WTI (Oct) $67.67 -$1.48, Brent (Nov) $71.56 -$1.63, Diff -$3.39 -15c
USNG (Oct) $2.28 +2c, UKNG (Oct) 88.75p +0.99p, TTF (Oct) €36.725 -€0.28

Oil price

Although oil is up as I write it is still struggling, last week both WTI and Brent were down well over $5, This was mainly due to the state of the US economy as the non-farm payroll number which not only fell short of the forecast but the July number was downgraded from a bad 114/- to 89/-. So rates will fall but if its too much markets will panic, you cant win, and Chinese inflation data was worse than expected as well. 

Opec+ left it late to say that it had delayed by two months the increase in export quotas, too little and too late and now they are in a bigger hole. And the Baker Hughes rig count showed overall rigs down 1 at 582 whilst oil was unchanged at 483 units.

Petro Matad

Petro Matad has provided the following operational update.

Spud of the Heron-2 Development Well

Petro Matad is pleased to announce that on 8th September it spudded the Heron-2 development well in the Tamsag Basin of eastern Mongolia. This is the first development well to be drilled on the Petro Matad operated Heron Field, which has total oil in place potential of c. 190 million barrels and which was discovered when the Heron-1 well was drilled and tested in 2019.

Heron-2 is being drilled by the DQE International rig 40106 and is located c. 800m south of the original Heron discovery well. It is targeting the same reservoir units of the Cretaceous Lower Tsagaantsav Formation that were proven productive in Heron-1. Heron-1 flowed at a maximum rate of 821 barrels of oil per day on test from a 12m interval between 2,834m and 2,846m in an overall oil column of some 70m. This was the third best test rate ever recorded in Mongolia. Heron-2 has been located to investigate the extension of the productive reservoir zone seen in the discovery well and will be drilled to a total depth (TD) of c. 2,900m. The reservoir is expected to be encountered at a similar depth to that in Heron-1 based on interpretation of the high quality 3D seismic data covering this portion of the Heron structure.

Drilling to TD is expected to take about 30 days following which wireline logging will be conducted to evaluate the productive potential of the reservoir. A well test and stimulation programme are planned to be executed during the 2024 operational season. If successful, Heron-2 will be put on stream in either late 2024, if time permits, or in Q2 2025 after the winter operational shut down.

Gobi Bear-1 Well Preparations

Mobilisation activities for the Gobi Bear-1 exploration well are underway with anticipated spud by mid-September. A separate update will be issued in due course.

Heron-1 surface equipment installation and preparations for production

The construction permit for the installation of production facilities at Heron-1 is at the final stage of the approval process. The construction contractor is ready to mobilise. The paperwork for the construction permit for Heron-2 is also being progressed whilst, in parallel, the Company has proposed a streamlined approval process to the Ministry of Construction to reduce the bureaucracy for the construction of oil production well pads.

Negotiations with PetroChina and industry regulator, the Mineral Resources and Petroleum Authority of Mongolia (MRPAM), on processing, transport and sales of Block XX production are progressing and Petro Matad has been invited by PetroChina to meet at its Block XIX facilities to review the logistical options.

Mike Buck, CEO of Petro Matad, said:
“After a lot of effort from our staff and considerable patience from our shareholders, we are very pleased to have spudded the Heron-2 development well and we look forward to Gobi Bear-1 following soon. We are encouraged by the progress of discussions on cooperation with PetroChina and we are pushing for the final approval on the Heron-1 construction permit which we don’t expect to take much longer.” 

Further updates will be provided as the 2024 work programme progresses.

So, MATD spudded the Heron-2 development well yesterday, the field has c.190m barrels discovered on Heron-1 back in 2019, things don’t travel quickly in Mongolia. At that stage the well flowed 821 b/d and this 2 well is investigating the extension of the original reservoir zone, it should take around 30 days plus logging. 

They are mobilising for the Gobi Bear-1 well and preparations are underway and all being well will spud in Mid September. Away from that the Heron-1 production site is awaiting its construction permit as is Heron-2 in parallel to try and save time.

It is really good to see things happening at Petro Matad but even now progress remains painfully slow and with the added inconvenience of the winter shutdown we may have to wait until next year to see significant progress, particularly at Heron. Having said that the management has stuck in there, the shareholders have indeed been very patient and next year should be one to enjoy.

