Edison Investment Research

UKCS 31st round awards reflect ongoing shift in mix of North Sea companies

37 licences have been offered to 30 companies in the 31st Offshore Licensing round, which focused on frontier areas of the North Sea. The round has followed recent trends seen in the basin, as European supermajors concentrate on specific areas and US companies leave the region to focus on US shale opportunities. Shell, BP, Total and Equinor are all represented and of these, Equinor has picked up the most awards with five, including four as operator.

Blackrock hits oil West of Shetland

Siccar Point Energy has announced that the Blackrock exploration well, 204/5b-2,  has encountered oil in a number of thin sandstones, though it has not been declared commercial. The prospect sits on the Corona Ridge between the Cambo and Rosebank fields and was targeting 200mmbbls in the Paleocene Flett reservoir, which rests on the volcanics of the Colsay Member. Gas was also encountered in the overlying Hildasay member. The well was the first to test the additional potential of Siccar’s acreage around its Cambo field, which it estimates could be up to 1.5bnbbls.

Verbier appraisal points to lower than expected resources

UK independent Jersey Oil and Gas (JOG) has announced that the Verbier appraisal well, 20/05b-14, has not encountered the targeted Upper Jurassic sands as expected, resulting in a likely downward revision of resources to the low end of pre-drill estimates. The objective of the Equinor operated appraisal well was to refine the estimated resource volume range of 25 – 130mmboe, with a mid case of 69mmboe. Verbier sits 8km to the north west of the Buchan field (now decommissioned), and was discovered on pre-broadband 3D seismic.

No magic at Presto as well comes up dry

The exploration well Presto in the Norwegian North Sea has encountered good reservoir quality rocks, but, according to the Norwegian Petroleum Directorate, hydrocarbons were not present. UK independent Cairn Energy holds a 30% stake in the Equinor operated PL885 licence. The well was targeting 160mmboe gross mean resources in the Lower Cretaceous Agat sandstones with a secondary objective in shallower stacked channelised turbidite fan complexes in the Upper Cretaceous

Gjøkåsen Deep is third well to disappoint in frontier south eastern Barents

Lundin Petroleum has announced that the Equinor operated 7132/2-2 well, Gjøkåsen Deep, did not discover hydrocarbons. Sandstones of varying quality were encountered in the late and early Triassic primary objectives, and a deeper extension to evaluate the underlying reservoir potential did not encounter reservoir rocks. The well was located in production licence PL857 and Lundin had assigned 428mmboe gross prospective resources to the prospect. The well followed on from the Gjøkåsen Shallow well (also in PL857) which had been estimated by Lundin to hold 768mmboe, but came up dry in February this year.

Orinduik resource upgrade for Eco Atlantic offshore Guyana

Company adds mainly Tertiary prospects to portfolio

A CPR carried out for Eco Atlantic by Gustavson Associates LLC has increased the gross prospective resources (P50) in its Orinduik Block, offshore Guyana, from 2,913mmboe to 3,981mmboe. The new figure was assessed after taking into account ExxonMobil’s Hammerhead Tertiary discovery, together with the processing and interpretation of 2,550km2 3D seismic acquired in 2017.

The bulk of the increase is due to the addition of five new leads, of which four, Jethro, Jethro Ext, Joe and HH are all targeting the Tertiary.

No moveable hydrocarbons in Alaskan Winx-1 well

Initial wireline data points to low quantities of non-mobile oil in both the Nanushuk and Torok formations in Winx-1. The well, drilled by a consortium of independent companies (88 Energy, Red Emperor Resources, Otto Energy and Pantheon Resources )
was targeting the Nanushuk play fairway of Alaska’s North Slope and was looking to build on Repsol’s 2017 success at Horseshoe-1. The Repsol well is located four miles to the west of Winx-1 and had extended the Nanushuk play 20 miles to the south of the Pikka Unit.
Preliminary interpretation indicates that oil saturation and fluid mobility in the Nanushuk was negatively impacted by the presence of dispersed clay in the matrix. While this is a known characteristic elsewhere in the Nanushuk, Winx-1 did not benefit from the presence of further high quality oil saturated sandstones as typically seen in successful wells in the play.

