WTI (May) $85.23 -$1.30, Brent (June) $89.42 -96c, Diff -$4.19 +24c
USNG (May) $1.87 +3c, UKNG (May) 68.5p -1.13p, TTF (May) €27.765 +€0.085

Oil price

Brent has a feeling of $90 all over it, most recent activity has led people to believe that barring accidents we may be at the top of the recent trading range. Today has been all about the US inflation data and with CPI coming in above the whisper markets headed south.

But the EIA STEO has come to the rescue and  hitched up its global demand estimates by 480/- b/d and now has world consumption at 102.9m b/d.

Chariot

Chariot has announced that following receipt of all necessary Moroccan governmental and regulatory approvals, the Partnership Agreements with Energean, as announced on 7 December 2023, have now fully completed.

• Energean now holds 45% and 37.5% of the respective interests in, and is operator of, the Lixus and Rissana licences, offshore Morocco
• Chariot retains 30% and 37.5% of the respective interests in these licences, with ONHYM maintaining a 25% stake in each
• Chariot has now received the US$10 million upfront cash consideration from Energean 

In addition, a rig contract has been signed with Stena Drilling for the use of its Stena Forth drill ship for the Anchois-East appraisal and development well and an optional well, located within the Lixus licence. This drilling and testing campaign will be conducted in Q3 2024 which will further appraise the existing gas sands, including flow testing, and target undrilled prospective resources to look to increase the Anchois gas development to over 1 Tcf.

Adonis Pouroulis, CEO of Chariot commented: 
“We are very pleased to have received formal approval from the Moroccan authorities for the transaction, for Energean to officially be our partner on the Lixus and Rissana licences and to have the rig contract signed for the Stena Forth. Our teams have been working closely together on well planning to deliver the expedited commencement of this campaign in Q3 2024 and further updates on this will be provided in due course. I would like to thank ONHYM, the Ministry of Energy Transition and Sustainable Development and the Ministry of Finance for their ongoing support in securing the approvals as we look to progress the Anchois project and its surrounding acreage.”

This is a red letter day for Chariot and given the importance of such an announcement I might have expected a better appreciation from the market. After all this is a significant moment in the development of the Anchois development and the procuring of a quality partner and being carried for the substantial part of the costs is a huge step.

The company has received $10m in cash as part of the deal and as I said, are carried from here as part of the process and the JV has today announced a rig contract and that the Anchois appraisal and development well will be drilled in Q3 2024 with the option to drill another after that. 

The massive nature of this benefit to Chariot should not be missed, along with the fast moving developments at Loukos the company are building a substantial, highly profitable hydrocarbon business here and perhaps more importantly, are delivering the goods very much in line with expectations. I remain confident in the company, its management and more importantly its asset base which has significant upside share price potential from this very low level.

Touchstone Exploration

Touchstone has provided an operational update, highlighted by drilling results at our Cascadura-3ST1 delineation well and our CO-374 development well. 

Highlights

• The Cascadura-3ST1 delineation well was drilled to a total depth of 8,252 feet, and openhole logs and drilling data indicated a total sand thickness of approximately 900 feet in the targeted Herrera Formation.
• The Cascadura-3ST1 well has been cased and production testing is scheduled to commence in the third quarter of 2024 directly into the Cascadura natural gas facility.
• The construction for the flowline from the Cascadura C surface location to the Cascadura natural gas processing facility is progressing, with anticipated completion in the third quarter of 2024.
• The hazard and operability analysis (“HAZOP”) and engineering designs for the expansion of the Cascadura facility have been approved, and procurement for the expansion has commenced.
• The CO-374 development well on our CO-1 block was drilled to a total depth of 5,684 feet, with openhole logs and drilling data indicating a sand thickness of approximately 400 feet in the Forest Formation and approximately 300 feet in the Cruse Formation.
• The CO-374 well has been cased for crude oil production and will be completed once the CO-375 development well has been drilled and the rig is moved from the location.
• The CO-375 development well was spud on April 3, 2024 and is targeting to be drilled to a total depth of 6,500 feet.
• Achieved average net sales volumes of 7,015 boe/d in the first quarter of 2024.

