Weekly oil news round up by Oilman Jim – HUR I3E CLNR UKOG ALBA ANGS ECHO CORO ZEN PVR RBD RMP

It was another interesting week.  Getting the bad news out of the way first, Hurricane Energy (HUR) announced a disappointing well result and the share price fell around 25%.  I mentioned HUR two weeks ago as a gamble for those who prefer to ignore what I say about only going for the “certainties,” the small number of shares each year which, absent a “black swan” event, look virtually certain to perform.  Hurricane also illustrates the law of diminishing returns as a company develops and requires more capital.  It’s now trading below the 34p placing price three years ago.

A further North Sea focussed company, I3 Energy (I3E) confused many people with its two RNS announcements on Friday.  The first RNS announced that “it is expecting to complete the subscriptions for 14,285,715 new ordinary shares in the Company at 35 pence per share…and expects the admission of the new shares to be on or around 9th December”  Unfortunately, certain social media posters either ignorantly or deliberately ignored the first part of the announcement stating that it was “further to its announcement of 8th November,” before the latest Liberator well disappointment.  This subscription in fact was nothing new.  The second RNS announced the receipt of the funds exactly as expected and in line with the legally binding agreements announced on 8 November, thus again nothing new.  This, however, was spun by certain parties into a post Liberator fundraising at several times the market price.

Even more seriously misrepresented was I3E’s statement that “BP Oil International Limited, funds managed by Lombard Odier Investment Managers group, and James Caird Asset Management…all took up their contractual rights to be granted warrants to subscribe for new ordinary shares in the Company…at an exercise price of 40 pence per share.”  The spinners falsely interpreted this as BP at al. actually exercising their warrants and paying 40p per share.  The truth is that these were simply free extra warrants granted to these parties, pursuant to the terms of earlier agreements.  They didn’t pay anything.

Overall, I3E ended up 52% on the day and, absent any meaningful news next week, it’s going to come back down.  Problem here is people relying on a tweet rather than reading the RNS themselves, or reading the RNS and not understanding it.  As I’ve said before, be careful whose tweets you believe.

Another one operating in the North Sea is Cluff Natural Resources (CLNR).  I highlighted this at 1.325p last weekend and some strong buying came in Monday.  It turns out partly to have been well known oil company investors, David and Monique Newlands, who’ve bought 3.1%.  Still well below the last 1.75p placing price, it’s one to think about.

UK Oil & Gas (UKOG) announced an 0.85p placing and the share price has fallen back into the 0.90s.  They need extra cash since their co-venturers at Horse Hill (principally Alba Mineral Resources (ALBA))  are considered unlikely to contribute their 14.365% share of current cash calls.  Short-term, the UKOG share price is going to come down to the results of the extended well test and the quantity of shares sold by the convertible loan note holders, plus of course the new placees.

Angus Energy (ANGS) now is talking about paying dividends to shareholders.  Sadly, there’s a long way to go to achieve that; all they actually announced last week is OGA approval for the transfer of the Saltfleetby licence and the appointment of an operator.  Big question is, when/if they do get to the point of production and sale, will the company at the plc level actually operate profitably?  And then there’s the tedious formality of clearing off the £6,226,000 accumulated loss first before they can legally pay any dividends.  Remember, someone paid Angus £2.5 million to take Saltfleetby off their hands and they knew what they were doing.

Echo Energy (ECHO) updated regarding its South American assets.  Santa Cruz Sur is producing 587 barrels of oil and 11.96 million cubic feet of gas per day net to Echo’s interest.  Further upside could come from the Campo La Mata x-1 well currently being drilled and the upcoming Campo Limite exploration well.  Like Angus, the issue is can they ever actually operate profitably at the plc level and return money to shareholders.

Stablemate Coro Energy (CORO) announced the disposal of its Italian assets to Zenith Energy (ZEN) for £400,000 payable in new ZEN shares issued at more than double the market price.  Theoretically, there’s a further payment if a certain production target is met, but that’s far from certain.  I think it’s a good deal for Coro, who probably correctly viewed the “assets” as liabilities and it gives Zenith something to talk about for no cash.  It’s quite interesting to read and compare the perspectives in the two RNS announcements.

Providence Resources (PVR) announced a leadership change.  Tony O’Reilly has stepped down as CEO with immediate effect.  His position had become untenable after the Barryroe fiasco when the funds failed to arrive and the board now is looking to identify and recruit a replacement.  It’s difficult to see where this goes now in the current environment, but it’s an interesting one and always worth keeping an eye on.

Reabold Resources (RBD) announced an increase in its shareholding in Danube Petroleum to 51%.  The problem is that none of these investments have yet been shown to achieve any return and the share price is back down to where it was two years ago, well below the price of recent fund raising exercises.  I’ve been critical of this one for some time and others are now starting to see the problems too.  If RBD want to retain credibility they’re going to have to disclose production numbers and I’m not sure they’re going to be sufficient to satisfy the market.

On a more positive note, Red Emperor Resources (RMP) is back in business.  It’s signed an option agreement to acquire a large scale Perth Basin oil play in Western Australia.  Unfortunately, it’s not particularly exciting since they’re only talking about acquiring 3D seismic in order for drillable prospects to be matured.  They do, however, say that they are continuing to identify and evaluate additional projects that can potentially provide relatively near term, high impact drilling opportunities.  With this one, that’s what to look out for.

