Brazil Independent Declares Commerciality at Wahoo

December 22, 2021

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Brazil Independent Declares Commerciality at Wahoo

Brazilian independent PetroRio has �led a development plan and declared commerciality at the

Wahoo �eld offshore Brazil, breathing new life into what was once a groundbreaking pre-salt

discovery that had since been pushed to the back burner.

The company af�rmed in its �ling on Wednesday that the �eld holds around 126 million barrels of

recoverable oil.

It plans to drill four producer wells and two injector wells, with production anticipated at around

10,000 barrels per day per well, implying total �ows of about 40,000 b/d across the development.

Wahoo lies in roughly 4,600 feet of water in the Campos Basin about 20 miles north of the Frade

�eld, which PetroRio also operates. The company is planning to tap Wahoo via subsea tie-back to

the Frade �oating production, storage and of�oading (FPSO) vessel.

PetroRio said it has hired the Norbe VI rig from Brazilian contractor Ocyan for development drilling

at Wahoo and for revitalization work at Frade.

PetroRio has estimated a total capital outlay at Wahoo of around $800 million: $400 million for the

tie-back and subsea equipment, $360 million for well drilling and $40 million for adjustments to the

Frade FPSO and other items.

First production is targeted for 2024.

Long Wait

Brazil has seen plans for multiple medium-term pre-salt development projects �rmed up this year.

For Wahoo, it's been a long time coming.

Wahoo was discovered in 2008 by Anadarko Petroleum, and was one of the �rst discoveries by an international operator in Brazil's

pre-salt play.

Anadarko saw Wahoo as a potential megaproject, claiming an estimated resource potential of up to 500 million barrels of oil

equivalent after drilling appraisal wells and carrying out production tests.

But the project lost momentum in the mid-2010s after a disappointing appraisal well followed by a major downturn in the global oil

sector.

Anadarko instead turned its attention to projects onshore US and in the Gulf of Mexico, and was acquired by Occidental Petroleum

late in the decade.

Project Evolution

Anadarko ultimately sold out of Wahoo in 2018 to BP and TotalEnergies.

BP went on to sell its operated stake in the project to PetroRio in 2020. Total sold out to PetroRio this year. PetroRio now holds a

64.3% operated interest, but the remaining ownership breakdown was not immediately clear.

CONTENTS

Brazil Independent Declares Commerciality at Wahoo

Shell Farms In to Chevron Suriname Block

Scant Interest for Additional US SPR Sales

Despondent Markets Temporarily Brush Off Omicron Fears

US Petroleum Data - Week Ending Dec. 17, 2021

In Brief

Continental's Hamm Ups His Stake in Company

Lawsuit Aims to Block Shell's Deer Park Sale

Data Snapshot

Oil and Gas Prices, Dec. 22, 2021

Equity Markets, Dec. 22, 2021

Kathrine Schmidt, Houston

PetroRio did not respond to a request for comment on Wednesday, but has said previously that it was working to acquire the

remaining stake in the �eld.

PetroRio, formerly known as HRT, was known in the early 2010s for its high-�ying speculative exploration in Brazil’s remote Solimoes

basin, and off Namibia.

But after disappointing results and a period of struggle in the mid-2010s, the company shifted focus to smaller discoveries and

optimizing maturing �elds in Brazil.

PetroRio also holds an interest in the Itaipu �eld, another pre-salt discovery of a similar vintage to Wahoo. However, unitization

questions have slowed development of that project, the company said.

PetroRio says Wahoo is a carbonate reservoir in the pre-salt layer at between 16,400 and 23,000 feet total depth. The �eld is of

“excellent quality” with crude of 30º API and low viscosity, it says.

Associated gas from Wahoo will be used to generate power for the Frade FPSO.

Wahoo Development Plans

Kathrine Schmidt, Houston

Shell Farms In to Chevron Suriname Block

Royal Dutch Shell has farmed in to a shallow-water block off Suriname picked up by Chevron in a bid round earlier this year, the South

American country's regulator said.

The Anglo-Dutch supermajor will take on a 20% stake in the block, with operator Chevron retaining 40%. A unit of state oil company

Staatsolie holds the remaining 40%, Chevron con�rmed.

Staatsolie said it “welcomes the participation of a renowned party such as Shell,” adding that the deal “underlines the great interest” in

Suriname’s offshore play.

Shell declined further comment.

Bid Success

Suriname’s shallow-water round in July attracted some high-pro�le participants, with three blocks awarded: One to Chevron, one to

TotalEnergies and one to the company now known as QatarEnergy.

