Today’s Oil & Gas Update – Eco (Atlantic) Oil & Gas; Impact Oil & Gas; Mosman Oil & Gas; Rex Interna

0
64


Oil & Gas Daily Flow


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




Click for PDF


Market Update: Tuesday 31 August 2021


Eco (Atlantic) Oil & Gas (LON:ECO): Exxon spuds the Sapote-1 well, Canje Block, offshore Guyana


Impact Oil & Gas (Private) – Completion of farm-out with Shell, offshore South Africa


Mosman Oil & Gas* (LON:MSMN): Mosman prepares to spud Winters-2 well, East Texas


Rex International Holding* (5WH:SGX): Rex diversifies into offshore Malaysia


Sound Energy* (LON:SOU): Completion of SSRS acquisition, onshore Morocco


Union Jack Oil* (LON:UJO): Extended well test operations move to WNA-2 site




Energy Prices


Brent Oil US$71.6/bbl vs US$71.8/bbl on Friday


WTI Oil US$68.4/bbl vs US$68.2/bbl on Friday


Natural Gas US$4.47/mmbtu vs US$4.37/mmbtu on Friday




Oil Price News


Oil prices could be set of another rally if OPEC+ stops adding barrels to global supply, which is a possibility after the group’s next meeting, according to the Kuwaiti oil minister


Since COVID-19 has begun its fourth wave in some areas, the minister believes the group must be careful and reconsider its next increase


OPEC+ had agreed to boost oil production by 400,000bopd every month beginning August until its combined output reached pre-agreement levels towards the end of next year


However now that demand concerns are once again coming to the fore, OPEC+ is signalling that it is always ready to change tack


It’s worth noting that the Kuwaiti minister’s comments come soon after US President Joe Biden called on OPEC+ to boost production by more than 400,000bopd to offset strongly rising fuel demand in the world’s top consumer that led to a sharp rise of prices at the pump


Different opinions about how to respond to this call, however, are understandable


President Biden has prioritised emissions-cutting and a switch from gasoline-powered to electric cars that would diminish the demand for oil


In the context of his administration’s quest against the fossil fuel industry, a call for more oil is confusing


Yet if OPEC does indeed reconsider its cuts at its meeting on Wednesday, there will likely be more calls




Gas Price News


Concerns about LNG demand, which makes up about 10% of total domestic US consumption, was providing the support for natural gas in trading today


Natural gas futures soared to multi-year highs on Friday as radar showed Hurricane Ida appeared to be moving away from LNG export facilities as it spun toward New Orleans


LNG export demand has been one of the factors supporting natural gas prices this summer


So damage to facilities would have cut off deliveries


This would have been a bearish development


Bullish natural gas traders would prefer to see LNG continue to flow as much as possible to keep exports strong


September natural gas futures surged higher last week however, 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


Eco (Atlantic) Oil & Gas (LON:ECO): Exxon spuds the Sapote-1 well, Canje Block, offshore Guyana


Share price: 26.3p, Market Cap: GBP51m


Eco has announced that the Sapote-1 well on the Canje Block, offshore Guyana has been spudded.


The Sapote-1 well is designed to test Upper Cretaceous reservoirs in a stratigraphic trap.


Drilling of the well is expected to take up to 60 days.


Eco holds an indirect interest in the Canje Block as a result of its transaction to acquire up to 10% interest in JHI, and JHI is fully funded for the ongoing program on the Canje Block, including for the Sapote-1 well and any additional potential wells considered for this year.


The Sapote-1 prospect is located in the southeastern section of Canje, approximately 50km north of the Haimara discovery in the Stabroek Block which encountered c.207ft (63m) of high-quality, gas-condensate bearing sandstone reservoir and approximately 60km northwest of the Maka Central discovery in Block 58 which encountered c.164ft (50m) of high-quality, oil-bearing sandstone reservoir.


The Canje Block is operated by ExxonMobil (35%), and also includes partners Total (35%), JHI (17.5%) and Mid-Atlantic Oil & Gas (12.5%).


