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For me, the investment thesis for WTE is still visible, but we should not sway from the fact that the results so far have been below expectations.
This note only refers to Kaieteur and I will share a similar one for Canje.
Kaieteur thesis -
Tanager-1 yielded a 16M net oil pay discovery with 65.3MM Barrels (42.7MM Kaieteur + 22.6MM Off block).
The 2nd published CPR explicitly discloses that Kingfisher 6 and Kingfisher 8 prospects are "very close" to the Tanager discovery. The probability of geologic success at both of those two prospects has been increased to 57% (from 25% in 1st CPR) and targets the same Maastrichtian interval as Tanager.
Kingfisher 6 and Kingfisher 8 have a "best estimate" of 468MM Barrels. I would expect these prospects to be towards the top of the list for the next well candidate which will be named no later than 22nd March 2022.
Tanager + Kingfisher 6 + Kingfisher 8, could potentially form a 500MM+ Barrels combined development.
Tanager API is 20 degrees, which is heavier than Liza API of 32 degrees. So higher CAPEX would be needed to extract that oil and thus breakeven would be higher. For reference Payara which will develop 600MM Barrels has a $32 Brent breakeven.
The Hammerhead discovery contains "heavier" oil than the other Stabroek discoveries, but that it was still "very much commercial" quoting John Hess. According to Eco Atlantic CPR referring to Joe and Jethro - "The oil from these discoveries is reported by the operator to be similar to the ExxonMobil Hammerhead oil, in the 12 degrees to 15 degrees API range although a Final PVT analysis has not been provided by the operator at the time of this report." Tanager while Heavy oil appears to be Lighter than Hammerhead.
Elliot Management invested $30M into Cataleya, we are not told of the transaction economics - i.e. number of new Cataleya shares issued. However, on 30th August 2019, WTE purchased 313,500 common shares in Cataleya at a price of $10 USD/share. That could be a useful transaction to consider.
Post-Tanager, Hess have increased their stake from 15% to 20% in the block following a transaction with Cataleya. It's worth considering that Cataleya had an option to farm down 7.5% on the 2nd Kaieteur well in return for a carry by Exxon, and therefore this transaction with Hess must have better economics. More importantly, Hess with their knowledge of the Guyana basin view Kaieteur as very much attractive acreage.
Cataleya are well capitalized to fund their share of wells in the upcoming Kaieteur 12 well exploration drilling campaign.
Finally, from the WTE presentation, the Contractor share of revenue in the Kaieteur block is 50%, which is higher than that of Canje and Orinduik blocks, where the Contractor share of revenue is 40%.
Net Value per Kaieteur Barrel = [(Oil Price - Breakeven) x 50%] - [1% Royalty x Oil Price]
thanks,
Celtics.
Sapote-1 well results have been disclosed to the media.
Unfortunately it is not the result that we were hoping for. Oil exploration is a high risk venture.
The search for commercial crude outside Stabroek block will continue.
https://oilnow.gy/featured/just-in-exxons-3rd-well-at-canje-block-fails-to-deliver-commercial-crude/
thanks,
Celtics.
Today marks 60 days since drilling started. If the Sapote-1 well failed to discover any hydrocarbons or was non-commercial, I would think that we would have already seen an update by now, given that Hassa-1 a nearby well was drilled down to the Santonian interval and reported non-commercial after only 37 days of drilling.
An update could be released at any moment by Exxon, however, I continue to consider that no news is positive news.
For reference, previous oil discovery disclosures made by Exxon for Whiptail and Uaru-2 were reported a few days prior to the Earnings call.
Disclosures are available here - https://corporate.exxonmobil.com/News/Newsroom/News-releases
thanks,
Celtics.
Some of you are trying to evaluate the economics of a successful well at Sapote.
WTE disclosed in RNS that Sapote is "potentially the largest prospect drilled on the Canje block to date".
JHI stated on an Investor presentation in 2019 (video on YouTube) that the Jabillo prospect targeted 1Bn to 1.2Bn recoverable.
