Malcy’s Blog – Flash blog, Wentworth Resources, Chariot, Eco (Atlantic) Oil & Gas & Savannah Energy

A flash blog today as I’m in town with key interviews and meetings, anything I have missed I will add later or tomorrow.

Author @mgrahamwood

Wentworth Resources

Wentworth has announced an operational update ahead of its Annual General Meeting (“AGM”) to be held today.

Following record production achieved in 2021, Wentworth and its joint venture partners continued to realize strong production rates throughout 2022, recording an average production rate of 92 MMscf/d year to date. The five producing wells in the Mnazi Bay field and the associated joint venture operated facilities continued to perform well and without issues. Furthermore, the reductions in natural gas demand typically seen during the wetter months, April and May, were less severe and shorter, compared to previous years.  The Company’s production guidance for the year, provided in January 2022, remains unchanged at 75 – 85 MMscf/d.

The Government of Tanzania remains positive in their recent announcements regarding their willingness to progress and promote projects of national interest and it is expected that these positive actions will continue to promote further growth potential for the Tanzanian economy.

With the Company’s recent agreement to acquire Scirocco Energy plc’s 25% interest in the Ruvuma PSA, Wentworth is pleased to report that work on the 338 km2 3D seismic, over the discovery and potential development area, is progressing positively and is intended to provide data critical to the development of the field and to optimize further drilling locations. The operator, ARA Petroleum Tanzania, has indicated that the Chikumbi-1 well will be drilled following the completion of the seismic programme and that first gas from the project is possible by late 2024, following the award of a 25-year development licence and construction of a pipeline connecting the field to the Madimba gas processing facility which is located within the Mnazi Bay licence area. The Company looks forward to updating the market as operations on this transformational new project progress.

Operational Highlights and Outlook

·    Average daily production year to date is 92.2 MMscf/day (gross), compared with 79.9 MMscf/day (gross) during the same period in 2021

·    Record quarterly average daily production of 98.5 MMscf/day (gross) achieved in Q1 2022

·    Wentworth and Mnazi Bay JV Partners supply approximately 50% of natural gas demand in Tanzania which is primarily used for essential baseload electricity but is also expanding to include a multitude of industrial users

·    The Mnazi Bay JV Partners continue to progress the 2022 work programme, which is focused on ensuring reliable gas production through diligent field maintenance

·    The Operator will conduct essential maintenance during a two-day shut down planned for late June

·    The health and safety of the employees at Mnazi Bay remains of paramount importance as is evidenced with our continued efforts to ensure robust health and safety standards. As of 31 May 2022, the Mnazi Bay operations have reported zero lost time incidents for a period of five years and 301 days

·    Evaluation of the Mnazi Bay licence area for additional exploration and production potential is ongoing

Financial

·    Declared a final dividend in respect of FY 2021 of 1.16 pence per share ($2.6 million); a total dividend distribution in respect of 2021 of 1.7 pence per share ($4.0 million) representing an increase from 2020 ($3.8 million) and a yield of approximately 7.1% (based on current market capitalisation)

·    Debt free with cash on hand of $26 million

·    TPDC receivable $2.4 million representing 1-month of gas sales (fully current)

·    TANESCO receivable $753k representing 6-months of gas sales ($615k representing 5-months of gas sales in arrears)

Corporate

·    Actively progressing the Company’s strategy to diversify the asset portfolio with high quality growth opportunities as demonstrated with the recent Ruvuma acquisition

·    Strict commitment to maintain sustainable progressive capital returns

·    Continued focus on growth within Tanzania and the broader region by capitalising on a strong operational track record and in-depth local knowledge

·    Maintenance of a highly skilled Board and management team

·    Progressively engaged with shareholders by providing regular updates and management access

Sustainability

·    In light of the COP26 conference in 2021, Tanzania announced its commitment to reduce greenhouse gas emissions by 30% by 2030. In doing so, the Government cemented its commitment to decreasing its already-limited emissions output and reinforcing incentives for low-carbon energy sources such as natural gas