SDX Energy

As announced on 25 July 2024, the Company and Aleph Finance Ltd  signed a non-binding term sheet for a proposed new agreement  that would refinance the Company’s syndicated unsecured convertible loan agreement with the Lender for up to US$3.25 million.

The syndicated Existing Convertible Loan is unsecured, convertible at any time at the option of the individual lenders and repayable on 24 July 2024 (together with the signing of the term sheet, the Company requested and the Lender consented and agreed to repayment being delayed). The amount payable is US$3.82 million (principal US$3.25 million and interest US$0.57 million).

The Lender and the Company have now entered into the “New Facility Agreement” to refinance the Existing Convertible Loan. The key terms of the New Facility Agreement are:

Under the terms of the New Facility Agreement, the Lender will provide a term loan facility in the amount of up to $6,000,000, such total amount to be confirmed by the Lender (the “Loan”), to the Company to be repaid by 23 July 2025. The Company will apply the monies borrowed under the New Facility Agreement towards the repayment of existing financial indebtedness owed by the Company to the Lender under the Existing Convertible Loan and other agreements. The Company has no current plans to draw on the remaining balance of the Loan following repayment of the Existing Convertible Loan.

The Loan will be available for drawdown within six months of the satisfaction or waiver of the conditions precedent under the New Facility Agreement. The conditions are usual for a facility of this nature and include the Company securing shareholder approval.

In connection with the New Facility Agreement, the Company will grant the Lender the following security package:

(i) a pledge over the Company’s shares in SDX Energy Morocco (Jersey) Ltd;
(ii) a pledge over the Company’s shares in Sea Dragon Energy (Nile) B.V.;
(iii) a debenture over the Company, including assignment of intercompany loans and security over HSBC bank accounts in England; and
(iv) a security agreement, in the form of a pledge, granted by SDX Energy Morocco (Jersey) Ltd and/or SDX Energy Morocco (UK) Ltd in respect of rights and receivables that may be derived from Moroccan licences (being Sebou Central, Lalla Mimouna Sud, and Rharb Occidental).

All outstanding amounts under the New Facility Agreement shall accrue interest at a rate of 20% per annum. Interest will be capable of being paid in kind and added to the principal outstanding. A consent fee of US$144,759 in lieu of interest for the period from 24 July 2024 to 20 September 2024 and an arrangement fee of US$168,852 shall be payable and capitalised into the New Facility Agreement.

The Lender will have the right to convert the outstanding Loan, including any accrued, in full or in part, into ordinary shares in the capital of the Company (“Ordinary Shares”) at an exercise price (the “Exercise Price”) being 80% of the Average Daily Closing Price calculated over 30 trading days preceding the relevant date of notification for conversion, provided that the number of Ordinary Shares issued to the Lender pursuant to the New Facility Agreement does not exceed 200,000,000 Ordinary Shares (the “Threshold”). If the number of Ordinary Shares to be issued, based on the Exercise Price, would mean that the Threshold is met, then the portion of the Loan representing the excess Ordinary Shares will not be converted and will remain outstanding on the terms of the New Facility Agreement.

Together with the signing of the New Facility Agreement, the Company has requested and the Lender has consented and agreed to repayment of the Existing Convertible Loan being delayed, provided that the New Facility Agreement is entered into by the Borrower on or before 20 September 2024.

On 20 September 2024, the Company will convene a general meeting to ask shareholders to vote on the New Facility Agreement (the “General Meeting“) and hold its deferred Annual General Meeting. The completion of the New Facility Agreement is conditional upon the Company’s shareholders voting in favour of the resolutions at the General Meeting.

The directors consider that the resolutions to be proposed at the General Meeting will promote the success of the Company for the benefit of its shareholders as a whole. Accordingly, the directors intend to recommend that shareholders vote in favour of all of the resolutions, as they intend to do in respect of their own beneficial holdings.

Shareholders should note that, in the event that the resolutions are not passed, the New Facility Agreement will not become unconditional and the Existing Convertible Loan will be due for repayment on 20 September 2024. Therefore, if the resolutions are not passed, the Company will not be able to repay the Existing Convertible Loan and would be in default and, if no alternative arrangements can be agreed with the Lender, may become insolvent.

Ahead of the general meeting next week SDX will ask shareholders to vote on the New Facility Agreement, as you can see above prospects for the company are bleak should the various resolutions not pass. 

KeyFacts Energy Industry Directory: Malcy's Blog