Now, if you’re interested in knowing my actual trading ideas and want to read a more critical assessment of some of these and other companies, then subscribe to the private blog at https://www.oilnewslondon.com/oilman-jim

For those who are not familiar with me, I focus exclusively on small cap oil and gas companies and know this sector inside out.  I have been involved in the stock markets (both UK and US) since the early 1980s and understand exactly how the finance and promotion game works.  I also have many years’ operational and corporate experience in the oil business, which enables me to see very quickly whether or not these companies are telling the truth.  I share my take on companies and the markets and, as those who follow me know, I’m rarely wrong about these matters.

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The author holds one or more investments in one or more of the companies mentioned so this post cannot be viewed as independent research. This post does not constitute investment advice or a recommendation to buy or sell and may be incorrect or outdated.

Weekly oil news round up by Oilman Jim – 88E BPC CLNR EDR GBP I3E IOG LBE MNRG PET PMO PTAL PVR RBD RPT UJO UKOG

It turned out to be quite an exciting week.  Global Petroleum (GBP) announced a new prospective resources estimate of 964 million barrels of oil for its petroleum exploration licence 94 in Namibia.  One reservoir is estimated to have best estimate unrisked gross prospective resources of 772 million barrels of oil with a 15% chance of geologic discovery.  It’s worth a go, yet at the same time it’s worth nothing to them unless they can drill it, which will require either a farm-out or a large financing.  News of that is still awaited.

Regal Petroleum (RPT) announced a memorandum of understanding to acquire licences in the Ukraine with estimated oil initially in place of approximately 675 million barrels.  They intend to appraise the licences with the drilling of up to three wells.  Existing 3P reserves for RPT currently are estimated at 3.89 million barrels of oil equivalent, so this transaction, if it proceeds, could represent a very significant uplift.  Generally I’m cautious about companies operating in the former Soviet Union, but this now is one to keep an eye on.

More bad news for Providence Resources (PVR) unfortunately.  TOTAL have withdrawn from the licence containing the “Avalon” prospect.  And there’s still no news of a replacement farm-in partner for Barryroe, so the share price just continues to drift lower.

Another Dublin company continues to go in the opposite direction.  Petrel Resources (PET) pushed on with its remarkable journey higher, hitting 26.5p last week, up 2,550% from the 1p price at which I stated it as a favourite several times earlier this year.  More companies like this in the private blog if you’re interested.

Cluff Natural Resources (CLNR) announced that it has submitted multiple applications for additional licences in the latest 32nd UK Offshore Licensing Round.  Interestingly, one has been made jointly with an established international operator (I would guess Shell).  The blocks applied for contain a number of drilled discoveries, undrilled prospects and leads, which will create a strong pipeline of future drilling opportunities. They say they’re making significant progress on the existing portfolio, in particular the licences which Shell farmed into earlier this year, and they’re now working towards a firm well commitment on Selene and Pensacola.  With a £19 million market cap and a £15 million fundraising completed over 30% higher than the current 1.325p share price, it’s certainly one for the watch list.  Their farm out process on the Dewar prospect has generated significant interest and announcement of the completion of this could act as a catalyst.

UK Oil & Gas (UKOG) announced the completion of HH-2z.  Extended well test operations are expected to start next week.  Stephen Sanderson, UKOG’s Chief Executive, is “confident that the 2,500 ft of permeable Portland sweet-spot reservoir section, 70 times that seen in HH-1, can deliver significant rates.”  What I think we can be confident of is that UKOG will issue the most positive press releases possible.  Where this goes now though is very much going to be a function of how much the convertible loan note holders sell.

PetroTal (PTAL) announced a drilling and production update, providing an increased 2019 exit oil production rate of 11,000 – 13,000 barrels a day.  They will complete new production facilities towards month end, increasing capacity to 10,000 barrels of oil per day, but expect that the facility will be able to handle in the order of 15,000 barrels per day.  This is the first “forward looking” RNS that the company has issued and some are expecting a placing, but let’s see.

Union Jack Oil (UJO) finally announced its placing.  £5 million is being raised at 0.15p.  They and Reabold Resources (RBD) now are funded for two further wells at West Newton, which are expected in the second quarter of next year.  The interesting mystery here now is what is going to happen with Humber’s share.

Independent Oil & Gas (IOG) announced that henceforth it will be known simply as IOG.  The aim is to have a new identity and hopefully put behind controversial associations of the past.  It’s another one to keep an eye on and once the many loose shares in issue have found more permanent homes, it should start to work its way higher.

88Energy (88E) announced completion of the farmout with Premier Oil (PMO) and approval of the plan of operations for Charlie-1, which is expected to be drilled in February next year.  The gross mean prospective resource across the seven stacked targets to be intersected by Charlie-1 is 1.6 billion barrels of oil (480 million barrels net to 88E).

Bahamas Petroleum Company (BPC) now is trying to raise funds from locals to finance next year’s drill via the creation of a Bahamas-domiciled mutual fund that will exclusively hold BPC shares.  It’s quite a novel approach and I imagine people could be interested.  It will be fascinating to see how this goes and I’m sure many other companies will be interested in the outcome.

I3 Energy (I3E) announced another disappointing well result, but many obviously knew about it in advance of the market.  I said on Wednesday that this one is a rigged deck and unless you’re an experienced trader I would suggest leaving it alone.  The share price continued to collapse again on Thursday prior to a further announcement of the conclusion of its 2019 drilling campaign (people had been led to believe there might be a fourth well).  I now view this as uninvestible.

