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Elaine Reynolds
20 March 2019

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.

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Elaine Reynolds
31 January 2019

Exploration Watch: 2019 exploration wells

Worldwide exploration continued to be dominated by ExxonMobil’s ongoing success offshore Guyana, with five discovery wells and the opening up of two new plays. In 2019, this activity will continue, but will be joined by two separate efforts led by Tullow Oil and Repsol that will look to extend this success to the inboard Orinduik and Kanuku blocks. In Latin America attention will also be focused on Mexico, as drilling extends into deeper waters alongside further exploration of the shallower Sureste Basin. In the North Sea, potential high impact wells in the Barents Sea and West of Shetland were deferred into 2019 and activity looks set to increase in these areas this year. Onshore, we look at high impact wells in the Nanushuk trend of Alaska’s North Slope and the frontier region of Western Mongolia. Click here for full report

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5 November 2018

UK shale gas - Cuadrilla reports gas to surface

In our view, first shale gas to surface at Preston New Road is encouraging and supports results from the 2011, Preese-Hall 1 vertical well were gas was successfully flowed to surface from the Bowland shale. To date, Cuadrilla has only hydraulically fractured a small section of shale surrounding the first of two horizontal wells; gas flows on completion of the planned multi-frac are expected in early 2019 and should be significantly higher than those from current flow-back.

As discussed in Edison’s probabilistic analysis of UK shale potential, we believe that based on current knowledge, and assuming a supportive political/regulatory framework, there is a 67% chance of commercial success for UK shale (NPV15>0). We note that forward summer and winter average gas prices have risen materially since publication of our UK shale valuation, driven by declining domestic production, absence of long-term storage, rising oil prices and higher gas transportation costs.

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11 October 2018

Diversified Gas & Oil acquisition of Core Appalachia Holding Co

Diversified Gas and Oil has announced the acquisition of Core Appalachia Holding Co (Core) for a consideration of $183m comprised of $130m in cash (funded through the assumption of $93m of Core debt and $40m DGO debt drawdown) and 35m new shares issued at £1.15. The deal is expected to be immediately accretive to cash flow and earnings with synergies with DGOs existing Appalachian asset base. Net working interest production is expected to increase 19% to 71,000boed and 1P reserves +25% to 493mmboe. DGO expects immediate to near term synergies of $5-10m pa. The deal is priced at 72% of management estimated PV10 of $255m and is in line with the EQT acquisition on this metric. Assuming we were to include the Core assets at PV10, post equity dilution, the deal would add c.8.4p/share to our last published valuation of 138.1p/share excluding synergies. We note that DGOs share price has disconnected from recent spot price strength in Henry Hub in recent weeks and on our last published forecasts the stock yields c 7.4%.

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Elaine Reynolds
4 September 2018

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.

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20 August 2018

Southern gas corridor to the EU nears agreement

The EU’s desire to diversify sources of gas supply, reducing its dependency on Russia, has driven interest in developing a southern gas corridor from the East Mediterranean towards Europe. Following last month’s meeting between Trump and European Commission President Jean-Claude Juncker, an agreement between both parties was reached, and the EU is poised to raise its US LNG imports in the coming years. In addition, Egypt and Cyprus reaching an agreement to connect the Aphrodite gas field to Egypt highlights a new potential gas supply source to the EU.

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Elaine Reynolds
1 August 2018

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.

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Elaine Reynolds
6 June 2018

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.

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Elaine Reynolds
2 May 2018

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.

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Elaine Reynolds
28 March 2018

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.

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Elaine Reynolds
20 March 2018

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.

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Elaine Reynolds
7 February 2018

Lower break even for Johan Sverdrup

With the world class development almost 70% complete, estimated costs have been reduced and the resource estimate increased, bringing the break even costs down to below $15/bbl for Phase 1 of the Statoilt operated project, offshore Norway.

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Elaine Reynolds
6 December 2017

Positive news from Genel’s Taq Taq

Results from TT-29w, the latest well to be drilled in the field, have proved an oil water contact (OWC) to be 145m deeper than estimated pre-drill at this location, implying that more oil could be recovered from the flanks of the field than currently planned.

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Elaine Reynolds
26 September 2017

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.

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Elaine Reynolds
12 July 2017

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).

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Elaine Reynolds
4 July 2017

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.

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Elaine Reynolds
7 June 2017

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.

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Elaine Reynolds
23 May 2017

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.

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Elaine Reynolds
2 May 2017

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.