·    Natural gas will play a critical role in meeting a reduction in emissions with reliable baseload electricity helping to further replace carbon-intensive off-grid fuel sources such as heavy fuel oil and diesel

·    Ongoing ESG strategy remains a priority following the publication of Wentworth’s second Sustainability Report for 2021; it addresses how Wentworth proactively manages its impacts by upholding relevant international standards and adopting a responsible approach to doing business in Tanzania; the Company is progressing its initiatives with Vitol and the Government of Tanzania on how to best address these goals

Katherine Roe, Chief Executive of Wentworth, said:

“I am delighted that Wentworth has made such a strong start to the year with production, supporting our full year guidance and providing the confidence to announce a further dividend increase and maintain our attractive yield, one of the highest in the independent E&P sector. 

“Mnazi Bay continues to provide Tanzania with approximately half of the country’s natural gas demand and our contribution to the country’s growth will be further enhanced by our recently announced acquisition of a 25% stake in the nearby Ruvuma gas development project.

“Ruvuma is a transformational transaction for Wentworth and represents an attractively priced, low risk entry into a high growth opportunity which cements our position as a leading supplier of domestic gas to Tanzania.”

 All going ahead of plans for Wentworth as today’s update shows. Very strong production has led to another dividend increase and the recent Ruvuma deal will add to growth in Tanzania. The yield and this growth makes Wentworth amongst the best value shares in the sector.

Chariot

Chariot has announced its audited final results for the year ended 31 December 2021.

Transitional Gas:

Anchois Gas Development Project

·    Successful drilling campaign of the Anchois-2 well, completed safely, on time and on budget delivering a significant gas discovery.

·    An accelerated field development plan underway as the Company looks to progress the front end engineering design (“FEED”), ahead of the final investment decision (“FID”).

·    Discovery exceeded expectations: 150m net pay confirmed across seven reservoirs, excellent quality and consistent dry gas composition which should enable a simple development.

·    MoU on gas offtake and partnering signed with a leading international energy group

·    Societe Generale appointed as financial advisor to lead the project financing.

·    Collaboration / FEED agreement in place with Subsea Integration Alliance to progress the front-end design, engineering, procurement, construction, installation and operation of the development project.

·    Management focussed on progressing towards material cashflows as quickly as possible.

Material upside potential:

·    The drilling campaign also directly de-risked a material portfolio of prospects within the Lixus licence area.

·    The Rissana Offshore Licence, Morocco was signed in February 2022 which surrounds the Lixus acreage and captures gas play extensions from the Anchois wells.

·    Potential for multi Trillion Cubic Feet (“TCF”) volumes in deeper plays.

Transitional Power

Renewable Energy for Mining Projects

·    Acquisition of AEMP completed in Q2 2021 with the AEMP team now fully integrated within Chariot’s Transitional Power business.

·    Projects are developed in strategic partnership with Total Eren, a global renewable IPP focused on low-risk mining power projects in Africa.

·    The partnership was extended in January 2022 to cover a three year period, with an option to extend for a further two years thereafter. Chariot has the right to invest between 15-49% into the co-developed projects.

·    This partnership is building up a pipeline of African mining power projects and looking to collaborate on other non-mining energy projects and transactions across the continent.

·    First project in operation, a 15MW solar project, at the Essakane gold mine in Burkina Faso, successfully generating material returns.

·    Two more projects signed in the post-period and in development:

 An MoU signed for a 40MW solar PV project with Tharisa Plc, to provide power to its chrome and PGM operations in South Africa.

 Partnership in place with First Quantum Minerals to advance the development of a 430 MW solar and wind power project for its copper mining operations in Zambia – one of the largest renewable private sector energy projects in Africa.

Green Hydrogen – Project Nour

·    Exclusivity awarded over licences to develop a large scale green hydrogen project utilising renewable power to split water through electrolysis.

·    Recent Pre-Feasibility Study confirms that Mauritania is exceptionally well-placed for green hydrogen production due to its unique solar and wind resources and the project has the potential to produce some of the cheapest hydrogen in the world.

