Petrel Resources - Interim Statement For 6 Months Ended 30 June 2018

Posted by OilVoice Press - OilVoice


Petrel Resources plc (AIM: PET) today announces financial results for the six months ended 30th June 2018.

Petrel's main focus in the period under review was on the Irish Atlantic Porcupine Basin:

Frontier Exploration Licence (FEL) 11/18:

Petrel's Joint Venture with Woodside Energy is now focused on the key FEL 11/18 - the "filet mignon" of the Irish Atlantic Porcupine Basin, located only 150km southwest of Kerry/Cork.  There are a wide variety of potential drill targets, especially of mid-depth of late Jurassic / early Cretaceous age.  The processed seismic data has been delivered to the operator, which is now working up drill targets.

Petrel acquired this 10% working interest at no cost, as part of the resolution of prior issues under arbitration.  FEL 11/18 covers circa 1,579km2 of acreage, combining a number of play types in reasonable water and rock depths.

Our 10% stake brings access to all historic data, as well as circa 1,600km2 of state-of-the-art 3D seismic data.

Frontier Exploration Licence (FEL) 3/14:

Petrel has applied for a 12 month extension to the seismic first phase of our Frontier Exploration Licence on the FEL 3/14, on which Petrel will operate 100%. If the extension is granted Petrel will have an opportunity to seek drilling partners. 

Licensing Option (LO) 16/24:

Petrel has proposed a work programme for the conversion of our recently expired Licensing Option 16/24 into a Frontier Exploration Licence - but Petrel is not yet ready to commit to drilling a well until this acreage has been farmed down.

Licensing Option 16/24 includes 664km2 bordering the Connemara oil-field discovered by BP in 1983.  Though sufficient oil did not flow to be commercial, the proximity to mobile oil enhances our acreage.

Our LO 16/24 work confirmed that this acreage has good potential.  Our technical staff hope to upgrade it sufficiently to tempt someone in to carry out a seismic survey in the initial 3-year period of a FEL - an easier task than getting a company to give a well commitment.

Licensing Option (LO) 16/25:

Petrel did not opt to continue its smaller Licensing Option 16/25, as targets identified were sub-economic at the then prevailing oil price.

Meanwhile the Irish Atlantic Porcupine Basin continues to benefit from increased petroleum industry activity, especially high quality 3D seismic acquisition and processing:  the Porcupine Basin is a thick sedimentary basin, though with only 32 wells to date and, until recently, only limited modern 3D seismic data.  No well has yet been drilled on such state-of-the-art 3D seismic.

Petrel participated in two of these recent major 3D seismic acquisition and processing programmes, covering FEL 3/14 and FEL 11/18.  Extensive processing has been completed to a high standard.

Ghanaian Tano 2A Petroleum Agreement

The Company announced on 17 September 2018 that the Directors believed that all outstanding issues had been resolved with the Ghanaian National Petroleum Commission ("GNPC") on our Tano 2A Block.  The signed Petroleum Agreement is now being sent to the Cabinet and all legal proceedings have been withdrawn.

After a period of slow progress, Ghana's current NPP Government has galvanised the licensing effort.  The administration is pro-development, and actively reviewing historic Petroleum Agreements, with stated focus on early exploration, discoveries and output.  During 2018, the Ghanaian Ministry of Energy and the GNPC considered the current re-application by Pan Andean Resources Ltd (30% Petrel, 60% Clontarf Energy, 10% local interests) over the original Tano 2A licence block acreage in the prospective Tano Basin, West Africa. 

There is a mutual desire to complete the ratification process.  Our strong preference is to honour as far as possible the terms of the existing signed Petroleum Agreement, adjusting the revised co-ordinates if necessary.

Buy back and cancellation of shares

During the period, the Company reached agreement to buy back 16,747,368 shares for a nominal sum (subject to shareholder approval, which was secured at the Annual General Meeting in July 2018). The shares were subsequently cancelled, thereby reducing the number of shares in issue by approximately 17%. These shares were part of the initial consideration for the acquisition of certain interests in an early stage oil opportunity in the Wasit province of Iraq in August 2013 which did not proceed to spudding.

Iraq's difficult re-birth:

Petrel is re-establishing its Baghdad operations.

As we approach the end of 2018, Iraq is fitfully emerging from conflict, and again open for responsible business.  Baghdad has re-established its authority, by defeating Da'ech insurgents and recovering Kirkuk. 

Pro-business parties won the 2018 elections.  While it proved difficult to form a National Government in 2018, which contributed to turbulent protests in southern Iraq during 2018, prospects are now more encouraging than at any time since 2010.

Iraq has endured an almost continuous period of conflicts and/or sanctions since 1980, from which it is only now emerging.  Much trauma has been inflicted, as shown by the difficulties forming a government in 2018 and the protests in southern Iraq - a region generally supportive of Baghdad governments since 2005.

Yet, despite 2018 difficulties, we believe Iraq is finally turning a corner: pro-business parties open to international investment polled well in the May 2018 general election.  But no one party holds a majority and, as of September 2018, negotiations on new government formation were ongoing.

So far, the impact of this unrest on oil production from the southern fields has been limited, with August 2018 output stable at 4.65 million barrels daily (mmbod).  Internal demand of 0.8 mmbod leaves nearly 3.8 mmbod available for export - which has remained consistent despite infrastructural and decision-making challenges - though well below the 2008 target of 6.5 mmbod and the 2012 target of 8.5 mmbod.  Iraqi output is actually higher than immediately before the November 2016 OPEC + Russia cuts, and also higher than its current official OPEC quota of 4.444 mmbod.

The Western Desert, where Petrel has an interest in exploration ground, is still impossible for international companies to effectively operate.  

John Teeling


24th September 2018

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