Longboat Energy (LBE) listed this week.  Essentially it’s a cash shell looking for a deal.  Could be interesting and I’ll be looking into it further.  Another one that appears to be entering the oil and gas space is MetalNRG (MNRG) which announced the signature of an exclusivity agreement to acquire 75% of an established operating company based in Romania, which owns 100% of an oil and gas concession.  No details on this yet, but as they become available I’ll share my thoughts.

Finally, Egdon Resources (EDR) announced licence extensions covering the Resolution gas discovery where a Competent Persons Report by Schlumberger reported estimates of mean contingent resources of 231 billion cubic feet of gas.  They announced earlier this month an exclusivity agreement regarding these licences  with a large internationally recognised exploration and production company and they have until 31 January next year to demonstrate to the Oil and Gas Authority’s satisfaction that a farm-in agreement has been fully executed which provides for funding of the licence work programme.  It’s potentially interesting if they can pull this off.

In closing, if you’d like to know my trading ideas (and as those who follow me know, I’m rarely wrong), then subscribe to the private blog at: https://www.oilnewslondon.com/oilman-jim

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The author holds one or more investments in one or more of the companies mentioned so this post cannot be viewed as independent research. This post does not constitute investment advice or a recommendation to buy or sell and may be incorrect or outdated.

PET ECHO CORO SOU ECO HUR UKOG and making money in the markets (part 2)

Interesting second half to the week.  Petrel Resources (PET) announced that the issue of new shares to friends and business acquaintances of the new control parties has been approved.  It is anticipated that a flow of potential investment proposals now will be offered to the company.  I suggested Petrel and stated it as a favourite numerous times around 1p earlier this year (see https://oilmanjim.blogspot.com and numerous posts on Twitter) and it closed at 8.75p yesterday, up 775%.  There’s more shares with this sort of potential in the private blog.

James Parson’s “Holy Trinity” had a busy week.  Echo Energy (ECHO) announced the commencement of drilling of the CLM x-1 well.  This is the first of an expected four-well exploration drilling programme.  It’s expected to take approximately four weeks, plus a further five to six weeks if logging supports completion.  Maybe at last they will have a success, but so far at ECHO it’s been only failure.  Now 2.95p, it’s down from 17p.  Coro Energy (CORO) updated on operations at the Tambak-1 well.  This was designed to both appraise the Mako gas field and test the underlying Tambak prospect.  Appraisal success was a given, but the exploration failed and the shares fell to 2.2p.  Sound Energy (SOU) had earlier in the week announced approval of the environmental impact assessment for a 2D seismic acquisition programme, but the directors’ hearts simply are no longer in it.  None of their names were stated anymore in the RNS and the only contact for the company was an email address.  I’ve been critical about all three companies for some time and have been calling SOU down since last year when the price of their so called “golden tickets” was over 10 times higher (again see https://oilmanjim.blogspot.com and posts on Twitter), but it still has a market cap of nearly £40 million and plenty of room to fall further.

Eco (Atlantic) Oil & Gas (ECO) recognised the market reaction to their last announcement on the oil quality discovered at Jethro and Joe, and the partners are considering alternatives for further drilling and testing. Crucial will be the further update on the partners’ drilling plans for next year to be made in January 2020.  I stated ECO as a favourite several times around 80p (see yet again https://oilmanjim.blogspot.com and posts on Twitter) and it subsequently went to nearly £2.  ECO is a prime example of why you should never fully believe any of these companies – and always take profits or de-risk.  This is a permanent statement in the blog and I really can’t emphasise the importance of this enough.

For those who like a gamble (and prefer to ignore what I’m about to say below), Hurricane Energy (HUR) announced commencement of drill stem testing on the Warwick West well.  They will provide an update on initial results of the well, including flow rates and oil type, following completion of this test.  Rumour is that they they’ve a hit a huge pay zone and odds of a successful test are probably better that evens.  Currently 44.34p, parameters to look at are a 52 week low of 37.84p and a high of 64.5p.  UK Oil & Gas (UKOG) too is currently testing, in its case an extended well test of HH-2z.  I feel sure they’re going to have lots of positive announcements to put out.

Moving on to the subject of making money in the markets, on Wednesday I detailed some of the changes which have come about with advent of social media and concluded with five main points:

First, know where the company is in its operational, financing and promotional cycle.  Understanding that unlocks the door to market success, since by entering at the right point you’ll always be buying into upward moves.  And this is key.

Second, only go for the certainties, even if that just means just 10 or so trades a year.  Profits are worth nothing if they’re wiped out by losses, the losses have to be eliminated.  One of the most important lessons is that it is not just about the shares you buy, even more importantly it’s about the shares you don’t buy.  You need to control yourself and go only for the certainties, the small number of winners each year that are virtually guaranteed.  Only buy when you’re absolutely certain and don’t let it bother you if you miss a few.

Third, conviction.  You must have that so you don’t get shaken out of the position.

Fourth, position sizing.  No position must be so large that it stops you sleeping at night and fear shakes you out.  Choose a position size where even if it goes to zero, you won’t be too badly hurt.

Fifth, always de-risk as the price rises, or take profits completely.  End up holding the position for free and ride it if you want, but remember that ultimately, these companies’ business projects usually fail.

Now, although it’s enjoyable and interesting to participate, social media isn’t going to help you much with any of above, but since it’s such a big source of information for people now, let’s stay with the subject for the moment.

