focusIR May 2024 Investor Webinar: Blue Whale, Kavango, Taseko Mines & CQS Natural Resources. Catch up with the webinar here.
continuation:
The Elepa South oilfield is possibly the prospect which was first identified by Oryx Petroleum as Clarendon South, a “three-way dip closure against a S-displaced fault”. A second prospect, Clarendon North straddles the western border of NW OML 141into OML 59 and is a”three way dip closure against a N-displaced fault”.. Both appear to be based on seismic interpretation alone, as is also the Curlew Channel gas and condensate prospect located in the southern region of the NW area.
The wider geographical implications of ZEN's initiative arise from the historic background to OML 141. This was license area OPL 229 in the 2000 competitive bidding round, and was awarded to Emerald Energy Resources Ltd a Nigerian independent which was in 2007 granted a 20 year lease [presumably inclusive of Risk Service Contract] for the whole area including the NW. Prior to April 2019, when the OML 141 lease was revoked, apparently due to non-payment of fees, Emerald was seeking farm-ins and participants in Risk Development Finance Contracts for various projects in the lease area. Apart from CNOOC [35% WI for which it paid $60m] from 2006-8 and Oryx [38.67% WI ] from 2011-17, which tried exploratory farm-ins, Noble Hill-Network Ltd appears to have been the only other participant, acquiring in Sept 2014 the 100% Risk Service Contract for the 105 sq km of the NW, including Barracuda and the other prospects detailed above. Presumably the lease and associated RSC for the marine portion of OML 141, 1190 sq km in area and >25m water depth has reverted to the Nigerian Dept of Petroleum Resources and remains so since none of the O & G prospects it contains would have qualified as Marginal Fields in the latest bidding round. Of the 10 prospects 2 have been drilled with encouraging results and most could be exploited from wellhead platforms organised around a Mobile Oil Processing Unit with access to the nearby Brass Marine Terminal for export.. This could therefore constitute long term potential if ZEN acquires an equity interest in NHNL.
Long-term investors will recall that AC walked away from an Exclusivity Agreement for the acquisition of a major Central Asian asset in 2018 as well as the Coro Italy acquisition and other gas assets in Norway and Poland during 2019/20, so is not easily satisfied with whatever is on offer. This Nigerian opportunity will demand very rigorous scrutiny so I will not be surprised if it meets a similar fate.
AGEOS.
Further to my post of 07.09.2021 regarding NW OML 141 there are aspects other than the potential of the Barracuda Field which will doubtless be considered by ZEN in evaluating a possible equity stake in Noble Hill-Network Ltd [NHNL]. The 'Exclusivity Agreement' RNS specifically mentions the Elepa South oilfield and the Curlew Channel gas and condensate prospect but there are other potential targets in the 105 sq km NW area all of which are presumably included within the Risk Service Contract [RSC] 100% held by NHNL and in which ZEN would acquire an interest in proportion to whatever equity holding it acquires. A stake in these assets might in the longer term also open the door to involvement in development of known prospects in the offshore 1190 sq km area of OML 141, as will be outlined later.
With regard to the Barracuda Field the most convenient, but somewhat superficial, source of information is that of the ADM Energy website, via 'operations/barracuda' [ www.admenergyplc.com ] for which, note the following anomalies.
Firstly the details of equity owners of OML 141 listed beneath the asset map is misleading. Emerald Energy Resources Ltd lost its licence in OML 141 in April 2019, the AMNI International Petroleum Development Co is listed on the Nigerian Corporate Registry as “inactive” and Bluewater O & G appears to have transferred its 2% OML 141 interest to Supernova Energy B.V. in 2019. Secondly the ref to Karra Oil Noble Hill UK Ltd is now outdated [company dissolved 03.08.2021] and is superseded by the formation of K.O.N.H. (UK) Ltd [registered 19.02.2021] as explained in my 2 posts of 31.08.2021. The 'OML 141 geology' highlights are also regional generalities which do not necessarily apply to Barracuda.
