The Company is pleased to announce its Final Results for the year ended 30 June 2021, and hereby gives notice that the Annual General Meeting of Westmount Energy Limited will be held at No 2 The Forum, Grenville Street, St Helier, Jersey JE1 4HH, Channel Islands on 9 December 2021 at 11.00.
CHAIRMAN'S REVIEW
2021 Highlights
- High quality reservoirs identified in first drilling campaign on Kaieteur and Canje blocks - but no standalone commercial discoveries to date1
- Tanager-1 Discovery contains gross 65.3 MMbbls (42.7 MMbbls Net to Kaieteur Block) contingent resources (2C, unrisked)2 in high quality Maastrichtian reservoir - but is non-commercial as a standalone development
- Detailed analysis and integration of multi-play drilling results and newly acquired sub-surface data into regional petroleum system models to high-grade potential follow-on drilling targets
- Applications for environmental authorisation submitted by operator to the Guyanese EPA with respect to potential new drilling programs on the Canje and Kaieteur blocks from 2022
- Shares commenced cross trading on the US OTCQB market under the ticker symbol "WMELF"
- Final repayment of the 10% Convertible Unsecured Loan Notes 2021; the company is now debt free
- Cash balance of £1.2M at year end, 30 June 2021
Global economic recovery, the ebb and flow of the COVID-19 pandemic, an accelerating energy transition in parallel with an Opec+ stabilization of oil markets have been the central themes in the upstream sector over the past 12 months. The green shoots of economic recovery that were in evidence in the second half of 2020 have continued to sprout in 2021. Vaccination programs and improving management strategies are pointing towards light at the end of the pandemic tunnel. Increasing economic activity, population mobility and oil demand, combined with OPEC+ supply discipline, has driven a sustained oil price rally over this period with Brent crude trading consistently above US$80/bbl since the start of October. While the clean energy transition has also gained momentum during this period, the redirected capital flows and poor regional performance of some renewable sources (wind and hydro) during summer 2021 have had some unintended consequences - such as gas shortages in Europe and Asia boosting demand for crude - while adding significantly, at least in the near term, to gas and oil pricing pressures. So, while pandemic threats remain in the form of mutant strains, other economic threats are now moving centre stage - such as rising inflation driven by rebound demand and spiking energy prices - together with uncertainties around future energy policies, the pace and direction of decarbonisation and energy capital allocation decisions in the face of an array of technologies with variable cost, carbon and reliability profiles, not to mention societal impacts. As the 'unintended consequences' in 2021 have shown energy transition is complex and multi-dimensional which suggests that reliable sources of energy such as low cost, low carbon oil and gas that can be rapidly commercialised, will have a role to play in the energy system for decades to come.
During the last 12 months the development of the upstream sector in Guyana has continued to power ahead making Guyana the world's fastest growing economy in 2020 with standout economic growth of over 40%. Building on the foundations of a world class petroleum province the country continues its transformation towards a significant oil producing nation - with potential for the installation of at least 6 Floating Production Storage and Offloading (FPSO) units on the Stabroek Block by 2027 and a discovered resource inventory, to date, which underpins up to 10 FPSOs3. Three of these FPSOs are already operating or are under construction - with the Liza Phase 1 (Destiny FPSO) reaching its plateau production rate of 120,000 BOPD during the past year, Liza Phase 2 (Unity FPSO) about to commence installation and hook-up offshore Guyana and on track to achieve first oil in early 2022, with a capacity of 220,000 BOPD and with a third field development, Payara (Prosperity FPSO), also with 220,000 BOPD capacity, undergoing topsides fabrication at drydock in Singapore and targeting first oil in 2024. In addition, it is anticipated that the Stabroek consortium will submit to the government a 4th development plan, for the Yellowtail discoveries, by the end of 2021, targeting a gross production capacity of 220,000-250,000 BOPD and first oil in 2025. At this stage a number of follow-on developments are also envisaged including development of the Mako/Uaru and Whiptail discoveries, subject to government approvals and project sanctioning4.
Six years on since the world-class Liza-1 discovery, the Guyana-Suriname Basin continues to manifest the hallmarks of a prolific emerging hydrocarbon province. With more than 50 wells drilled in the basin since 2015, in excess of 11 billion oil equivalent barrels discovered between Stabroek and Block 58 (with estimated 70% oil or liquids)5 and a total basin potential now estimated to be more than twice the discovered resource6, the basin continues to be an outlier in terms of global exploration performance and investment growth. Large prospects, high success rates and continuous aggressive exploration and appraisal drilling has catapulted Guyana to the number three position for proven oil reserves in the Latin America-Caribbean region7.These advantaged barrels, characterised by low breakeven costs, low carbon emissions and potential for rapid commercialisation, are likely to continue to make Guyana a preferred destination for deepwater exploration and production investment.
