Malcy’s Blog – Flash Blog, Genel Energy, IGas Energy, Tower Resources & Jadestone Energy

A flash blog today as I’m on a pitch, anything I miss will be catch up on tomorrow…

Author @mgrahamwood

Genel Energy

Genel has announced its unaudited results for the six months ended 30 June 2022.

Summary

  • Material cash generation from low-cost and high-margin oil production:
    • Net production averaged 30,420 bopd in H1 2022 (H1 2021: 32,760 bopd)
    • Low production cost of $4.4/bbl and strength of oil price delivered a margin per barrel of $32/bbl (H1 2021: $20/bbl)
    • Free cash flow of $129 million (H1 2021: $22 million)
  • Financial strength provides options for capital allocation:
    • $75 million of capital expenditure in H1 2022, of which $41 million was spent at Taq Taq and Tawke, and $27 million on Sarta appraisal
    • Genel took on operatorship at Sarta on 1 January 2022, with Sarta-5 and Sarta-1D subsequently being completed
    • Cash of $412 million (31 December 2021: $314 million)
    • Net cash of $141 million (31 December 2021: net cash of $44 million)
  • A socially responsible contributor to the global energy mix:
    • Zero lost time injuries (‘LTI’) and zero tier one loss of primary containment events at Genel and TTOPCO operations
      • Two million work hours since the last LTI, as we seek to repeat the performance of six years without an LTI up to September 2021
    • As we mark 20 years of operations in the Kurdistan Region of Iraq (‘KRI’), the Genel20 Scholars initiative has launched, with Genel funding the opportunity for 20 economically disadvantaged students to have a life-enhancing education at the American University of Kurdistan

Outlook

  • Production guidance for 2022 maintained as around the same level as 2021, currently tracking between 30-31,000 bopd for the full-year
  • 2022 capital expenditure guidance of between $140 million and $180 million tightened to $150 million to $170 million
  • Genel expects free cash flow of over $250 million in 2022, pre dividend payments
  • Appraisal at Sarta is ongoing, with results of the Sarta-6 well expected around the end of the year
  • The Company continues to actively pursue new business opportunities, focused on production and cash generation
  • The London seated international arbitration regarding Genel’s claim for substantial compensation from the KRG following Genel’s termination of the Miran and Bina Bawi PSCs is ongoing
  • Interim dividend retained at 6¢ per share:
    • Ex-dividend date: 15 September 2022
    • Record date: 16 September 2022
    • Payment date: 14 October 2022

Paul Weir, Interim Chief Executive of Genel, said:

“Our cash generation in the first half of the year has been exceptionally strong – driven by our low-cost, high-margin oil production and disciplined capital allocation. We remain focused on the delivery of our long-established strategy of putting capital to work to grow our production and cash generation, while retaining our resilience and paying a material and progressive dividend.

We generated $129 million in free cash flow and are well on track to generate over a quarter of a billion dollars of free cash flow for the full year. This continues to build our balance sheet strength and optionality, providing us with the funds to add the right assets at the right price. Our cash flow this year benefits from the recovery of receivables and our override payments, and we are focused on replacing these by building a portfolio that supports the resilience, sustainability, and progression of our material dividend.”

Nothing here that wasn’t expected, Genel is keeping with the successful story that has kept it in good order for a  number of years. To that end I would expect growing the business and building the portfolio via organic and inorganic means to be the way it will go. 

With free cash flows of some $250m this year and capex of $150-170m the scope in both growth areas is immense, that is what will support the ‘material and sustainable shareholder dividends’. Operationally much is focused on Sarta but Tawke continues to bring a huge pot of value. The dividend of 6c yields 10%  and accordingly the shares are way too cheap at this level. 

IGas Energy

IGas is pleased to confirm it has completed its scheduled six-monthly RBL facility redetermination process. 

The redetermination exercise confirms $22 million (£18.1 million) of debt capacity.

Cash balances as at 29 July 2022, were £2.4 million with net debt of £8.2 million. 

A total of 95,000 bbls are currently hedged in 2022 using swaps at an average price of $77/bbl and 55,000 bbls using puts with an average guaranteed minimum price, net of premiums, of $44/bbl. We have also hedged 60,000 bbls for H1 2023 using swaps at an average price of $95/bbl.

Commenting, CEO Stephen Bowler, said

Higher commodity prices continue to drive strong operating cash flow generation giving us financial flexibility.  Since year-end, we have repaid c.£4 million of debt.”

In addition, IGas expects to announce its results for the six months to 30 June 2022 on 15 September 2022.

Things are going very well for IGas right now across the board as the portfolio seems ready made for the current circumstances. The shares have tripled so far this year but on any reasonable expectations are way too cheap.  

Tower Resources

Tower has announced that the Company has raised gross proceeds of £1,499,999 through a placing and subscription of approximately 857,142,286 new ordinary shares of 0.001 pence each at a price of 0.175  pence per Placing Share.