I think that anyone new to the market who joins Twitter must find it quite daunting.  Thousands of unknown stock symbols and tens of thousands of unknown people (or perhaps let’s say accounts) commenting on them.  They’ve no idea who even to follow and no idea at this stage whether their comments are bona fide or bogus.  I’m not going to name any names here (that’s for the private blog), but it might be useful to broadly describe the various different groups.

First, those with a good market knowledge, who have no particular agenda, but enjoy commenting and stating their opinions.  This is the group you should try to follow.  They do not depend on you buying the shares they mention.

Second, those with a good market knowledge, who do have an agenda, but this agenda is possibly only visible to the first group.  These ones are very dangerous for your pocket.  They will try to inveigle you into buying shares that result in a direct financial reward for them, either by selling you their shares at a higher price than the price at which they bought them, or because they are being paid to promote the stock.  Needless to say, these shares are rarely the best.

Third, those with limited market knowledge, but no agenda.  Harmless, but they’re generally just repeating the views of the first and second groups without discernment, although when they repeat the misrepresentations of group two, that’s usually in good faith.  They are generally unable to see the difference between groups one and two.

Fourth, those with limited market knowledge, but an agenda.  Group two hanger ons, or subalterns, they’re minor pumpers and promoters, who become unpleasant when their line is challenged.  They have no answers or proper responses, since they have no actual knowledge, and generally they have to resort to ad hominem attacks.

Fifth, those with no market knowledge, who are seduced by the promises and misrepresentations of groups two and four.  This is the largest group and feeds groups two and four.

The most money is made by groups one and two, although group one probably sleeps better at night.  Group three hovers around break even.  Group four makes a little money, but no huge rewards.  Group five lose most of their cash quite quickly.

If you do just want tips, then you need to make sure it’s only the people in group one you’re following and ignore completely the other four groups.  The problem you’ve got is that all you’re going to get is a throw away line with none of the detailed reasoning and without that you’re not going to know why you hold the share other than because someone else does and you’re not going to have the essential conviction needed to hold and not be shaken out.

I’ll move on to the third part next week, when as usual there will be a mid-week podcast and both a podcast and a blog at the weekend.  If you’re interested in knowing my actual trading ideas and want to read a more critical assessment of some of these and other companies, then subscribe to the private blog at https://www.oilnewslondon.com/oilman-jim

Contact me on Twitter @Oilman_Jim

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The author holds one or more investments in one or more of the companies mentioned so this post cannot be viewed as independent research. This post does not constitute investment advice or a recommendation to buy or sell and may be incorrect or outdated.

Weekly oil news round up by Oilman Jim

It’s been an interesting week, with some very good news and some very bad.  To start off, Savannah Petroleum (SAVP) was able to announce that, at last, it has completed the Seven Energy transaction.  This now gives Savannah a material producing asset base to complement its Niger exploration and development assets, in respect of which it aims to recommence activity in 2020, with expected delivery of first oil from R3 East and a multi-well exploration drilling campaign.  This was financed by institutions two years ago at 35p per share and I expect to see the share price now start to work its way up from the current level of 26p.

Reabold Resources (RBD) and Union Jack Oil (UJO) advertised upgraded potential volumes  at West Newton in a pre market RNS first thing Monday morning and spiked the early buyers.  Union Jack slid down from nearly 30p to under 20p by the end of the week and the coup de grace was delivered just after market close on Friday when it announced that it is in the process of taking market soundings from investors in regard to an equity placing of up to £5 million.  Investors are not happy and are hoping that it’s not below the last placing price of 17p.  More on what’s going on here in the private blog.

Amerisur Resources (AMER) announced a recommended cash acquisition by GeoPark Colombia.  Each Amerisur Shareholder will receive 19.21p cash per share.  It’s less than people were hoping for, but significantly higher than the 12.1p price at which the shares were trading before bidding opened.  It’s also a small profit for those who bought in the 17s and 18s over the last few months.  The board undoubtedly tried for a better price (directors and institutions were in much higher) but South America is not the best place to be right now unfortunately.

Anglo African Oil & Gas (AAOG) reported that it has entered into a rig option agreement, but the rig might not be available until 30 March 2020.  Unfortunately, November turned out to be the date for a rig agreement, not the rig arriving as investors had hoped.  The problem for them though is that paying for the drill depends on Riverfort selling shares at a higher price than now and how does that situation come about?  Slippery language isn’t working anymore for these companies and I see only one way for the Anglo African share price now, which is to decline further.  I’ve been warning about this one all the way down from just under 20p and the shares hit an all time low of 2.4p on Friday.

On a brighter note, UK Oil & Gas (UKOG) announced the successful completion of its Horse Hill horizontal drill.  A total of approximately 2,500 ft of horizontal trajectory was drilled within the reservoir’s most oil productive zone, which gives around 70 times greater exposure than in the vertical discovery well.  This is why HH-2z is capable of delivering significantly greater flow rates than those seen in the vertical well.  HH-2z is now being prepared for an extensive extended well test, which is expected to commence in the coming weeks and I expect to see some impressive numbers being reported here soon.

Sound Energy (SOU) announced that James Parsons and Simon Davies have confirmed their decision to leave the Company.  This follows on from the announcement that the CFO is leaving and not being replaced.  Last week’s announcement was deliberately drafted to make people think the sale of the Morocco assets is a certainty.  So, it’s the end game here now and it appears that they’re trying one last ramp before lights out.

