The recent RIU Good Oil and Gas Energy Conference, held over two days, shed light on the rapidly evolving dynamics of the oil market, where the prospect of oil prices mounting to $100 per barrel is now a swift reality.
A Crude Reality
While West Texas Intermediate (WTI) recently settled at $86.87, marking the end of a nine-day rally, and Brent crude futures settled at $89.92 per barrel, industry experts are acknowledging the influential role of momentum in shaping current market dynamics.
Amid these developments, Saudi Arabia’s decision to prolong unilateral production cuts for the next three months and Russia’s move to trim exports by 300,000 barrels per day until year-end have attracted attention, with these actions, when combined with the ongoing OPEC+ production cuts launched late last year, having had a notable impact on the supply side of the oil market.
Notably, despite facing challenges such as China’s slower-than-anticipated economic recovery and heightened production levels from US producers, crude futures have surged by over 25% since late June.
Analysts anticipate that the oil market will continue to tighten throughout the remainder of the year, driven by the unwavering commitment of Riyadh and Moscow to production cuts. Their projections indicate an average price of $86.50 per barrel for WTI and $91 per barrel for Brent International in the final quarter of this year.
Goldman Sachs analysts adopt a more bullish stance, entertaining the possibility of Brent crude reaching $107 per barrel by December 2024, with this projection hinging on the assumption that OPEC+ maintains its announced 2023 cuts through the end of 2024.
Opportunities for Emerging Players
As the oil industry navigates these turbulent waters, small and emerging oil and gas companies find themselves in a unique position to seize opportunities, with the evolving landscape offering players a chance to contribute to the energy market’s transformation.
Melbana Energy (ASX:MAY)
Melbana Energy (ASX:MAY), the Australian energy company with a growing footprint in Cuba, is poised for an exciting period ahead as it looks to tap into substantial oil resources in multiple regions.
To grasp the magnitude of Melbana’s growth, one need only compare its financial standing today to that of three years ago. In 2020, the Company’s market capitalisation was $18.5 million, with a modest $1.5 million in the bank. Fast forward to the present, and Melbana boasts a market capitalisation of $253 million, supported by a substantial cash reserve of $35 million.
In the Australian sector, Melbana secured a farm-in agreement with industry giants Santos and Total for the Beehive prospect. While the option to fund the exploration well expired, the Company sold WA-488-P for $7.5 million and a forward royalty. The Beehive prospect, estimated to hold up to 1.4 billion barrels of oil, is slated for drilling in 2024 by a prominent US major.
Moreover, Melbana is actively farming out its adjacent permits, WA-544-P and NT/P87, further unlocking its potential with a potential recoverable resource of 1.2 billion barrels.
On the international front, Melbana has embarked on a strategic partnership with Sonangol, Africa’s largest oil producer, in Cuba’s Block 9, with Sonangol providing $5 million upfront and funding two exploration wells, securing a 70% interest.
Meanwhile, Cuba, nestled in the oil and gas-rich Gulf of Mexico, presents an attractive opportunity. Despite a daily oil consumption of 90,000 barrels, local production only meets around 45,000 barrels, creating an immediate market demand right at its doorstep.
With favourable infrastructure and a government keen on fostering energy production for the benefit of its people and economic prosperity, Melbana’s long-standing permit of 2,380 square kilometres in the region holds significant promise.
The drilling of Alameda-1 and Zapato-1 wells yielded promising results, with Alameda-1 certified to contain a best case prospective resource of 267 million barrels across multiple zones. Alameda-2 further confirmed the presence of moveable oil across various zones, with flow rates of over 1900 barrels per day of 19° API 30 cP oil.
Figure 1: Alameda-1 (TD of 3,916 mMD) intercepted three geologically independent reservoirs.
Additionally, significant progress has been achieved in evaluating the Amistad Formation’s Net Pay, with measurements revealing a substantial increase to 346 metres TVD, surging from the previous 109 metres, and further extending to an impressive 615 metres when factoring in the highly fractured limestones, constituting 45% of the total interval.