For a comprehensive account of Barracuda we must await the CPR, which as ADM confirmed on 25.05.2021 has been commissioned from Xodus Group Ltd. Although anticipated within “4-6 weeks” I assume it has been delayed possibly due to difficulty in obtaining access to the 700 sq km of 3D seismic,1200 km 2D seismic and well-log petrophysics, originally and probably still held by Emerald Energy. That will include the data acquired by CNOOC Ltd in 2007 and by Oryx Petroleum which spent $14.6m on seismics in 2014. A positive conclusion to this CPR will be necessary before the RSA Consortium can confirm the operational agreements in place with Eunisell Ltd, OES Energy Services [rig provider] and 4Motion Drilling Services, to commence with the Barracuda 5 well. The CPR will also be a decisive element of ZEN's due diligence and in the consideration of any financing. As ADM is due to release 2020 results by end of this month, an update on the CPR and other RSA related developments should accompany this.
To be continued
Although I have no equity interest in ADM Energy I do have a substantial share-holding in Zenith Energy, for which reason I have researched ADM's prospective involvement in development of the Barracuda Field to better understand its relevance to ZEN's possible role as RNS'd in the “Exclusivity Agreement” of 31.08.2021.
On 31.08.2021 and 01.09.2021, I contributed several posts [see history via a click on 'AGEOS'] which essentially concluded that ADM;s potential interest was confined to a stated “70% interest in the Barracuda Risk Sharing Agreement [RSA]” whereas ZEN is exploring as stated “ the potential purchase of an equity stake in Noble Hill-Network Ltd [NHNL]” The two interests are different and complementary.
To clarify the issue I have added two posts to the ZEN share-chat site. On 06.09.2021 [Monday at 15:36] in response to a post by MarketGS, I explained the legal basis of the Risk Service Contract [RSC] for the development of the whole of NW OML-141 lease area, and in which ZEN would acquire an interest if it purchases an equity stake in NHNL. I also explain that ADM's interest is legally separate as it is a 70% indirect interest in the Risk Sharing Agreement [RSA] for the Barracuda Field, in which ADM is lead member of a Consortium. A second post, on 07.09.2021 [Tues 13.48] details the whole issue from ZEN share-holders perspective.
In conclusion it appears that it would probably be in the interests of both ADM and ZEN shareholders if both companies are successful in their initiatives. ADM in obtaining a potential return from capital and operational input into Barracuda via the Consortium, and ZEN from potential returns from the whole NW. OML 141 [105 sq km] area, including Barracuda, via an equity interest in NHNL.
I post this in response to the increasingly irresponsible speculation and misinformation appearing on this site in the hope of encouraging a more reasoned discussion. Having researched ADM thoroughly I have found little of concern other than the risks facing most early stage O & G enterprises and wish all share-holders ' best of luck' with their investment.
AGEOS.
Continuation:
The share of assets which would accrue to ZEN are described in the 31.08.2021 RNS as including the Barracuda and Elepa South oilfields and the Curlew Channel gas and condensate prospect. It is important to bear in mind that although it is correct under current 'Petroleum Reserves and Resources Definitions' to describe the two oil prospects as Fields they have no historical or recent production and although intercepting 'oil-shows' none of the, at least eight wells, sunk in the NW have been designated 'commercially viable stand-alone wells'..The best was the April 2007 Barracuda well sunk by CNOOC which encountered “several payzones with high water saturation” according to petrophysical interpretation. The projected production rates and reserves cited for the NW by ZEN and ADM are therefore entirely 'probabilistic' and based on well-log data, seismics and comparison with nearby analogue Fields. That said, the prospects are encouraging and a successful 05 well at Barracuda would be a significant first step.
As ZEN have chosen this target from a stated 12 under consideration, there must be compelling reasons for doing so other than those immediately apparent. A target which does not include historical or current production involves a higher level of risk then I would have expected AC to accept at this stage in corporate development. I assume therefore that either the prospect at Barracuda is far more positive than available geophysical evidence currently indicates, or that this is another 'distressed corporate situation' in which AC sees an opportunity to acquire potentially significant assets at a bargain price. Developments at ADM Energy [ADME] during the next three months may be a useful guide especially in the latter regard.