Our take: The Sapote-1 well on the Canje Block could represent another major discovery offshore Guyana, adding to the multi-billion barrels discovered to date in relatively short order. The majority of the discoveries offshore Guyana to date have been made in the slope environment. Canje will be the first block offshore to test prospects on the basin floor – which have the potential to contain larger accumulations of recoverable hydrocarbons. Eco will look to deliver further drilling success with its next exploration campaign on the neighbouring Orinduik block in the Basin and the follow-through potential of ExxonMobil’s recently announced multiple well pre-permitting on the Canje Block next year.




Impact Oil & Gas (Private) – Completion of farm-out with Shell, offshore South Africa


Impact Oil & Gas has confirmed the completion of the previously announced farm-out transaction with Shell of a 50% working interest and operatorship in the Transkei & Algoa exploration right, offshore South Africa.


Following completion of the transaction, the participating interests in the Transkei & Algoa blocks are as follows: Shell (Operator), 50% and Impact Africa Limited, 50%.


Impact has also confirmed that the South African Government has granted the Second Renewal Period of the licence.


This is a two-year exploration period that commenced in August 2021.


Impact and Shell intend to proceed with the acquisition of approximately 6,000 km2 of 3D seismic during 2022.


Our take: This transaction, and the proposed 3D seismic acquisition programme, enables Impact to deliver on its objective of accelerating the exploration of the transform margin of the South African Natal Trough. The Algoa block is situated in the South Outeniqua Basin, a short distance east of Block 11B/12B, containing the Brulpadda gas condensate discovery and where Total has recently announced a further significant gas condensate discovery, following the successful drilling of the Luiperd-1X exploration well, which it is currently testing.




Mosman Oil & Gas* (LON:MSMN): Mosman prepares to spud Winters-2 well, East Texas


Share Price: 0.15p, Market Cap: GBP5.3m


Mosman has confirmed that the drilling of the Winters-2 well in East Texas is expected to commence as soon as the contracted drilling rig is available.


Mosman (via its 100% owned subsidiary Nadsoilco) has assumed Operatorship and it is ready to spud the Winters-2 well as a development well targeting the Wilcox formation.


Nadsoilco will have a 28.62% working interest in this well.


Mosman acquired an interest in the Winters lease as part of its recent purchase of Nadsoilco.


The Winters lease is held by production with c.969bbls of oil sold in the last 12 months from the Winters-1 well.


The rig contractor has advised of the current challenges to secure rig crew due to the ongoing effects of the COVID-19 pandemic in the USA.


Mosman continues to work on its other East Texas projects, including Greater Stanley, Falcon, Galaxie and Cinnabar, as well as workovers at Stanley.


Important technical work is also progressing at the Amadeus Basin exploration assets in Australia.


Our take: Following the recent accretive acquisition of Nadsoilco, Mosman has swiftly turned its attention to repeating its drilling success at Stanley and Falcon to Winters. Winters-2 is a development well targeting the Wilcox formation, the same zone that is producing in adjacent wells (on other leases not held by Mosman). On a project economics basis, development of the Polk County area is the priority with its low well costs, low operating costs and low risk, coupled with existing infrastructure.


* SP Angel acts as Nominated Advisor and Broker to Mosman Oil & Gas




Rex International Holding* (5WH:SGX): Rex diversifies into offshore Malaysia


Share price: SGD 0.19, Market Cap: US$256m


STRONG BUY – SGD 0.45 TP


In a significant update, Rex has announced that together with its Malaysian partner, Duta Marine (DMSB), has signed two Production Sharing Contracts (PSCs) awarded by PETRONAS, Malaysia’s national oil corporation.


These PSCs are related to the development and production of the Rhu-Ara and the Diwangsa Clusters, offshore Peninsular Malaysia.


The Rhu-Ara Cluster contains two discovered oil fields, and the Diwangsa Cluster contains four discovered oil fields.


The Clusters have been awarded following the Malaysia Bid Round 2020.


The new PSC terms under the Small Fields Assets (SFA) includes an up to two-year pre-development phase followed by a two-year development and a ten-year production period.


The participating interests of Rex and DMSB are 95% and 5% respectively with Rex being the operator of the PSCs.