In October 2021, on the back of a string of exploration successes, estimates of gross discovered resources to date on the Stabroek Block alone have been revised upwards to approximately 10 billion barrels of oil equivalent8. Successful exploration and appraisal wells reported during the last 15 months include Redtail-1, Yellowtail-2, Uaru-2, Mako-2, Longtail-3, Turbot-2, Whiptail-1, Whiptail-2, Pinktail-1 and Cataback-1 bringing the total number of reported significant discoveries to date on the Stabroek Block to twenty-one. In addition, circa 15m of oil bearing, Santonian, sandstone was reported in the Hassa-1 well, which is located proximal to the Canje block boundary. These frenetic activity levels are supported by the current deployment of six drillships, offshore Guyana, with a 7th drillship plus one semi-submersible rig operating offshore Suriname.
In the Surinamese sector, at the south-eastern end of the basin two additional stacked pay discoveries were announced by the Total/Apache consortium in Block 58, during this period - Kwaskwasi-1 and East Keskesi-1 - bringing the number of reported discoveries on the block to four. These discoveries reported light oil and gas-condensate pay in the shallower Campanian reservoirs overlying light oil pay in deeper Santonian reservoirs. Appraisal of these discoveries has commenced, with Total as operator, targeting FID for the first development in early 2022 and first oil by the end of 2025. Initial appraisal progress has been mixed with early success at Sapakara South-1, disappointments at Kwaskwasi and Keskesi East-1, and the general challenges around valorization of large associated gas volumes. In December 2020, Petronas announced a discovery at the Sloanea-1 exploration well on Block 52, where several hydrocarbon-bearing sandstone packages with good reservoir qualities were encountered in the Campanian.
Exploration drilling results continue to support the presence of multiple plays, quality reservoirs and the potential for stacked-pay drilling opportunities within the basin. Although the Upper Cretaceous Maastrichtian-Campanian Liza play dominates in terms of number of discoveries and discovered volumes to date the deeper Santonian pools on Block 58, in conjunction with the deeper hydrocarbons reported at Liza-3, Tripletail-1, Yellowtail-2, Uaru-2, Turbot-2, Longtail-3 and Hassa-1 on the Strabroek Block, suggest an extensive emerging deeper play fairway within the basin.
It is against this backdrop that the first 'large step-out play extension wells' have been drilled on the Kaieteur and Canje blocks during the last 15 months - with results to date confirming the presence of high-quality reservoirs and the extension of the Cretaceous petroleum system outboard of the Liza-Sloanea trend.
Kaieteur Block
The first well on the Kaieteur block, Tanager-1, remains the deepest well drilled in the Guyana-Suriname Basin to date. It was spudded on the 11 August 2020, using the Stena Carron drillship. The well was drilled in a water depth of 2,900 metres and reached a total depth of 7,633 metres circa mid-November 2021. Evaluation of LWD, wireline logging and sampling data confirmed 16 metres of net oil pay (20oAPI oil) in high-quality sandstone reservoirs of Maastrichtian age. Although high quality reservoirs were also encountered at the deeper Santonian and Turonian intervals, initial interpretation of the reservoir fluids was reported to be equivocal, requiring further analysis - results of which have yet to be disclosed. Post well analysis and integration of the data collected continues with a view to high grading the next drilling target on the Kaieteur block.
A post-well Netherland, Sewell & Associates Inc. ("NSAI") published CPR (14 February 2021) indicates that the Tanager-1 Maastrichtian discovery contains a 'Best Estimate' Unrisked Gross (2C) Contingent Oil Resource of 65.3 MMBBLs (Low to High Estimates 17.7 MMBBLs to 131 MMBBLs) - with a 'Best Estimate' Unrisked Net (2C) Contingent Oil Resource attributable to the Kaieteur Block of 42.7 MMBBLs (Low to High Estimates 11.3 MMBBLs to 86 MMBBLs). However, this discovery is currently considered to be non-commercial as a standalone development.