As part of the Placing, Jeremy Asher, Chairman and CEO, has entered into a subscription agreement to subscribe for, in aggregate, 142,857,143 new Placing Shares in the Placing for £250,000 as further detailed below.

Cameroon Financing Update

The Company and BGFI Bank Group are continuing to work on the documentation and final approvals for the loan to Tower Resources Cameroon SA towards the financing of the NJOM-3 well, as set out in the Company’s announcement of 29 June 2022. This process is currently expected to be complete by the end of September 2022. In the meantime the Company is continuing to discuss additional financing options at the asset level, as also disclosed on 29 June 2022, for additional amounts in the US$5-10 million range with various parties, in order to complete the well financing or more. The Company is also progressing rig and service company contracts and would like to be in a position to make advance payments in respect of such contracts if required, in order to ensure rig and service availability.

The Placing

While the financing discussions in respect of the NJOM-3 well are concluded, the Company has  raised approximately £1.5 million for the preparation of the drilling of the NJOM-3 well, including payments on account of services associated with the well, and for working capital purposes via the Placing and subscription. A small portion of the funds raised will also be used to advance the Company’s other 2022 work programs in Namibia and South Africa, including the basin modelling work currently underway on the Company’s Namibian license PEL 96.

The Company has also issued a broker warrant in favour of Novum granting it the right to acquire 10,588,228 ordinary shares for a period of two years at a price of 0.425p per share.

Jeremy Asher, Chairman and CEO, commented:

We are as confident as we can be about the completion of the TRCSA loan financing and other asset financing to complete the NJOM-3 well. We are also paying attention to the tighter markets for rigs and services, and we want to keep the operational discussions moving in parallel with the financial discussions. I have offered to participate in this Placing myself to underscore my personal confidence in our reaching our goals with the NJOM-3 well.

The NJOM well in Cameroon is inching over the line, Chairman Jeremy Asher must think that he and a few loyal shareholders have carried the whole process and when completed as I’m sure it will be it will be a magnificent achievement. 

Jadestone Energy

Jadestone has announced that it is today launching a share buyback programme in accordance with the authority granted by shareholders at the Company’s Annual General Meeting on 30 June 2022.

The maximum pecuniary amount of the Programme is US$25 million and, in line with the authority granted to the Company at its Annual General Meeting on 30 June 2022, the Programme will not exceed 46,574,528 Ordinary Shares.  While the Company has launched the Programme, there is no certainty on the volume of shares that may be acquired, nor any certainty on the pace and quantum of acquisitions.

On 6 June 2022, the Company announced its intention to return up to US$100 million of cash to shareholders over the course of 12 months, predicated on the Company’s strong balance sheet and highly cash generative nature of its asset base.  In conjunction with the Company’s ordinary dividend, today’s buyback announcement represents the next phase of this shareholder returns commitment.  The purpose of the Programme is to reduce the share capital of Jadestone.

The Programme will be conducted within certain pre-set parameters in accordance with Jadestone’s general authority to repurchase up to 46,574,528 Ordinary Shares, and will be carried out on the London Stock Exchange.  It is intended that the Programme will be conducted within the parameters prescribed by the Market Abuse Regulation 596/2014 (as in force in the UK by virtue of the European Union (Withdrawal) Act 2018 and as amended by the Market Abuse (Amendment) (EU Exit) Regulations 2019) (the “Regulation”), the Commission Delegated Regulation (EU) 2016/1052 (as in force in the UK by virtue of the European Union (Withdrawal) Act 2018 and as amended by the FCA’s Technical Standards (Market Abuse Regulation) (EU Exit) Instrument 2019) (the “Delegated Regulation”).  The Company will retain the ability to make purchases under the Programme which exceed the average daily volume limits established by the Delegated Regulation and therefore the Programme may not fall within the safe harbour provisions of the Regulation where appropriate.

Any market repurchase of Ordinary Shares will be announced no later than 7:30 a.m. on the business day following the calendar day on which the repurchase occurred.  All Ordinary Shares repurchased will be cancelled.

Paul Blakeley, President and Chief Executive Officer of Jadestone commented:

“Following on from last week’s announced acquisition of an interest in the North West Shelf oil assets, we are very pleased to be able to launch this buyback programme now.  This delivers on our commitment, originally announced in early June 2022, to significantly increase returns to shareholders, as well as clearly demonstrating that significant M&A activity and enhanced returns are not mutually exclusive. We believe this is a differentiating factor in our investment case, and we look forward to growing our business further, while at the same time ensuring that shareholders benefit directly from the positive impact of higher oil prices on our cash flows.”

Jadestone goes from strength to strength and correctly comments that M&A activity and enhanced returns are not exclusive, at least in a fast growing company like JSE. As a result I remain convinced that the thoughts of CEO Paul Blakeley at a recent meeting with me where he was bullish on acquisitions in this market place will happen.

The opinions expressed here are those of the author

Author @mgrahamwood

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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