The Oil Man: Hurricane, SDX Energy, Pantheon, Genel, Premier Oil
11th December 2017 12:53
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WTI $57.36 +67c, Brent $63.40 +$1.20, Diff -$6.04 +53c, NG $2.77 +1c
Even with a decent bounce on Friday the week ended on a downward note, WTI lost $1 and Brent 33c as geopolitics wrestled with inventory oddities and, of course, the strong greenback encouraged by a likely rate hike didn't help. I am in Dubai for a few days so will try and test the mood out there.
Hurricane Energy
The long-awaited CPR from is out this morning covering all the Rona Ridge assets, excluding the Lancaster field, and delivered by RPS Energy Consultants Limited. By any yardstick this is a very substantial resource increase. Hurricane's total 2P reserves and 2C contingent resources are increased by ∼231% to 2.6 billion barrels of oil equivalent.
At Halifax, RPS concludes that it has similar reservoir properties to Lancaster and, importantly, similar oil types which may even come from the same aquifer. 2C contingent reserves at Halifax of 1,235 million barrels of oil equivalent is another piece of independent evidence to back the case for this discovery.
As for Lincoln, again RPS report that similar reservoir properties to Lancaster and again, similar oil types. This confirms the Hurricane view that the Brynhild Fault Zone separates Lancaster from Lincoln, and that the O/W contact is materially deeper than at Lancaster.
Looking at Lincoln compared to Warwick, whilst RPS "recognises that they have the potential to be a single hydrocarbon accumulation", they have elected to take a more conservative approach by evaluating them as separate structures, at least until a well is drilled at Warwick.
Nevertheless, RPS give 2C contingent resources at Lincoln of 604 million barrels of oil equivalent on its own. With Warwick as yet undrilled, it is assigned prospective resources of 935 million stock tank barrels of oil and a chance of discovery of 77%, given the proximity to the Lincoln discovery and the Lancaster field, very promising indeed.
One can draw from this that, whether or not they are separate structures or a single accumulation, the Greater Warwick area are comparable in resources potential with the Greater Lancaster area, with a combined recoverable resource potential of 1.5 billion barrels of oil equivalent.
I have spoken to CEO Dr Robert Trice this morning and he is clearly delighted with this CPR. He feels it has been done fairly and specifically with regard to Warwick, has assessed the potential objectively. The fact that the same type of oil is prevalent in Lancaster, Lincoln and Halifax franks the company's initial work and the testing programme.
On that note, he fully understands that further test wells will need to be drilled and oil will have to be flowed to surface in order to further de-risk the whole project. What can be said is that this independent corroboration of the information that has been placed in front of shareholders over the last two years or so, "validates the geological model" and makes Hurricane a very exciting vehicle in the next year or so.
I say that because with the plan to go to EPS of Lancaster straight away now looking eminently sensible, the de-risking of the rest of the project could have a significant value add to the company. At this stage they have confirmed that they are "committed to achieving maximum shareholder value" and to monetising the "vast resources" via farm-out and ultimate sale of the company "at the appropriate time" , ie when it receives an offer it believes reflects that value to shareholders.
SDX Energy
has announced that the KSR-16 development well is a gas discovery with 14.2 million of net conventional natural gas pay in the Hoot formation. As with previous wells this will be connected to existing infrastructure and on production within 30 days. This is another successful well from SDX and again exceeded pre-drill estimates, this time by around 50%. The rig now moves off to drill ELQ-1 on the Gharb Centre Permit, a recently acquired licence. In the meantime, the company expects KSR-15 to be on test production early next week.
This success has allowed the company to "accelerate new customer acquisition activities" and may result in them bringing forward the start of their forecast gas sales. All in all, further success for SDX and, with ambitious plans for drilling and development across the portfolio, I may have to bang on again about how exceptionally good value the stock is.
Pantheon Resources
An operational update from this morning on the logging operations at VOBM#4 where Schlumberger has completed its work. Electric logs indicated the presence of hydrocarbons in a "potentially significant reservoir in the targeted Wilcox formation confirming the natural gas flows encountered during drilling".
All the usual caveats apply as, until flow testing is completed, nothing can be taken for granted, but this looks pretty good to me. The only drawback is that they are bringing in a cheaper workover rig for that process, which will add to the timing of the next news. However, given they weren't even looking for the Wilcox, this is highly encouraging news.
Genel Energy
has confirmed that the Peshkabir-3 well has been extremely positive and the field, in the Tawke Licence is now has now tripled to 15/- bopd.I am seeing Genel before Christmas, and looking forward to an update.
Premier Oil
The E.ON acquisition is the gift that keeps on giving to and there is plenty more where that came from. Today the company announces the sale of its 30% stake in the ETS pipeline to CATS for $31.6 million, for an asset that is totally core it is a great piece of business, not as good as buying the whole E.ON business for $120 million in 2016. Even Dick Turpin wore a mask…
And finally…
In some haste after last night the Prem looks wrapped up as an early Christmas gift for Pep.
In the Champions League draw they got Basel which is OK, the Red Devils got Sevilla, Spurs will play Juve, the HubCap Stealers Porto and Chelski pulled out Barca…
Malcolm Graham-Wood is an independent oil industry expert and freelance contributor, not a direct employee of Interactive Investor
This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.