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Oil price, Genel, UJO/Reabold, VOG. And finally…

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WTI $52.85 +24c, Brent $55.81 -10c, Diff -$2.96 -34c, NG $2.76 +10c, UKNG 56.7p +3.55p

Oil price

Oil was obfuscated by the overall market yesterday and also the greenback which ironically rose after bearish remarks from the Fed about the US economy and also just how badly the country is handling the virus vaccination programme.

In a story that you couldn’t make up, Wall Street is transfixed by the fight between Hedge funds that are shorting GameStop and other similar plays and the retail market that have lined up on Reddit in order to take them on. It is clear that as is often the case that when the hedgies don’t get things their own way they run to the regulator, as Corporal Jones would say ‘they don’t like it up ’em sir’. This will run and run….

In amongst all this a perfectly reasonable set of EIA inventory stats came and went, a big crude draw of 9.9m barrels including a decent chunk at Cushing, and commercial stocks down 11.7m was overlooked. The products were mixed, as is often the case at this time of the year as gasoline built 2.5m barrels but distillates still showed a modest draw.

Genel Energy

Genel has announced receipt of payments for oil sales in December from the KRG, for Tawke it was a net $10.5m and a welcome addition, a net $1.4m from Sarta.

Union Jack Oil/Reabold Resources

UJO has published a technical presentation in respect of the recently drilled West Newton B-1 and B-1Z wells on PEDL 183. The West Newton technical presentation contains new significant technical data that is material to the ongoing commercial evaluation of the project.

The presentation identifies or contains the following new information, locations for the West Newton A-1, A-2, B-1, B-1Z and a proposed B-2 well, which has planning permission in place and is provisionally planned to be drilled in H2 2021, and a demonstration of where the B-1Z well represented a considerable 2.5 kilometre step-out to the south of the A-2 well.

Good seismic calibration across the West Newton project area, highlighting both the Kirkham Abbey “platform” and “slope” formations which demonstrated hydrocarbon column of at least 118 metres with no hydrocarbon-water contact including a thick porous section identified in both A-2 and B-1Z wells suggesting a contiguous structure across the Kirkham Abbey formation.

The B-1Z well de-risks the southern component of the West Newton licence area and crucially supports the accuracy of the seismic interpretation across the entire platform and the log results at B-1Z well were excellent, exceeding Union Jack`s pre-drill expectations.

Good porosity is clear throughout the interval and the Kirkham Abbey interval hydrocarbon is saturated, mudgas concentrations where observed while drilling through the Kirkham Abbey formation at B-1Z well were as high as 9.8% total gas and 18 metres of core was cut and recovered from the B-1Z well.

If all these points were not in themselves bullish enough, visible natural fracturing, micro fracturing and vuggy porosity demonstrated from core-lab inspection and analysis prove that if anything testing probably isn’t even required which I will come back to.

Something else I will add later is UJO’s comments that ‘numerous additional leads and prospects, including Ellerby and Spring Hill, have been identified across PEDL183′.

David Bramhill, Executive Chairman of Union Jack commented: “Following the drilling of the successful B-1Z appraisal well, the technical summary of the West Newton project, provided on the Union Jack website, is the result of extensive evaluation by technical teams at Rathlin Energy, Reabold Resources and Union Jack, all whom have contributed additional materiality to our technical understanding of West Newton.

“There remains considerable upside in the opinion of Union Jack`s management especially with the Ellerby and Spring Hill Prospects being on-trend with West Newton.

“We look forward to reporting further progress on this compelling onshore conventional project in due course.”

I’m trying to bring together data and information that has been published by both companies and presentations are available on both sites which I strongly advise perusal of.

From Reabold obviously the data is the same but they point out that West Newton B-1 originally targeted the Kirkham Abbey slope (vs A-2 which made a discovery on the platform) and demonstrated hydrocarbon column of at least 118 metres, with no water contact.
The subsequent B-1Z targeted the Kirkham Abbey on the platform, similar to A-2 but with a considerable step out to the South and thick, porous reservoir section identified in both the A-2 and B-1Z wells, suggest a contiguous structure. The B1-Z discovery both de-risks the southern part of the West Newton field and crucially supports the accuracy of the seismic anomaly across the entire platform.

So we know from the data that this is as solid a discovery as one could find and I suspect that even those bears of the Zechstein can’t get away from the fact that West Newton is already very substantial and this year is going to prove it. Now to come back to my earlier point about testing which the market is in a tizzy about, mainly as many investors worry that it has been delayed and still isnt publicly announced.