Record APA awards in Norway

Norway has awarded 83 new production licenses under the 2018 Norwegian APA round which covers the most explored areas of the Norwegian shelf. This is the largest number ever awarded in a single APA round. The licences were mainly distributed across the North Sea with 37 awards, and the Norwegian Sea with 32 awards. The award of 14 licences in the Barents Sea reflects the frontier nature of the region, however this figure continues to grow, with only three licences awarded here in APA 2016 and eight awarded in 2017.(Link to awards maps)

Sound Energy well result highlights reservoir variability in Morocco

Sound Energy’s TE-9 well in the Tendrara Basin in Morocco has encountered poor reservoir in the primary Triassic TAGI target and the well will be plugged and abandoned. The well was the first in a three well exploration campaign and was testing the A1 structure around 25km to the north west of the company’s Tendrara production concession, with a mid-case pre-drill estimate 0.7TCF gas in place. Since 2016, Sound has successfully drilled and tested the TE-6 and TE-7 wells in the core Tendrara area around the TE-5 discovery well, however results from the larger step out wells such as 2017’s TE-8 (which encountered tight TAGI sands to the west)  and exploration further afield in TE-9 have not been as encouraging.

Samo-1 hits water for FAR in Gambia

The first well to be drilled offshore The Gambia since 1979 has encountered water bearing sands in a disappointing result for operator FAR Limited. Samo-1 was targeting best estimate recoverable resources of 825mmbbls oil in shelf edge Albian sandstones located around 5km south of the Cairn operated SNE field in Senegal, in which FAR is also a partner. The well was an extension of and on trend with similar sands in SNE that had been successfully drilled and proven in nine exploration and appraisal wells. Samo-1 was located in Block A2, immediately adjacent to SNE and this proximity was reflected in the well being assigned a COS of 50%.

Pontoenoe-1- latest well to disappoint offshore Suriname

Kosmos Energy is plugging and abandoning its Pontoenoe-1 exploration well in Block 42 offshore Suriname, after encountering water in the Upper Cretaceous primary target. It is the company’s second well to be drilled in the region this year, with the Anapai-1 well also failing to find hydrocarbons in the Lower Cretaceous. Both wells did however encounter high quality reservoir and Kosmos believes it has found evidence of a working source kitchen in Pontoenoe-1. Both appear to have failed due to a lack of trap, a key risk in stratigraphic prospects. The company expects to return to drill in Suriname in 2020, where it holds a portfolio of multiple independent prospects. The Kosmos wells were highlighted by us as wells to watch in our ‘Exploration Watch: 2018 exploration wells’ report.

Tullow’s Namibian well disappoints

Tullow Oil’s Cormorant-1 well is being plugged and abandoned after encountering water bearing sands, in the latest well to be drilled in the Walvis Basin offshore Namibia. Interest from industry has been intensifying as it looks to capitalise on the 2013 breakthrough Wingat and Murombe wells, and the majors have been moving in, with ExxonMobil farming into two separate deals in 2018. Attention in the region will now switch to the south of Cormorant, as the Ocean Rig Poseidon moves to PEL 71 to drill Prospect S for Chariot Oil & Gas. Both Cormorant-1 and Prospect S were highlighted by us as wells to watch in our ‘Exploration Watch: 2018 exploration wells’ report.

Tullow spuds Cormorant well offshore Namibia

UK independent Tullow Oil has spudded the Cormorant exploration well in the Walvis Basin offshore Namibia and highlighted by us as a well to watch in our ‘Exploration Watch: 2018 exploration wells’ report. The well is targeting resources of 125mmbbls in a basin slope Cenomanian Cretaceous fan covering 120km2. If successful, the well would open up a potential 1bnbbls in other fans for the company together with the rest of the basin for the industry, where majors have been building a position in recent years, most recently with ExxonMobil’s 30% farm in to AziNam’s PEL 44 licence immediately to the south of Cormorant. The well is one of two high profile wells to be drilled in Namibia this year, with Chariot Oil & Gas due to drill its Prospect S well from mid-October and also covered in our report.

Mexico: reassurance or uncertainty?