Interesting developments at Cadogan Petroleum (CAD).  Requisitioning shareholders had an overwhelming majority (93.08% to 6.92%) at the general meeting, thus Adelmo Schenato and Enrico Testa have been removed as directors of the Company with immediate effect, Fady Khallouf, Lilia Jolibois and Jacques Mahaux have been appointed to the board, Zev Furst has tendered his resignation as a director, Fady Khallouf is succeeding Guido Michelotti as CEO of the company and Michel Meeus, a non-executive director of the company and one of the requisitioners, has been appointed as chairman.  One of the complaints against the old board is that the company has continuously underperformed and the company’s share price has not materially improved in recent times.  The market capitalisation is £13 million and net assets (including around $14 million cash) are nearly $52 million, so there is significant upside here.

Eco (Atlantic) Oil & Gas (ECO) announced an update on the initial analysis of the Jethro and Joe wells and the share price more than halved.  This is a prime example of why you should never fully believe any of these companies – and always take profits or de-risk.  This is a permanent statement in the blog and I really can’t emphasise the importance of this enough.  All I can say in this case is that it is inconceivable that Tullow Oil (TLW) and hence ECO did not know it was heavy oil before the announcement.  Remarkably, indeed shockingly, Gil Holzman, CEO, was promoting ECO to private investors at a London South East promotional event the day before.  If you believe people can be judged by the company they keep, then him sharing a promotional platform with Matt Lofgran of Nostra Terra Oil & Gas (NTOG) possibly says it all.

Coro Energy (CORO) and Empyrean Energy (EME). announced their Tambak-1 well intersected the intra-Muda reservoir of the Mako field as expected and data have established the well as a successful appraisal of the Mako gas field.  The interesting part is coming up for CORO and EME, since their Indonesian well now will be drilled to a total depth of around 4,005 feet to test the potential of the Tambak prospect, which is estimated as having a mid-case prospective resource potential of 250 Bcf and a geological chance of success of 45%.  The impact of this drill to date has actually been negative for the share prices of both companies, but perhaps an exploration success can galvanise them.

On the subject of Indonesia, Baron Oil (BOIL) announced that it has entered into a non-binding agreement to acquire SundaGas, which owns the Chuditch Block, offshore Timor-Leste, and the Telen Block, offshore Indonesia.  The vendor will receive 66.67% of Baron before the fundraising.  There is no indication yet as to what type of financing they will do, for what amount and at what price, so we’ll have to wait for the details to form an assessment.  The shares are now suspended pending the publication of an admission document.

Finally, there’s been a lot of interest in the new private blog and some confusion too, so let’s try to clarify everything.  Currently I record two podcasts each week, one mid-week and one at the weekend, and I write a blog on Sunday.  All these remain the same, unchanged and free of charge.  The private blog contains the information which cannot be published in the public blog and podcasts due to legal constraints and it also includes my actual trading ideas with full reasoning.  It is sent out immediately by email as events dictate so you receive the information straight away.  There is a charge for the private blog, but I think you’ll find the information within it is worth many times its cost.

For those who are not familiar with me, I focus exclusively on small cap oil and gas companies and know this sector inside out.  I have been involved in the stock markets (both UK and US) since the early 1980s and understand exactly how the finance and promotion game works.  I also have many years’ operational and corporate experience in the oil business, which enables me to see very quickly whether or not these companies are telling the truth.  It’s not investment advice that I offer and if you want that, you should speak with a financial advisor.  I share my take on companies and the markets and, as those who follow me know, I’m rarely wrong about these matters.  This is the link to subscribe: https://www.oilnewslondon.com/oilman-jim

In other news, Oilex (OEX) announced an extension of the bid closing date for Cambay, Aminex (AEX) issued a Ruvuma joint statement with Solo Oil (SOLO) who also announced the appointment of an independent non-executive director, Columbus Energy (CERP) announced a medium term funding agreement and the extension of the Inniss Trinity IPSC, SDX Energy (SDX) announced the commencement of production at South Disouq and a directorate change, Predator Oil & Gas (PRD) announced a CO2 EOR Trinidad update, Alba Mineral Resources (ALBA) announced a Horse Hill update, Echo Energy (ECHO) announced the completion of an acquisition, Range Resources (RRL) announced a continuous disclosure update and a Trinidad tax appeals update, Canadian Overseas Petroleum (COPL) announced Q3 2019 results, Touchstone Exploration (TXP) and Serinus Energy (SENX) announced third quarter 2019 results, President Energy (PPC) announced the expiry of Decree 566 and oil prices in Argentina returning to normal, Zenith Energy (ZEN) announced the filing of quarterly results, Lekoil (LEK) announced the acknowledgment of the OPL310 licence extension payment, The Parkmead Group (PMG) announced preliminary results for the year ended 30 June 2019, Cabot Energy (CAB) announced directorate and management changes and Angus Energy (ANGS) announced a Balcombe update.

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The author holds one or more investments in one or more of the companies mentioned so this post cannot be viewed as independent research. This post does not constitute investment advice or a recommendation to buy or sell and may be incorrect or outdated.