Figure 2: Oil on shakers whilst drilling Zapato-1
In the coming six months, Melbana is gearing up to transition from its successful Alameda-2 endeavour to the eagerly anticipated Alameda-3 Project.
The excitement surrounding Alameda-3 lies in its ambitious target of tapping into a recoverable resource estimated at a 179 million barrels of oil, albeit at a modest 5% ‘typical Cuban’ recovery rate.
Melbana’s certified resource of a staggering 5 billion barrels of Oil-In-Place at Alameda-1, with potential upside to 12 billion, opens the door for exploration of the deeper sheet, potentially yielding lighter oil and further enhancing the Company’s ‘potential to rank amongst the world’s greatest onshore oil discoveries.’
Figure 3: 1 McDaniel & Associates, Competent Persons Report August 2022
Bass Oil (ASX:BAS)
Bass Oil Limited (ASX:BAS) is an established Australian-listed oil producer with operations in the Cooper Basin, Australia, and the South Sumatra Basin, Indonesia.
Figure 4: Bass Oil operating locations
The Company holds a majority interest in eight permits within the Cooper Basin, including full ownership of the Worrior and Padulla oil fields. Additionally, it has a 55% stake in a South Sumatra Basin KSO (Kontrak Kerja Sama Operasi), with Bass Oil’s strength lying in its debt-free status and its commitment to leveraging its operational expertise, strong reputation, and industry relationships in both Australia and Indonesia.
Bass Oil’s growth strategy revolves around its substantial oil assets, which generate consistent cash flow. With a market capitalisation of $30 million, the Company has a current daily production rate of 400 BOPD from its Indonesian and Southern Cooper Basin oil assets.
Figure 5: Cooper Basin asset location map
The Company is exploring growth opportunities, particularly in the Northern Cooper Basin, where it anticipates potential gas reserves and an Extended Production Test (EPT) at its Kiwi 1 well is planned to commence by year-end.
Bass Oil’s strategy involves acquiring late-life assets to extend their production life. In the Cooper Basin, they have doubled oil production from around 65 BOPD at acquisition to over 130 BOPD, and 2P reserves have risen from 200,000 barrels to 388,000 barrels of oil, typically with an Net Present Value of A$15/bbl to A$25/bbl in reserves.
Looking ahead, Bass Oil is committed to a Worrior Production Growth Strategy, which includes ongoing production optimisation at Worrior and Padulla.
The installation of a second power fluid pump at Worrior is expected to enhance production, with the Company also aiming to increase reserves and production by converting contingent resources (2C) of 418,000 barrels of oil in the Murta formation.
Beyond its current operations, Bass Oil is actively exploring value-accretive acquisition opportunities, positioning itself for continued success in the oil and gas industry.
Red Sky Energy Limited (ASX:ROG)
Red Sky Energy (ASX: ROG), a burgeoning player in the oil and gas exploration and development sector, is actively pursuing opportunities to acquire, drill, and develop its valuable resources. Despite being a small-cap company, Red Sky Energy boasts a market capitalisation of $26.51 million.
During the Good Oil Conference, Red Sky Energy’s Managing Director, Andrew Knox, took the stage on the second day of the event to provide investors with a comprehensive update on the Company’s advancements and achievements related to its two ongoing projects.
Figure 6: Red Sky Energy’s Managing Director Andrew Knox presenting at the Good Oil Conference. You can view the Company’s slide presentations here.
The Company’s primary focus lies in its prominent projects, with the latest addition being the Innamincka Project, where Red Sky Energy holds a substantial 20% stake. Additionally, the Company proudly owns the Killanoola Project, which has achieved a noteworthy milestone this year, successfully securing a crucial crude sale agreement with Viva Energy (ASX: VEA), covering the sale of all produced crude.
Figure 7: The Killanoola Oil Project in South Australia’s onshore Otway Basin.
