Chariot looking forward after disappointing year

Atlantic margins-focussed oil and gas exploration company Chariot Oil & Gas updated the market on its operations on Tuesday, prior to its 31 December year-end, reporting that over the past 12 months it had continued to invest in its portfolio to capitalise on the current low cost environment.

The AIM-traded firm said it had participated in two deepwater exploration wells - one in Morocco in a fully carried well operated by Eni, and the other in Namibia operated by Chariot.

Disappointingly, both wells were unsuccessful, but it confirmed the financial impact was “significantly reduced” through partnering and, in Namibia, delivering what was likely to be one of the lowest-cost deepwater drilling operations carried out anywhere this year.

Chariot said it retained a portfolio of “highly prospective” assets in Morocco and Brazil.

The Chariot in-house subsurface team was continuing to develop an inventory of drill-ready prospects with material follow-on potential, and had initiated partnering processes in Morocco and Brazil.

With rig rates remaining at historic lows, the board said it was continuing to analyse how the company could again benefit from the low-cost environment.

Utilising the experience gained in Namibia and drawing on its in-house knowledge, Chariot said it had conducted a “thorough analysis” of drilling cost estimates for its key prospects, feeding that data into the current partnering processes.

Chariot launched drilling preparations in its operated Morocco assets through the approval of the drilling environmental impact assessment, long lead items identification and other operational arrangements, the board explained.

It said the company’s management believed that the preparatory work would enable Chariot to avoid unnecessary delays associated with its plans to drill in the near term, and to continue to capitalise on the current low-cost environment for drilling.

Chariot said it was continuing to apply the “strict capital discipline” demonstrated during the drilling of Prospect S in Namibia, and its “significantly reduced” annual cash overhead.

As a result, the company claimed to retain a strong cash position, with unaudited year-end cash estimated to be $19m.

It remained debt free, with no licence commitments across its entire portfolio.

“Clearly it has been very disappointing not to have delivered a transformational discovery from the two deepwater wells that we have participated in this year,” said chief executive officer Larry Bottomley.

“However, one of these wells was delivered at zero-cost, and the other was drilled significantly under-budget for what is likely to become a new benchmark for the sector.

“In Namibia, Chariot also demonstrated it is capable of safely and efficiently operating a deepwater well, delivering the operation within a short timeframe to capture the optimum point of the cost cycle.”

Bottomley said that the Rabat Deep 1 well had demonstrated a new petroleum system in the offshore sector of Morocco - one which could be significantly more robust than that previously extensively explored by the industry, which materially de-risked the Mohammedia and Kenitra licences.

“Looking ahead, we are focused on delivering an exploration well in Morocco utilising our established in-house drilling team to deliver this programme safely, efficiently and cost-effectively.

“With all licence commitments now met across the entire portfolio, the company is fully-funded to progress our assets in Morocco and Brazil whilst remaining vigilant to other value accretive opportunities.”