Oil price, Challenger, Predator, VOG, Hurricane. And finally

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WTI $68.81 -2c, Brent $71.31 -4c, Diff -$2.50 -2c, NG $3.04 -3c, UKNG 63.05p -0.52p


Oil price


Oil was flat yesterday but underlying is still very strong compared to the downside. After all, the economic data from the US in particular is very strong in the ISM services and with ADP jobs rising and jobless falling ahead of today’s NFP where the consensus is for growth of some 670/- positions remains strong.


Following on from his comments post the Opec+ meeting I saw an interview with the Saudi Oil Minister where he was asked about the comments he made about the IEA report being, he reminded us, that it was ‘the sequel to La la land’. He pointed out what the IEA wrote was ‘not a realistic scenario’ and that ‘you have to think about it’. He noted that the authors ‘are not in touch with reality’ which is a good way of describing it, I couldn’t have put it better myself.


The EIA stats yesterday were pretty positive, crude oil drew by some 5.1m barrels and with refining capacity rising by another 1.7% to a recent record of 88.7% clearly a pointer to refiners taking no risks on gasoline demand over Memorial weekend and the start of the driving season. That made gasoline build of just 1.5m b’s and distillates up 3.7m, both will erode if heresay on colossal driving and flying numbers are confirmed.


Finally below is an article I contributed to with Jeremy Naylor and others at IG, published recently.


When oil prices briefly rose above $70 a barrel in March for the first time in more than a year, investors were quick to see it as a sign that higher prices were here to stay.


Since then, the price of crude has bounced up and down nervously along the way, revealing little about its future direction and prompting investors to wonder whether the rally that began last November is reaching an end or is the start of even better things to come.




Challenger Energy Group


Challenger has provided an update on progress at the Saffron-2 appraisal well, currently being drilled at the Saffron project in the South-West Peninsula of Trinidad this morning. As previously advised, the objectives of the Saffron-2 well are twofold: to achieve profitable immediate production and cashflow, and to enable the Company to define an appropriate development plan for the Saffron field as a whole.


The primary targets of interest for the Saffron-2 well are the Lower Cruse and lower Middle Cruse sands and from which, based on the outcomes of the Saffron-1 well, the Company’s has a P50 expectation of Saffron-1 production rates in the range of 200 – 300 bopd.


The company announce that drilling of the top section of Saffron-2, though the Upper Cruse and upper parts of the Middle Cruse, has now been completed to a depth of 1,593ft, on time and on budget, with formations encountered in line with pre-drill expectations.


Logging has been completed for the top section of the Saffron-2 well; logs are as prognosed and are consistent with comparable logs from Saffron-1 and casing is being run and cemented deeper than the equivalent casing point for Saffron-1, providing a better foundation for drilling the deeper, primary targets.


The next stage of the Saffron-2 well will evaluate the deeper Middle Cruse, and the final stage of the well will evaluate the Lower Cruse.


The next (middle) section of the Saffron-2 well (at 12 1/4?) will be drilled to a target depth of approximately 2,800ft, and thereafter logged and cased. In this next section of the Saffron-2 well the Company expects to encounter hydrocarbons as identified in the Saffron-1 well in the deeper Middle Cruse, but as distinct from the Saffron-1 well also expects to be able to acquire open hole wireline logs where they were not previously able to be run.


Thereafter, the drill plan is for the Saffron-2 well to be drilled to a final target depth of approximately 4,550ft, logged, sampled and cased as a future producer. As with the middle section of the well, in the final lower section of the Saffron-2 well the Company expects to be able to assess and produce hydrocarbons that were identified in the Saffron-1 well in the Lower Cruse but were unable to be logged and tested in that well.


Eytan Uliel, Chief Executive Officer, commented:




“Last week, on assuming the role of CEO of Challenger Energy, I indicated that I would seek to actively engage with our shareholders, including providing regular updates, and, given the centrality of Saffron-2 to our immediate forward strategy, I know that many shareholders are acutely interested in the progress of this well.




“I am thus pleased to advise that Saffron-2 is proceeding as planned, with the first section of the well successfully completed and logged, on time and on budget. Thus far, everything is as we would have hoped it would be, both geologically and operationally. This creates a good foundation for the next two stages of the well, which will evaluate the primary targets of interest. A further update on progress will be provided in due course.”