The Killanoola Oil Project stands poised for sustained long-term production, with Red Sky Energy recently revealing a Best Estimate PIIP (Petroleum Initially In Place) now pegged at 135.5 million barrels, marking a 47.7% surge compared to the previous estimate in March.
As part of its strategic vision, Red Sky Energy is aggressively pursuing its objective of achieving recoverable oil exceeding 30 million barrels, thus bringing the Flagship project significantly closer to generating substantial cash flow.
The Company’s active pursuit of strategic acquisitions to enhance its oil portfolio underscores its transition from an oil explorer to an oil producer.
Brookside Energy (ASX:BRK)
Brookside Energy Limited (ASX: BRK) has recently achieved a significant milestone by successfully establishing commercial oil production in the Juanita Well, marking a promising development within its expanded Bradbury Area of Interest (AOI) in the Arbuckle Uplift – Ardmore Basin, Oklahoma.
This achievement highlights the effective utilisation of the prolific Simpson Group formation, known for its abundant hydrocarbon reservoirs, resulting in an initial peak production rate of 130 BOPD and an average production rate of 112 BOPD over the last five days.
Positioned within Brookside Energy’s Bradbury AOI, the Juanita Well, with access to ten potential oil reservoirs within the Simpson Group, represents a crucial component of the Company’s strategy, emphasising its focus on commercially viable zones and its intention to conduct thorough tests on remaining targeted reservoirs.
Brookside Energy recently reached the milestone of delivering its millionth barrel of oil equivalent from its portfolio of high-impact, low-cost wells in Oklahoma, including 715,000 BBLS of liquids.
This achievement, attained in less than two years since the Company’s first operated well, Jewell, came into production, underscores Brookside’s successful exploration strategy and its ability to bring multiple wells online, including Flames and Ranger Wells, contributing to what the Company terms a “Transformative Year.”
Additionally, the youngest well in their portfolio, Wolfpack, set a new company record for IP24 production rate at 2,034 Barrels of Oil Equivalent per day.
Figure 8: Brookside Energy 2Q2023 results
Looking ahead, Brookside Energy remains proactive in its pursuit of monetising its substantial Proved and Probable (2P) Reserves of 11.9MMBOE, valued at US$170.5 million.
The Company is actively developing its fifth well, the Juanita Well, which has shown potential with peak production testing rates of up to 329 BOE, marking a significant addition to the Company’s portfolio. This journey to one million BOE is a testament to both the geological quality within Brookside’s tenure and the operational and corporate expertise of the Brookside team.
Triangle Energy (ASX:TEG)
Triangle Energy (Global) Limited (ASX:TEG), a prominent player in the energy sector, has strategically positioned itself in the Perth Basin, approximately 270 kilometres north of Perth, Western Australia, setting the stage for substantial opportunities and growth.
The Company holds a 50% interest in two permits, a strategic partnership formed with New Zealand Oil & Gas and Talon, each holding a 25% stake. This collaboration has proven advantageous, as Triangle Energy secured an impressive $20 million in work commitments, allowing it to operate in a free-carried manner.
Looking ahead, the Company’s strategic plans include the execution of two wells in the first half of the upcoming year. One of the most promising prospects on the horizon is the Booth prospect, where the “best estimate” suggests a prospective gross gas resource of 279 billion cubic feet (Bcf) of gas.
While success is never guaranteed in the exploration field, the potential value is substantial. To provide context, based on previous transactions, 1Bcf of gas in the Perth Basin is valued at approximately $2 million. Therefore, should Booth align with the best estimate, Triangle Energy’s 50% interest, equivalent to approximately 140Bcf, would represent a significant milestone for the Company, currently valued at $28 million.
In addition to gas prospects, contributing to a total best estimate net of 197Bcf for Triangle Energy, the Company has identified several promising small oil prospects, such as Becos, with an estimated potential net of 2.5 million barrels.
