Rising geopolitical tensions in the Middle East, which accounts for one-third of the world’s seaborne oil trade, have markets on edge. US and UK airstrikes on Houthi targets in Yemen in response to attacks on tankers in the Red Sea by the Iran-backed group raised concerns that an escalation of the conflict could further disrupt the flow of oil via key trade chokepoints.
While oil and LNG production have not been impacted, a rising number of ship owners are diverting cargoes away from the Red Sea. At the time of writing, Brent futures were just above US$82/barrel and WTI around US$79/barrel.
Demand growth outside China slows
Over the course of 2023, the pace of oil demand growth outside China slowed significantly, to around 300,000 barrels per day on average during 2H23, according to the International Energy Agency (IEA). China will continue to lead oil demand growth in 2024, with its expanding petrochemical sector gaining an ever-larger share.
However, increases in global oil demand are set to halve from 2.3 million barrels per day (mb/d) in 2023 to 1.2 mb/d this year as energy efficiency improvements and electrification of the vehicle fleet curb oil use.
Supply risks
At the start of 2024, the risk of global oil supply disruptions from the Middle East conflict remains elevated, particularly for oil flows via the Red Sea and, crucially, the Suez Canal. In 2023, roughly 10% of the world’s seaborne oil trade, or around 7.2 mb/d of crude and oil products, and 8% of global LNG trade passed through this major trade route.
The main alternative shipping route around Africa’s Cape of Good Hope extends voyages by up to two weeks – adding pressure on global supply chains and boosting freight and insurance costs.
Small caps making moves in December quarter
Botala Energy
Botala Energy Ltd (ASX:BTE) completed three of the four planned pilot wells at the Serowe Coal Bed Methane (CBM) gas project in Botswana during the quarter with the remaining well drilling suspended for completion in the new year after core sampling.
These wells intersected significant coal sections, with Serowe-3.3 intersecting 24 metres of net coal and Serowe-3.5 a total of 25 metres of net coal in the targeted upper coal seams.
Successful completion of these wells on time and under budget underscores Botala's operational efficiency and the high potential of the Serowe CBM gas project.
Botala also secured A$2.4 million through an oversubscribed placement in December 2023, receiving strong backing from both new and existing investors.
Tamboran Resources
During the quarter, Tamboran Resources Corporation (OTC:TBNRF, ASX:TBN) completed the 10-stage stimulation program over a 500-metre (1,640-foot) horizontal section of Mid Velkerri B Shale within the Shenandoah South 1H (SS-1H) well in Beetaloo Basin exploration permit EP 117 in the Northern Territory.
Tamboran managing director and CEO Joel Riddle said: “The second quarter has seen significant activity as we progress towards our proposed Pilot Project in the deeper section of the Mid Velkerri B Shale at Shenandoah South.
"The successful stimulation program at SS-1H was carried out in December 2023 and we look forward to announcing IP30 flow rates from the well during the first quarter of 2024.
“The company successfully raised A$55 million from our existing shareholders and new strategic partner Liberty Energy, a highly regarded onshore energy services firm. The funding is expected to support our activities and purchase of long lead items until the sanctioning of the proposed Shenandoah Pilot Project.”
Triangle Energy
Triangle Energy (Global) Ltd continued to smoothly progress production, export and sales at the Cliff Head Oil Field in the Perth Basin with 46,555 barrels of oil produced during the quarter at an average daily production of 506 barrels.
The company has also made encouraging progress on technical work and preparation for drilling on the L7 and EP 437 permits.
The 3D seismic has undergone further special processing and AI interpretation to finesse the fault/structural interpretation, significantly increasing the oil prospectivity identified in Permit L7.
Read: Triangle Energy raises $5 million to drill Perth Basin opportunities
Kinetiko Energy
Kinetiko Energy Ltd (ASX:KKO, OTC:KKOEF) is developing an energy transition solution for South Africa focused on commercialising advanced shallow conventional gas projects in the Mpumalanga Province.
The company awarded a drilling contract to Infin Drilling to deliver five appraisal production wells in the Volksrust region to the south of ER271 and Northern ER270.