AGEOS
The Exclusivity Agreement with Noble Hill-Network Ltd (NHNL) [ref RNS 31.08.2021] relating to the NW OML-141 licence area of Nigeria, whilst being only the initiation of an evaluation and due diligence process, nevertheless is the precursor to a potentially significant asset acquisition for ZEN. If successfully concluded it appears that ZEN participation will be in the form of the “purchase of an equity stake in NHNL” thus acquiring “participation in the Risk Service Contract (RSC), 100% held by NHNL, “for the development of the North-West Corner of OML-141 (NW OML 141).
The RSC is the legal instrument under which NHNL exercises sole rights to develop the North West part of OML-141 and should not be confused with the Risk Sharing Agreement (RSA) entered into by ADM Energy as outlined in my 06.09.2021 post, and which is a contractual agreement between as yet unspecified members of a consortium and relating to the Barracuda Field alone.
Since ZEN's objective is to “purchase an equity stake in NHNL” it is perhaps worth examining what this might entail, a subject so far not considered on this chat-site. Noble Hill-Network Ltd is a private company limited by shares, incorporated in Lagos on 16.10.2014, reg no RC 12118898, specifically for “developing NW OML 141”. The founder and MD from 2014 to present-day is Thomas Cavanagh, a Houston/Nigeria based , former Exxon geologist. There are 6 other board members all executives of regional O & G service companies. Shares in NHNL are held by two companies, Network Oil & Gas Ltd [Benin City] with two Board members, and Noble Hill Exploration & Production Ltd of which Cavanagh is President & MD and majority or sole shareholder. To comply with Nigerian law at least 51% of shares in NHNL must be held by Nigerian nationals so ZEN will presumably be limited to acquiring 49% maximum. An equity purchase agreement would presumably be allied to a capital injection either directly into NHNL and/or into the Barracuda Field RSC as a consortium member.
To be continued.
MarketGS re your 13.28 post:
Under the terms of the Petroleum (Amendment) Decree of 1996, indigenous companies which hold Oil Mining Leases [OML's] are allocated participatory rights to oil acreages on a 'sole risk basis', thereby entitling them to carry out 'sole risk petroleum operations'. If I understand this aspect of Nigerian law correctly this is the basis on which Noble Hill-Network Ltd [NHNL] holds 100% of the 'Risk Service Contract' [RSC] for the development of NW OML-141.
Under the terms of the ZEN/NHNL Agreement RNS'd on 31.08.2021, ZEN is “evaluating the opportunity to participate in the RSC via the potential purchase of an equity stake in NHNL, the sole holder of the RSC.”
ADM Energy's interest, on the other hand, is a 51% equity interest in K.O.N.H. (UK) Ltd [see 31.08.2021 post here], which it states has a 70% indirect interest in the Risk Service Agreement [RSA] relating to the Barracuda area [a prospect not a Field]. The RSA is different from the RSC and the other 30% of the RSA is held by other members of the 'Consortium'.
Consequently and as I have explained on the ADM chat-site on 01.09.2021, the potential interests of ZEN and ADM are not in conflict and if both are successful may well be highly supportive. If you find any flaw in my reasoning or the evidence on which it is based let us know.
As I am in possession of a considerable volume of information regarding OML-141, I may post more in due course.
AGEOS
Stag22Tilly, thanks for the response, all potentially valid as there can be no certainty in any of my conclusions. Establishing the facts is difficult enough.
However I am still of the view that ADM's 70% interest in the Barracuda RSA, via its stated 51% equity holding in K.O.N.H.UK Ltd, is through a contractual agreement [the RSA] with the RSA Consortium, defined as being comprised of “the investors in NHNL” in the ADM 23.03.2021 RNS. I cannot find any evidence of ADM having acquired an equity interest in NHNL.
Although the 23.03.2021 RNS states that “KONH holds, through its subsidiary Noble Hill-Network Ltd (NHNL), a 70% indirect interest in …...the RSA.....OML 141.” it is perhaps significant that in all subsequent RNS releases in which this sentence appears, the words “through its subsidiary NHNL” are omitted. It is even more telling that the statutory filings for KONH UK at Companies House do not include any of the legal or financial disclosures required for registering a subsidiary or for acquiring equity interests in another company. KONH was incorporated on 19.02.2021 with capital of £100 [100 shares of £1], 51% of which was presumably allotted to ADM on 13.04.2021, the date on which ADM was filed as having “Significant Control”, hardly consistent with a company about to acquire NHNL as a subsidiary.
