Malcy’s Blog – Flash blog, Challenger Energy Group, Angus Energy & Gulf Keystone Petroleum

A flash blog today as I am presenting in town this morning.

By Malcolm Graham-Wood

Challenger Energy Group

Challenger has provided the following update on its Trinidad and Tobago business unit’s operating results for Q1 2022:

·    Total gross oil production for Q1 2022 was 32,183 barrels, representing an average daily production rate of approximately 358 barrels. The gross production rate of approximately 400 bopd at the end of Q1 2022 has sustained consistently into April 2022. This current level of production is approximately 12% higher than the overall daily average for Q1 2022.

The increase in average daily gross production is principally because of the successful recompletion work undertaken in March and April 2022 as communicated in the Company’s previous announcement dated 20 April 2022. Additional near-term production enhancement activities are being planned for the coming months, with the objective of further increasing production by up-to an additional 10%.

·    Total oil sales in Q1 2022 amounted to 29,727 barrels with a gross realised average price per sold barrel of US$83.37. It is noted that the realised gross average price per barrel sold in March 2022 was US$97.13, approximately 17% higher than the quarterly average, reflecting the rise in global oil prices seen through the quarter. The prices realised by the Company are at an approximately 10% discount to the quoted WTI prices. The Company does not currently use any hedging instruments in relation to its oil sales so is making full gain of the current pricing regime.

·    Revenue received by the Company from oil sales (being gross revenues less Government royalties and mandatory source deductions and adjustments applicable under the relevant licences)1, amounted to approximately US$1.17 million in Q1 2022 and represents average net revenue to the company of US$39.29 per barrel sold. It is noted that average net revenue for the month of March was US$46.20 per barrel sold, approximately 17% higher than the quarterly average and, again, reflecting the increase in global oil prices seen through the quarter that continue to be sustained.

·    In total, the Company’s operations in Trinidad and Tobago generated an (unaudited) pre-tax operating cash surplus in Q1 2022 of approximately US$0.2 million. This surplus is stated after field operating costs, in-country G&A and other Trinidad expenses, but before corporation and other taxes (including supplemental petroleum tax, where applicable). It is noted however that, given large carry-forward tax losses in Trinidad and Tobago, the Company is currently largely shielded from corporation taxes.

·    The improved operating and financial performance of the Company’s Trinidad and Tobago operations during Q1 2022 was achieved despite a number of material disruptions to operations and production caused by grid power supply issues. This included an extended nationwide grid outage in February 2022 that caused production facilities and well pumps to go offline for an extended time.

To mitigate against potential recurrences, the Company is upgrading in-field power infrastructure including installation of a new transformer and several generator-sets in the Company’s primary producing fields. In addition, other planned facilities and infrastructure upgrade works continue, so as to improve day-to-day production integrity and operational resilience. The objective of this work is to protect and maximise the Company’s cash generating capacity.

Eytan Uliel, Chief Executive Officer of Challenger Energy, said:

“During the first quarter of 2022 our Trinidad and Tobago operations generated a cash operating surplus, based on production that averaged around 360 bopd, and realised oil prices across the quarter averaging approximately US$83 per barrel.

This encouraging first quarter result reflects a renewed focus on routine operations, stringent cost control, and the committed efforts of everyone in the Challenger Energy team. I’d also note that both average production and realised prices achieved in the first quarter of 2022 are considerably below the levels we are seeing as we start the second quarter, where the Company is benefitting from continued strong oil prices globally and higher production. The increased and more stable base line production we are currently enjoying has been gained through a targeted work programme aimed at production enhancement, made possible due to the successful completion of our restructuring and recapitalisation in March 2022.

We have more production accretive work being planned for the coming quarters and I look forward to reporting on further improvements as the year progresses”.

CEG is now beginning to pick up pace and the new management team is clearly showing that it is more than capable of delivering the goods. The transformation of the Group is under way and I look forward to chatting to Eytan before long. 

Angus Energy

The Company updates on progress on its installation and commissioning schedule.  Delivery and installation dates remain substantially unchanged with the bulk of the last skids arriving shortly after the bank holiday weekend, although it is possible that the Joule Thomson skid could be delayed to the following week as a consequence of a potential delay in the delivery of an accessory.  All earlier packages, referred to in our RNS of 8 April 2022 are now being tied in.

Skid/Unit

Basc Fabrication Status

Blasting, Painting Assembly, Testing, Certification etc

Target Delivery Date

Electrical Room

100% complete

Completed

Completed

Separator Vessel

100% complete

Completed

Completed

Passive Dehydration

100% complete

Completed

Completed

1st compression

100% complete

Completed

27 April

Gas Engine Generator

100% complete

90% complete

29 April

Export Filters/Diverters

100% complete

Re-assembly

3 May

Condensate Stabilisation Skid

100% complete

Reassembly

4 May

Joule Thomson Skid

100% complete

Re-assembly

5 May-10 May

The work of dry commissioning has begun with the identification of key lines for initial hydrotesting and the development of programme for some 40 tests.  All welds are visible so testing is of a relatively short duration.

Welding and electrical tie-in of these skids to the ring main of pipework and cabling around the site are the immediate objectives.  Cable pull is expected over the next 5 working days and the ring main of pipework is 80% complete.    We have some 9 squads of welders, riggers and fitters supported by platers and a number of electrical specialists supporting tie in.  The first stages of dry commissioning are in progress with determination of the selection of with select hydrotesting of key site pipework.  This will be augmented with electrical and control tests during throughout the first two weeks of May.

Wet commissioning is expected to begin at or around 18 May and we are pleased to be assisted in this by an experienced team led by OSL and Inspec.  We continue to aim for a short wet commissioning programme and a target date of First Gas of 1 June.   This would allow for one full month of production at current high spot prices before the Company’s obligations to deliver volumes at the hedge price commence at the end of June.

Good to see that things are progressing well at Saltfleetby, my spies tell me that the work rate of senior management is flat out!

Gulf Keystone Petroleum

Gulf Keystone confirms that a gross payment of $53.2 million ($41.7 million net to GKP) has been received from the Kurdistan Regional Government (“KRG”). The payment is comprised of gross $43.5 million ($34.1 million net) for Shaikan crude oil sales during January 2022 and gross $10.7 million ($8.3 million net) in relation to the arrears from the outstanding January 2020 to February 2020 invoices. Following receipt of the arrears payment, the current outstanding arrears balance is $8.4 million net to GKP. 

The payment for January 2022 sales reflects adjustments proposed by the KRG to pipeline tariff charges, which are now linked in part to Dated Brent. The total payment also includes a one-time gross adjustment of $1.0 million ($0.8 million net to GKP) related to a backdated pipeline tariff increase for 2021.

No further comment is needed…

The opinions expressed here are those of the author

Malcolm Graham-Wood

Disclaimer: Malcy’s Blog is provided for general information about the international oil and gas industry and the companies that operate within it. It does not constitute investment advice and Malcy does not buy or sell shares, warrants or bonds in any company written about within the blog. Information is taken from publicly available sources and any comment is that of the author who does not take any third party comment in the blog


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