Subsequent to the Tanager-1 discovery, on 24 May 2021, it was announced that Hess Corporation ("Hess") had increased its working interest ("WI") in the Kaieteur Block, offshore Guyana, from 15% to 20% via the farm-down of a 5% WI by Cataleya Energy Limited ("CEL"). Although the details of this farm-in transaction were not disclosed this farm-in, by one of the Stabroek block partners and a leading player in the Guyana-Suriname basin, suggests confidence in the prospective resource potential of the Kaieteur Block and augurs well for the continuing exploration of the area.
On the 23 August 2021 it was announced that the date for elective nomination, by the operator, of the prospect target for the 2nd well on the Kaieteur Block has been extended by seven months to the 22 March 2021. The Kaieteur Block partners agreed to this extension to facilitate continuing analysis by the operator and integration of extensive multi-play drilling results and comprehensive data collection programs into regional petroleum system models and the prospect nomination decision.
Subsequently, in September 2021, the operator, ExxonMobil, submitted an application for environmental authorization to the Environmental Protection Agency (EPA) to proceed with a 12 well exploration campaign on the Kaieteur Block.
The Kaieteur Block is currently operated by an ExxonMobil subsidiary, Esso Production & Exploration Guyana Limited (35%), with Cataleya Energy Limited ("CEL") (20%), Ratio Guyana Limited ("RGL") (25%) and a subsidiary of Hess Corporation, Hess Guyana (Block B) Exploration Limited (20%) as partners. Westmount retains a holding of approximately 5.3% of the issued share capital of Cataleya Energy Corporation ("CEC") the parent company of CEL and circa 0.04% of the issued share capital of Ratio Petroleum Energy Limited Partnership ("Ratio Petroleum") the ultimate holding entity with respect to RGL.
Canje Block
The first well on the Canje block, Bulletwood-1, was spudded on the 31 December 2020 using the Stena Carron drillship and was completed in early March. The well was safely drilled in a water depth of 2,846 metres to its planned target depth of 6,690 meters. The primary target in the well was a Campanian age confined channel complex. The well encountered quality reservoirs but non-commercial hydrocarbons. There has been limited disclosure of the well results to date as detailed analysis of the data collected is ongoing. However, the initial results confirm the presence of the Guyana-Suriname petroleum system and the potential prospectivity of the Canje Block.
Initial drilling operations at the second well on the Canje block, Jabillo-1, commenced on the 14 March 2021 using the Stena Carron drillship. Previously published information indicated that Jabillo-1 was targeting a Late Cretaceous, Liza-age equivalent, basin floor fan9. After interruption for a brief period of maintenance work on the drillship drilling operations at Jabillo-1 recommenced circa the 5 June 2021 and were completed in early July. The well was safely drilled in a water depth of 2,903 metres to its planned target depth of 6,475 meters. The well did not encounter commercial hydrocarbons.
The third well on the Canje block, Sapote-1, was spudded circa the 29 August 2021, using the Stena DrillMAX drillship. This well is located in the southeast of the Canje Block, approximately 60kms north of the Campanian and Santonian Maka Central-1 stacked pay discovery, in a new depositional setting linked to the Berbice canyon system. It is an independent multi-layer prospect, with several Upper Cretaceous targets, and is potentially the largest prospect drilled on the Canje block to date. Drilling of Sapote-1 is anticipated to take 60 days, with results anticipated in late October. At the time of going to press the results of the well are pending.
Westmount holds an indirect interest in the Canje Block as a result of its circa 7.2% interest in the issued share capital of JHI Associates Inc. ("JHI")10. The company also holds an additional indirect interest in the Canje Block as a result of its shareholding in Eco (Atlantic) Oil and Gas Ltd. ("EOG") and following the investment in JHI Associates Inc. ("JHI") announced by EOG on the 28 June 2021. Subsequent to this EOG transaction and a previous 2018 farm-out to Total JHI is fully carried/funded for the 2021 three well drilling campaign and is also funded for the drilling of additional wells.
The Canje Block is currently operated by an ExxonMobil subsidiary, Esso Exploration & Production Guyana Limited (35%), with TotalEnergies E&P Guyana B.V. (35%), JHI Associates (BVI) Inc. (17.5%) and Mid-Atlantic Oil & Gas Inc. (12.5%) as partners.
Orinduik Block
Westmount continues to hold an indirect interest in the Orinduik Block as a result of its circa 0.75% interest in the issued share capital of Eco (Atlantic) Oil and Gas Ltd. ("EOG"). Over the last 12 months the focus of the Orinduik Block JV partners has been on the analysis and assimilation of the 2019/20 drilling results and data gathering program, the reprocessing and re-interpretation of the 3D seismic data, and the high grading of the Cretaceous light oil prospect inventory with a view to the next drilling campaign on the Orinduik Block. EOG remains fully funded for its 15% working interest share of further planned/near term drilling on the block, which is anticipated to commence as soon as it is practical to do so.
