Today’s Oil & Gas Update – Helium One; Prospex Energy and more…

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Non-Independent Research; Marketing & Sales Commentary – MiFID II exempt information – see disclaimer below




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Market Update: Friday 27 August 2021


Helium One (LON:HE1): Completion of 2021 drilling campaign, Tanzania


Prospex Energy (LON:PXEN): NED Board appointment confirmed




Energy Prices


Brent Oil US$71.8/bbl vs US$71.5/bbl yesterday


WTI Oil US$68.2/bbl vs US$67.5/bbl yesterday


Natural Gas US$4.37/mmbtu vs US$4.12/mmbtu yesterday




Oil Price News


BP has confirmed the Company intends to spin off its assets in Iraq by setting up a joint venture with PetroChina which will manage Iraq’s largest oilfield Rumaila as the supermajor is looking to invest more in low-carbon energy sources and become a net-zero business by 2050


BP and PetroChina are creating a new standalone joint venture company, Basra Energy, to run Rumaila together with Iraqi state-held Basra Oil Company


The new venture will have access to external financing


The new joint venture will operate Rumaila through 2034, when the current contract expires, and will allow BP and PetroChina to continue investing in the oilfield’s operations


The Iraqi government approved BP’s spin-off plan, Iraq’s oil minister Ihsan Abdul Jabbar Ismaael said in a separate statement


Reports have been circulating for more than two months that BP was considering creating a separate company to manage its Iraqi assets


In June, The Wall Street Journal reported that BP was considering spinning off its Iraqi operations, including its holding in the world’s third-largest oilfield, Rumaila


BP was said to be working on the plan to create a new company together with China National Petroleum Corporation (CNPC), the owner of PetroChina, which is BP’s partner in the field alongside the Iraqi state-owned Basra Oil Company


BP’s presence in Iraq began in Kirkuk in the 1920s when the company helped Iraq to locate, produce, and export oil from Baba Gurgur, which was the largest oil field in the world at the time


Rumaila, the third-largest producing field in the world, is estimated to have around 17bnbbls of recoverable oil remaining


With BP as an operator, the Rumaila oilfield produces 1.5MMbopd, or around a third of the crude oil pumped in OPEC’s second-largest producer after Saudi Arabia


Oil production at Rumaila has increased by 40% since 2010




Gas Price News


September natural gas futures surged higher yesterday, buoyed by a tight government storage print and a rebound in liquefied natural gas (LNG) demand


The prompt month hit a US$4.193/mmbtu intraday higher and went on to settle at US$4.184, up 28.7 cents from Wednesday’s close


The October contract jumped 28.6 cents to US$4.211


After two days of small day/day price changes, Thursday’s storage data came as a surprise along the Nymex futures curve


The Energy Information Administration (EIA) reported a 29Bcf injection for the week ending 20 August, surprising far to the downside of projections and sending futures to their highest settlement since December 2018




Company News


Helium One (LON:HE1): Completion of 2021 drilling campaign, Tanzania


Share Price: 9p, Market Cap: GBP55.4m


HE1 has confirmed the Company has completed its 2021 exploration drilling campaign with the identification of a working helium system in the Rukwa Basin.


Drilling has demonstrated seal, reservoir, and trapping geometries as well as identified a charge mechanism in the basin away from known surface seeps.


The identification of a well-developed sealing claystone 130m thick at the top of the Karoo Formation demonstrates sufficient sealing capacity in the basin to support the trapping of helium gas within the untested reservoir formations beneath.


Additional helium shows on multiple horizons, including beneath marginal sealing clays in the Red Sandstone Formation and shallow traps in the Lake Bed Formation, indicate potential for multiple prospective intervals within a productive system.


Tai-2, which was completed without identifying helium gas, has provided valuable information on shallow trapping potential.


The well targeted continuation of a 2.2% helium show identified in a sandstone interval at 70.5m in Tai-1: A high-grade gas show which potentially indicates free gas in the subsurface.


Wireline logging of Tai-2 demonstrated continuous clay over this interval, suggesting that the reservoir in Tai-1 pinched out against clay, which provides both vertical and lateral seal.


The Company believes that the new shallow target traps offer an opportunity for a low-cost route to explore and develop a helium gas deposit.


Current seismic data does not accurately resolve trapping styles at a shallow depth.


The Company is therefore reviewing several alternative low-cost geophysical techniques to test over known structures in the Tai area, before deployment over a wider area in the basin.


Drilling of the shallow traps will be cheaper than testing deep targets and could potentially be conducted using a light-weight water-rig, or similar rig capable of producing a stable hole, possibly opening the option to conduct drilling operations over the wet-season.


HE1 remains sufficiently financed for the proposed exploration programme with a cash position of GBP10m.


By focussing on using various geophysical techniques to reduce geological risk and improve drill targeting, the Company remains committed to cost-effective exploration.


The Company plans for rapid deployment of Phase 2 exploration activities and is working to mobilise various geophysical investigations before the commencement of seasonal rains in November.


Our take: The fact that Tai-2 was completed without identifying helium gas will come as another disappointing update for shareholders following Tai-1 earlier this year. Nevertheless, results from Tai-1 have shown a prolific basin with helium shows identified at multiple levels from near surface to basement. Tai-2 has verified the potential for development of newly identified ‘Shallow’ traps within the Lake Bed Formation, which has the capacity to open a pathway to low cost exploration and development of near surface gas deposits.




Prospex Energy (LON:PXEN): NED Board appointment confirmed


Share Price: 2.9p, Market Cap: GBP4.3m


Prospex has confirmed that Alasdair Buchanan has been appointed as an independent Non-Executive Director of the Company with immediate effect.


Alasdair is a highly experienced upstream oil and gas professional with considerable experience at senior executive and board director level with multi-national global service companies.


Our take: Another high-level appointment to the board will come as welcome news to shareholders in our view. With the Selva gas field in Italy due to come online in 2022, a work programme in place to increase electricity generation at the El Romeral power plant in Spain, and the ongoing.


Research – Oil & Gas


Sam Wahab – 0203 470 0473 / 0784 385 5037


[email protected]




Sales


Richard Parlons – 020 3470 0472


Abigail Wayne – 020 3470 0534


Rob Rees – 020 3470 0535


Grant Barker – 020 3470 0471




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Sources of commodity prices


Oil Brent, WTI – ICE


Natural Gas – NYMEX






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