Although Triangle Energy has already solidified its presence as an oil producer by operating in the offshore Cliff Head Project, where it serves as the registered operator and holds a significant 78.75% interest in the Cliff Head Oil Field (PL WA-31-L), which includes both the onshore Arrowsmith Stabilisation Plant and the offshore Cliff Head Alpha Platform, the Company is now redirecting its attention toward a future in carbon capture and storage (CCS) operations.
Figure 9: Triangle Energy’s asset locations. You can view the Company’s slide presentations here.
As part of this strategic transition, Triangle Energy has decided to divest its interest in the Cliff Head project to Pilot Energy (ASX: PGY), a transaction involving $15 million in progress payments and continuing royalties.
With this shift, the Company is poised to focus on its core interests in conventional oil and gas exploration within the Perth Basin, while actively exploring potential new additions to its portfolio in diverse regions spanning the United Kingdom and Asia.
ADX Energy (ASX:ADX)
ADX Energy (ASX:ADX) is a dynamic oil and gas exploration and production company with a market capitalisation of $32.59 million, strategically focused on projects in Austria, Romania, and Italy.
ADX’s operations in Italy have recently received a significant boost with the ratification of licenses by Italian authorities for its projects situated in the Sicilian Channel. These projects present a compelling opportunity for gas exploration, underpinned by an attractive fiscal framework, minimal exploration risk, shallow water conditions, and substantial unmet gas demand in both Italy and Europe.
Within Italy, ADX Energy has identified and prioritised five high-quality gas prospects, with these prospects deemed low risk, primarily due to their straightforward 4-way dip anticline closures.
Additionally, each of these prospects exhibits a seismic amplitude response, which serves as a potential indicator of the presence of gas, further enhancing the Project’s attractiveness and potential for success.
In Romania, the Company is active under its Parta exploration permit and Iecea Mare production permit, with a 49.2% equity interest in Danube Petroleum Limited.
ADX Energy’s primary operations are in Austria’s Vienna Basin, a historically successful oil production region in Europe, with the acquisition of the Zistersdorf and Gaiselberg production facilities in late 2019, along with a substantial interest in the Welchau-1 gas prospect, boasting an estimated 807 billion cubic feet equivalent (BCFE) best technical prospective gas resource.
Figure 10: Map showing ADX-AT-II license area and the planned Welchau-1 drilling location in the Northern Calcareous Alps.
The Welchau Project stands as a project of paramount importance, not only for its substantial resource potential but also for its alignment with the United Nations’ Sustainable Development Goals, particularly Goal 7: Affordable and Clean Energy, as the world undergoes a transition towards decarbonization.
Notably, ADX Energy has recently secured funding from the Austrian Science Fund (FFG) to bolster its comprehensive scientific endeavour in the Welchau project area, aimed at uncovering valuable geological insights and sustainable energy prospects.
Elixir Energy (ASX:EXR)
Elixir Energy (ASX: EXR) is a small-cap company, currently holding a market capitalisation of $61.78 million.
The Company’s primary focus lies in gas exploration and development, with a specific emphasis on coal-bed methane natural gas, found in the South Gobi region of Mongolia and Queensland, Australia.
Figure 11: Elixer Energy Managing Director Neil Young presenting at the RIU Good Oil and Gas Conference. You can view the Company’s slide presentations here.
Apart from its Oil and Gas Projects, Elixir Energy has been actively involved in the development of the Gobi H2 green hydrogen project and a solar project in Mongolia.
The Company holds complete ownership of its extensive Nomgon Project, spanning approximately 30,000 square kilometres, where the Pilot Production Project commenced this year and is currently ongoing, with plans for new well drilling in the near future. Positioned strategically near China, this project aims to maximise distribution and export potential.
Figure 12: Elixer Energy Grandis Project in Queensland Australia
Within Australia, Elixir Energy’s portfolio encompasses the wholly-owned Grandis Project in Queensland, featuring an initial contingent resource (2C) of 365 billion standard cubic feet of gas and plans for a high-impact well slated for drilling in October this year.
You can view recorded presentations from all the speakers and companies that participated in the RIU Good Oil & Gas Energy Conference by visiting the link here.