NHNL is not listed on the Nigerian Exchange or the Corporate Registry but from what I know of its assets, management and share holders, any disposal of equity will not be for peanuts. The founder and majority shareholder is a fellow-geologist.
Whatever our speculations regarding these matters no doubt all will be revealed in time and hopefully it will be advantageous to ADM and ZEN shareholders alike.
AGEOS
Peterashbeck, I will clarify in detail on the ZEN LSE Share Chat site a.s.a.p. within the next few days. In the meantime, my understanding is that ZEN have an exclusivity agreement to potentially acquire an equity stake in NHNL [Noble Hill-Network Ltd RC 1218898], a Nigerian owned and controlled company, established in Sept 2014 for the legal ownership and operation of the licence for NW OML 141 which includes the Barracuda and Elepa South oilfields and the Curlew Channel gas and condensate prospect.
ADM Energy's interest is limited to acquisition of 51% equity holding in K.O.N.H.(UK) Ltd RC 13213236, a UK registered company, stated by ADM to hold a 70% interest in the RSA [Risk Sharing Agreement] relating to the Barracuda Field. As stated in the ADM 08.06.2021 RNS this RSA does not include any option to acquire a participating interest in the NW OML 141 licence. Hence the question of ADM acquiring “ownership” of Barracuda, which appears to be assumed by some posters on your site, is misguided.
The initiatives by ADM and ZEN therefore involve different companies and legal entities, and target different and separate potential interests in the NW OML 141 area.
AGEOS
Peterashbeck, I've just added this to the ZEN site. If anyone here can clarify the situation as outlined, it would be much appreciated.
Further to my earlier post of today, it appears that the interests of Karra Oil Noble Hill Ltd were transferred to a new company named K.O.N.H. (UK) Ltd registered at Companies House as co no 13213236 on 19.02.2021 , and that ADM Energy plc was registered as a “Relevant Legal Entity” with “Significant Control” on 13.04.2021. So presumably ADM's 51% equity stake is now in this company and not in the Isle of Man registered Karra Oil Noble Hill Ltd as stated on ADM's website. K O N H (UK) Ltd has no subsidiaries, was registered on behalf of Calabar Capital Ltd by Daniel Maling and has 5 directors, none Nigerian.
An ADM Energy RNS of 23.03.2021 states “KONH holds, through its subsidiary Noble Hill - Network Limited ("NHNL"), a 70% indirect interest in the rights, benefits and obligations under the RSA relating to the Barracuda area of OML 141” a statement entirely at odds with the above Companies House information and with the Noble Hill-Network Ltd website which describes the company as a “100% Owned Nigerian Company”.
If anyone can untangle this apparent confusion please do.
AGEOS
Further to my earlier post of today, it appears that the interests of Karra Oil Noble Hill Ltd were transferred to a new company named K.O.N.H. (UK) Ltd registered at Companies House as co no 13213236 on 19.02.2021 , and that ADM Energy plc was registered as a “Relevant Legal Entity” with “Significant Control” on 13.04.2021. So presumably ADM's 51% equity stake is now in this company and not in the Isle of Man registered Karra Oil Noble Hill Ltd as stated on ADM's website. K O N H (UK) Ltd has no subsidiaries, was registered on behalf of Calabar Capital Ltd by Daniel Maling and has 5 directors, none Nigerian.
An ADM Energy RNS of 23.03.2021 states “KONH holds, through its subsidiary Noble Hill - Network Limited ("NHNL"), a 70% indirect interest in the rights, benefits and obligations under the RSA relating to the Barracuda area of OML 141” a statement entirely at odds with the above Companies House information and with the Noble Hill-Network Ltd website which describes the company as a “100% Owned Nigerian Company”.
If anyone can untangle this apparent confusion please do.
