Good morning reader
Orca is a north sea acreage licence owner. It’s flagship is “Pilot” (presumably keeping the whale theme going) and it recently announced a partnership with Ping.
ORCA are engineers through and through. Their plan is to produce north sea oil at possibly the lowest level of CO2 emission in the world. Look how it compares to other UKCS oilfields (pilot is the red blob way below the others!)
Floating wind turbines will power the whole thing and another fascinating technology is called “polymer flood”. This technology has been used before - by Ithaca - another north sea player.
The partnership with Ping listed in KL, has been announced for an 18.25% share is equivalent to 14.6mmlbbls worth something like £0.95bn revenue.
Ping are arranging the finance for the project to first oil (which should be 2-3 years so 2027/2028) so the fact Orca are shall we say “financially challenged” doesn’t matter.
The NPV10 value estimate according to WH Ireland depending on whether you use the 1P, 2P or 3P resources and assuming $85 a barrel brent oil, is somewhere between £63m and £143m.
Yet the market price is £13m. Now that’s 8X higher than 6 months ago (when the Labour party announced a moratorium on north sea oil). There’s been no reaction to the news. It’s true the agreement completes in Q1 2024 but the deal makes strategic sense to Ping - and of course to ORCA.
Strange, in my opinion. Financing the project was the achilles heel and Ping solves that.
Hidden upside
There are other holdings like Narwhal and ORCA have made several applications in the 33rd NSTA round.
The aspect I find attractive is the depth of their technical knowledge. Their ideas to use Polymer Flood, low CO2 extraction, carbon capture and reinjection are in keeping with today’s net zero world.
A Final Thought
Labour’s announcement to “stop oil” in the North Sea was ludicrous. “Stop oil” is like something King Canute might say. If the UK doesn’t produce oil in the north sea we import it. If Labour or any government actually wants to “stop oil” or not contribute further towards climate change the most effective way to do this would be force people to stop using oil, or curtail oil for example through taxes. If Diesel were £3 a litre or £6 a litre due to tax that would to quite some extent “stop oil”.
As well and instead of tax the bad you can subsidise the good. But the government have largely withdrawn subsidies on EVs, Solar Panel FITs, and other measures which would promote a more positive “Start Transitioning” campaign. Given that the UK and indeed the world have just agreed at COP28 to "transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner ... so as to achieve net zero by 2050 in keeping with the science." There are changes coming reader.
But, Oil, will continue to be demanded. Remember oil is not refined not energy. Think about chemicals, plastics. Its many uses exceed the ways that contribute to climate change. And organisations like Orca, able to extract the stuff with few emissions are probably on the right side of history to benefit.
A final thought
The significance of Pilot’s 2KG/boe and of ORCA’s potential contribution is best understood in context to current energy emissions. Average UK is 21KG/boe and average LNG is 79KG/boe. If we boosted North Sea gas to replace the 28% we get through LNG with projects like pilot then the UK’s CO2 emissions of supply would fall by 28% * 549 million boe * 77Kg = 11.8 mega tonnes of CO2.