The newsflow from Challenger under CEO Eytan Uliel is now getting underway with the Saffron-2 well and it is the beginning of a new era from CEG. With plenty in the portfolio in Trinidad plus higher beta projects to work on elsewhere there is a bright future in all risk categories.


Predator Oil & Gas


PRD has just announced operational highlights and a placing of 10m shares at 15p per share to raise GBP1.5m which was ‘significantly oversubscribed’. Operationally the highlights are as follows. The MOU-1 well has an estimated spud date of between 15 – 27 June 2021 and drilling is estimated to take 14 to 20 days. The MOU-1 site construction and civil works are nearly complete, a rig contract with Star Valley has been executed as is a Schlumberger Master Services Agreement.


All well services and logistical support in place, well costs in line with budget forecasts and pre-drill geological expectations firmly remain as previously reported. The CO2 EOR injection is continuing as planned in Trinidad despite COVID restrictions.


During the past few months the Company has made significant progress in developing additional business opportunities, the uses of the proceeds are as follows.


The previously announced submission in response to the call for an Expression of Interest in an FRSU LNG facility for Morocco has raised the Company’s profile in Morocco and within the global LNG downstream sector.


The previously announced C02 EOR services Heads of Agreement was signed with Massy Gas Products Trinidad – currently the only supplier of surplus liquid C02 in Trinidad. The new joint venture will raise further the profile of Predator within Trinidad and increase the rate of roll out of our C02 EOR services business.


As previously announced a Collaboration Agreement with a leading Trinidadian industrial company was signed with Lease Operators Ltd. (“LOL”) for the PS-1 Block in the Palo Seco PS-1 field to provide C02 EOR services. LOL secured a 10-year contract with State oil company Heritage Petroleum Trinidad Ltd. (“Heritage”) to further develop the PS-1 Block in the Palo Seco PS-1 field. Application of the Company’s C02 EOR expertise has an important role to play during the period of the LOL and Heritage contract. Lease Operators Ltd. are one of the largest private Trinidadian companies


When the Company has the ability to issue further shares the Company intends to issue Paul Griffiths 11,784,845 new Ordinary Shares and will take all necessary steps required in order to such shares and make the necessary listing and admission hearing applications. This will put Paul Griffiths back into the position that existed, in terms of his aggregate shareholding in the Company, had he not made the transfer of Ordinary Shares. For the avoidance of doubt the transfer of shares to Novum Securities Ltd from Paul Griffiths involves no consideration being paid to Paul Griffiths.


In Ireland the Company will undertake a preliminary scoping engineering study, based on its highly relevant operating experience gathered in Trinidad, to assess the previously announced potential for CO2 storage, in the “Ram Head” reservoirs in the Celtic Sea in order to enhance its ongoing application for a successor authorisation. This is consistent with the Company’s integrated strategy for Ireland to seek to reduce C02 emissions through the Energy Transition.


Proceeds raised in the Placing are being assigned to evaluating and potentially acquiring rights to the new business opportunities that the Company has recently identified together with general working capital. Finally, the company has announced its intention to move to the Aim market.


Paul Griffiths, CEO of Predator Oil & Gas Holdings PLC commented:


“This month will see the execution of the MOU-1 drilling programme in Morocco, potentially the single most important catalyst to creating near-term shareholder value over the last 3 years. Whilst this is an exciting but immensely challenging, due to COVID, operational milestone for the Company, we have also made progress on developing our upstream and downstream business activities on several fronts on three continents. We are seeking to build significant shareholder value based on our broader portfolio of projects that we have now developed simultaneously with our growth in market capitalisation. A move to AIM is now the logical next step to maintain the momentum for business growth during the Energy Transition. In 2018 we firmly positioned ourselves in a different space with the focus dominantly on C02 sequestration and the upstream gas sector, enhanced by a move into niche LNG opportunities. This was not yesterday’s decision based on changing public attitudes to excessive C02 emissions but rather a strategic focus that foresaw changes ahead for the energy industry before they crystallised.”