Now if you go to the Reabold website and look at the presentation which is obviously almost identical to the UJO one, as you would expect, they actually spell out the timetable for the testing process and reasons for any further delay. From this one can detect that delays have been and remain as a consequence of Covid, ie that these operations require skilled international technical personnel but should be ready to start soon. So  operations are ‘planned to commence in February 2021 but subject to ongoing uncertainty around Covid based operational restrictions’ and will continue until half way through 2Q 2021.

There is one more point that should be made before I look at the Reabold raise and that is that the discussions with regard to the testing of West Newton at all. By this I mean that of all the people I have spoken to with regard to this almost all have said that to be frank this testing isnt necessary and that going straight to the next phase would be sufficient for all concerned.

Now obviously that ain’t going to happen as the market wants a flow rate so a flow that is what they will get but I’m with them, the B-2 well with its horizontal into the Kirkham Abbey will do its job and as has been said reach the A wells 2.5km away.

On to the Reabold raise now, they have brought in via placing and subscription £7.5m at 0.55p a 2.8% premium to the market place which is most impressive but maybe the recent 27% fall in the share price since 18th December tells you more. The company, who are always astute at raising money for key projects clearly want to be well financed for work at West Newton and this certainly ticked the boxes.

The raise went very well as the Reabold fan club of institutional investors left it significantly oversubscribed with scaling back and now the company is set fair to fund the rest of the WN project in testing, drilling and in seismic as well as the costs of the Victory gas development via Corallian and sundry contingencies.

Enough is enough and investors should make their own calls but Reabold has today risen in relief at the raise but UJO has actually fallen. Now either investors still do not believe in West Newton or they don’t believe that UJO are fully financed, which they are. Go and read the presentation and take a look at the logs, this is a top quality onshore hydrocarbon discovery that doesn’t need a testing programme to prove it, so if the market is disappointed that testing is delayed then they are barking up the wrong tree.  How often can you buy a ten pound note for a fiver?

Victoria Oil & Gas

A Q4 2020 update from VOG this morning, average daily gross gas sales rate for the quarter of 5.1 MMscf/d (Q3 20: 4.7 MMscf/d) of natural gas plus gross 3,109 bbls (Q3 20: 2,438 bbls) condensate was produced safely and sold to industrial customers.

 La-108 Remediation work was completed mid November 2020 and during initial testing the well flowed at the 19 to 20 MMscf/d limit of the surface equipment, with a Flowing Well Head Pressure (FWHP) of 3,580 psig.  The full potential of the well is highly likely to exceed the capacity of the plant, which is 20 MMscf/d

A settlement was reached with Cameroon Holdings Limited to cease all legal action and cancel the CHL royalty agreement and GDC received, as operator, approval from the Minister of Mines, Industry and Technological Development for the extension of the Matanda Block licence and we have commenced well planning.

Roy Kelly, CEO of the Company, commented:

“We are very pleased with the resilience our Cameroon business has shown yet again under the challenges and restrictions posed by the pandemic. Looking ahead, we are delighted to have a number of growth opportunities to increase gas sales in Cameroon which remains resource rich but energy poor, especially around Douala, the country’s largest city and the economic engine of the country.

 

The flowrate of the La-108 well obtained on short-term test was excellent, but such short-term deliverability is no measure of either long-term deliverability, or the ultimate reserves that may be recovered by the well, as the variations in the performance of the other wells has illustrated. We therefore require a period of sustained production from La-108 to determine how we can best use the well to serve the growing demand in the area.

 

Finally, we are also pleased to have received an extension to the Matanda license for which we thank the relevant Government of Cameroon departments and we have started the well planning process for a shallow well to target one of the many Tertiary prospects, most of which are within a few kilometres of existing GDC infrastructure.

This was a straightforward and simple update which I suspect is just what shareholders want at the moment. Economically the opportunities around Douala are plentiful and as in other parts of the sub-continent Governments are increasingly realising that using their own domestic power sources is not only cheaper but environmentally agreeable.

Historically that has not always been the case, certainly not in the latter, burning any old fuel for power generation suited despots but things are changing albeit slowly in some cases. I know that the new team at VOG has been working flat to the boards on restructuring and that it is beginning to reap rewards in the domestic power market, with Matanda there is upside as well.

And finally…

An interesting night in the Prem as the Red Devils lost 1-2 to the Blades and stayed 2nd in the table as the Foxes failed to win at the Toffees in a 1-1 draw. Burnley beat the Villa 3-2 and Chelski and Wolves drew 0-0 as did the Seagulls and the Cottagers.

Tonight it is Spurs v Liverpool where a home win would take Spurs to 4th and Liverpool to 6th….

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