Paul Baay, President and Chief Executive Officer, commented: 
“We are pleased with the successful results from the two delineation wells at Cascadura, with both wells demonstrating the quality and scale of the structure. In addition, the Cascadura-3ST1 well is the first to cross the C-fault to the east side of the structure, an area where reserves have not been previously assigned. The CO-374 development well is also noteworthy, as it has the highest net pay we have observed to date on our crude oil legacy blocks.“

This is another company announcement that the market has failed to appreciate given how far forward the company is moving with its very substantial asset base at Cascadura in Trinidad. At the Cascadura-3ST1 delineation well which has reached TD with total sand thickness of c. 900ft in the target Herrera formation, and as above crossing the C-fault, and is being cased with production testing ready for 3Q of this year.

The CO-374 development well on the CO-1 Block was drilled to a total depth of 5,684 feet, with drilling data indicating a sand thickness of approximately 400 feet in the Forest Formation and approximately 300 feet in the Cruse Formation, another excellent performance, this will likely also see perforation and testing later this year after the CO-375 well which spudded last week, has completed. 

Also work is being carried out on the flowline from the Cascadura C surface location to the natural gas processing facility which will also be completed in the 3rd quarter of 2024. There is a theme running through here, as successful development wells are being drilled and prepared for production as the production facility is being upgraded.

Touchstone is developing a substantial and highly profitable business at Cascadura and whilst I appreciate that there were some delays in the original development there is now evidence that the drilling programme is putting production in place as this announcement points to. With a Target Price of 200p I’m confident that shareholders will be rewarded by their patience this year.  

Cascadura-3ST1 Drilling Results
The Cascadura-3ST1 delineation well was spud on March 4, 2024 from our Cascadura C surface location and reached a total depth of 8,252 feet on March 29, 2024. While drilling the well, a high-pressure gas kick was encountered at a depth of approximately 7,500 feet which resulted in wellbore instability issues. As a result, a portion of the wellbore was redrilled via a sidetrack.

Drilling samples and openhole wireline logs indicated over 900 feet of sand in the targeted Herrera Formation, with over 230 feet of net hydrocarbon pay. The top of the key Herrera Formation was detected at a measured depth of 6,852 feet, with sand and shows observed throughout the section to the total depth of the well. Based on these encouraging results, the well has been cased for future production.

We continue to  expect to test the recently drilled Cascadura wells directly into the Cascadura natural gas facility in the third quarter of 2024.

Cascadura Infrastructure
We are currently progressing with the 1.6-kilometer road and flowline project, spanning from our Cascadura C surface location to the Cascadura natural gas facility. Presently, the flowline right-of-way has been fully cleared and graded, road construction is approximately 65 percent complete, and the watercourse culvert crossings are approximately 50 percent complete. Additionally, the procurement of the flowline has been finalized and the Company has issued a tender to local contractors for the installation of the flowline and bridge construction. 

Progress has also been made on the Cascadura facility expansion project. The engineering designs and HAZOP have been completed and a new natural gas separator has been procured. This separator is expected to increase the facility’s gross natural gas production capacity from approximately 90 MMcf/d to 140 MMcf/d.

The Cascadura flowline and infrastructure upgrades remain on track for completion in the third quarter of 2024.

Cascadura Optimization
Since the facility commenced operations in September 2023, choke adjustments have been made to the Cascadura-1ST1 and Cascadura Deep-1 wells, resulting in moderate success in increasing natural gas production rates. Further, additional perforations were added to the Cascadura Deep-1 well with limited success. The Company continues to monitor production rates from the wells and will optimize production where possible.

CO-1 Drilling Operations
The CO-374 development well, located on our CO-1 block, was spud on March 1, 2024 and reached a total depth of 5,684 feet on March 22, 2024. The targeted Lower Forest Formation was encountered at a depth of 3,491 feet and the Upper Cruse Formation at a depth of 4,578 feet.