·    Domestic benefits for Mauritania include providing baseload power to the national grid, diversifying industrial activities (e.g. green steel), promoting job creation and developing local infrastructure with the potential to have a significant impact on GDP.

·    Framework Agreement in place which defines the terms and guiding principles to pave the way for the in-depth feasibility study that will be undertaken over the next 24 months.

·    Optimising project fundamentals through reducing acreage position to 5,000km² therefore allowing for a more focused scope

·    MoU signed with the Port of Rotterdam International, a global energy hub and Europe’s largest seaport which represents a first step towards establishing supply chains.

·    Partnering process underway with the objective to form a world class consortium.

Other licences

·    Whilst fully written down, Chariot has retained its interest in its licences in Brazil with no work commitments going forward and will host datarooms for interested parties as required.

·    The Central Blocks in Namibia have expired but Chariot retains a 10% back in right in the Southern Blocks as a low risk future option.

Corporate

·    Further to the successful equity fundraising of US$25.5m and $4 million Open Offer announced in June 2022, the Company is well financed to take the Anchois Gas Project through to FEED and FID, in addition to progressing the Company’s wider asset portfolio.

·    Oversubscribed equity fundraising completed in December 2021.

 Year end cash position as at 31 December 2021 of $19.4 million with no debt and minimal remaining work commitments.

·    Senior leadership team fully aligned with shareholders, with the Board owning 9.57% of the shares in issue following June 2022 fundraising.

Outlook

Chariot is focused on:

·    Delivering prompt FID on the Anchois gas development

·    Progressing towards production and material cashflows from Anchois as quickly as possible.

·    Strategic partnering in Morocco to accelerate growth from a portfolio of high value, low risk upsides

·    Further development of the pipeline of Transitional Power projects.

·    Evaluation of further value-accretive new ventures in line with the Company’s focus on the theme of energy transition.

Adonis Pouroulis, Acting CEO of Chariot commented:

“During what has been a turbulent macro environment since the onset of the COVID-19 pandemic, I am very proud of the progress we have made across the business over the past year, as we continue to establish our transitional energy platform within Africa. Our mission is to create value and deliver positive change by investing in projects that are driving the energy revolution and we are fully committed to executing our plan. Through progressing and accelerating our gas development offshore Morocco we are looking to provide a gas hungry market with domestic supply; through our renewable power projects we are materially reducing the carbon emissions of mining operations in Africa and with our acreage in Mauritania, we are progressing what has the potential to be one of the world’s largest green hydrogen projects and a key source of green energy in the future.

As a nimble and entrepreneurial team, we will also continue to leverage our network and utilise our expertise to seek out new ventures where we can play a key role and that fit within our ethos and strategy. We are excited about the potential that sits within our current portfolio, as well as opportunities that the future holds. We look forward to our ongoing progression and evolution as a company and we thank our shareholders for their ongoing support.”

A very much in line with expectations set of results today with nothing that wasn’t already in the market. CEO Adonis Pouroulis is very confident and so he should be.

Eco (Atlantic) Oil & Gas

Eco has provided an update on the operations for its planned Gazania-1 Well, offshore South Africa.  Eco through its wholly owned subsidiary Azinam South Africa Limited Operates and holds a 50% working interest (“WI”) in Block 2B, plans to spud the Gazania-1 well, 25km offshore the Northern Cape in South Africa in  September 2022. The well will take approximately 25 days to drill. 

Eco Atlantic acquired 100% of Azinam Group as initially announced on 10 January 2022, which increased WI in its all existing Namibian licences PELs 97, 98, 99 and 100 to 85%, and led to a new country entry with two blocks offshore in the Orange Basin, South Africa; a 50% WI and Operatorship in Block 2B, which contains the previous AJ-1 oil discovery with 56 million barrels of oil equivalent (“mmbbl”) Mean Contingent Resources of light oil, and a 20% WI in Block 3B/4B.  Block 3B/4B directly offsets the prolific multibillion barrels discoveries offshore Namibia announced earlier this year by Shell (Graff-1) and TotalEnergies (Venus-1). 

