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OGV Energy weekly oil and gas review

OGV Energy weekly oil and gas review


It might have been the week before Christmas, but there was still a steady flow of news from the oil sector, both good and bad.

Among the majors, Royal Dutch Shell PLC made a bad start to the week, revealing on Monday that it will write down the value of its oil and gas assets by a further U$3.5bn to US$4.5bn due to the uncertain backdrop.

The Anglo-Dutch oil giant took a US$16.8bn write-down earlier this year but said this time the impairments relate to a partial write-down of Appomattox in the Gulf of Mexico, its refineries and integrated gas contracts.

Shell revealed the write-downs in a statement ahead of its fourth-quarter results and said higher underlying operating expenses would also affect adjusted earnings across all  its businesses.

But there was good news on the second line on Wednesday, with Cairn Energy PLC announcing that it has been awarded costs and damages worth US$1.2bn by a tribunal in the Netherlands for a tax dispute with India dating back to 2015.

In a statement, Cairn said that the tribunal ruled unanimously that India had breached its obligations to the company under a treaty with the UK.

The complaint was filed in 2015 following a capital gains demand of US$1.4bn from India’s tax authorities that stemmed from the listing of the oil group's Indian arm in 2007.

Cairn sold most of its stake in the Indian business to Vedanta in 2011, but the outstanding 10% was seized by the Indian government in 2014 along with dividends owed to the FTSE 250 company via its holding in Vedanta.

And power firm SSE PLC announced on Tuesday that it has agreed to sell all of its interests in its portfolio of gas exploration and production assets to Viaro Energy for £120mln.

The transaction is based on a 'locked box' economic date of March 2019 and is subject to regulatory approval and partner consent.

The portfolio comprises non-operational equity shares in over 15 producing fields in three regions in the North Sea, where SSE will be obliged to pay 60% of the decommissioning costs.

Turning to the small caps oilers, on Monday Bahamas Petroleum PLC announced that it had commenced drilling of the Perseverance 1 well, with spudding having taken place on December 20, 2020.

The AIM-listed firm said the well is expected to take 45-60 days to complete and is targeting P50 prospective oil resources of 0.77bn barrels with an upside of 1.44bn barrels.

In a statement, BPC chief executive Simon Potter said the spudding of the well was a “momentous milestone”.

On Tuesday, Westmount Energy Limited, an investor in oil exploration assets in the Guyana-Suriname Basin, revealed that it has increased its stake in JHI Associates to 7.2% following the purchase of 250,000 shares for US$400,000.

The main asset of Ontario-registered JHI is a 17.5% carried interest in the Canje Block, which covers over 4,800 square kilometres, offshore Guyana. It sits next to and in the same geologic basin as the Stabroek Block which has delivered eighteen substantial oil discoveries since 2015 for a total of nine billion oil-equivalent barrels.

JHI is carried for up to four wells and is funded for the drilling of additional wells.

And on Friday, Falcon Oil & Gas Ltd told investors that nitrogen lift operations should start in the next few days at its Kyalla 117 N2-1H ST2 well in the Betaloo basin of the Northern Territory in Australia.

The owners of the Betaloo licence decided earlier this month to execute operations without delay to re-enter Kyalla 117 with coiled tubing and apply nitrogen lift to lower the pressure in the wellbore and to assist with achieving and sustaining gas breakthrough. If successful, the operation will allow extended production testing to confirm at the well.

There was good news for the Gatwick Gusher this week. On Tuesday, UK Oil & Gas PLC welcomed news of the dismissal of a legal challenge to the planning permission for its Horse Hill oil field in Surrey.

"The written judgement rejects the challenge's three grounds and, therefore, the company's production planning consent remains in full force," UKOG said in a statement.

The case claimed that, in granting permission, Surrey County Council failed to assess the impact of greenhouse emissions from the use of the oil produced.

Mr Justice Holgate, however, concluded that the council acted within EU and Town and Country Planning Act environmental impact assessment guidelines and that other indirect environmental effects fall under other dedicated environmental regulatory regimes

Elsewhere, a £20.6mln share purchase agreement between San Leon Energy PLC’s chief executive Oisin Fanning and major shareholder Toscafund is to be unwound, the AIM-listed oil group said on Wednesday.

Fanning had agreed to buy 98mln shares from the fund manager in May at 21p, but San Leon said today that due to movements in financial markets since then he has been unable to raise the money required.

San Leon said Toscafund has been supportive of the efforts Fanning has gone to in endeavouring to settle the purchase consideration but now both parties have decided the prudent course of action is to recognise that the deal will not go ahead.

And in the boardroom, United Oil & Gas PLC, the growing oil and gas company with a portfolio of production, development, exploration and appraisal assets, announced the appointment of Tom Hickey as an independent non-executive director with effect from January 1, 2021.

The group noted that Hickey is known across the oil and gas industry and beyond as a significant contributor to the success of Tullow Oil PLC in his role as CFO from 2000-08. During this time he was central to the successful conclusion of major acquisitions and exploration discoveries which helped shape that company into a leading Independent oil and gas exploration and production company.

Hickey is currently CEO of Boru Energy Limited, the West African focussed private oil and gas company, which is supported by The Carlyle Group.

Read the latest issue of the OGV Energy magazine HERE.

Published: 26-12-2020

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