The Orinduik Block is currently operated by Tullow Guyana B.V. (60%), with TOQAP Guyana B.V. (25%) and EOG (15%) as partners. TOQAP Guyana B.V. is jointly owned by TotalEnergies E&P Guyana B.V. (60%) and Qatar Petroleum (40%).
Block 47, Suriname
Westmount retains a minor indirect interest in Block 47, Suriname, via its circa 0.04% holding in Ratio Petroleum. The first well on Block 47, the Goliathberg-Voltzberg North-1 ("GVN-1") well was spudded circa 25 January 2021, using the Stena Forth Drillship and was reported by the operator Tullow Oil to have reached total depth on the 18 March 2021. The well was drilled to a total depth of 5,060 metres in a water depth of 1,856 metres and was targeting Turonian-Cenomanian stacked reservoirs. The well is reported to have encountered good quality reservoir with minor oil shows and was subsequently plugged and abandoned.
Block 47 is operated by Tullow Suriname B.V. (50%), with Petroandina Resources Corporation N.V (30%) and Ratio Suriname Ltd. (20%) as partners.
Portfolio Effect
Westmount's investment strategy has been to provide shareholders exposure to a portfolio of drilling outcomes in the Guyana-Suriname Basin. Since 2019, we have participated, indirectly via our investee companies, in six wells (Jethro-1, Joe-1, Tanager-1, Bulletwood-1, Jabillo-1 and Sapote-11), offshore Guyana, which have yielded 3 oil discoveries (Jethro, Joe and Tanager), but no standalone commercial success to date. While these initial drilling outcomes are below our expectations for the portfolio, the results provide encouragement and must be viewed in the context of 'large step-out' wells evaluating giant stratigraphic prospects while seeking to establish the perimeter of the multiple Tertiary and Cretaceous play fairways both to the northeast and southwest of the prolific Stabroek block.
In any case, the drilling to date has confirmed the presence of high-quality reservoirs of various stratigraphic ages in the Kaieteur, Canje and Orinduik areas, which are capable of supporting deep-water developments when containing commercial volumes of light oil. Recent public domain presentation and commentary suggests that trap adequacy and hydrocarbon migration/timing are the key exploration risks inferred from these initial drilling results, out with of the Stabroek Block sweet-spot. These results together with the analysis and synthesis of the extensive well data gathering programs executed by the respective operators should improve understanding of the plays, reduce sub-surface risk and inform prospect selection for the next round of drilling on these blocks. We remain hopeful that the geoscience learning curve combined with the portfolio effect provided by drilling an extended sequence of prospects in this prolific basin will win out over individual prospect risks to yield a commercial discovery. We look forward to the next drilling campaign across these blocks which will potentially commence in early 2022. ExxonMobil, the operator of the Kaieteur and Canje blocks, has already submitted an application for environmental authorization to the Environmental Protection Agency (EPA) with respect to potential 12 well drilling programs on both the Kaieteur and Canje blocks.
Investment portfolio rebalancing and optimisation of exposure to 2021 drilling activity
During the period under review your company executed a number of transactions with a view to rebalancing the investment portfolio and optimising exposure to the more immediate and material drilling opportunities that were presented by the scheduled three well campaign on the Canje block in 2021.
On the 10 September 2020 the company announced that it had purchased 1,550,000 common shares in JHI by way of the issue of 18,290,000 new ordinary shares of no par value in Westmount ("New Ordinary Shares"), representing approximately 12.7% of Westmount's enlarged issued share capital. This share exchange transaction was agreed with the counterparties on the basis of a share swap metric of 11.8 new ordinary shares in Westmount for each common share in JHI - with Westmount shares being valued at 14.745p per share and JHI shares being valued at CAD$3 per share.
Two additional 'cash only' JHI share purchase transactions were also entered into by Westmount during the period under review. On the 22 December 2020 the company announced that it had purchased 250,000 common shares in JHI at an aggregate cost of US$400,000. On the 18 January 2021 the company announced that it had purchased 287,500 common shares at an aggregate cost of CAD$718,750. Following these purchases, Westmount holds a total of 5,651,270 shares in JHI, representing approximately 7.2% of the issued common shares in JHI as of 30 June 2021.