Chevron has been conservative with its exploration queue in Latin America, but is making room for opportunities in the proli�c

Guyana-Suriname Basin.

“This operation will take advantage of the technical and �nancial strengths of both companies to deliver a robust exploration program,”

Chevron told Energy Intelligence in a statement.

The pair are frequent partners in exploration and development projects in the US Gulf and in Mexico, and Chevron still holds a 33.3%

stake in the Shell-operated deepwater Block 42 in Suriname.

Chevron has not divulged �rm plans for work on its new shallow-water block. The bid round terms include only an initial commitment

to acquire 3-D seismic within two years, with a single well required only if the leasehold is extended another two years.

Future Plans

Shell has not been as active in the region as rivals such as Exxon Mobil, Hess and Total. But the Chevron farm-in shows its appetite for

adding to its existing position in the region.

The company plans to drill a well in its operated Block 42 in the second quarter of 2022, Staatsolie Managing Director Annand Jagesar

told Energy Intelligence earlier this year.

Full Circle

Shell was an early participant in exploration efforts in the broader region offshore Guyana, Suriname and French Guiana, but those

efforts came up short of success.

Shell partnered with operator Tullow Oil on the 2011 Zaedyus discovery off French Guiana, a well hailed as a potential play-opener.

But four follow-up wells, operated by Shell, were not successful, and the �eld was never developed.

Shell was also an original partner with Exxon off Guyana, but exited its position in 2014, just a year before Exxon drilled its

groundbreaking Liza discovery.

Scant Interest for Additional US SPR Sales

Regular sales from the US Strategic Petroleum Reserve (SPR) have delivered a steady stream of crude oil to the market in 2021, but

re�ners have so far shown limited interest in taking additional oil that would need to be returned to the storage facility.

The Biden administration’s 50 million barrel release from SPR inventories on Nov. 24 is meeting a market that is well supplied and

facing a surplus in the �rst half of 2021 — after cranking crude up to $82 per barrel earlier in November on fears that winter was going

to be tight.

So far only Exxon Mobil is keen to take oil in an exchange — 4.8 million bbl of 32 million bbl available. It has to be returned to the SPR

and can only be taken if a buyer can show a disruption in supply, per the stipulations of the exchange.

Traders have until Jan. 4 to make offers on 18 million bbl of a mix of sweet and sour grades, delivered from the caverns in Texas and

Louisiana in February and March 2022. These congressionally approved volumes typically all get taken up.

The limited interest for oil that needs to be returned to the SPR is somewhat of an anticlimax to weeks of speculation that the US

government would release oil to bring prices of crude — and especially gasoline — down.

The US is for now the only country announcing actual sales from SPR inventories even though the UK, Japan, South Korea, India and

China also signed on to a “coordinated” release. Theoretically, some 80 million bbl of oil combined was on offer.

The main purpose of the sale was to lower gasoline prices. They have come down 25¢ per gallon on the Nymex, which is �ltering

through to the pump.

Steady Stream

Since September, 250,000 bbl per day in crude oil has been drained from the US SPR in accelerated sales mandated by Congress, which

boosted supply to a market that was increasingly worried about shortages of crude oil and re�ned products going into winter.

The 18 million bbl of sales come on top of sales already arranged. SPR stocks have fallen below 600 million bbl, their lowest level in 18

years, after starting the year at 638 million bbl.

Last week, SPR volumes fell to 596 million bbl, down 2.5 million bbl from the previous week, the US Energy Information Administration

(EIA) reported on Wednesday.

These steady stream of SPR sales could not prevent US benchmark West Texas Intermediate (WTI) jumping over $82 late October.

Just two days after countries announced additional SPR sales, WTI collapsed $10/bbl on expectations of a mild winter and fears that

the Omicron variant of Covid-19 would erode oil demand growth.

Analysts noted that the price drop was mostly from speculative capital leaving during a holiday weekend, setting off a cascade of sales,

and only partially inspired by the notion that more SPR oil would come to market.

Not So Tight

The major oil consumers announcing SPR sales would no doubt take credit for falling prices, but oil balances had already signaled for a

while that the market was going to run a supply surplus in the �rst half of 2022.

On Dec. 2, WTI fell to a recent low of $62/bbl in a sign market sentiment and perceived �ows rapidly changed in just a week.

In a twist, Opec-plus announcing it would continue adding oil to the market helped the oil price bounce back from its lows as it was

seen to be a sign of con�dence that winter demand would be strong after all.