Our take: Following well documented success offshore Oman and Norway, Rex will now add another important geography to its asset portfolio looking to repeat its ongoing success in Malaysia. The Company will work with PETRONAS to develop the already discovered resource base contained within the Clusters. Over the next two years, Rex’s focus will be on the pre-development phase of the Clusters to further grow the Company’s production and reserves base. Clearly, Rex will leverage its experience in Oman particular, where Rex has proven to be an effective operator which has in turn transformed the Company’s production profile. This, in addition to a sharp recovery in commodity prices this year, has significantly improved the Company’s free cash position providing the basis for investment offshore Malaysia without the need for shareholder dilution. We also highlight that production from the Brage Field (Norway) will also further augment Rex’s current production, adding a further 3,440boepd to Rex’s existing 12,210bopd output from its interest in Masirah Oil in Oman. We reiterate our STRONG BUY rating and SGD0.45/share target price.


*SP Angel acts as Corporate Broker to Rex International Holding




Sound Energy* (LON:SOU): Completion of SSRS acquisition, onshore Morocco


Share price: 1.5p, Market Cap: GBP24.4m


BUY: 8.2p TP


Sound has announced the completion of its acquisition of the entire issued share capital of Schlumberger Silk Route Services Limited (SSRS) from Schlumberger.


SSRS holds a 27.5% participating interest in the Anoual and Greater Tendrara exploration permits in Eastern Morocco, together with a 27.5% indirect interest in the Tendrara Concession.


Sound now controls operated working interests of 75% in the Exploration Permits and in the Concession.


The transaction significantly increases Sound’s discovered and undiscovered resource position in the region, ahead of ramping up its transformational phased development strategy at Tendrara.


In consideration, Sound has made a nominal payment of US$1 and may make future contingent payments to Schlumberger in line with an agreed Profit-Sharing Deed (PSD).


Under the principal terms of the PSD, Sound will pay Schlumberger an amount equivalent to between 8% and 11% of total net profits (after costs, taxes and other applicable deductions) arising from the Concession over a period of 12 years from first commercial production from the Concession.


In the event of a cash disposal by the Company of part or the whole of the sellers interest in the Exploration Permits on or before 28 February 2023, Schlumberger would be entitled to receive 27.5% of the net cash proceeds, rising to 55% of proceeds in the event of such a disposal occurring prior to 31 December 2021.


Our take: This accretive transaction has now completed and further strengthens Sound’s position as the leading gas developer in Morocco in our view, simultaneously increasing Sound’s exposure to a high impact, cash generative play in Tendrara, underpinned by further significant exploration upside in Greater Tendrara and Anoual. Following the recently announced Gas Sales Agreement with Afriquia Gaz, the Company is now moving inexorably forward to the Final Investment Decision for its Micro LNG project.


* SP Angel acts as Corporate Broker to Sound Energy




Union Jack Oil* (LON:UJO): Extended well test operations move to WNA-2 site


Share Price: 25.5p, Market Cap: GBP25.7m


STRONG BUY – TP: 176p


Union Jack has provided a much-anticipated update in respect of well test operations at the West Newton B-1z and A-2 appraisal wells located within PEDL183, onshore UK.


Union Jack holds a 16.665% economic interest in PEDL183, which contains the West Newton-A1 (WNA-1), WNA-2 and WNB-1z hydrocarbon discoveries.


Union Jack has highlighted that West Newton B-1z contains a significant hydrocarbon column of c.118m demonstrated on completion of drilling at the B site which remains in place.


To date, 44m of the Kirkham Abbey formation perforated, and the Company has confirmed that good quality gas has been recovered and incinerated at surface, consistent with gas flowed from WNA-1 and WNA-2 wells.


A gas analysis report indicates approximately 90% methane, 4.5% ethane and no H2S (Hydrogen Sulphide).


The Kirkham Abbey formation is naturally fractured, confirmed by imaging log, core, SEM photomicrographs and most significantly fluid injection rates of 5.7bbls per minute (8,208bbls/d).


The operator has reported that there are indications that the formation is sensitive to fluid/water, specifically in matrix, and consequently, during drilling and completion operations, the Kirkham Abbey formation is suspected to have been subject to near well bore formation damage preventing optimum hydrocarbon flow.


WNB-1z is therefore currently shut in with gauges in hole recording data and pressure build up, which is already being observed, into early October 2021.


Remedial action will be informed by pressure data recorded, results from WNA-2 test and an independent technical review.