On the 17 November 2020 Westmount sold 1,200,000 shares in Ratio Petroleum for an aggregate consideration of ILS 1,514,681 (£338,480 after costs). On the same date the company sold 300,000 WL2 Warrants for an aggregate consideration of ILS 69,251 (£15,282 after costs). A residual holding of 89,653 WL2 warrants were exercised on the 14 January 2021 for an aggregate consideration of ILS 116,280 (£27,378). After rebalancing and the WL2 warrants exercise, Westmount continues to hold 89,653 shares in Ratio Petroleum representing approximately 0.04% of the issued share capital.
Westmount continues to hold a total of 567,185 common shares in CEC, representing approximately 5.3% of the issued share capital of CEC as of 10 August 2020.
Westmount continues to hold 1,500,000 shares in EOG, representing approximately 0.75% of the common shares in issue as of 6 September 2021.
On the 1 April 2021 the company announced that final repayment had been made with respect to the 10% p.a. convertible unsecured loan notes 2021 ("Convertible Loan Notes"), due on 31 March 2021. The final repayment was a total of £456,548 cash, consisting of £400,000 residual principal of Convertible Loan Notes plus £56,548 in accrued interest. This transaction completed the repayment in full of all Convertible Loan Notes issued on the 23 October 2018 and the company is now debt free.
The reported financial loss for the period is primarily made up of a non-cash loss on financial assets held at fair value through the profit and loss, some of which is as a result of Foreign Exchange movements on the portfolio Investments when valued at the period end.
US OTCQB Cross Trading Facility
On 1 December, 2020 we announced that the company's ordinary shares of no par value each ("Ordinary Shares") commenced cross-trading on the "OTCQB Market" in New York, U.S., under the ticker symbol "WMELF".
The cross-trading facility on the OTCQB Market will allow Westmount's Ordinary Shares to be traded in US Dollars by broker-dealers in the United States. Westmount's Ordinary Shares continue to trade on the AIM market of the London Stock Exchange with the ticker symbol "WTE".
Summary/Outlook
The green shoots of economic recovery that were in evidence in the second half of 2020 have continued to sprout in 2021. Vaccination programs and improving management strategies are pointing towards light at the end of the pandemic tunnel. Increasing economic activity, population mobility and oil demand, combined with OPEC+ supply discipline, has driven a sustained oil price rally over the past 12 months with Brent crude trading consistently above US$80/bbl since the start of October 2021. While the clean energy transition has also gained momentum during this period, the redirected capital flows and poor regional performance of some renewable sources (wind and hydro) during summer 2021 have had some unintended consequences - such as gas shortages in Europe and Asia boosting demand for crude - while adding significantly, at least in the near term, to gas and oil pricing pressures.
Drilling activity in the Guyana-Suriname basin continues to accelerate driven by the industry's focus on 'advantaged barrels' as a result of the unique combination of prospect sizes, reservoir quality, low carbon intensity and low breakeven metrics (US$25/bbl-US$35/bbl) that are available offshore Guyana. While the initial drilling outcomes from the Westmount portfolio have yet to deliver a standalone commercial discovery, the results to date provide encouragement and must be viewed in the context of initial 'large step-out' wells evaluating giant stratigraphic prospects while seeking to establish the perimeter of the multiple play fairways both to the northeast and southwest of the prolific Stabroek block. We are also heartened by the industry's continuing appetite for exploration acreage in the Guyana-Suriname basin - such as the Hess 5% farm-in on the Kaieteur Block (post Tanager-1) and the award of 3 blocks in the Surinamese Shallow Offshore Bid Round 2020/21 to Chevron (Block 5) and TotalEnergies + Qatar Petroleum (Blocks 6 and 8). Furthermore, the applications for environmental authorisation submitted to the Guyanese EPA by ExxonMobil the operator of the Canje and Kaieteur blocks augurs well for potentially extensive new drilling programs on these blocks from 2022.
Westmount's strategy remains one of offering shareholders exposure to high impact drilling outcomes in the Guyana-Suriname Basin via material indirect holdings in some key licences. In this context, and in spite of the access challenges, your Board remains focused on investment opportunities and deployment of capital that gives additional exposure to drilling in this prolific emerging basin. In addition, subject to future drilling outcomes, there are likely to be some consolidation opportunities within the basin amongst the junior players, as exploration matures and in response to risk management demands of investor capital. For the moment Westmount remains the only US OTCQB and London AIM listed junior player offering exposure to drilling outcomes across 3 blocks offshore Guyana. We travel in hope.
