WTI $45.28 +73c, Brent $48.25 +83c, Diff -$2.97 +10c, NG $2.78 -10c

Oil price

The Opec+ meeting is ongoing, little point in second guessing, but a range from doing nothing to a sliding scale of a 2m b/d add is still being talked about…The EIA inventory stats were poor for choice, a small draw in crude wasn’t enough to offset 3m+ builds in gasoline and distillates and a refinery rate of 78.2%

Zephyr Energy

Zephyr has announced that it has signed a drilling contract with Cyclone Drilling Inc, this follows a competitive selection process by Zephyr’s team, involving ‘extensive technical and commercial evaluation across multiple potential drilling contractors’.  Cyclone, based in Gillette, Wyoming, is one of the leading providers of rigs in the Rockies.

‘Cyclone’s fleet of modern rigs was purpose-built for operating in the remote locations and rugged environment of the Rockies, and they hold one of the best drilling safety records in the U.S. oil and gas industry.  Additionally, Cyclone has recent experience drilling similar stratigraphic wells, including a 10,200-foot-deep stratigraphic well drilled in 2019 which was also part-funded by the U.S. Department of Energy (the “DOE”)’.

Additionally, the signing of the State 16-2 drilling contract is a trigger for the Company to draw down the second $600,000 tranche of the $2 million grant funds allocated by the DOE for the drilling of the well. The balance of the DOE funding, a further US$800,000, will be received by Zephyr in two further tranches once additional routine well development milestones are met.

Colin Harrington, Zephyr’s Chief Executive, said
“We are delighted to be partnering with Cyclone to drill the State 16-2 well. Cyclone has a 40-year history as a respected contractor with a safe and successful track record of drilling wells, including on other DOE-funded projects. We are confident in their ability to help us deliver this well in an efficient and responsible way.

“Awarding this contract is an important milestone in our plan to spud the State 16-2 well prior to the end of the year, and we look forward to working with the Cyclone team.

“With the well now fully permitted, the site and road work complete and the rig contract signed, we are ready to commence drilling in the very near term.”

Block Energy

Block has announced a placing and subscription to raise £5.28m gross at 3p per share, a 19.1% discount. It seems that the shareholder group who where active in the summer, and still are as far as I’m aware, have not only ‘followed’ their money in but were instrumental in the terms of the placing.

In terms of use of funds the company say that they will be implementing the first phase of a new, two-phase development strategy, following its acquisition of Schlumberger Rustaveli Company Limited. The company has identified as ‘Phase 1’ a programme which is intended to include all the following, ‘the restart of the two existing wells at West Rustavi, WR-38Z and WR-16aZ, to resume oil production and commence gas sales from the newly commissioned early production facility and to continue base production from existing wells in Block XIB, Norio and Satskhenisi’.

‘In addition the plan is to drill one new well under the West Rustavi PSA, re-enter an existing well under the Block XIBPSA (“JKT-1”) and drill a new horizontal side-track. This should target an initial production rate of 550 bopd at each of WR-BA and JKT-1. Following these actions workover of existing well WR-16aZ at West Rustavi, including the installation of an electrical submersible pump, to target increased production of oil and gas’.

The two wells proposed to be drilled in the First Phase are intended to further increase production and cashflow from West Rustavi and Block XIB in order to target in excess of US$40 million net present value of future cash flows.

As for the second phase, which it appears starts at the end of 2021, ‘the Group intends to undertake the following works as the second phase of the development strategy:

• Drill a further four wells commencing at the end of 2021 and during the course of 2022.
• One of these four wells will be under the West Rustavi PSA (“WR-BB”) and the other three will be under the Block XIBPSA – “RUS-BA” in the Rustavi oil field and “PAT-BA” and “PAT-BB” in the Patardzeuli oil field.

Chief Executive Officer Paul Haywood commented:
“I am pleased to be able to announce the successful completion of our placing today. The equity raise enables Block to deploy capital into its significant portfolio, which has been strengthened by the recent acquisition of SRCL. As part of the First Phase capital deployment, Block will restart production at the West Rustavi field, drill a new well in West Rustavi and perform a re-entry of a well in the recently acquired XIB licence area. Both wells will be tied into the newly commissioned early production facility, targeting a production rate in excess of 1,000 boepd, which will significantly increase Block’s net free cash flow.  The Second Phase will see a further four wells drilled in the Group’s portfolio, adding further production and establishing Block as a significant oil and gas producer.

So, what does this mean for Block shareholders? There is certainly and particularly amongst retail shareholders, a feeling that ‘we’ve been here before’ where money is raised, as before, with promises of activity which simply out, weren’t  been delivered. What is different this time?

I would suggest that the activities of the group will continue and that it is they who are dictating terms at the moment. I also suspect that this means that we have more to come, in terms of a new board structure and the way BLOE is run, in which case yes, it is different this time. The way that placing agents Gneiss Energy have handled not only this raise but the group of activist shareholders since the summer give room for encouragement for the patient, enduring investors.

Far Limited

Far has announced that Woodside has pre-empted the deal they did with ONGC in Senegal. No surprise there and Far keeps the proceeds as arranged with ONGC but now from Woodside.

Touchstone Exploration 

The company has announced that the Cascadura Deep-1 results show that the well encountered ‘significant hydrocarbon accumulations based on drilling and wireline log data’.

Cascadura Deep-1 was drilled to a total depth of 8,303 feet. Drilling was suspended prior to the planned total depth of 10,600 feet due to high pressure gas zones encountered while drilling, the well encountered total sand thickness of 2,100 feet in multiple, stacked thrust sheets in the Herrera section. Wireline logs indicated natural gas pay totalling approximately 1,315 net feet in four unique thrust sheets in the Herrera sands from a depth of 5,455 feet to total depth.

An aggregate 1,007 net feet of natural gas pay was identified in the overthrust sheets, an increase of approximately 20 percent compared to the Cascadura-1ST1 discovery. Additional natural gas pay of approximately 308 net feet was encountered in two previously untested Herrera thrust sheets below the sands observed in the Cascadura-1ST1 well.

Paul R. Baay, President and Chief Executive Officer, commented:
“I am pleased that the Ortoire block continues to outperform our expectations. The Cascadura Deep-1 well is the best well we have drilled on the Ortoire property to date and it has provided three key pieces of information, primarily that the Cascadura field has numerous targets with each one of the thrust sheets providing its own unique opportunity. It has also shown that the system is hydrocarbon charged and that in time we will require more drilling horsepower to evaluate the deeper zones. We now have a unique opportunity to design a development drilling program in the area and expand our exploration program while we complete and tie-in the existing Cascadura and Chinook wells. The time required to undertake this will allow us to secure additional equipment and submit a full field development plan to proceed with a continual drilling program. As we move into 2021, Touchstone is entering a new phase that will see rapid production growth along with a balanced portfolio of development and exploration opportunities.”

Another ripper of a drilling result for the Touchstone team and the Ortoire Block just keeps on giving. The shares are still making new progress and I expect this to continue, TXP remains a mandatory holding.

KeyFacts Energy Industry Directory: Malcy's Blog