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Elaine Reynolds
21 March 2017

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.

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Elaine Reynolds
15 February 2017

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.

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27 January 2017

EnQuest acquisition: Ability to extract net economics (NAV) will be demonstrated over time

EnQuest’s agreement to take over operatorship of Magnus, SVT and associated infrastructure is a material operational undertaking, especially when considered in parallel with commissioning and ramp-up of production at Kraken. The transaction will involve EnQuest taking on several hundred onshore and offshore staff and contractors. With this in mind, EnQuest’s staged approach, which involves taking on just 25% of Magnus and an additional 3% of SVT at the outset, appears to be sensible. The combination of deferred consideration payments, a ‘call’ option on additional equity in the transaction assets and downside protection mechanisms suggest that EnQuest is backing its ability to maximise value from late-life assets without exposing shareholders to potential downsides. EnQuest has until 15 January 2019 to exercise its option over an additional 75% of Magnus and related transaction assets, giving it time to understand the operational complexities as well as study decommissioning options before taking on risk. 

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Elaine Reynolds
18 January 2017

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

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Elaine Reynolds
17 January 2017

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.

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Elaine Reynolds
30 November 2016

Decommissioning - changing the mindset

£1.1 billion was spent on decommissioning in the UK in 2015, accounting for 5% of total UKCS expenditure that is expected to increase to 12% in 2017. Oil & Gas UK has estimated that decommissioning on the UKCS up to 2025 represents a £17.6 billion opportunity.

With the UKCS accounting for 50% of the global decommissioning spend over the next 5 years, the North Sea is at the forefront of developing the techniques to optimise the process and could position itself as a major player in the global decommissioning industry. At a recent conference on the subject hosted by Edison, together with Addleshaw Goddard, the key themes of cost uncertainty and industry collaboration emerged.

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Elaine Reynolds
28 September 2016

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.

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Elaine Reynolds
27 September 2016

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.

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27 July 2016

SDX initiation

Egyptian producers with development and exploration upside

SDX Energy (SDX) is a London/Toronto-listed company with interests in two producing onshore fields in Egypt. Crucially for a small E&P, it will be cash flow positive in 2017 and is unlikely to return to the market for more equity to develop assets. The current work programme (of new wells, workovers and water flood) could see a more than doubling of recoverable volumes and is both cheap and relatively low risk. Once this work starts to bear fruit (later in 2016/17), the low-cost production will put SDX in the enviable position of being able to largely fund development of exploration prospects, while giving it resources and operational credibility to add further assets in Egypt. Our analysis indicates that the share price is more than supported by current operations, giving upside potential for the near-term production increases we see as likely and free exposure to exploration upside.

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9 June 2016

BP Stat review - quick thoughts and highlights


The annual BP Statistical Review is the industry standard source for tracking energy trends, usage and sources.  Full details of the Statistical Review can be found here. This year’s edition was presented yesterday, with interesting commentary made on the statistics.

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5 March 2015

African Petroleum - Initiation


We initiate on African Petroleum (see link). Pure play E&Ps are not in favour of late as poor exploration results in recent years and the falling oil price has depressed sentiment. However, for investors willing to look through near-term oil prices and seek exposure to exploration risk, African Petroleum has ten offshore blocks with large working interest positions, many of which are very close to successful wells drilled in 2014 (not least SNE-1 and FAN-1 off Senegal, and Total off Côte d’Ivoire) - as seen below.

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Elaine Reynolds
3 March 2015

Exploration Watch - Falklands


‘Exploration watch’ is a regular Edison publication focusing on upcoming exploration activity and the impact on notable E&Ps.

In this inaugural edition, we look at the upcoming campaign in the North Falklands Basin where the first well, Zebedee, is due to spud in March 2015. This campaign, targeting c 350-600mmbbl, is often referred to as ‘exploration’; however, it includes a significant element of low-risk exploration together with an appraisal opportunity, especially for those looking to expand on the existing Sea Lion footprint. With Sea Lion development FID expected in 2016, appraisal and low-risk exploration elements of the upcoming Zebedee, Chatham and Jayne East wells could all add high-value barrels to the existing 393mmboe of contingent resources identified to date. The biggest exploration targets, however, lie 40km to the south of Sea Lion where the Isobel/Elaine complex could be as big again as Sea Lion. The Falklands has seen no exploration drilling for over two years, so this campaign will be a welcome return for investors interested in what is still essentially a frontier region

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