WTI *(Jan) $80.11 -$1.29, Brent (Jan) $87.62 -$2.16, Diff -$7.51 -63c. *WTI Expiry, USNG (Dec) $6.30 +43c, UKNG (Dec) 270.0p +5.0p, TTF €119.495 +€5.19

Oil price

Oil continues to take a beating as China goes from bad to worse. Covid cases have risen sharply and are back to previous high levels. Beijing is shutting down again and the vaccination position is pathetic. Oil might fall further and the next Opec meeting isn’t until December 4th.

WTI is back in to contango, the recovery will be sharp but it has just been delayed. The Baker Hughes rig count saw a rise of 3 rigs overall to 782 but up only 1 in oil to 623.

Chariot

Chariot Limited, the Africa focused transitional energy group, notes recent media reports on a workshop held recently between the Company and representatives of various ministries and institutions of the Government of Morocco regarding the roadmap for the development of the Anchois gas field, offshore Morocco. The workshop was held as a closed meeting. The information therefore contained in the media reports solely represents the views of the authors.

Chariot will keep the market updated as development plans continue to progress, but, as previously disclosed, the Company confirms the project remains on track and that all parties are working collaboratively to ensure the timely delivery of the Anchois development, a significant project for Morocco, for the benefit of all stakeholders.

It seems that a regular but private meeting between all stakeholders in the Anchois field development, where a series of presentations were made has been infiltrated by a journalist who has either taken the presentations or slides or both. 

There is nothing damaging here, whilst the article makes it looks like it’s written by Chariot, which it clearly is not, it is actually pretty positive as it shows that what the company is saying to the Government is what they are telling investors. There is nothing sensitive in the data released nor, I understand any information that was not already in the market, but just not what the company or the Government would normally share at this stage of the development. 

Perhaps more importantly, Chariot has announced news from South Africa.

Chariot has announced it has formed a new joint venture through a 25% interest in a new South African electricity trading company, Etana Energy (Pty) Limited (“Etana”) which has been granted an electricity trading licence by the National Energy Regulator of South Africa (“NERSA”).

• South Africa is the largest electricity market on the continent but has regular power outages due to insufficient supply. To combat this energy crisis rapid market deregulation is currently taking place, which includes selectively issuing electricity trading licences and facilitating the build of energy projects of up to 100 MW generation capacity.
• Etana’s objective is to deliver unique renewable energy mix solutions at competitive prices to help address the significant power requirements across South Africa with the licence opening up access to a range of high-volume off-takers including municipal, industrial and retail customers.
• This trading licence gives the right to buy and sell electricity on the national transmission grid and within some selected municipal areas.
• Electricity trading could bring an additional revenue stream into Chariot and could enable Chariot’s future participation in large renewable projects in Southern Africa.

Etana is owned indirectly by Chariot (25%), the Neura Group (“Neura”) (49%), H1 Holdings (21%) and Meadows Energy (5%). The Partners have extensive relevant experience in the electricity market in South Africa. Chariot, H1 Holdings and Meadows Energy have a proven track record in developing and investing in large renewable projects in Africa, whilst Neura has developed a unique hardware and software based technology specifically designed for the trading in the South African environment. In addition to this Etana is the first empowered trading company in South Africa.

Benoit Garrivier, Chariot Transitional Power CEO commented:
“As one of the largest energy markets in Africa opens up, our trading platform will provide the opportunity to enhance and revolutionise the energy mix across South Africa by supplying greener power for commercial and industrial requirements.  In forming this joint venture we see a great opportunity to expand our footprint of renewable projects in the country whilst also developing another revenue stream as the private electricity market in South Africa grows. We look forward to working alongside our partners to progress the next steps of growth across this platform and delivering much needed power across the national grid.”

Having recently visited South Africa I am fully aware of the power outages which regularly disrupt electricity supply to both personal and industrial markets. This announcement seems to add two important channels of importance to Chariot’s Transitional Power business. 

Firstly, with the power market being opened up, a great number of the restrictions on energy generation have been removed and the changes include selectively issuing electricity trading licences which formerly were particularly difficult to come by. 

The key to securing this trading licence this is that it allows the company, in this case Etana, the opportunity to buy and sell electricity into the grid to a range of high volume customers. The deregulation of the market is also opening up the opportunities for new renewable projects to enter the supply side which means that Chariot can also look to develop further power projects in South Africa to crucially sell into the grid. This is another key piece in the power jigsaw in which Chariot have been assembling for some time as this facilitates the build of energy projects of up to 100 MW generation capacity.

Secondly and of equally significant importance is that it creates a revenue stream for Chariot, it will be able to sell its own electricity into the market but like other companies before, be able to trade third party electricity. Finally the funding of this business will be done at subsidiary level and not at parent level, this will mean that gas projects will be the core business but with the power effectively in the model for free.