Exxon have stated that Payara will develop 600 million oil-equivalent barrels.
https://corporate.exxonmobil.com/News/Newsroom/News-releases/2020/0930_ExxonMobil-to-proceed-with-Payara-development-offshore-Guyana
Hess have disclosed that Payara breakeven is $32 Brent (page 13 - https://investors.hess.com/static-files/0654cb7b-d66b-4e11-b03e-0b64afce0184).
I assume the following -
- Sapote prospect - Targets 1Bn oil-equivalent barrels
- Oil gravity for Sapote would be of a similar grade to Payara /Liza given the location
- Break-even = $32 Brent
- Royalty = 1% (disclosed in WTE presentation)
- Contractor Revenue = 40% (disclosed in WTE presentation)
- Oil Price = $55 Brent
- 1.39 USD /GBP
[(55 - 32) x 40% Contractor Share] - (55 x 1% Royalty)] / 1.39 FX = 6.22 GBP value per barrel
WTE holds 7.23% Equity in JHI and therefore 1.27% Indirect interest in Canje block.
1Bn barrels @ 1.27% = 12.7M barrels net to WTE on Sapote.
12.7M barrels x 6.22 GBP value/barrel = 78.78M GBP
WTE shares outstanding = 144,051,486
So value per share = 0.55 GBP /share
This does not take into account the time value of money /present value of cash flows.
thanks,
Celtics.
We made it through last week with no news, which was good news.
Today marks day 51, since the well operations commenced on 28th August (WTE RNS).
I have my fingers crossed that the Sapote well will return successful, nevertheless, I believe we will be drilling again possibly as soon as December 2021 on Canje block, with reference to the Exxon submission to the EPA (page 6) - https://www.epaguyana.org/epa/project-summary2/download/5-project-summary/770-canje-12-well-project-summary
thanks,
Celtics.
Hi Happysparrow - I agree the risk profile has changed significantly with the announcement of major drilling campaigns across Canje and Kaieteur, however those public notices have been known for quite some time. In my opinion, I do not think they are drivers for the price movements in the last two days.
Canje -
Formal publication 8th August 2021 - https://www.epaguyana.org/epa/publicnotices2/summary/4-public-notices/769-30-days-public-notice-eepgl-08-08-2021
Media Update - https://oilnow.gy/featured/exxon-seeking-epa-approval-for-major-12-well-drill-campaign-at-canje-block/
Kaieteur -
Formal publication - https://www.epaguyana.org/epa/publicnotices2/download/4-public-notices/790-30-days-public-notice-eepgl-12-well-exploratioin-draft-2
Media Update - https://oilnow.gy/featured/exxon-seeking-approval-to-drill-12-more-wells-in-major-exploration-campaign-at-kaieteur-block/
thanks, Celtics.
In my opinion, yesterday's price movement followed by today's continued move up is a positive sign towards this 3rd well result. I was unable to obtain a quote to buy at spot yesterday at each time I attempted.
No rational investor (and i would think no institution) would initiate a new long position at this moment in time/accumulate when there had been an opportunity to do so at sub 10p prices in the past 3 months. Initiating a new long position now on Sapote-1 is like playing black v red in a casino given we are so close to the 60 days ... i can only surmise that the price rise is linked to someone accumulating NOW on the back of information known to them and maybe not the market or a gambler with funds they're willing to risk.
Some key points.
- Bulletwood-1 (non-commercial) results were disclosed to the market on 4th March 2021.
WTE opened at 20.5p on 10th February 2021, with the price trending down further as we moved towards the disclosure date. The price closed 16.25p on 3rd March 2021, representing a 20.7% DECLINE over that timeframe (16 trading days).
- Jabillo-1 (non-commercial and relatively fast drill) results were disclosed to the market on 5th July 2021, on 21st June 2021 the price opened at 13.75p and closed at 11.75p on 2nd July 2021. That was a 14.5% DECLINE over that timeframe (10 trading days).
We opened at 9.25p on 13th October and are now currently 13.9p, that's a 50.3% increase. If this holds thru to end of this week and early next week i will feel even more bullish.
I still hope we receive no news this week and there is nothing not to like about this price rise.
What I can conclude is that it does not follow trading patterns that preceded the last two drills results.
thanks,
Celtics.