AGEOS
The ADM Energy involvement in the Barracuda Field is stated to be in the form of a “51% equity stake in Karra Oil Noble Hill UK Limited” which “holds a 70% interest in a Risk Sharing Agreement Consortium” the legal status and composition of which appears unspecified.
Karra Oil Noble Hill Ltd, company no 015555V, incorporated 11.12.2017 in the Isle of Man jurisdiction, is listed as Struck Off and dissolved on 03.08. 2021 [ref opencorporates.com] ie less than three weeks ago.
If Karra Oil Noble Hill Ltd are one and the same company then ADM Energy appear to have lost their equity interest and their shareholders are overdue an RNS.
Noble Hill-Network Ltd [www.noblehillnetwork.com], the Lagos based company ZEN are dealing with, appears entirely unconnected to the company ADM Energy were involved with.
No doubt more to be revealed and a major development in store if a joint agreement can be achieved.
AGEOS
On 16.07.2021 I posted details of an apparent doubling of oil production at the Ezzaouia Field, Tunisia, as indicated by the ETAP daily production figures during the week 05.07.21 – 11.07.21..
Since then the daily figures have fluctuated markedly, reverting at times to the upper limit of the previous range of 380-480 bopd, but periodically rising abruptly to the 600-800 range, culminating in the last four days, of 878 [20/8], 868 [20/8], 957 [21/8] and 922 [22/8] bopd. During the past eight weeks the fluctuations in daily production suggest that maybe at least three of the four producing wells have undergone an intervention of some kind so perhaps the latest daily totals, if maintained, will be indicative of future production approaching 1000 bopd of which 450 bopd will be net to ZEN.
These recent well interventions are presumably part of the “production optimization” program to which MARETAP, the joint operating company was committed prior to acquisition. The further program of field operations, including new wells as mentioned by AC on Aug 19th, and as defined within the “New Concession”, still awaits parliamentary approval.
Presumably an RNS confirming the enhanced production achieved by MARETAP will be released in due course.
AGEOS.
The appointment of Stev Onanga as DGH [Directeur General des Hydrocarbures] is not only a positive preliminary to final approval of the Tilapia II, 25 year licence but also has implications for the acquisition of additional assets in Congo Brazzaville. In his previous role as General Manager of SONAREP, the Research and Production subsidiary of SNPC [National Oil Company], Onanga was not only responsible for the State's 44% operational interest in the Tilapia Field [since 2005] but also for its interest in the MKB Fields [Mengo, Kundji,, Bindi and Tchiniambi, 700 sqkm] which has progressively reverted back to SNPC control during the last decade as production has matured and declined.
AC has made numerous references to possible additional acquisitions in the Congo including the 07.07.2020 RNS to that effect and the Feb 2021 Fin Fox interview in which he mentions “discussions re second and possible third and fourth assets”. In a 10.07.2020 post on the subject of a second Congo asset, I detailed the possibilities and concluded that the Kundji Field was the most likely candidate, which with two wells still in production in early 2019, conformed with the description of the target in the 07.07.2020 RNS. Following AC's mention during the Fin Fox interview of possible additional acquisitions, I extended the likely targets to include the Mengo and other MKB Fields as detailed in a 12.02.2021 post.
Without reiterating details from those earlier posts it is perhaps worth emphasising that despite ELF having extracted 1.5million bbls of oil from the MKB Fields during the 12 years to 1992, oil in place was still certified as >1.3billion bbl in 2013 with further untested potential in the deeper Vandji sandstone. The technical challenges for further production from the Mengo sands are known and Panoro Energy developed plans for several hydraulically enhanced 500-600 bopd wells at Kundji by 2011 but withdrew for reasons unspecified. Since then the Chinese State company,Wing Wah Petrochem, has successfully developed the adjacent onshore Banga Kayo Field, achieving an estimated production of 50,000 bopd apparently by drilling numerous low production wells in close proximity [No information from Wing Wah but reported as 460 wells from 50 platforms according to an independent source.] If Wing Wah do not extend their activities further then the feasibility of ZEN deploying its own rig on one or more of the MKB Fields therefore remains a possibility.