Italian major Eni received approval this week for a $7.49bn development of the Amoca, Mizton and Tecoalli fields offshore Mexico, and the first such approval since the election of the new administration under President -elect Andres Manuel Lopez Obrador (Amlo).  Last week, Amlo unveiled his plans to boost the country’s energy sector, with $4bn set aside for state operator Pemex to drill new wells in 2019, and with the goal of increasing production by 600,000bbl/d over the next two years. Also included are plans to build a new refinery and rehabilitate six existing refineries, but no reference was made to the fate of future bid rounds, which he pledged during campaigning to pause and review.

Drilling success remains elusive in Suriname

Kosmos Energy’s Anapai-1 is being plugged and abandoned after failing to find hydrocarbons in the latest well to be drilled offshore Suriname. The well is the latest in a number of recent attempts to prove an extension of the Cretaceous fan play that has been so successful for ExxonMobil in neighbouring Guyana (The company has just announced its eighth discovery, Longtail, in its prolific Stabroek block).

Major resource upgrade for Europa in the Porcupine Basin

Europa Oil & Gas has almost doubled its prospective resource estimate in its FEL 3/13 licence in the Porcupine Basin offshore Ireland. The completion of pre-stack depth migration (PSDM) reprocessing of 3D seismic data originally acquired in 2013 has led to an estimated combined gross mean un-risked prospective resources on the licence of 2.9 bnboe, up from the 2016 estimate of just under 1.5 bnboe. The increased understanding of the Beckett, Shaw and Wilde prospects will provide a fuller picture to potential partners that Europa will be hoping to attract when it launches a farm out process for FEL 3/13 after providing similar updates on its other Porcupine licences, FEL 2/13 and FEL 1/17.

Plenty of action for Hurricane on Lancaster EPS

Since our most recent note on Hurricane Energy, ‘Lancaster EPS on track and on budget’ activity has continued at pace for the company as it remains on track for first oil in H119. Last week the offshore installation phase of the Lancaster EPS commenced with the installation of the Enhanced Horizontal Xmas Trees on the two existing wells, 6 and 7z, completed by the Far Superior offshore construction vessel. In addition the Lancaster EPS buoy departed from Drydocks World in Dubai on the Jumbo Kinetic vessel and is scheduled to arrive in Lerwick in the Shetland Isles by the end of June, allowing installation of the turret mooring system for the Aoka Mizu FPSO to take place on schedule by the end of Q318. Meanwhile, we expect that re-entry and completion operations on the 6 and 7z wells will commence imminently, since the Paul B Loyd Jr rig is now on location. The activity will provide plenty of opportunities for those who like to track vessel movements.

Implications of Rabat Deep 1 results

Following on from this weeks’ announcement that Eni’s Rabat Deep 1 well offshore Morocco had encountered only limited hydrocarbon indications, partner Chariot Oil & Gas has provided an early set of conclusions regarding the outcome of the well.Under the terms of its farmout to Eni, Chariot was fully carried for the cost of the well.

UK independents pick up blocks in Mexico’s Round 3.1

Premier Oil was awarded three blocks, while Cairn Energy has picked up one block in the latest shallow water round offshore Mexico. Premier beat off bids from five other consortia for Block 30,  which was the most hotly contested of the round. The company holds a 30% WI in the Sureste basin block, which will be operated by DEA and partnered by new entrant Sapura.

Some way to go for FAR in FAN

FAR has today released independently assessed resource figures for the FAN deepwater basin discovery offshore Senegal. RISC assigns 2C recoverable resources of 198mmbbls, based on data from the FAN-1 discovery well, drilled in 2014. Given that the well encountered thin reservoir sands of disappointing quality, the JV has since focused on appraising and developing the more attractive SNE field that sits nearby in shallower water on the shelf.

Kosmos exploration hiccups

Kosmos this week announced that its most recent exploration well offshore Mauritania, Lamantin-1, was water bearing.

The well is the second disappointment in a four well exploration campaign offshore Mauritania and Senegal designed to test the outboard basin floor fan fairway. Since its Tortue-1 discovery in 2015, the company had enjoyed a 100% success rate in the region, with 25 Tcf discovered across five wells.