The next 1-2 weeks are key, particularly this upcoming week ... no news would be good news. Tomorrow will be day 43 on an expected 60 day drill result. In my opinion, the market is not pricing a discovery nor a duster ... there has been little to no volume in the past 2-3 weeks.
For context, Hassa-1 well was drilled in 2020 and is in close proximity to Sapote-1 although at a slightly shallower water. For water depths throughout the basin, you can refer to - https://www.tdi-bi.com/tdi-brooks-international-inc-completes-ebs-program-offshore-guyana/. Hassa-1 was spudded on 9th Dec 2020 (mariners notice 82) and a result communicated on 15th Jan 2021 (37 days) which confirmed 50 feet /15.7M net oil pay in the Santonian interval, a non-commercial discovery. This suggests to me that Sapote-1 drill is probably already at the Santonian interval.
WTE, Eco nor JHI have disclosed explicitly what deeper interval(s) is /are being targeted on the Sapote-1 well other than "upper cretaceous reservoirs", however one would suspect the Santonian interval is the most likely given the 60 day timeframe provided along with the multiple references made by Hess with respect to the Santonian interval being of interest throughout the basin. If Sapote-1 well targeted any deeper intervals beyond Santonian then I would think the drill would take much longer than 60 days ... for reference Tanager-1 took 99 days before a result was returned.
Fingers crossed that Sapote-1 will be a commercial result, however if not, then there is a major 24 well drilling campaign to look forward to taking place across the next 3 years across Canje and Kaieteur starting in early 2022.
As an investor in WTE, for me it is a matter of when not if.
thanks,
Celtics.
Drilling underway shortly.
https://marad.gov.gy/wp-content/uploads/2021/08/No.-102_2021_EEPGL_Sapote_1_Drilling_Operation.pdf
thanks,
Celtics.
I have added to my WTE investment today. There is significant asymmetric upside potential from today's price point.
Looking back to the Exxon 2021 Investor Day, Exxon Upstream VP Neil Chapman stated, with reference to Tanager-1, Bulletwood-1 and Sloanea-1, "All of these wells confirm the presence of hydrocarbons and high-quality reservoirs and we are actively integrating the data to guide our future programme." Exxon are now positioning themselves for a major 12 well drilling program on the Canje block and the request to the EPA has also been submitted even before Sapote-1 has spudded.
JHI are well positioned to fund the early phase of that potential 12 well drilling program on the Canje block without further accessing capital markets beyond the JHI Warrant held by Eco Atlantic.
JHI held Net Assets of approximately $46.3M at 31st December 2020. With the strategic investment by Eco Atlantic, the transaction added $10M immediate Cash injection plus a Warrant option worth up to $18.3M. Although a component of the $46.3M will be built up by Petroleum licenses, I expect a significant component of that will be Cash. Separately, from the farm out transaction to TotalEnergies by JHI, JHI were to be carried on 2 exploration wells and 2 appraisal wells. With this information and the Investment by Eco Atlantic and Warrant option available to Eco Atlantic, I think there is sufficient funding for multiple exploration wells as well as those 2 remaining carried appraisal wells.
Finally, JHI made it clear during the 121 Oil & Gas Conference in 2019 (https://www.youtube.com/watch?v=RpcwXurxh60) that their "mandate is to add value through the drill bit and exit via an Asset Sale sometime after discovery". I expect after the first significant discovery, that process will initiate, however I expect JHI will see itself through at least one significant discovery plus an offsetting appraisal well before any sale is finalized with Exxon and TotalEnergies the most likely acquirers.
thanks,
Celtics.
Thank you Harel for sharing. A lot of asymmetric upside potential for WTE. Looking forward to the next news on Kaieteur as well ... hoping that Kingfisher 8-1 is going to be confirmed as the next prospect to drill there.
Celtics.
Interview with Gil Holzman on JHI investment @ 8.30 seconds.
https://www.**********.co.uk/articles/galliford-try-eco-atlantic-glen-goodman-67b8830/
Excellent question at 9.50 minutes by the interviewer.
thanks,
Celtics.
On LinkedIn, Gil Holzman has shared a write up done by VOX on the JHI transaction, with a caption from Gil "Exciting days are coming..." including a rocket emoji.
thanks,
Celtics.