The appointment of Stev Onanga should therefore not only facilitate the conclusion of Tilapia negotiations but also of one or more subsequent acquisitions.
AGEOS.
Appointed at the last Council of Ministers, Stev Simplice Onanga, new Director General of Hydrocarbons officially took office, August 4th. The televised ceremony took place under the chairmanship of Macaire Batchi, Direecteur de Cabinet du Ministre des Hydrocarbures and in the presence of the outgoing director general of hydrocarbons, Teresa Goma.
Stev simplice Onanga, nouveau directeur général des hydrocarbures prend officiellement fonction. - YouTube https:www.youtube.com/watch?v=FLcF2LOChW8
AGEOS
I should have added "checkout the SONAREP website:
https://www.snpc-group.com/en/subsidiaries
it refers specifically to SONAREP's involvement inTilapia.
MG well spotted. Although the English language translation is misleading in describing the post as "General Manager of Hydrocarbons", the original French confirms it as "Directeur General des Hydrocarbures" so Stev Onanga, former General Manager of SONAREP is the new DGH. Not long now to the Tilapia II announcement.
continuation:
Total Probable Reserves of light and medium oil [including solution gas] 2,593 MSTB Net, ie 2,593,000 bbl. Note, these reserves are not defined as “Undeveloped”, which implies they are expected to be recovered from known accumulations without significant expenditure ie new wells, or interventions of similar cost. Net present value [netback], before corporate tax but after deduction of royalties and development, production and well abandonment costs, is estimated as 2.593 Mbbl @ $24.41 per unit bbl = US$63,303,000.[ref pp 5] The program of field operations intended to exploit these reserves is integral to the “New Concession” currently awaiting parliamentary approval.
Prospective Resources [F2] Ezzaouia
Defined as “Resources other than Reserves” for the Ezzaouia Concession as “Risked Gross Volume of 32,282 MMscf [million standard cu ft natural gas] Ref pp 17 of the CPR but pp 2 of the F2 Report dated 14.07.21 as lodged on SEDAR. No value is given but estimated netback at $3.12/boe @ 6 Mscf/1boe = US$16,786,639 for total gas sold.
This refers to the gas resource previously exploited by Candax and utilised at the now defunct SEEB Gas to Power Facility.
The combined O & G, F1 & F2, Reserves & Resources of ZEN's 45% interest in the Ezzaouia Field therefore has an approximate netback value of around US$80million and that is without the longer term prospect of the deep Triassic play.
AGEOS
The “2021 CPR” released via RNS on 22.07.21 provides an independent evaluation of reserves for assets in Italy and Tunisia [in part] in compliance with NI 51-101 Standards of Disclosure for the Canadian O & G Industry. The Report contains significant information of which that relating to Tunisia is of particular interest as it concerns immediate and medium-term prospects of increased production The following comments are therefore confined to those aspects alone.
AC in his RNS comments emphasised that this Report does not include 2P reserves for our 45% Sidi El Kilani Tunisian interests. In addition, from having assessed the data on which this CPR is based I have no doubt that our 100% interests in both the Robbana and El Bibane Fields are also excluded All three are described on the ZEN website as being subject to future CPR's. The Tunisian element of this current CPR is therefore based wholly on our 45% interest in the Ezzaouia Field, the significance of which includes the following:
O & G Reserves [F1] Ezzaouia
Total Proved Reserves of light and medium oil [including solution gas] 242 MSTB [1000 Stock Tank Barrels] Net, ie 242,000 bbl. These reserves are defined as “Developed Producing” implying they are expected to be recovered from completed reservoir intervals open at the time of estimate, ie from current producing wells [4 producing, 9 non-producing]. The calculation will have been based on data from production volumes to date and projected decline rates. With current production at over 700 bopd gross [ref ETAP website] that Total Proved Reserve [presumed to be 45%] is equal to only two years production, implying the exclusion of production enhancement potential from those Reserve calculations. The 242,000 bbl of Proved Reserves appears therefore to be an extremely conservative figure. Production optimization and associated workover activities by MARETAP, the joint operating company, are presumably currently in progress as evidenced by recent fluctuations in daily production numbers.
To be continued