NG Energy continues on its path of unlocking shareholder value as it approaches production and generating cash flow at its operations in Columbia as it looks to fuel Colombia’s clean energy transition in the years ahead.
As I pointed in my previous article on NG Energy (please click here to read), natural gas represents the cleanest burning hydrocarbon on the planet and will play a key role in helping transition the world to more renewable energy sources.
NG Energy has a portfolio of strong de-risked portfolio of assets in well-known producing areas adjacent to Canacol’s assets in Columbia.
I will be doing an in-depth pure commentary article on NG Energy in the coming weeks as I believe 2021 will be a transformational year for the company, given its production coming online alongside its ongoing exploration efforts.
However, today I am pleased to be joined by NG Energy’s CEO, Serafino Iacono to give us a general update on the company:
Hello Mr. Iacono, it’s a pleasure to be speaking with you to provide my subscribers and general readers another update on NG Energy.
What is new with the company? I noticed the company recently announced prospective resources at the Sinu 9 and Conchita Blocks. Can you touch on that to start?
Hi Alex, my pleasure and very happy to provide a company update. It has been all hands on deck to start the year as the company has been working on a few key objectives including: preparing the company for first production, commencing further exploration at Maria Conchita field, and preparation for the initial drill program at our flagship Sinu 9 asset. There is a lot of work ahead and the excitement is building as we inch closer to turning the taps on at Maria Conchita and breaking ground for exploration at Sinu 9.
Yes, we announced contingent and prospective resources towards the end of Q1 which was conducted by Petrotech Engineering and prepared in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (“NI 51-101”). The results from Petrotech independent report confirmed that we had previously been quite conservative with our numbers.
At Sinu 9 block, of which the company has 72% working interest, Petrotech confirmed best estimate Contingent Resources of 51 BCF and best estimate unrisked Prospective Resources of 836 BCF for Prospects and 637 BCF for Leads
At Maria Conchita Block, of which the company has an 80% working interest, Petrotech confirmed best estimate unrisked Prospective Resources of 195 BCF and 2P Reserves of 35 BCF.
This is close to double what we were previously stating. Its significant because it increases the life of our projects and should add many years of Gas production for the company.
The company certainly has a strong portfolio of assets, as showcased by its reserves, in addition to its exploration potential with its best estimate prospects.
Can you touch on the extensive exploration programs the company has for the remainder of the year?
Is there an asset, in particular, the company wants to focus on?
At Maria Conchita, as you know, we successfully re entered Aruchara-1 back in July of last year. The results were fantastic, exceeding expectations with 7-11 mmcf/d through separate DST tests in 3 different zones with 48/64” choke. We expect to add to this gas flow from Maria Conchita with recent re-entry of Istanbul 1. The company will be providing an update on the re-entry activity and flow testing in the next couple weeks.
The Company has also identified new zones of possible accumulations in the limestone of the Tinka area and the sandstones of the Istanbul-1, Aruchara-1 and Tinka 1 area. This study has identified five new possible locations to be drilled for the field development and the benefits to re-enter Tinka 1 which will be the next target for re-entry at the field.
At Sinu-9, we remain on track to commence exploration by Q3 2021. We have a binding offer with CPVEN for exploration of four wells; Magico, Mago, Hechicero, Hechizo fully financed at a combined cost of $27.7 million. We are expecting to receive final environmental permitting in the coming months and break ground at our Magico well in July/August.
Is everything still on schedule for near-term production?
I know the plan was to produce 40 mmcf/d by YE/21. Is that still on track?
Yes, production from Maria Conchita is expected to commence in the near term and we are very excited to achieve this milestone. NG has already obtained letters of intent for take or pay contracts with Colombian gas utilities at prices of US$5.08/mmscf for the sale of our gas from Maria Conchita. As for production targets, at Sinu-9, we are expecting the Magico well to produce between 20-40 mmcf/d alone. With an additional 2 wells planned for drilling before the end of the year; as well as production from Maria Conchita, the company production potential is well above 40 mmcf/d by YE/21.
Alex Deluce: With gas prices in Colombia showcasing its stability the past few years (maintaining around $5.00 / Mcf since 2015) – can you touch on the future of Natural Gas in Columbia and how it will be utilized as the country transitions to clean energy?
The combat on climate change has been met with ambitious plans for clean energy growth via renewable energy sources. I am a proponent of clean energy growth; however, I believe natural gas will remain an imperative energy source as the world makes a sustainable transition to the increased use of renewable sources of energy.
The underlying factor with renewable energy sources is that they are, for the most part, intermittent power sources; and so, there needs to be some means of providing electricity when renewables are not available. Solar power for example produces no power at night and very little on cloudy days and wind power is of course reliant on the wind. When you lose access to Natural Gas the results can be devastating; as we saw in the winter storm that hit Texas earlier this year, and left much of the state without heat and power for several days. I see natural gas as a transition fuel and as the number one source of electricity generation for decades to come.
The case for Natural Gas in Colombia is even stronger. The country has traditionally burned coal to produce electricity; however, in order to meet Paris emission targets the country has turned to Natural Gas to help reduce Co2 emissions. In addition, rising electricity consumption combined with low hydro reservoirs is amplifying demand for natural gas fired electricity in Colombia. At the same time that demand for Natural Gas is surging, major legacy fields are in decline, it has been estimated the Chuchupa and Ballena natural gas fields have decline rates of up to 20% annually which will continue to rise as they age. These factors are not easily fixed and will continue to drive a price premium on natural gas in Colombia for the foreseeable future. It’s a very favorable scenario for NG Energy.
I know this is a forward-looking question, but you’re someone that is a proven leader at building world-class companies.
What is your long-term vision with GASX?
Yes, many members of our current management team were a part of Pacific Rubiales, a company which saw production grow from 9000 bopd to 300,000 bopd from its Colombian heavy oil operations. I believe we have assembled the right ingredients to help achieve similar success in the business of Natural Gas production. We have identified fantastic targets in close proximity to national infrastructure and have assembled a team with experience to make the most out of these assets. The company vision is to continue scaling production on a sustainable upward trajectory; and by doing so, make a substantial impact on the country’s goals to dramatically reduce coal burning electricity and transition towards a sustainable green future. We are here to help fuel Colombia’s clean energy transition.
Thank you very much, Mr. Iacono. I am looking forward to catching up with you again in the next few months for another update.
The company trades on the TSX-V: GASX & OTC: GASXF.
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