rustaveli Company Limited (SRCL), a vehicle hold the licences for onshore blocks IX and XI. I gave Block access to several development and exploration opportunities that the company plans to advance in the coming months.

Timelines have yet to be disclosed but such projects are likely to be important drivers in 2021 for the shares, which was boosted significantly by prior results in the field.

Block said the deal was transformational for the company.

It will now pursue a workover and drilling programme across the XIB and its already owned West Rustavi licence areas.

Aminex (LON:AEX)

After its wheels were left spinning until the Tanzania farm-out deal closed in October the company’s gas project is now set to kick into gear.

APT, the new operator of the Ruvuma asset, will lead an active campaign through 2021 with the aim of making the project ‘development ready’ by 2022.

Drilling the Chikumbi-1 appraisal and exploration well will be a highlight and key catalyst in 2021. The well is planned to start by the second quarter and run into the third.

Helium One (LON:HE1)

It’s a unique take on exploration – and not an energy play – but the playbook for 2021 should be familiar to oil and gas investors.

The company is advancing the Rukwa helium project which is believed to host enough gas to satisfy global demand for at least a decade. Like oil or natural gas exploration, the method is to identify prospects in seismic and test them with the drill bit.

Rukwa has 21 prospects and 4 leads comprising an estimated 138bn cubic feet of helium. A programme of three wells is due to kick off in the first half of 2021.

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