Even though WTI has bounced back to $73/bbl, traders agree that physical oil is widely available. SPR releases are expected to add to

US crude oil exports.

John van Schaik, New York

Despondent Markets Temporarily Brush Off Omicron Fears

Oil futures regained some momentum on Wednesday, selectively dismissing bad news on the spread of the Omicron variant of Covid-

19 to take cues on crude inventory movements instead, including a large US crude draw.

“Expect some volatile trading in what is a fairly gappy, illiquid market,” Star Fuels senior broker Matt Stanley warned.

And so it was, with both Brent and West Texas Intermediate (WTI) trending again higher amid resilient price volatility. The CBOE oil

volatility index (OVX) was still straying north of 46%, barely budging from its prior levels this week.

In London, the February Brent contract was up $1.31 and settled at $75.29 per barrel, while in New York, the front-month Nymex

West Texas Intermediate (WTI) February contract gained $1.64 and closed at $72.76/bbl.

Cheerless Gasoline

In the US, crude inventories fell by 4.7 million bbl in the week ended Dec. 17, data from the US Energy Information Administration

(EIA) showed.

Crude stocked in the US Strategic Petroleum Reserve (SPR) fell to its lowest level since November 2002, to 596.4 million bbl. This

includes the latest 2 million bbl that were injected two weeks ago into commercial inventories.

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LATEST EIA CRUDE OIL PRODUCTION DATA

Weekly Production Oil Rigs Monthly Production

Apr '20 Jul '20 Oct '20 Jan '21 Apr '21 Jul '21 Oct '210

4000

8000

12000

16000

0

300

600

900

1200

Source: Energy Information Administration, Baker Hughes

($/b

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ICE BRENT VS. NYMEX WTI FUTURES

Front Month Contracts

Nymex Light Sweet ICE Brent

10. Dec 12. Dec 14. Dec 16. Dec 18. Dec 20. Dec 22. Dec66

68

70

72

74

76

Julien Mathonniere, London

As the year draws to an end, ad valorem tax liabilities were again center stage, prompting buyers to hold their crude imports until the

new year, while some crude volumes were moved into �oating storage to readily ship abroad come January.

Product stockpiles, however, increased, with gasoline adding 5.5 million bbl to 224.1 million bbl while diesel inventories grew 400,000

bbl to 124.2 million bbl.

US implied gasoline demand dipped by 486,000 barrels per day last week to 8.986 million b/d.

Lower gasoline demand heading into the Christmas holiday could potentially be a harbinger of Omicron's toll on travel and mobility

despite lower US gasoline prices, sources said.

Undecisive Paper Market

Meanwhile, the oil derivatives markets continued to regain thrust after the mixed EIA report.

“This is a pragmatic market that wants to be bullish but knows relief rallies will not last. It is also convinced that it will be presented

with more attractive entry points, possibly some time in the new year,” PVM oil analyst Tamas Varga wrote.

It was also unclear to what extent a force majeure in Libya and another one in Nigeria helped to rekindle prices.

In Libya, National Oil Corp. is expected to shut down about 300,000 b/d of output, while Shell Nigeria declared force majeure on its

Forcados crude export stream on Monday.

After bottoming out on Dec. 20, the Brent forward time spreads over the front six months have widened again to an average 35¢/bbl.

But the prompt premium over deliveries in six months is currently straying north of $2/bbl, still well below the $6.11/bbl premium

achieved at the beginning of November.

Omicron had already wreaked havoc on investors’ bullish bets and contributed to signi�cant liquidation in the paper market at the end

of November.

Since then, money managers betting on higher prices have cut their net long positions by a combined 115 million bbl in Brent and WTI

futures.

At the same time, they have increased their bets on lower Brent prices.

There are now 2.7 bullish bets for every short, bearish position in Brent, down from a 7-to-1 ratio at the end of September.

mill

ion

bb

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US & CUSHING CRUDE OIL STOCKS