Tullow’s Araku result completes our 2017 wells to watch list

At the start of this year, we highlighted seven exploration wells due to be drilled in 2017, all involving independent companies and targeting resources over 100mmboe. The results from the last of these wells, Tullow’s Araku, were announced last week, with the offshore Suriname well proving the presence of gas condensate but with no significant reservoir quality rocks.

Verbier delivers after sidetrack

Statoil’s sidetracked Verbier well has discovered oil after the main wellbore found water filled sand. The company was targeting oil in an updip location on the structure together with joint venture partner Jersey Oil & Gas (JOG). Statoil believes that the 20/05b-13z well has proven a minimum recoverable resource of 25mmbbls, and that the upside could be as much as 130mmbbls. The JV has not at this stage provided details of the discovery such as sand quality and thickness, or of the location of the sidetrack. Appraisal wells will now be planned to assess the commerciality of Verbier, and to mature further prospectivity in the P2170 licence including the Cortina prospect and Meribel lead.

Fatala well latest disappointment offshore West Africa

Results from Hyperdynamics’ Fatala-1 are the latest in a number of disappointing wells drilled offshore West Africa. It joins Ophir’s Ayame-1X well in Cote d’Ivoire and ExxonMobil’s Liberian well Mesurado-1 as highly anticipated exploration wells that have failed to deliver over the last year in an effort to extend the successes seen in Mauritania, Senegal and Ghana.

Drombeg adds to Druid disappointment

The Druid/Drombeg frontier exploration well, 53/6-1, is currently being plugged and abandoned after encountering porous water bearing reservoir across both target intervals. Operator Providence Resources announced the results from the deeper Drombeg target this week, following on from similarly disappointing results from Druid in August.

Korpfjell disappoints in the Barents

One of the most anticipated exploration wells of 2017, Korpfjell, has proven a small non-commercial gas volume in the frontier southeast region of the Barents Sea. The Statoil operated well had been targeting oil in a large structure that was estimated by partner Lundin to be over four times the size of that seen in the giant 1.9 - 3bnbbl Johan Sverdrup field.

Significant discovery for Premier offshore Mexico

Premier’s discovery in Zama-1, offshore Mexico, demonstrates why international companies have been lining up to secure positions in the region. The well encountered net oil bearing reservoir in the Upper Miocene that the company estimates contains over 1 bn bbls gross oil in place (while partner and operator Talos Energy gives a range of 1.4 to 2bnbbls).

Sound focus on Morocco after Badile disappointment

Sound Energy will switch its focus to its ongoing activity in its Sidi Moktar licence onshore Western Morocco following the sub -commercial gas volume discovered at Badile.

South east basin most popular in latest Mexico round

Following on from our recent Offshore Mexico ‘Exploration Watch’ (Click here for report), bidding in Round 2.1 was concentrated on the south east basins and saw the first entry to the basin of supermajor Shell as well as UK independent Cairn Energy. Ten of the fifteen shallow water blocks on offer were awarded, with nine of these located in the Sureste Basin. Only one block, Block 2, was awarded (to Dea Deutsche and Pemex) in the five blocks on offer in the Tampico-Misantla and Veracruz basins.

Porcupine Basin attracts Total

Total is the latest major oil company to move into the Porcupine Basin offshore Ireland, a region that has been generating interest across the industry. It has entered into two separate agreements with Providence Resources and Sosina Exploration that will give it the option to farm into Frontier Exploration Licence FEL 2/14 as well as securing a 50% WI and operatorship of Licensing Option 16/27. FEL 2/14 is the location of the upcoming 53/6-A Druid/Drombeg well which is due to spud at the end of this month and was highlighted in our ‘Wells to watch 2017’ report. Click here for report  LO 16/27 is to the north of Druid/Drombeg and contains the Avalon prospect.Providence has also agreed an option to farm out a further 20% of LO 16/27 to Cairn.

Premier spuds Zama-1 offshore Mexico

The spudding of Zama-1 marks the first offshore exploration well to be drilled in Mexico by an international company in over 80 years. The Talos Energy operated well, partnered by Premier Oil and private Mexican company Sierra Oil and Gas was on our list of wells to watch in 2017. Click here for report.