Zephyr Energy

Zephyr has announced that drilling operations have commenced on the State 36-2 LNW-CC well  at its flagship project in the Paradox Basin, Utah, in the United States of America.

Summary of drilling operations
Over the last week, CWC Ironhand Drilling Rig 118 mobilised to the well-site, where it was subsequently assembled and tested.  In addition, all necessary ancillary service providers arrived on site to support drilling operations.

The fully-funded well will target the Cane Creek reservoir, and drilling is planned to a total depth  at 20,456 feet measured depth (9,598 feet true vertical depth) incorporating a 10,346 feet horizontal reservoir section.  The well’s objective is to further delineate the Cane Creek reservoir beyond the productive State 16-2 LN-CC well and the nearby Federal 28-11 well (which was recently acquired by Zephyr and is currently shut-in due to infrastructure constraints, details of which were announced by the Company on 14 September 2022).

Drilling operations are expected to take approximately 30 days. After reaching TD and dependent on schedule and availability, a completion crew will subsequently be mobilised by the Company to hydraulically stimulate the horizontal portion of the well, immediately after which production testing shall commence. Further updates will be provided in due course.

Colin Harrington, Zephyr’s Chief Executive, said: 
“The commencement of drilling of the State 36-2 LNW-CC well is another landmark moment for the Company in its pursuit of unlocking the significant potential upside value from the Paradox project.

I’d like to thank our many partners and contractors who worked tirelessly through challenging conditions to meet our ambitious timeline following receipt of the final permit earlier this month. The focus now turns to drilling and operating in the safest and most effective manner possible, and I know this commitment is shared by all personnel on the drill site.

“While Zephyr’s primary objective for the well is to target production from the Cane Creek reservoir, we also plan to use the drilling operation to acquire important additional data from overlying reservoir targets.

“We look forward to keeping our stakeholders informed as drilling progresses over the coming weeks, and, as always, we will endeavour to operate in line with our core mission:  to be responsible stewards of our investors’ capital and responsible stewards of the environment in which we work.”

So, the long wait for the start of this drilling campaign is over, what all those involved in the Paradox over the years have been waiting for and de-risked to an extent by the first well. This well is planned to a total depth  at 20,456 feet measured depth and most importantly  incorporates a 10,346 feet horizontal reservoir section. 

The target is of course the Cane Creek reservoir, to delineate it from the State-2 LN-CC well and of course the recently acquired nearby Federal 28-11 well. The well should take 30 days, complete, fracc and then go on production test. 

Zephyr shares are nearly 7p today and volumes in recent days have indicated that there is institutional support there somewhere. Whilst there is obviously a drilling risk I am confident that the three wells in this campaign will repay investment by this management group in the acreage.

Overall Zephyr makes a clear case for remaining in the The Bucket list in the December shake-up, by then we will know more but I remain convinced that this portfolio is tactically well set up so that the Paradox, which might be huge due to the extra reservoir targets, is well financed and can start to deliver.

Tower Resources

Tower has provided an update on its financing activity in respect of its Thali Production Sharing Contract, in the Rio Del Rey sedimentary basin offshore Cameroon.

Cameroon Financing:
Tower is pleased to announce that its subsidiary, Tower Resources Cameroon S.A, has been notified by BGFI Bank Group (“BGFI”), the largest bank group in Central Africa, that the medium term loan of approximately US$7 million for which TRCSA and BGFI agreed a term sheet at the end of June 2022, has been approved by the credit committee of the Cameroon bank. Further approval is still required at the BGFI group level and discussions are now turning to the details of the structure and documentation, as well as a potential modest enlargement of the facility.

Whilst the Company aims to complete these discussions as quickly as possible, it cannot be certain of when final approval will be received, if it is successful.

As previously disclosed, the Loan should cover around 40% of the approximate US$18 million cost of the well, with a further amount of 25% already having been paid for by TRCSA. The balance of 35% of the cost of the well is also to be funded by TRCSA. This balance may be funded by further financing at the asset level, or with corporate funds.

The Company is continuing to discuss additional financing options at the asset level, including with BGFI. The Company’s current plan is to complete the Loan financing documentation, if possible, before seeking to conclude any further bank discussions.

Jeremy Asher, Tower’s Chairman and CEO, commented:
“We are very happy with the progress in our discussions with BGFI Bank Group, and the support that the local bank has shown towards our project in Cameroon.

“Discussions regarding the rig options with suppliers and other operators are also continuing as expected. As previously announced, long lead items for the well have already been purchased, and the environmental and social impact assessment, site survey and site debris survey are complete. Therefore, we are in a position to move quickly once a rig slot is finalised.

“We remain very confident that we will be able to drill the NJOM-3 well in good time and thank our shareholders for their patience while we seek to conclude these discussions.”

This announcement speaks for itself, this is a crucial step but Group level will be an equally tough hurdle but the company seem confident that patience with regards to the Thali PSC. 

KeyFacts Energy Industry Directory: Malcy's Blog