Weekly oil news round up by Oilman Jim

10 November 2019 – UK Oil & Gas (UKOG) started the week with a Horse Hill update.  So far they’ve successfully drilled 2,016 ft within the Portland reservoir’s most oil productive zone.  It’s a clever PR, because the news last weekend was that of a rig engine fire.  However, they’ve fitted a new rig engine now and are drilling the remaining 1,200 ft horizontal section. Drilling is expected to be completed by mid-November, at which point they will immediately complete, clean-up and flow test the well. The share price is still held back by Riverfort selling, but as this eases up I expect UKOG to go higher.

Rose Petroleum (ROSE) announced a placing to raise £1.25 million at 1.1p.  The directors are buying a 10% interest in a 317 acre lease from themselves, but it actually equates to just a 2.217% working interest in the spaced drilling unit.  It’s a shale project, an area in which US companies are trying to divest, yet they’re paying over $9,500 an acre for it.  It’s also worth remembering that US projects which show up in London these days usually are doing so because they can’t raise funds in North America.  I suspect that may well be the situation here.

Bahamas Petroleum Company (BPC) announced it had raised $11.4 million at 2p per share via a placing and open offer.  However, the Company’s present estimate of the total cost for the drilling of the initial exploration well is in the range of $20 million to $25 million and they warn that “in circumstances where suitable funds are not raised via the Conditional Convertible Notes, or if a farm-out is not secured, the Company would likely not have sufficient cash to complete the drilling of the planned initial exploration well in 2020.”  As I’ve said several times before, I wouldn’t consider this until the well is fully financed.  If it isn’t drilled next year, they lose the licence.

IGas Energy (IGAS) had a difficult week following the announcement that the UK Government has announced a moratorium on “fracking” in Britain.  The shares hit a low of 21.5p on Monday before stabilising around 30p, at which price the company is capitalised at less than £40 million.  Some say the moratorium is only for the duration of the election campaign, but check out the actual betting odds for the general election and the chances of no overall majority / a hung parliament are around evens.  Does anyone really think that a Labour/LibDem/Green coalition would reinstate “fracking”?

There’s also been a interesting development at Cabot Energy (CAB), which previously announced the proposed cancellation of its AIM admission next month. On Monday, Eric Krafft of Monaco bought 10.96% of the company. The share price now has stabilised around 2p and further news is awaited with interest. Perhaps it’s not all over yet? The EGM to approve the cancellation of the AIM listing is on 25 November.

I3 Energy (I3E) issued a positive RNS.  The Liberator A2 well has been spud, the Company has agreed to issue £5 million of equity to funders of i3’s junior loan notes at a price of 35 pence per share to provide additional flexibility to extend the drilling programme, and the funding long stop date by which the Company was required to enter a reserve-based lending facility or to source alternative development financing has been extended from 6 December 2019 to 30 April 2020.  On the minus side, Lombard Odier continue to sell down, but once they’re clear, I see the share price moving higher. Overall, at this level, to me it’s a buy. Although always remember that in the oil business, nothing is risk free.

Sound Energy (SOU) issued a hollow sounding RNS. The company has now entered into a non-binding heads of terms agreement with a privately-owned, UK registered company and has granted this company an exclusivity period expiring on 14 February 2020.  The announcement was not received well and, after the last “keep the lights on” placing a few months ago at 10p, the share price has now dropped under 5p and the market capitalisation has dropped under £50 million.  I remember receiving a huge amount of criticism for questioning the merits of Sound Energy last year when it had a £450 million market cap.  It was so obvious even then that it was questionable, with its self-important behaviour and the pretence that the team were somehow leading experts.  The rot has also spread through the other members of their so called “holy trinity” (Echo Energy (ECHO) and Coro Energy (CORO)) all of which were marketed to the gullible in an almost show business manner, resulting in huge investor losses.  I warned about them all – all the way down – and you can read what I said in the Blogger archives at https://oilmanjim.blogspot.com.  Back to the current “deal” for Sound, we don’t actually know who the private company is which is meant to be buying the Moroccan assets, or whether it even has any money, but one thing’s for sure, they’ll use this announcement to do another placing and keep paying their six and seven figure salaries.

Pantheon Resources (PANR) issued an equally insincere announcement.  Reading between the lines, it doesn’t sound like they’re going to be drilling this winter and in reality I’m not sure they’re ever actually going to farm out leases to which Halliburton publicly attached no value at all.  I like the line in the RNS in relation to the progress of the farm-out when they say that they “simply cannot discuss it,” in which case why even bother issuing an announcement?

Savannah Petroleum (SAVP) issued a Seven Energy transaction update.  Final long-form documentation in relation to the Seven Energy Group financial restructuring has been agreed and next up is a court hearing  on 13 November at which Seven Energy International Limited will request the appointment of administrators in order to effect the transfer of the Seven Assets to group companies controlled by Savannah and AIIM.  Currently trading around 26p, institutions financed this deal at 35p a share two years ago and since then Savannah have had significant drilling success in Niger.  It’s one that I see trending up.

Baron Oil (BOIL) noted the provisional award of the Timor-Leste offshore Chuditch Petroleum Sharing Contract to SundaGas.  Baron is entitled to be issued a 33.3% shareholding in the intermediate parent company of SundaGas and, according to Executive Chairman, Malcolm Butler this has the potential to add significant value to Baron and its shareholders.  Could this now be the new lease of life for BOIL?