Cairn/FAR return to deepwater FAN in Senegal

The next well to be drilled by the Cairn/FAR joint venture offshore Senegal will be the FAN South-1 exploration well, marking a shift away from the shelf and back into the basin where the first exploration well, FAN-1, was drilled in 2014.

Wells to watch in 2017

Since the oil price crash of 2014, exploration has been particularly badly hit as companies looked to trim expenditure. Wood Mackenzie estimates that 2017 exploration will account for 8% of upstream expenditure, down from historic norms of 14%. In this more difficult environment, any surviving exploration has tended to be led by majors, for example ExxonMobil’s giant Liza discovery offshore Guyana in 2015. In our most recent Exploration Watch, we highlight wells due to spud in 2017 that involve independent companies, with resources estimates greater than 100mmboe. Our exception is the much anticipated multi-billion barrel potential Korpfjell prospect in the Barents Sea offshore Norway, which is operated by Statoil and partnered by major companies.

Filicudi discovery - positive start to 2017 Barents exploration

Lundin’s Filicudi discovery is a successful start to exploration drilling in 2017 for the Barents Sea. The prospect holds an estimated 35 - 100mmboe and encountered 63m of oil and 66m of gas in high quality Jurassic and Triassic sandstones. Filicudi is on trend with Johan Castberg around 40km to the north east and the discovery has derisked the adjacent 218mmboe Hurri prospect together with the 285mmboe Hufsa. As a result, both prospects now carry a 25% CoS, and Lundin and licence partners AkerBP and Dea are considering drilling one or both of these later this year.

Norway awards 56 new licences

Norway has awarded 56 new production licences under the 2016 Norwegian APA (Awards in Pre-defined Areas) Licence Round, which covered the more explored areas of the Norwegian Continental Shelf . Interest was strongest in the North Sea area with 36 awards, while 17 were awarded in the Norwegian Sea. Only three awards went in the Barents Sea, reflecting the frontier nature of the basin. Link to awards maps

2017 Senegal appraisal to kick off in January

Cairn Energy confirmed today that it will return to drilling offshore Senegal by the end of January this year, with two firm wells designed to further evaluate its 473mmbbl SNE discovery. The Stena DrillMax is contracted for these two appraisal wells together with multiple follow on options yet to be confirmed but which could include exploration wells in addition to further appraisal.

Mexico shale potential

Mexico’s Secretary of Energy, Pedro Joaquin Coldwell, indicated in a speech in Houston last week that the country’s first auction for its northern shale fields, delayed because of low oil prices, could now take place as early as Q2 2017.

According to an EIA assessment report carried out in 2013, Mexico holds technically recoverable resources of 545TCF of shale gas and 13.1blnbbls of shale oil and condensate. The bulk of this sits in the Eagle Ford Shale of the Burgos Basin which is estimated to contain 343TCF and 6.3bnbbls. Since the reservoir in Burgos is an extension of its commercially successful equivalent in South Texas there are hopes that the US fracking successes can be repeated here. In the basins to the south and east of Burgos the shale geology becomes more complex and shale development potential is less certain.

Barents Sea - frontier drilling in 2017

The Barents Sea to the north of Norway is estimated to contain almost half of the recoverable undiscovered resources remaining in the Norwegian Continental Shelf (NCS). At present only two fields, Statoil’s Snøhvit and Eni’s Goliat, are in production but a number of discoveries since 2011 have the potential to be stand-alone developments and are currently being appraised. The recent 23rd licensing round awarded acreage exclusively in the Barents and for the first time included the frontier South East Barents. Statoil has already indicated that it plans to drill the high-risk/high-reward Korpfjell prospect located in PL859 in this frontier area as part of a five to seven well Barents exploration programme in 2017.

Conoco sells Senegalese discovery blocks - fair price?

Conoco’s sale of its interests in Senegal can be used as a barometer of industry sentiment and as a yardstick on valuation of the assets.

We believe the deal reached was a fair reflection of the value of the assets given the current environment, where the collapse in the oil price has lead to a re-evaluation within the industry. Conoco may have signalled its intent to sell the assets, but as a result this was an open process where all comers could have bid.