Oil & Gas Daily Flow
Non-Independent Research; Marketing & Sales Commentary - MiFID II exempt information – see disclaimer below
Market Update: Thursday 19 August 2021
Helium One (AIM:HE1): HE1 spuds second well of drilling campaign, Tanzania
Zenith Energy (LON:ZEN): Workover of ROB-1 to boost near term production, Tunisia
Energy Prices
Brent Oil US$67.2/bbl vs US$69.7/bbl yesterday
WTI Oil US$64.1/bbl vs US$67.1/bbl yesterday
Natural Gas US$3.80/mmbtu vs US$3.82/mmbtu yesterday
Oil Price News
Oil prices fell for a fifth session yesterday, as investors remain worried about the outlook for fuel demand as COVID-19 cases surge worldwide just as more supply reaches the market from large global producers, including the US
Oil benchmarks have been under pressure for the last few weeks due to the rise in infections caused by the Delta variant of the coronavirus worldwide
Several countries have re-introduced travel restrictions and air traffic has softened in recent weeks
Minutes of the US Federal reserve's July 27-28 policy meeting showed officials noted the spread of the Delta variant could temporarily delay the full reopening of the economy, and restrain the jobs market
US crude inventories fell 3.2MMbbls last week to 435.5MMbbls, their lowest since January 2020, according to US Energy Department figures
Gasoline stocks, however, rose modestly, and gasoline product supplied to the market, a measure of demand, was 9.5MMbopd, just 1% below 2019 levels
Fuel demand in the world's top consumer has steadily increased throughout the year with the four-week average of overall US product supplied was 20.8MMbopd, in line with pre-coronavirus levels from 2019
That has come just as the OPEC+ agreed to raise output by 400,000bopd every month into next year, returning some of the supply the group has held back since early 2020
The IEA estimates that demand for oil is expected to increase at a slower rate over the rest of 2021 because of surging cases of the Delta variant
Also bearish for the markets in the longer term, a US offshore regulator yesterday said efforts to resume a federal oil and gas leasing program were underway and would soon bear results following a court decision ending a suspension
Gas Price News
Natural gas futures closed lower yesterday, reversing the previous session’s gains as updated forecasts showed cooler temperatures into the end of August
The price action is pointing towards the current low storage levels, and elevated summer temperatures in the US and Europe
Carbon dioxide emissions from the energy sector will increase 7% to 4.9 billion mt in 2021 given growing economic activity, according to the EIA's Short-Term Energy Outlook
The sector's emissions fell 11% in 2020.
With summer heat nearing what traditionally is the peak period this month, weather forecasts have once again become a driving force for gas markets
The American and European data each saw a difference of less than 2 cooling degree days (CDD) for the coming 15 days
Company News
Helium One (AIM:HE1): HE1 spuds second well of drilling campaign, Tanzania
Share Price: 11.5p, Market Cap: £71m
HE1 has announced the commencement of drilling operations at the Tai-2 exploration well at its 100% owned Rukwa Project, Tanzania.
Tai-2 represents the Company’s second exploration well on the Project, targeting the Tai prospect.
The exploration well targets prospective Lake Bed stratigraphy, which was identified but not fully evaluated in Tai-1.
Tai-2 is located c.20m from Tai-1 and utilises the same drill pad, saving time and money in relocation compared to mobilising from one site to another.
Tai-1 has de-risked the Rukwa Basin by proving a working helium system.
With confirmation of a working helium system, Tai-1 supports ongoing exploration with helium shows identified at multiple stratigraphic intervals.
The drilling at Tai-2 will test one of several targets highlighted for additional exploration following positive results from Tai-1.
Our take: Demonstration of seal and reservoir indicates a working system and Tai-2 will test shallower targets that were not fully evaluated in Tai-1. Whilst typical exploration risks will remain especially given the close proximity to Tai-1, investors can take some comfort from the evidence of Helium shows at multiple stratigraphic levels recorded during drilling of the first well of the programme.
Zenith Energy (ZEN LN): Workover of ROB-1 to boost near term production, Tunisia
Share Price: 1p, Market Cap: £14m
Zenith has confirmed that the Company has finalised all the necessary preparations for the commencement of operational activities in the Robbana concession, onshore Tunisia.
The Company's operational team in Tunisia has made the decision to perform a workover of ROB-1, which is currently producing at a rate of c.20bopd.
The workover of ROB-1 is expected to more than double existing production, resulting in a daily production rate of c.50-80bopd.
The cost of the ROB-1 workover has been estimated to be approximately US$550,000.
Mobilisation of the Rig to the ROB-1 well location is expected to take place within the next 10-14 days, and the commencement of operations is expected on or before September 10, 2021.
Workover operations are expected to take between 20-30 days from start to finish.
Plans to drill an infill well in Robbana (ROB-3), first announced in June 2021, remain and long-lead equipment required for the drilling of ROB-3 are already on location.
Our take: The Company’s slated primary objective for Robbana is to achieve a daily production rate of approximately 200-250bopd, to be obtained via the successful workover of ROB-1 and the drilling of ROB-3, representing a tenfold increase in respect of current daily production from the concession. In addition, Zenoth will look to update the market with a refreshed CPR which will include the reserves of the El Bibane and Robbana concessions, having been acquired at a time after the effective date of the last reserves evaluation.
Research – Oil & Gas
Sam Wahab - 0203 470 0473 / 0784 385 5037
sam.wahab@spangel.co.uk
Sales
Richard Parlons – 020 3470 0472
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Sources of commodity prices
Oil Brent, WTI - ICE
Natural Gas - NYMEX
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