Predator Oil and Gas Holdings PLC (LON:PRD) Chief Executive Officer Paul Griffiths caught up with DirectorsTalk for an exclusive interview to discuss their latest operational update for Trinidad & Ireland.
Q1: Just looking at your latest announcement, this looks like a positive update, can you just run us through the highlights?
A1: I would agree, it’s an extremely positive and good news. To start with, CO2 EOR operations can now start earlier than planned and we can plan that for late September/October this year and that can help us achieve our goal of 400 barrels a day incremental production, which is our target. Two infill development wells on their own were never going to achieve that for us so that’s why CO2 EOR was important to accelerate and get going as soon as possible. It will also give us a better and more sustainable cash flow potential from towards the end of the year particularly as oil prices, as you know, have been improving recently.
Infill drilling represents the capital investment of around $13 a barrel compared to approximately $1.1 a barrel for CO2 EOR operations and for me, that’s a pretty compelling commercial argument by any stretch of the imagination to progress CO2 EOR in preference to infill drilling.
On Corrib South, the application for a Frontier Exploration Licence is progressing and it’s all on track along with discussions with interested parties seeking to join us in a well in 2020. All interested parties fully understand the commercial rationale for a tie-back to the Corrib gas field in a success case and that obviously helps with our whole process in gaining partners for this project.
So, we remain very excited about the potential to finding another TCF of gas close to Corrib, naturally that’s a big asset for the company.
Q2: With regards to the CO2 supply contract, how does this aid Predator Oil and Gas Holdings?
A2: The bottom line is on CO2 enhanced oil recovery, you can’t run operations without CO2 or a supply of CO2. So, through this contract, we’ve secured Trinidad’s entire current surplus amount of CO2 which I would say puts us in a really dominant position to do CO2 enhanced oil recovery in Trinidad.
Without the CO2, you can’t do CO2 EOR operations so that’s why the supply contract is critical and effectively cornering the market for CO2 puts us in a very very strong position.
Q3: What are the benefits of accelerating the C02 EOR pilot?
A3: Accelerating project means that we can get approximately a 5-fold uplift in production rates and cash revenues compared to the same amount of investment in infill drilling or drilling two infill wells.
So, again that’s a fairly compelling commercial argument for investing in CO2 EOR because we uplift the production rates and indirectly therefore uplift the cash flow that we can get out of the wells.
Q4: Now, you’ve chosen a phased investment strategy, why is this?
A4: Well, there’s no mystery in this, we simply wanted to assess the results at the initial investment of the pilot CO2 to determine where the optimum area of the Innis Trinity field was for follow-up investment.
We don’t want to invest all the money into one particular area of the field if there’s an opportunity to invest in other areas of the field on the back of the results of the first stage of the pilot CO2. Again, obviously, we’re trying to deploy our capital to get the best possible production rates from the wells, so it just makes sense to do it in two phases, there’s no other reason for that other than we need to collect data to determine which is the best area to move on to to expand the project.
Q5: Can you discuss the reasoning behind the plans of implementing a well at Corrib South?
A5: Just for a background, very simply, there’s a renewed demand for gas in Europe as you know in the medium-term as gas is replacing less carbon-efficient fuels such as coal and oil. So, the European indigenous gas production is also declining from older mature fields and also the geopolitical deals for gas are now being done, you saw the deal recently between Germany and Russia for the Russian gas. So, all of this has put up the pressure on the European gas prices which we believe will be with us for some time to come.
Corrib South, if successful, could feed gas into the Corrib infrastructure by 2022, there is no other gas project off-shore Ireland that can compete with this timeline. So, that, again, puts us in a very strong position to develop Irish gas but in the high estimate case, Corrib South could create £3.5 billion to £4 billion worth of gross revenues even at a very conservative gas price, approximately 75% of today’s gas price.
So, it’s easy to see therefore why the fundamentals are attractive to our very select group that we have invited as potential interested parties and why this project dwarfs everything else we have in the company, in its portfolio.
The largest returns for our shareholders, it’s particularly in small-cap companies like Predator Oil and Gas Holdings, occur where such a company has exposure to what you could call ‘the big one’ and that’s how Cove Energy in East Africa and more recently, Sound Energy in Morocco.
So, the onus is on us to ensure that we do everything we can to put us in a position to drill in 2020 and win this potentially very large prize. So, for us it makes sense to progress the drilling plans in order to meet that timetable.