Cushing Total US

Apr '20 Jul '20 Oct '20 Jan '21 Apr '21 Jul '21 Oct '21400

440

480

520

560

24

36

48

60

72

Source: EIA

US Petroleum Data - Week Ending Dec. 17, 2021

CRUDE OIL: STOCKS(million bbl) Current Week Prev. Week

Padd 1 (East Coast) 7.6 7.9

Padd 2 (Midwest) 113.9 113.7

Cushing, OK 33.7 32.2

Padd 3 (Gulf Coast) 230.8 234.1

Padd 4 (Rockies) 24.4 24.1

Padd 5 (West Coast) 46.8 48.5

Total US 423.6 428.3

CRUDE OIL: IMPORTS('000 b/d) Current Week Prev. Week

Padd 1 (East Coast) 713 806

Padd 2 (Midwest) 2,729 3,296

Padd 3 (Gulf Coast) 1,028 1,117

Padd 4 (Rockies) 440 392

Padd 5 (West Coast) 1,283 860

Total US 6,194 6,471

PRODUCTS: TOTAL US STOCKS(million bbl) Current Week Prev. Week

Total Motor Gas 224.1 218.6

Kerosene Jet Fuel 35.4 35.6

Total Distillate Fuel Oil 124.2 123.8

Residual Fuel Oil 26.5 26.7

Un�nished Oils 85.4 88.2

PRODUCTS: REFINER & BLENDER OUTPUT('000 b/d) Current Week Prev. Week

Total Fin. Motor Gas 9,627 9,775

Total Kero Jet Fuel 1,473 1,451

Total Distillate Fuel Oil 4,852 4,812

Residual Fuel Oil 164 230

US REFINERY INPUTS AND UTILIZATION('000 b/d) Gross Inputs Oil Inputs Utilization

Padd 1 (East Coast) 748 707 91.5%

Padd 2 (Midwest) 3,880 3,864 92.6%

Padd 3 (Gulf Coast) 8,760 8,546 89.8%

Padd 4 (Rockies) 565 565 86.1%

Padd 5 (West Coast) 2,288 2,137 84.3%

Total US 16,242 15,818 89.6%

Prev. Wk. 16,280 15,670 89.8%

Source: US Energy Information Administration

Caroline Evans, Houston

IN BRIEF

Continental's Hamm Ups His Stake in Company

Continental Resources founder and chairman Harold Hamm has increased his holdings in the US independent amid speculation he

might take the company private.

From Dec. 1-3, Hamm purchased about 367,000 Continental shares ranging in price from $41.39 to $45.01 per unit, for total value of

nearly $16 million, according to �lings with the US Securities and Exchange Commission.

Hamm now owns about 81% of the company, according to data compiled by Reuters.

Last week, Hamm told Bloomberg TV that he saw the appeal of operating privately, as publicly traded producers are facing pressure

from investors to keep production �at and boost shareholder returns. Private companies, meanwhile, have been adding rigs and

reaping rewards from higher oil prices, he said.

“You have to do what the market wants when you’re public,” Hamm said. “These privates, they have more freedom than we do.”

A spokesperson for Continental did not respond to a request for further comment on Wednesday.

Continental is known for its operations in the Bakken Shale of North Dakota and the Anadarko Basin of Oklahoma, but has expanded

its reach this year.

In February, it announced a new position in the Powder River Basin of Wyoming. It later bought Pioneer Natural Resources' assets in

the Delaware subbasin of the Permian in a deal that closed this week.

Lawsuit Aims to Block Shell's Deer Park Sale

A pair of New York businessmen �led a lawsuit in a US court seeking to block Mexico's state oil company Pemex from taking control of

a Texas re�nery, claiming the sale would raise US gasoline prices.

Royal Dutch Shell in May agreed to sell its majority stake in the 302,800 b/d Deer Park re�nery outside Houston to Pemex, its longtime

partner in the plant, for about $596 million.

The lawsuit, �led in a US District Court in Houston last week, alleges a sale would lead to "substantially less competition" in gasoline

and "signi�cantly increase" the plaintiffs' energy costs. They asked the court to permanently block the sale or force Pemex to divest its

holdings.

The deal has been delayed by an ongoing review by the Committee on Foreign Investment in the United States (CFIUS), a national

security group that can block or set restrictions on foreign purchases of US businesses. The CFIUS launched a second 45-day review

that halted Pemex's plans to complete the sale this year.

Aaron Hagele and Andrew Sarcinella, owners of a coin-operated laundromat in New York who �led the lawsuit, said their business

would suffer "an incalculable but evident" affect if more of Deer Park's output is exported. (Reuters)

DATA SNAPSHOT

Oil and Gas Prices, Dec. 22, 2021

All data are produced by Energy Intelligence in cooperation with Re�nitiv.

CRUDE OIL FUTURES($/bbl) Chg. 1st Mth. 2nd Mth.