A very interesting short clip (from 5.51 minutes to 6.16 minutes) delivered by Keith Hill, commenting on Orinduik and seismic interpretation in simple terms /no bull$hit - https://www.youtube.com/watch?v=1c-i20PG5LI
Note, you cannot determine fluid quality from Seismic (there was an interview by Gil Holzman with Proactive where he explained that risk in fluid quality). However, Tanager-1 somewhat de-risks that element.
As referenced in the Eco RNS today, both Africa Oil and Eco have been conducting a technical analysis of the Canje block and a a $10M immediate commitment is no small step for Eco. As @ 31st Dec 2020, Eco had $16.35M USD Cash and are raising an additional $4.9M USD to fund this immediate $10M transaction into JHI, leaving it effectively funded for 1 Orinduik cretaceous well in 2022 without further dilution beyond the 184,697,723 Eco shares + 14,945,913 private placement.
Technical analysis of the Canje block has been done by both Eco and Africa Oil. On top of the Bullish use of "low risk" in the RNS headline "Near-term, low risk, exploration drilling catalysts with significant upside", the direct appointment of Keith Hill to the Board of JHI given his Geology expertise & proven success in discovering commercial Oil/Gas (West Africa), and his effective rubber stamping of this $10M immediate transaction in JHI bodes well for how we should think about the chance of success on Jabillo and Sapote. I would be scratching my head if neither Jabillo-1 or Sapote-1 deliver Commercial outcomes.
thanks,
Celtics.
The deal between Eco Atlantic and JHI Associates is encouraging news for Westmount Energy (WTE). There, are several mentions to the current 2-well drilling program (Jabillo and Sapote) being “low risk”.
From the June 2021 WTE Corporate Presentation, WTE held 5,651,270 shares in JHI representing 7.7% of issued share capital assuming same number of shares as at July 2019. Therefore, total JHI issued shares = 5,651,270/7.7*100 = 73,393,116
Today, Eco Atlantic acquires 5,000,000 shares @ $2/share, in JHI representing 6.4% of issued share capital per RNS.
5,000,000 / (73,393,116 + 5,000,000) = 6.38%.
WTE new ownership in JHI is circa 7.21% post Eco Atlantic acquisition of 5,000,000 shares in JHI. 5,651,270 / 78,393,116.
WTE and ECO have working interests in other blocks, so you cannot make an apple to apple comparison.
Remember, WTE has a penetration in the Cretaceous on Kaieteur block with Tanager-1 well which has significantly de-risked Kingfisher-6&8. CPR on Kaieteur high graded Kingfisher 6&8 with 500MM Barrels and 57% COS. While, ECO has 15% of Orinduik block and enormous upside potential on that block should there be a Commercial discovery in the Cretaceous.
Market Caps
WTE = 144,051,486 shares * 0.12 = circa 17.3M GBP
ECO = 184,697,723 (RNS 24th Nov 2020) + 14,945,913 shares (post placement to Africa Oil & Charlestown Energy) * 0.26 = 51.9M GBP
Not comparing WTE vs ECO, WTE has much lower risk now given the existing market cap but still meaningful upside potential. JHI has 3 more wells funded by TotalEnergies (that includes Jabillo and Sapote) and are sufficiently funded for a new 2022 drilling campaign of possibly 3 further wells (Eco Atlantic RNS highlights that JHI had Net Assets of $46.3M USD as at 31st Dec 2020. JHI now has an additional $10M USD, so post transaction JHI has Net Assets of $56.3M with all else equal assuming low cash burn from the employee salaries and other commitments).
So, in theory, WTE has multiple shots on goal and only requires 1 well on Canje (out of theoretically 6 wells to go which include Jabillo and Sapote) to potentially multi-bag from its current price. Cataleya’s farm out to Hess on Kaieteur block and funding from Elliot also means there are several more shots on goal on the Kaieteur block.
Thanks, Celtics.
I do think it is very encouraging.
Hess could have looked at options to farm down their WI in Kaieteur block and instead concentrate their financial resources on developing the Stabroek block, which already holds substantial value with further upside potential.
In addition, consider that Cataleya Energy appear to be sufficiently capitalized to fund future drilling at Kaieteur, with their raise of $30M from Elliott Management (announced in November 2020).