Two companies which I highlighted recently have started moving.  PetroTal (PTAL) is up 60% and 88 Energy (88E) is up 30%.  Both have significant further potential in my opinion, particularly 88E (currently 0.875p), which has a broker’s price target of 4.8p and an un-risked value per this broker of 47.8p.  Brokers’ targets are always hugely optimistic, but with these numbers out there I see 88E moving higher.  Current favourites for those interested are I3E, 88E, UKOG and PTAL.  Previous favourites were I3E, ECO, UKOG and PET.  ECO more than doubled and PET rose 800%.  We’re now waiting for I3E and UKOG to perform.

Finally, I’ve started a private blog available on subscription.  You can read the details, plus a bit more about me, and subscribe if you wish here: https://www.oilnewslondon.com/oilman-jim

In other news, Europa Oil & Gas (EOG) announced an update on the Wressle public enquiry and confirmed that its production is unaffected by the fracking moratorium, Egdon Resources (EDR) announced an update on the Wressle public enquiry and a farm-out exclusivity agreement for P1929 and P2304, Rockhopper Exploration (RKH) announced a PL032 discovery area licence extension, Union Jack Oil (UJO) announced a response to the UK Government shale gas moratorium, a response to market speculation and the conclusion of the Wressel public enquiry, Zenith Energy (ZEN) announced the proposed acquisition of a Norwegian oil company and the approval of a prospectus, Alba Mineral Resources (ALBA)announced a Horse Hill update, Empyrean Energy (EME) announced the Tambak -1 well spud, Aminex (AEX), Andalas Energy & Power (ADL), Cadogan Petroleum (CAD) and Caspian Sunrise (CASP) announced operations updates, Reabold Resources (RBD)announced completion of the Rathlin cash investment and an update on West Newton, Attis Oil & Gas (AOGL) announced the extension of a memorandum of understanding, Solo Oil (SOLO) issued a Ruvuma update, Range Resources (RRL) issued a drilling rigs sale update and Hurricane Energy (HUR) issued a response to media speculation.

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The author holds one or more investments in one or more of the companies mentioned so this post cannot be viewed as independent research. This post does not constitute investment advice or a recommendation to buy or sell and may be incorrect or outdated.

TXP – Spudding of COHO-1 and Notice of Interim Results

Calgary, Alberta – August 8, 2019 – Touchstone Exploration Inc. (Touchstone or the Company) (TSX / LSE: TXP) announces that drilling operations have commenced with the spudding of the first exploration well on the Ortoire block. The Company also provides an operational update and a date for the release of interim results.

Highlights

·      Spudded Coho-1, the Company’s first exploratory well on its Ortoire property, on August 7, 2019.

·      Achieved crude oil sales of 1,768 barrels per day (bbls/d“) and 1,944 bbls/d for the three and six months ended June 30, 2019, respectively, representing increases of 3% and 19% relative to the prior year comparative periods.

·      Delivered an average of approximately 1,829 bbls/d of field estimated crude oil production through the first six days of August 2019.

·      Received regulatory approval to reinject produced water from four of our producing properties.

Drilling Operations

Touchstone spudded the Coho-1 exploration well on the Ortoire exploration block on August 7, 2019 using Well Services rig #80. The Coho-1 well is targeting gas prospects in the Herrera formation at depths between 5,200 and 8,500 feet. The well offsets the Corosan-1 well drilled by Vintage Petroleum Inc. in 2001. Touchstone’s Coho-1 well is targeting the same zones tested in the Corosan-1 well in an up-dip location and the well is also expected to penetrate a second and previously untested thrust sheet that the Company deems prospective based on 3D seismic and offset production records. The Coho-1 well is expected to be drilled to a total measured depth of 8,545 feet at an estimated cost of approximately US$3 million. Drilling is anticipated to take approximately 28 days and the Company will make a further announcement once the well is drilled and logged. Following rig release, we will utilize a smaller service rig to test the well. Testing is anticipated to take up to 30 days as a full flow and build-up is planned to be completed on each zone.

The Coho-1 well is the first of four earning exploration wells under Touchstone’s Ortoire Exploration and Production Licence. The Company has an 80% working interest in the well but is responsible for 100% of the drilling, completion and testing costs associated with the well. Heritage Petroleum Company Limited holds the remaining 20% working interest.

Touchstone has no Reserves associated with this well location included in the Company’s December 31, 2018 Reserves Report. An independent prospect evaluation review prepared by GLJ Petroleum Consultants Ltd. dated January 16, 2019 and effective December 31, 2018 estimated 2,058 thousand barrels of oil equivalent (best estimate) of unrisked Contingent Resources (Development Pending) and 1,190 thousand barrels of oil equivalent (best estimate) of unrisked Prospective Resources (Prospect) for the Company’s 80% working interest in the well. Please refer to Touchstone’s January 17, 2019 announcement titled Touchstone Announces Ortoire Independent Prospect Evaluation for further information, definitions and advisories regarding the resources other than reserves associated with prospects evaluated on the Ortoire exploration block.

Production

After a strong 2019 first quarter of production buoyed by flush volumes from the 2018 drilling programme, the Company embarked upon a well optimization programme which spanned the majority of the second quarter of 2019. The programme focused on converting flowing wells to pumping wells as volumes declined, equipping certain wells with capillary strings to combat wax production and to extend run-times and the recompletion of low rate producers. As a result of these initiatives, various wells and associated production were off-line during the second quarter. Additionally, mechanical issues with a bottom hole assembly in the Company’s CO-372 well resulted in nil production in the second quarter.