ICE Brent +1.31 75.29 75.28

Nymex Light Sweet +1.64 72.76 72.33

DME Oman 0.00 72.87 73.65

ICE Murban +0.65 75.27 74.68

INTERNATIONAL SPOT CRUDES($/bbl) Chg. Price Prior Close

Brent (Dated) +1.85 74.69 72.84

Dubai +2.00 72.54 70.54

Forties +1.93 73.94 72.01

Bonny Light +1.60 74.86 73.26

Urals +1.60 72.41 70.81

Opec Basket* NA

*Opec price assessed.

NORTH AMERICAN SPOT CRUDES($/bbl) Chg. Price Prior Close

WTI (Cushing) +1.72 72.82 71.10

WTS (Midland) +2.47 74.07 71.60

LLS +1.47 75.32 73.85

Mars +0.37 72.47 72.10

Bakken +1.72 73.67 71.95

($/b

bl)

ICE BRENT CRUDE FUTURES

Jul '20 Sep '20 Nov '20 Jan '21 Mar '21 May '21 Jul '21 Sep '21 Nov '21$0

$20

$40

$60

$80

$100

REFINED PRODUCT FUTURESNymex Chg. 1st Mth. 2nd Mth.

Gasoline (¢/gal) +1.58 216.80 216.50

ULSD Diesel (¢/gal) +5.00 230.78 229.92

ICE

Gasoil ($/ton) +9.75 649.00 648.00

Gasoil (¢/gal) +3.11 207.14 206.82

$/b

bl

NYMEX LIGHT CRUDE FUTURES

Nymex Light crude Futures

Jul '20 Sep '20 Nov '20 Jan '21 Mar '21 May '21 Jul '21 Sep '21 Nov '21$0

$25

$50

$75

$100

Energy Intelligence

($/t

on

)

ICE GASOIL FUTURES

ICE Gasoil

Jul '20 Sep '20 Nov '20 Jan '21 Mar '21 May '21 Jul '21 Sep '21 Nov '21$0

$200

$400

$600

$800

US SPOT REFINED PRODUCTSNew York (¢/gal) Chg. Price Prior Close

Regular Gasoline +1.51 222.16 220.65

No.2 Heating Oil +4.76 219.19 214.43

No.2 ULSD Diesel +4.76 231.07 226.31

No.6 Oil 0.3% * 88.21

No.6 Oil 1% * 72.56

No.6 Oil 3% * 66.61

Gulf Coast (¢/gal)

Regular Gasoline +1.76 215.41 213.65

No.2 ULSD Diesel +4.76 225.69 220.93

No.6 Oil 0.7% * 74.46

No.6 Oil 1% * 74.46

No.6 Oil 3% * 64.11

*Price in $/bbl. Percentages refer to sulfur content.

INTERNATIONAL SPOT REFINED PRODUCTSRotterdam ($/ton) Chg. Price Prior Close

Regular Gasoline +13.70 694.50 680.80

ULSD Diesel +15.50 657.25 641.75

Singapore ($/bbl)

Gasoil +2.65 83.66 81.01

Jet/Kerosene +2.15 83.09 80.94

VLSFO Fuel Oil ($/ton) +16.67 570.67 554.00

HSFO Fuel Oil 180 ($/ton) +13.22 417.09 403.87

(¢/g

allo

n)

NYMEX GASOLINE FUTURES

Jul '20 Sep '20 Nov '20 Jan '21 Mar '21 May '21 Jul '21 Sep '21 Nov '210

50

100

150

200

250

300

NATURAL GAS PRICES($/MMBtu) Chg. Price

Henry Hub, Nymex +0.11 3.98

Henry Hub, Spot +0.05 3.97

Transco Zone 6 - NY NA NA

Chicago Citygate +0.05 3.75

Rockies (Opal) +1.61 7.79

Southern Calif. Citygate +1.04 8.42

AECO Hub (Canada) +0.15 3.36

Dutch TTF (euro/MWh) -15.55 166.75

UK NBP Spot (p/th) -53.50 404.00

US/Canada spot prices from Natural Gas Week

Equity Markets, Dec. 22, 2021

All data are produced by Energy Intelligence in cooperation with Re�nitiv.

EQUITY MARKET INDEXESChg. Index YTD %Chg.

EIF Global* +4.42 282.70 +25.15

S&P 500 +47.33 4,696.56 +26.01

FTSE All-World* +13.76 875.97 +16.19

*Index for previous day

($/M

MB

tu)

NYMEX NATURAL GAS FUTURES

Natural Gas Futures

Jul '20 Sep '20 Nov '20 Jan '21 Mar '21 May '21 Jul '21 Sep '21 Nov '21$0

$2

$4

$6

$8

Re�nitiv

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