WTI (Jan) $71.46 -55c, Brent (Feb) $76.15 -$1.02, Diff -$4.69, USNG (Jan) $5.96 -20c, UKNG (Jan) 344.0p -46.0p, TTF (Jan) €139.925 -€11.32

Oil price

WTI rose sharply at the off yesterday as the news seeped out that there was a leak in the Keystone pipeline, even the thought of losing 600,000 b/d wore off soon and the shares lost out on the day but better than Brent. Markets will remain jittery into next week or Fed week as it is going to be with not just the raise, likely 75bp’s but also the tenor of the speech by Jerome.

Exxon and Chevron both announced capex plans for next year, both at the top of guidance, the former at $23-25bn (2022-$22bn) and the latter at $17bn (2022-$15bn). In addition Exxon announced a new share buy-back of $$50bn through 2024 against $30bn through 2023.

Zephyr Energy

Zephyr has announced the signing of an amended cooperation agreement detailing an additional US$1.0 million in non-dilutive research grant funding for the Company.  These funds will be utilised for data gathering purposes during the ongoing drilling of Zephyr’s State 36-2 LNW-CC well in the Paradox Basin, Utah, U.S.

Zephyr initially received a total of US$2.1 million in U.S. government-backed research grant funding for operations at its State 16-2 well in 2020 and 2021 (as first announced by the Company on 2 September 2020).  Since then, Zephyr’s technical team has worked closely with the research project team which is led by the University of Utah’s   Energy & Geoscience Institute (“EGI”) in collaboration with the Utah Geological Survey (the “UGS”) and other Utah -based partners. The project funding continues to be sponsored by the U.S. Department of Energy and its National Energy Technology Laboratory (the ” DOE “).

The objective of the additional funding is to acquire further geological data to assist in the understanding of the Cane Creek reservoir and of the additional reservoirs overlying the Cane Creek reservoir.

The following is a summary of the main objectives related to the additional grant monies:

• To fund a Distributed Acoustic Sensor (DAS) fibre in the lateral portion of the well in order to evaluate the stimulation and any post-stimulation fluid production. This will assist Zephyr and the EGI with understanding frac geometry and will latterly measure inflow rates along the horizontal part of the well.
• To deploy QuadCombo and lithoscanning logging tools, to further evaluate the shallow Paradox Formation, and the C9 clastic zone in particular.
• To obtain additional cuttings for use in fracture analysis.

Zephyr will acquire the data during the ongoing drilling operations on the well and will have full access to the results of the research project, which are expected to provide significant insight into both the Cane Creek and overlying reservoirs.

The Board hopes the results will materially assist Zephyr in its efforts to maximise the chance of success and optimise efficiencies with future well planning and drilling operations, especially in relation to planned exploration drilling in the overlying Paradox Formation exploration zones and the C9 reservoir zone in particular.

Colin Harrington, Zephyr’s Chief Executive, said:
“I am delighted to announce the award of this incremental research funding, the results of which are expected to further enhance our technical understanding of the Cane Creek and overlying reservoirs. The expected output from this analysis will assist with future well planning and drilling operations, particularly in relation to the C9 overlying reservoir, as we look to unlock further value from our Paradox project.

“I would like to thank the DOE, the EGI and the UGS for their continued focus and investment in the Paradox, and we are excited to be further aligned with their respective organisations.

“We look forward to keeping our stakeholders updated with the results from this research and from our ongoing drilling and production test operations.”

It is highly important that the US government, and Zephyrs academic partners, are continuing to support the project, and the data acquired this time around will be invaluable in assessing the C9 potential from this location.  

Indeed, the planned well targeting the C9 is envisioned to be co-located at the same pad as the current drill, assuming the geology looks as promising here as it did at the State 16-2 location making for continued improvement in the economics.

Overall this is a more than welcome help to Zephyr as it seeks to better understand the Cane Creek formation and the additional testing which is enabled by this research grant will undoubtedly improve the way the company drills its wells out in the future.

These are exciting times for Zephyr and with so much information on the way with regard to the knowledge of the Paradox Basin any help, however small should be appreciated and the management applauded. 

PetroTal Corp

PetroTal has announced the following corporate updates.

Peruvian political changes
On December 7, 2022, the Peruvian Congress voted to remove Mr. Pedro Castillo as President of Peru.  Pursuant to Peruvian constitutional law, the Vice-President, Ms. Dina Boluarte assumes the Presidency.  Following this change, there will be a reassessment of all government Ministers before a new cabinet is named.  This process is expected to occur smoothly and should not impact PetroTal’s operations.

Petroperu Agreement Finalized
PetroTal and Petroperu have finalized an agreement outlining the repayment terms of the $64 million in true up revenue owed to the Company by Petroperu from the Company’s July 2022 export of approximately 720,000 barrels of oil to an international refiner.  On December 1, 2022, the Company received $10.9 million from Petroperu as part of a schedule of payments, which is expected to be fully repaid by August 1, 2023.

Production Impact from River Blockade
Since the Company’s Q3 2022 financial and operating results were released on November 17, 2022, the Company has been producing nearly 14,000 barrels of oil per day (“bopd”), reaching 18,000 bopd recently.  As a result of the river blockade, PetroTal has reduced production to between 4,500 bopd and 5,000 bopd since November 30, 2022, to manage storage levels and will need to further reduce production levels should the blockade persist as the Northern Peruvian Pipeline (“ONP”) remains unavailable due to ongoing repairs.

AIDECOBAP River Blockade
On November 25, 2022, Asociacion Indigena de Desarrollo y Conservacion de Bajo Puinahua (“AIDECOBAP”) followers detained a barge traveling to Brazil with crude oil purchased from PetroTal.  The crew was taken hostage in an effort to force the Company to sign an addendum related to the social trust prior to formal working table approval.  Approximately 48 hours later, the crew of the barge was released, however, territorial control of the river pathway continues, limiting further barge movements to and from the Company’s oilfield. 

PetroTal strongly condemns the taking of hostages and using force and violence as a negotiating tactic and calls on Peruvian government intervention to prevent further unnecessary escalation.  The Company recommends that the terms in the draft addendum, already agreed with Perupetro, be duly agreed upon with the entire working table to ensure a repeatable social trust model in other oil producing districts in the region of Loreto where Block 95 is located.  Since January 1, 2022, PetroTal has been contributing 2.5% of the value of its fiscalized oil production, when operating without social disruption, to a dedicated bank account which has now grown to nearly $7 million.  This blockade is not only impacting the trust fund, but also our social programs, thereby upsetting the local communities that understand this is an unnecessary protest without any logic.

Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:
“We are committed to ensuring that the proposed 2.5% Trust Fund is properly implemented so it may provide critical long-term funding to all the Puinahua District communities.  We are also pleased to conclude our true up payment agreement with Petroperu and will continue to communicate with them in good faith regarding the additional factoring amounts owed for Q1 2022 oil deliveries into the ONP and the reopening of the pipeline when appropriate repairs are concluded.” 

We can only sympathise with PetroTal with regard to the blockade as it is an action against the Government and not the company per se, indeed it reduces benefits that the company regularly donates to the fund.

On a happier note the company have come to an agreement with PetroPeru for the money owed to them which means that a payment of $10.9m was made on the 1st of December with the rest due by August 2023. 

My target price for PetroTal is 150p which I am more than happy with as the company is building a store of value which will in due course unwind in favour of shareholders. 

KeyFacts Energy Industry Directory: Malcy's Blog