Market Update: 6 February 2023
Union Jack Oil PLC (AIM:UJO) - Wressle reaches $13m net revenues
IOG PLC (AIM:IOG) - Southwark remedial works unsuccessful
Touchstone Exploration Inc (AIM:TXP, TSX:TXP, OTC:PBEGF) - Spuds Royston sidetrack
88 Energy Ltd (AIM:88E, ASX:88E, OTC:EEENF) - Hickory to spud in March
Energy News
Brent Oil US$80.0/bbl vs US$81.9/bbl last Friday
WTI Oil US$73.3/bbl vs US$75.6/bbl last Friday
Henry Hub Gas US$2.39/mmBtu vs US$2.46/mmBtu last Friday
UK NBP Futures 145p/therm vs 148p/therm last Friday
TTF Dutch Futures €60/MWh vs €60/MWh last Friday
- Crude oil prices closed below $80/bbl last week after strong US jobs data heightened concerns that the Federal Reserve would keep raising interest rates.
- The US Baker Hughes rig count was down 12 to 759 rigs last week, with oil rigs down 10 to 599 units and gas rigs down 2 to 158 units, and the spotlight on US Shale companies reporting over the next fortnight where we expect production targets to be in focus, as will supply-chain issues, labour shortages and rising costs.
Company News
Union Jack Oil PLC (AIM:UJO) 28.7p, Market Cap £32m: Wressle reaches $13m net revenues
- Union Jack reported $13m of net revenues have been achieved from the onshore UK Wressle development (40% WI), which continues to produce under natural flow with zero water cut.
- The Company said site upgrades are ongoing with a view to debottleneck the facility and boost production volumes, and a gas monetisation plan is also underway for the Ashover Grit reservoir.
- The Company is debt free with over £10m in cash and cash equivalents on its balance sheet that covers all planned operational and capex costs for at least the next 12 months.
- Union Jack paid a maiden special dividend of 0.8p/sh in December and has to date purchased 1.575m shares (1.4%) in its share buy-back programme, which we estimate will return c.£2m in aggregate to shareholders.
Another positive update on Wressle, which continues to drive the Company’s cash flow and investment proposition, and will fund an uptick in activity across the portfolio that should provide investors with the greatest potential for value creation over the next 12M. We look forward to a step-up in activity across the wider portfolio in 2023.
*SP Angel acts as Nominated Advisor and Broker to Union Jack Oil
IOG PLC (AIM:IOG) 5.2p, Market Cap £28m: Southwark remedial works unsuccessful
- IOG announced that the Southwark A2 development well has been suspended after flowing just 2.5mmcf/d following remedial works, which does not justify hooking up the well for production.
- The Company is considering advancing drilling on the Blythe H2 development well, which would allow time to incorporate A2 learnings into the Southwark A1 completion plan.
- The Company also announced that it was reviewing its 2023 capital expenditure programme, which includes rig options to drill two appraisal wells at Goddard and Kelham North/Central.
The stock is down ~35% in early trading, as shareholders digest another blow to its flagship Saturn Banks development (50% WI) in the UK Southern North Sea. Despite management’s focus on improving the performance from its existing production base and delivery of first gas from the Southwark field, material reservoir underperformance will likely reduce the cash flow that was expected to underpin further investment in the portfolio. IOG still has some way to go to rebuild shareholder confidence in both its operational capabilities and the asset base.
Touchstone Exploration Inc (AIM:TXP, TSX:TXP, OTC:PBEGF) 73.6p, Market Cap £172m: Spuds Royston sidetrack
- Touchstone announced the spudding of the Royston-1X sidetrack well located on the onshore Ortoire block (80% WI) in the Republic of Trinidad and Tobago.
- The Royston-1X well targets the previously tested Herrera sands and penetrates new sands at the base of the intermediate sheet and into the untested subthrust sheet. Operations are scheduled to take 45 days.
Following stuck pipe in the original discovery well, the Royston sidetrack aims to confirm the commerciality of the previously tested zones and assess the deeper potential. Touchstone is looking to high grade its asset portfolio, where the Company has significant running room to target the Herrera turbidite fairway around its core Ortoire licence. First gas from the Coho development in 2H22 has transformed the Company into a sustainable cash flow generating production-based E&P that can now grow production volumes through a combination of additional drilling and well optimisation, as well as take its learnings from this process in the development of the larger Cascadura project.
88 Energy Ltd (AIM:88E, ASX:88E, OTC:EEENF) 0.71p, Market Cap £130m: Hickory to spud in March
- 88 Energy announced the permit to drill has been approved by the Alaska Oil and Gas Conservation Commission for the Hickory-1 well (75% WI), located in Project Phoenix on the North Slope of Alaska.
- Construction of the ice-pad will commence imminently with rig mobilisation scheduled to begin mid-February, ahead of a targeted spud date in early March. Drilling costs are estimated at $13.5m gross ($10m net).
- Flow testing of the Hickory-1 well is planned to be undertaken in the 2023/24 winter season, subject to well results, providing sufficient time post-drilling to optimise the flow test design, permitting and implementation.
Following drilling disappointment last year, management extrapolated the relative success of Pantheon Resources’ (PANR LN) drilling programme to map the Shelf Margin Delta, Slope Fan System, Basin Floor Fan and Kuparuk play fairways that extend onto the Icewine East acreage. The Company recently secured additional funding to drill the Hickory-1 exploration well and complete at least one flow test from the same multiple Brookian reservoirs that successfully flowed in the nearby Pantheon wells. Reservoir quality and phase are the key pre-drill risks.
Research
David Mirzai – David.Mirzai@spangel.co.uk – 0203 470 0473
Sales
Richard Parlons – Richard.Parlons@spangel.co.uk - 0203 470 0472
Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471
Rob Rees – Rob.Rees@spangel.co.uk - 0203 470 0535
Abigail Wayne – Abigail.Wayne@spangel.co.uk - 0203 470 0534
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Sources of commodity prices
Oil Brent - ICE
Natural Gas - NYMEX
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