As a result, the Company averaged 1,768 bbls/d of crude oil sales in the second quarter of 2019 and 1,944 bbls/d of crude oil sales during the six months ending June 30, 2019. Field estimated production through the first six days of August 2019 has averaged approximately 1,829 bbls/d, which the Company anticipates maintaining in the third quarter of 2019 through further well optimization and recompletions.

Water Disposal

The Company has commenced transportation of all produced water from its Barrackpore, San Francique and Palo Seco properties to the recently commissioned water disposal facility on our Fyzabad block. We have also completed an initial injectivity test on our WD-8 block and will now begin a test period where substantially all produced water originating from the property will be disposed. These are key environmental milestones as we have undertaken to eliminate all surface water release by the end of 2019.

Paul R. Baay, President and Chief Executive Officer, commented:

“It is very exciting to commence drilling in Ortoire at our Coho-1 prospect. This is a significant milestone for Touchstone as we begin drilling the prospective exploration wells. We look forward to sharing the results of the wells with our shareholders throughout this potentially transformational period. The exploration programme has been a priority for 2019, but it is important that we continue to see annual production growth from our current producing assets. We are currently prioritizing our development drilling locations and will continue to focus on maintaining base production. While fostering a safe work environment we intend to further enhance our operations through various initiatives including our water disposal programme.” 

Notice of Results

The Company expects to release its unaudited interim results for the three and six months ended June 30, 2019 on August 14, 2019.

IOG – Spudding of Harvey Appraisal Well

Independent Oil and Gas plc (“IOG” or the “Company”), the development and production company focused on becoming a substantial UK gas producer, is pleased to confirm that the Maersk Resilient rig spudded the Harvey appraisal well at 2230hrs BST on Tuesday 6 August 2019. As previously indicated, completion of the well is expected to take approximately two months in the success case.

Harvey is centrally located within IOG’s asset portfolio in UK Southern North Sea Blocks 48/23c, 48/24a, and 48/24b, close to the Thames Pipeline export route. The primary objective of the well is to confirm gas volumes which management estimate at 85/129/199 BCF Prospective Resources in the Low/Best/High case, with a 63% Geological Chance of Success¹, and secondly to demonstrate reservoir deliverability. If successfully appraised, the additional scale and synergies of a Harvey development could substantially enhance the portfolio’s overall value and returns.

On completion of the farm-out transaction announced on 26 July 2019 the Company’s designated partner, CalEnergy Resources Limited (“CER”), will have the option to acquire 50 per cent of the Harvey licences within three months of completion of the appraisal well. If this option is exercised, CER will pay an additional £20 million to IOG and a £0.95/MCF royalty on all of CER’s life-of-field net gas production from Harvey (equivalent to £61.3 million if Harvey produces IOG’s 129 BCF Best Estimate Prospective Resources). This would maintain full alignment between IOG and CER across IOG’s entire SNS Assets.

The Maersk Resilient is a modern, high-spec rig with a strong operating history and an excellent safety record. The designated well operator is Fraser Well Management, who have extensive experience in drilling successful wells in the UK Southern North Sea (“SNS”). In addition, Halliburton Manufacturing and Services Ltd have been contracted to provide offshore drilling services for the well.  

Andrew Hockey, CEO of IOG, commented:

Spudding the Harvey appraisal well is an exciting development for IOG and potentially a major catalyst for the business. Our objective is to prove up a substantial, high-quality reservoir in the heart of our core asset base which would create significant shareholder value over and above our recently announced farm-out. Success at Harvey could trigger a further significant near-term cash payment plus valuable life-of-field royalties should our designated partner exercise its right to farm in. We are pleased with our choice of rig and contractors and look forward to drilling the well safely and successfully.”

MATD – Spud of Red Deer and Operational Update

Petro Matad Limited (“Petro Matad” or “the Company”), the AIM quoted Mongolian oil explorer, announces that the Red Deer-1 exploration well in the Asgat Sag Basin of Block XX in eastern Mongolia spudded on 4 August. The well is being drilled with the Daton Petroleum Engineering and Oilfield Service LLC rig, DXZ1.

The Red Deer-1 well is targeting a prospect with 48MMbo of Mean Prospective Recoverable Resource and is planned to be drilled to a total depth (TD) of 2,100 metres. The well is expected to take up to 35 days to complete. In the event of a discovery, the Company will bring in a separate rig for testing. A call-off testing contract has been signed which ensures testing operations, if warranted, can commence soon after discovery. 

Meanwhile, at Heron-1, the first casing point at 551 metres was reached on schedule and casing has been run and cemented. The DQE rig 40105 is now ready to drill out cement and then drill 8 ½ inch hole to the prognosed TD of 3,050 metres. However, the provincial government has challenged Petro Matad’s legal right to use the land at Heron-1 on the basis that a tripartite agreement between two central government agencies and the province has not been executed. In all of Petro Matad’s operations the Company has followed the land permitting regulations as required under the PSC and in accordance with instructions from the Ministry of Mining and the industry regulator MRPAM. The absence of a tripartite land use agreement between government agencies has never previously been an issue. We are working with the Ministry, MRPAM and the provincial government to remedy this situation as soon as possible.

The rig at Heron-1 has been put on standby whilst the situation is resolved. All efforts are currently directed at fixing this interruption as quickly as possible in order to minimise rig standby costs. Daily standby costs are low by industry standards and are of the order of $12,000. The Red Deer-1 well is located in a different province to that in which Heron-1 is located and has not been affected.

Further updates will be provided in due course.