Alpha Energy off to brisk trot on Mustang's first oil

Singapore

LOSS-making Alpha Energy Holdings has finally caught a break.

The Catalist-listed firm's core asset, the Mustang well in Alaska's oil-rich North Slope, has struck "first oil" in production as well as sales under an offtake pact with an oil major.

Alpha Energy said the oil from the North Tarn 1A well that flowed at a maximum of 1,300 barrels of oil per day was adjusted to a steady rate of 500 barrels daily and was successfully delivered and sold to a "multinational energy corporation operating on the North Slope in Alaska through the Alpine Pipeline system".

The sales contracts are based on published pricing by Argus and Platts of the benchmark Alaska North Slope (ANS) crude blend which has generally over the past six months been trading at a premium to global benchmark Brent crude.

More drilling activity is afoot as the Singapore-based upstream oil player intends to start developing the next three wells in the Mustang field in the first half of 2020 that could add a gross capacity of 6,000 barrels per day, it said.

"Achieving first oil for the Mustang project is the most significant step for us. We are now producing oil commercially, a first since we acquired the asset five years ago. We now just need to follow through with the rest of the development plan so that revenue can pile on," Alpha Energy director Tan Ser Ko told The Business Times.

Trading was halted on Alpha Energy shares on Tuesday pending the announcement. On Monday, the counter jumped 0.6 Singapore cent or over 20 per cent to finish the day at 3.4 Singapore cents.

The oil firm counts Houston-based Thyssen Petroleum as the biggest anchor investor and Affin Hwang Multi Asset Fund and Ezion Holdings as substantial shareholders.

The much-awaited development at Mustang field - the initial asset acquired by Alpha Energy which was formerly known as JK Tech Holdings until it sold its IT business in 2014 - has shown up late.

The firm had previously guided that production would unfold in the second quarter of this year. It later pushed the timeline to third quarter.

Still, it's a silver lining for Alpha Energy which is enroute to logging its fourth straight year in the red after losses more than doubled to US$1.2 million in the first half ended June 2019 from a year ago. Up to this point, it counted the Badami oilfield - also in Alaska's North Slope - as its only oil-producing asset, but in which it has a 7.5 per cent working interest.

Alpha Energy's Mustang project is an oil field located within the Southern Miluveach Unit (SMU) on Alaska's North Slope and south of the Kuparuk River Unit, the second largest oil field in North America. Alpha Energy has a 90.1 per cent working interest in the SMU which spans 8,960 acres encompassing five state oil and gas leases.

According to Mr Tan, the oil field has 19 wells altogether.

"We need a few years to complete the 19-well programme for the Mustang Project. (But) what we are very focused on now is the next three wells... we want to be sure-footed by taking small steps to achieving big goals."

Only a couple of months ago, Alpha Energy completed a S$21.1 million rights issue, the proceeds of which were partly used to settle a loan for the Mustang project's funding needs and development.

In March this year, the company got shareholders' nod on several transactions which consolidated its interest in the Mustang project into a controlling block for greater operational control.

Some of Alpha Energy's peers have also seen some excitement on the Singapore Exchange as crude prices saw a rebound amid a softer US dollar environment and positive macro data out US and China. The de-escalation in US-China trade tensions has also helped lift some of the gloom over oil's outlook.

Rex International Holding gained 0.9 Singapore cent or nearly 8 per cent to finish at 12.5 Singapore cents on Tuesday. It was the day's most active with 102 million shares done. RH Petrogas rose 0.6 Singapore cent or 15 per cent to 4.5 Singapore cents.

Malaysian tycoon Robert Kuok's Kuok Group made a recent cash bid to take Pacc Offshore Services Holdings (Posh) private at an offer price of 21.5 Singapore cents apiece, a premium of about 97.2 per cent over the last traded price prior to the announcement.

In other news, Mirach Energy's eye-raising exuberance, prompted SGX Regco on Tuesday to urge investors to exercise caution when dealing with the shares after the unusual trading activity remained unabated despite the regulator's earlier queries following sharp spikes in the price.