Would recommend, you check out Hess's fireside chats /investor calls -
https://investors.hess.com/events/event-details/hess-corporation-ubs-global-energy-virtual-conference-2021
While, not referencing Kaieteur block, Greg Hill (at about 30.50 mins) talks briefly about the future potential of blocks 42 and 59 in Suriname. Block 42 is adjacent to and at similar water depth to the Canje block, while block 59 is even further downdip.
The main takeaway is that Hess see potential downdip and outward of Stabroek.
I'm happy to patiently wait and see the outcome on Jabillo and Sapote.
thanks,
Celtics.
Drilling about to recommence at Jabillo.
Thanks,
Celtics.
https://marad.gov.gy/wp-content/uploads/2021/06/No.-57_2021_EEPGL_Drilling_Operation.pdf
A useful document regarding medical device registration from the MHRA. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/978379/Device_Registration_Reference_Guide_April_2021_Final_v1.pdf
"Within 6 working days from submission you should receive an email confirming the outcome of the application."
thanks,
Celtics.
Evidence that Rapid Antigen tests can effectively be used in a Test to Release approach.
No sign of infection after test concert in Spain.
https://www.bbc.co.uk/news/world-europe-56899764
thanks,
Celtics.
I wanted to talk about the association of CT values and Infectiousness and its relevance on the Clinical results disclosed by Avacta. Alastair explained that there is no binary cutover between the Point of “being infectious” and “being NON-infectious”. The reason for this is that each COVID case is unique – length of exposure, environmental conditions etc.
Studies have been completed that correlate successful isolation of the virus in a cell culture and the CT value.
Lower viral loads are indicated by a higher number of amplifications (CT value) in a PCR test.
In other words, the evaluators are trying to find out what point is the viral load low enough (CT value high enough), where the ability to culture the virus is no longer possible. The ability to positively culture has served as a proxy for Infectiousness.
Study 1
https://www.nejm.org/doi/suppl/10.1056/NEJMc2027040/suppl_file/nejmc2027040_appendix.pdf
Supplementary Appendix - https://www.nejm.org/doi/suppl/10.1056/NEJMc2027040/suppl_file/nejmc2027040_appendix.pdf
Within the Supplementary Appendix on Page 20.
At CT values 28-30, viral culture was positive in 2 out of 14 tested viral cultures.
At CT > 30, ZERO positive viral cultures were cultivated from 38 samples.
The PCR Test used in the evaluation was Allplex™ 2019-nCoV Assay on page 23.
Study 2
https://wwwnc.cdc.gov/eid/article/27/5/20-4688_article
This was part of a Clinical evaluation on Roche SD Biosensor Antigen Test.
At CT > 30, only 1/27 (4%) could be positively cultured.
Figure 2 provides an excellent visual representation - https://wwwnc.cdc.gov/eid/article/27/5/20-4688-f2
The PCR test /brand used is not mentioned.
Why is this relevant?
Antigen LFTs need to be as Sensitive as possible. AffiDX has robustly demonstrated Sensitivity up to and including CT Value 30. With 19 positive samples between CT values 29-30, ALL correctly identified.
In Avacta’s presentation (slide 18), explicitly noted is the PCR test engaged in the Clinical evaluation - Applied Biosystems TaqPath COVID-19 CE-IVD RT-PCR Kit.
Not all PCR tests are equal. There are various assay efficiencies. CT values are not consistent across labs using different PCR tests. Michael Mina commented on this - https://twitter.com/michaelmina_lab/status/1345917801052180480 (point 20/30). This is also an excellent thread about the ability to culture.
TaqPath is a product from Thermofisher Scientific (TMO). TMO is a world leader in medical instruments. I would expect TaqPath to have excellent assay efficiency. Therefore, a CT of 30 on TaqPath assay may in fact be equivalent to 30+ on another lab using a different PCR test provider.
In summary, with Positive samples up to and including CT value of 30, being demonstrated as “Infectious” by studies, LFTs should be Sensitive enough to detect to CT value of 30 in order to be employed as a “Test to release”. Avacta has just done that, not many competitors can say the same.
Celtics.