Drilling samples and openhole wireline logs indicated the presence of sands in both the Forest and Cruse Formations. The Forest Formation indicated 400 feet of sand, with approximately 250 feet of net hydrocarbon pay. Similarly, the Cruse Formation indicated 300 feet of sand, with 150 feet of net hydrocarbon pay. The well has been cased in preparation for oil production and will be perforated when the CO-375 well is drilled and the rig is relocated.

The CO-375 development well, located on the same surface location as the CO-374 well, was spud on April 3, 2024 and is targeting oil sands in the Forest and Cruse Formations with a planned total depth of 6,500 feet. Operations are underway with surface casing set and cemented at a depth of 1,495 feet.

First Quarter 2024 Sales Volumes

In the first quarter of 2024, we achieved average net sales volumes of 7,015 boe/d as follows:

Cascadura contributed average net sales volumes of 5,389 boe/d consisting of:

• net natural gas sales volumes of 30.8 MMcf/d or 5,127 boe/d with an average realized price of $2.49 per Mcf; and
• net natural gas liquids volumes of 262 bbls/d with an average realized price of $69.60 per barrel;

Coho field net average natural gas sales volumes were 2.8 MMcf/d or 460 boe/d at an average realized price of $2.28 per Mcf (excluding third party processing fees); and average net daily crude oil sales volumes were 1,166 bbls/d with an average realized price of $69.97 per barrel.

Jadestone Energy

Jadestone has provided the following updates.

Status of Reserves-Based Loan March 2024 Redetermination
The March 2024 redetermination process, which will set the borrowing base for the six-month period commencing 1 April 2024, is at an advanced stage. Primarily due to the proposed changes to the RBL facility borrowing base assets, namely the de-designation of Stag as a borrowing base asset and the inclusion of the recently acquired 16.67% interest in the CWLH fields, the RBL facility banks require additional time to complete the redetermination. The Company expects to announce the results of this redetermination shortly.

Nothing to add here really, except to note that Stag gets the bullet and the CWLH fields get into the redetermine process for the upcoming RBL. 

Notice of Full-Year 2023 Results

Jadestone will issue its full-year 2023 consolidated audited financial results on Monday 29 April 2024.

Star Energy

Star Energy yesterday announce the closing of a new €25 million secured facility (provided by Kommunalkredit Austria AG (Kommunalkredit)) to support its transition strategy into geothermal energy and enable continued investment in the oil and gas business utilising its existing cash flows.

Commenting, Chris Hopkinson, Chief Executive Officer, said:
“Securing this facility is an important milestone for Star Energy. It allows us to use cashflows from our existing oil and gas business to optimise near-term conventional production (with quick pay-backs)  and deliver our transition strategy; namely developing and monetising our geothermal business in both the UK and Croatia.

We believe that we have particular, tangible competitive advantages in making the energy transition. We have a highly qualified team already in place and an established track record in onshore development – everything from sub-surface expertise and knowledge of planning and other environmental processes through to long-term and responsible operatorship competence. These skills are valuable in conventional and geothermal projects alike.

The size and structure of Kommunalkredit’s facility evidences their confidence in Star’s people and its transition strategy. Our ability to drawdown on this facility for our geothermal activities will allow this business to be positioned for longer term and sustained growth. It will also give us greater flexibility to continue to optimise the value of our entire asset portfolio, with short cycle returns.”

The idea is at least partly good, use the money that has been built up by historic management teams to be the powerhouse of the business and when oil is at $90 to ‘optimise near term production’. As for transitioning into geothermal energy with the rest of the money well that is an interesting bet…

Key Facility Terms
The new five-year €25 million secured facility matures on 31 December 2028. This unique, tailored package secured with KommunalKredit has two components – Facility A and Facility B.

Facility A will fund the repayment of the outstanding US$7 million balance on Star Energy’s reserves based lending facility from BMO, which was due at the end of June 2024. It has a fixed interest rate of 9.384% and is repayable on 30 June 2025.

Facility B provides funding for Star Energy’s geothermal development activities. It carries an interest rate of Euribor + 6% and has a five year term, with repayments scheduled to commence from 31 December 2025.

KeyFacts Energy Industry Directory: Malcy's Blog