Reabold Resources PLC (LON:RBD) Co Chief Executive Officer Sachin Oza caught up with DirectorsTalk for an exclusive interview to discuss their strategy, the IM-1 well in Romania, operations & future plans in California, the Curlew A project in the UK and what’s happening at West Newton.
Q1: You provided a portfolio update yesterday, could you put this into context for us in relation to the company’s strategy?
A1: Our strategy is to invest in low technical risk, pre-cash flow upstream oil and gas projects with a quick cycle time to value recognition and that usually means investing for near-term drilling activity to take place.
Because of the state of the market for pre-cash flow assets, it means we can purchase these at effectively stranded valuations. These attractive valuations mean we can expose our shareholders to the steepest part of the valuation creation curve by taking it from a project that is not very well recognised in value terms to one that is. The execution of this strategy is now proven across many project areas in our portfolio.
Reabold Resources expect to continue to deliver shareholder value through the execution of this strategy in the near, medium and longer term.
Q2: Specifically, on the project areas, in Romania, can you remind us of the opportunity here and what the upcoming well, IM-1, will actually be testing?
A2: For this appraisal programme area in general, which is across two wells, ERC Equipoise estimated in a Competent Person’s Report, or an Independent Expert’s Report, there was 49.9 BCF of contingent and prospective resources there.
Specifically, for the IM-1 well, this is 18.8 BCF across three horizons that was in that report but there is a further 16 BCF prospective resource that was not factored in by ERC that has been identified by the operator. That incremental resource was tagged in the original well that was drilled near that location but was not able to be evaluated.
Really, that is what IM-1 is, it is as close to re-drilling an old well that was drilled in the 1980’s and therefore, one of our lowest risk wells pre-drill. So, it’s a significant amount of resource that is available there but also one that is near and adjacent to infrastructure that can take us to that point of quick monetisation that we were discussing earlier in the execution of our strategy.
So, a very exciting well that is to be drilled imminently.
Q3: In California, what’s happening there operationally and future plans there?
A3: Operationally, we announced, particularly for West Brentwood where we had drilled two wells VG-3 and VG-4, is that we’ve managed now to get VG-4 on permanent production.
A quick reminder, one of the reason we’re were not able to get that on permanent production was because of the significant amount of associated gas from VG-4 which we understand is one of the most prolific wells that’s been drilled in the basin for a couple of decades. Our ability not to be able to flare that gas meant that we had to tie it in to a nearby gas pipeline which has now been done which means we can now have both the VG-3 and the VG-4 both on permanent production.
I should also stress that these wells in California have some of the best economics that we see in any projects that we evaluate globally. As another reminder, it’s also worth mentioning that California is a little bit of an island in terms of oil pricing within North America because it’s more associated with the brent-type pricing for crude than it is a WTI-type pricing and additionally, you do get more favourable gas pricing in the region as well.
So, for all these reasons, this is a very significant cash flow generator for us now and having both on production is a really good sign. It also bodes well for what we believe is future prospectivity on that licence area which is why we mention that there is permitting for further wells there and that is being currently evaluated.
At Monroe Swell, which is a different licence area, we drilled the Burnett 2A and the Burnett 2B wells, they haven’t produced at the initial test rates so we’ll go back and clean those wells out, perforate some more zones and look to get those back onto production at the initial test rates.
So, that’s California and as I said, we are very encouraged by the cash flow we’re now generating, from West Brentwood in particular.
Q4: Closer to home, the offshore UK project, Curlew A, it’s something you’ve discussed previously, what is the progress there?
A4: It’s a project we haven’t really discussed previously because it’s currently not fully funded but activity continues to pace on that project as well. There is 38.8 million barrels of resource as estimated by Schlumberger’s compiled CPR report and the site survey that is taking place as we announced is really to try and get that well drilled as quickly as possible after the funding takes place.
Now that this site survey will be completed, we anticipate, the end of this week, the next stage will be to farm-out further the rest of that project so that it can get drilled as soon as possible.
As I’ve said, a very exciting opportunity and one we look to put in the Reabold Resources project pipeline as soon as that funding is achieved.
Q5: Finally, can you remind us as to what is happening at West Newton onshore UK in East Yorkshire?
A5: Within West Newton, were clearly extremely excited by that well result that was announced a few weeks ago.
The next set of steps, certainly in the near-term, is to get the flow test out of that well, that will be happening in the next few weeks we anticipate and, as we’d announced previously, later this year. That will be an important market for determining the forward development programme for that area.
It’s also worthwhile mentioning that we are permissive further wells at a different site at West Newton and look forward to the full evaluation of that field. Very exciting and one that has been truly transformational.