Following remedial interventions, the WNB-1z well is expected to be suspended as a potential producer.


As a result, Extended Well Test operations will be recommenced, and equipment now being mobilised to A site.


A significant hydrocarbon column of c.65m has been demonstrated on completion of drilling at WNA-2


A previously completed zone at WNA-2 has been shut in for two years with very little fluid head on the perforated interval, and in comparison to WNB-1z, minimal fluid was lost to the formation.


Union Jack remains fully funded for the intended well test programme.


Our take: Whilst there will be an element of frustration at the suspected formation damage at the wellbore, this is a surmountable issue which can be rectified by penetrating a different area of what is a significant accumulation. Indeed, there are substantial hydrocarbons in place at West Newton and an active hydrocarbon system present, further evidenced by the return of hydrocarbons to surface at this ongoing and early-stage testing of the Kirkham Abbey formation. Union Jack and its partners will now have another bite at this vast cherry, with well equipment currently being mobilised to the A-2 well site for the recommencement of testing. Given the ongoing nature of this testing programme, we leave our valuation unchanged, reiterating our STRONG BUY rating.


* SP Angel acts as Nominated Advisor and Broker to Union Jack Oil


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




SP Angel


Prince Frederick House


35-39 Maddox Street London


W1S 2PP




+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.




Sources of commodity prices




Oil Brent, WTI – ICE


Natural Gas – NYMEX






Disclaimer Non-Independent Research


This note has been issued by SP Angel Corporate Finance LLP (“SP Angel”) in order to promote its investment services and is a marketing communication for the purposes of the European Markets in Financial Instruments Directive (MiFID) and FCA’s Rules. It has not been prepared in accordance with the legal requirements designed to promote the independence or objectivity of investment research and is not subject to any prohibition on dealing ahead of its dissemination.


SP Angel considers this note to be an acceptable minor non-monetary benefit as defined by the FCA which may be received without charge. In summary, this is because the content is either considered to be commissioned by SP Angel’s clients as part our advisory services to them or is short-term market commentary. Commissioned research may from time to time include thematic and macro pieces. For further information on this and other important disclosures please the Legal and Regulatory Notices section of our website Legal and Regulatory Notices


While prepared in good faith and based upon sources believed to be reliable SP Angel does not make any guarantee, representation or warranty, (either express or implied), as to the factual accuracy, completeness, or sufficiency of information contained herein.


The value of investments referenced herein may go up or down and past performance is not necessarily a guide to future performance. Where investment is made in currencies other than the base currency of the investment, movements in exchange rates will have an effect on the value, either favourable or unfavourable. Securities issued in emerging markets are typically subject to greater volatility and risk of loss.


The investments discussed in this note may not be suitable for all investors and the note does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. Investors must make their own investment decisions based upon their own financial objectives, resources and appetite for risk.


This note is confidential and is being supplied to you solely for your information. It may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose. If this note has been sent to you by a party other than SPA the original contents may have been altered or comments may have been added. SP Angel is not responsible for any such amendments.


Neither the information nor the opinions expressed herein constitute, or are to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. Opinions and estimates included in this note are subject to change without notice. This information is for the sole use of Eligible Counterparties and Professional Customers and is not intended for Retail Clients, as defined by the rules of the Financial Conduct Authority (“FCA”).


Publication of this note does not imply future production of notes covering the same issuer(s) or subject matter.


SP Angel, its partners, officers and or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).


SPA has put in place a number of measures to avoid or manage conflicts of interest with regard to the preparation and distribution of research. These include (i) physical, virtual and procedural information barriers (ii) a prohibition on personal account dealing by analysts and (iii) measures to ensure that recipients and persons wishing to access the research receive/are able to access the research at the same time.


SP Angel Corporate Finance LLP is a company registered in England and Wales with company number OC317049 and whose registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP. SP Angel Corporate Finance LLP is authorised and regulated by the Financial Conduct Authority whose address is 12 Endeavour Square, London E20 1JN.




Recommendations are based on a 12-month time horizon as follows:




Buy – Expected return >15%


Hold – Expected return range -15% to +15%


Sell – Expected return < 15%



LEAVE A REPLY

Please enter your comment!
Please enter your name here