Casing and cementation hardware is being procured as imported content. These wells, scheduled to be commenced in early Q2 2024, are targeting a geological region in between explored areas where some of Kinetiko’s most gassy core wells were drilled over the last 12 months.
Map showing the locations of the appraisal production well sites in southern ER271 and northern ER270.
Additionally, the grant of ER320, covering a 2,383 square kilometre area, is anticipated to contribute substantially to the company's gas resources and reserves, with the environmental impact assessment expected to be completed within Q2 2024 and regulatory assessment and granting estimated for the end of 2024.
Elixir Energy
During the last quarter, Elixir Energy Ltd (ASX:EXR, OTC:ELXPF) drilled the highest impact well in the company’s history: Daydream-2 at the company’s 100%-owned Grandis Gas Project in the Taroom Trough of the Bowen Basin, Queensland.
The target gas-bearing Permian section was logged with a gross 607 metres. This section will be the subject of a multiple interval stimulation and flow testing program in the first half of 2024.
Work is well underway in analysing and integrating the extensive data gathered to optimise the stimulation and flow testing program.
After a rigorous tender process, Elixir finalised an agreement with Halliburton (NYSE:HAL), appointing it as the primary contractor for the forthcoming stimulation program.
Empire Energy Group
Empire Energy Group Ltd (ASX:EEG, OTC:EEGUF) acquired the Roslind Park Gas Plant (RPGP) in the Northern Territory from AGL Limited for $2.5 million in cash, significantly accelerating the path to Carpentaria Pilot Project production and reducing the capital expenditure required to commence gas sales.
Managing director Alex Underwood said: "The acquisition of the Rosalind Park Gas Plant from AGL was a highlight of the quarter.
“The plant has a design capacity of 42 TJ / day, which is well in excess of the capacity required for Empire’s up to 25 TJ / day EP187 pilot project.
“Empire expects that it will be able to reduce the timeline to first gas by ~12 months and potentially save more than $30 million compared to new build options given current global supply chain constraints.”
Carnarvon Energy
Carnarvon Energy Ltd (ASX:CVN) continued to focus on the delivery of the Dorado Phase 1 liquids development in the Bedout sub-basin offshore Western Australia, with its primary drivers being low capital cost and short timeframe to first production.
The company continues to support Santos, the project operator, in driving the project forward in preparation for a final investment decision (FID).
The key elements in reaching an FID include optimising and completing the facilities design for an integrated development of the Dorado and Pavo resources, settling project costs and finalising key construction contracts for the floating production storage and offloading (FPSO) vessel and wellhead platform.
Buru Energy
During the quarter, Buru Energy Ltd (ASX:BRU, OTC:BRNGF) reconfirmed the potential of its significant Rafael conventional gas and condensate resource in Western Australia.
Read: Buru Energy updates market on fast-tracked Rafael 3D seismic survey interpretation
Chief executive officer Thomas Nador said: “Buru finished the 2023 calendar year in a robust position against its strategic plan, creating a platform for growth and value creation across its portfolio of assets.
“The year has seen Buru regain full ownership of Rafael, the first significant conventional gas and condensate discovery in the onshore Canning Basin of Western Australia. Commercialising the Rafael resource is Buru’s priority, and the year has seen material progress achieved in support of this endeavour.
“Key milestones delivered included the completion of a 3D seismic survey over the Rafael structure; the commitment to long lead well equipment in support of planned appraisal drilling in 2024; the commencement of pre-FEED engineering for a Phase 1 Rafael development, and the commencement of a strategic appraisal/development partner selection process for the asset.”
Brookside Energy
During the fourth quarter of CY23, production remained strong with higher realised oil and gas prices, resulting in another strong financial result for Brookside Energy Ltd (ASX:BRK, OTC:RDFEF).
Group net production in the fourth quarter was 1,410 barrels of oil equivalent per day, up 33% from the previous corresponding period, with a 7% decrease from the previous quarter in line with modelled well depletion.
Production by quarter net to Brookside’s Working interest and net of royalties.
Despite this slight drop in production, the company generated strong cash receipts of A$12.2 million with higher realised prices quarter on quarter.
Brookside ended the quarter with a healthy A$26.2 million in cash and remains debt-free and unhedged.
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