Victoria Oil & Gas


VOG has announced a corporate update this morning in which it states that GDC has received $5.1m gross funds from Eneo ‘in line with the final settlement agreement of 16 April 2021.


Having reached the end of the exclusivity period with a potential buyer of ZAO SeverGas-Invest, the Company’s fully owned subsidiary which owns the West Medvezhye asset, discussions continue on the next steps.


GDC is pleased to report that the Environmental and Social Impact Assessment (ESIA) Report on its planned activities on the Matanda Block has been approved; and further to the Company’s April 1 update, the Parties in the Kemerkol dispute continue the exchange of information and settlement discussions.


Roy Kelly, Chief Executive of the Company, commented:


“We are very pleased to bring the Eneo episode to a close, and the funds significantly strengthen GDC’s working capital position. In addition to the funds received, GDC gains valuable tax credits which will be used to enhance cashflow. The potential buyer of SGI remains keen but we are carefully considering the next steps to avoid simply entering an open-ended phase.


We are particularly grateful to the relevant Ministries and SNH for their expeditious approval of our ESIA. Despite this being a lightly populated area, we thank the communities and their leaders for coming out to review the ESIA and for engaging constructively with GDC and State representatives. I am happy to add that we have added equal weight to ESG-related criteria as we do technical and commercial ones in our prospect ranking exercise and in the selection of a surface location as we seek to minimise our footprint in the area. Nonetheless, we remain very excited about the exploration prospects in a play that has been significantly de-risked by adjacent, tested discoveries.”




VOG is clearly getting better all the time under Messrs Kelly and Collins who are proving to be adept at everything from debt collecting to asset disposal and becoming highly proficient at the world of ESG. It will come as no surprise to anyone familiar with the area that getting the cash in from Eneo and closing the deal is in itself worth lauding but to fund GDC with the $5.1m, worth more than 2 months of turnover is the real deal.


The SGI sale is still live but KC and the sunshine band have kept the sale open without getting too over-excited and we may have more to hear from this in due course. Maybe the best news for growth going forward is from Matanda where the ESIA Report on its planned activities on the Block has been approved. The certificate of environmental conformity permits the progress of drilling activities subject to the implementation of an approved Environment and Social Management Plan. With canny changing of the previously first ranked prospect and with careful appreciation of the art of local diplomacy, Matanda is becoming the poster boy of the portfolio. Stand by for a CEO interview with Mr Kelly before long.


Hurricane Energy


Hurricane has announced that it has resolved not to exercise its option to extend the bareboat charter of the Aoka Mizu FPSO for a period of three years from June 2022 to June 2025.


As contemplated in the Explanatory Statement, the Company remains in negotiations with Bluewater Energy Services B.V., the owner of the Aoka Mizu FPSO, over an alternative extension to the Bareboat Charter for a shorter period than three years.


‘The Company believes there is a reasonable prospect of negotiating such an extension of the existing contract on acceptable terms. However, there is no guarantee of an extension of the existing contract on acceptable terms. In such an outcome, Hurricane may need to pursue a controlled wind-down of its business and cease operations at the Lancaster field upon the expiry of the Bareboat Charter in 2022, at which point the field would be decommissioned.


Strong words indeed, a hard ball approach to Bluewater but one assumes that HUR believe that they have the upper hand and expect to get a handsome discount on the contract. Having said that I still think that at $72 Brent you could run Hurricane for cash without consideration of the undrilled portfolio. Let’s see what the shareholders think when they get their say…


And finally…


A super busy weekend for sports fans all around the world. In horse racing the Epsom Downs host the world famous Derby tomorrow and today is the fillies version, The Oaks. Tomorrow sees the third leg of the US Triple Crown with the Belmont Stakes in New York.


In Baku it is the Azerbaijan GP and today in first practice the Mercs remain slow with Perez in the Red Bull leading the way.


Having kept everyone waiting about his selection for the Euros Terence Trent Darby has had to withdraw from the tournament, it means that Gareth doesnt now have to have four right backs I guess…


And as is often the case it is the Lords test so it has rained all day in a scorching week. No play today yet, probably none at all although my spies at Lords say that it is getting brighter in St Johns Wood but that is in licensed premises…

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