Eco, as Operator of Block 2B is leading the JV partnership comprised of Africa Energy Corp (27.5% WI), Panoro 2B Limited, a subsidiary of Panoro Energy ASA (12.5% WI) and Crown Energy AB (10% WI) in drilling the Gazania-1 Exploration Well in Q3’22. The well is being drilled 25km offshore in 150 meters of water and will be drilled to a depth of approximately 2,800 meters to target a stacked pay section up dip of the AJ-1 discovery and in the proven oil horizon.  

As announced on 3 March 2022, Eco contracted the Island Innovator rig with Island Drilling Company AS, the rig is to be mobilised from Bergen, Norway in the second half of July.  The state of the art semi-submersible drilling rig was selected for its modern safe operating systems, its stationary anchoring and its system specifically engineered for the engineering requirements and depth range for this well. The well anticipated to be low pressure and low temperature based on the evaluation of all regional wells. It will be cased with three telescoped and cemented casings and will be drilled with environmentally friendly water based drilling fluids. The Company plans to seal and plug the well after the test with no remaining equipment left on the sea floor. The sea floor well area was surveyed in 2021 to confirm there are no environmental or culturally sensitive concerns. 

Eco recently met face-to-face with members of the local communities and interested organizations through both focus groups and ongoing open meeting forums, to provide information sharing sessions,  to engage with them to inform on the upcoming operations and to answer any questions.

Colin Kinley, Co-Founder and COO of Eco Atlantic commented:

The acquisition of Azinam created an opportunity to work with the JV partners, the Government of South Africa and importantly the people of South Africa to drill this significant well in Q3 this year. We have worked diligently with our drilling team and partners to define a safe and efficient drilling strategy for Gazania, to define drilling engineering to meet world standards of environmental protection and hopefully give South Africa access to its own oil resources.”

 “We acknowledge that South Africa’s energy transition must be thought out from all perspectives. Although the required permits are in place at this point we thought it necessary to voluntarily meet with the regional local communities and interested parties to hear out concerns and interests. The Company met with community representatives at public information sessions and we have had, and will continue to have, face-to-face discussions in the coming weeks. We are currently on schedule to mobilize out of Norway in the third week of July and spud early in September. We anticipate approximately three to four weeks on site to drill the test well and then regardless of our findings we will seal off the well, ensure the site is completely restored and move off. Eco has chosen a majority of available South African services and will base its operations from Cape Town. This is an exciting opportunity and holds the potential of establishing a new over 300 million barrels light oil resource.”

 As I mentioned the other day Gazania is on track with all systems go as Eco get well and truly stuck into the South African drilling programme.

Savannah Energy

Savannah Energy PLC, the British independent energy company focused around the delivery of Projects that Matter in Africais pleased to announce that Accugas Limited (“Accugas”), the Company’s 80% indirectly owned subsidiary, has commenced gas sales to First Independent Power Limited’s (“FIPL”) Trans Amadi power plant in Port-Harcourt, Nigeria.

As previously announced in April 2022, Savannah executed an addendum to its gas sales agreement with FIPL, allowing FIPL to increase the quantity of gas purchased to up to 65 MMscfpd (from 35 MMscfpd) to allow supply to both its Trans Amadi and Eleme power plants (as well as its Afam power plant). FIPL is an affiliate company of the Sahara Group, a leading international energy and infrastructure conglomerate with operations in over 42 countries across Africa, the Middle East, Europe and Asia.

The FIPL Trans Amadi power plant has a power generation capacity of 136 MW but its generation capacity had recently been limited due to gas availability issues from its primary supplier. Savannah commenced gas supply to the Trans Amadi power plant on 19 June 2022, which has allowed for the immediate resumption of power generation and evacuation to Nigeria’s National Grid.

Andrew Knott, CEO of Savannah Energy, said:

“I am very pleased to have commenced gas sales to the Trans Amadi power station. I am proud of the key role we are increasingly playing in providing power to Nigeria at this time. I would like to thank our partners at Sahara for continuing to choose to work with us and look forward to exploring further opportunities with them in the future.”

Kola Adesina, Group Managing Director, Sahara Power Group, said:

We are pleased to have achieved operationalisation of gas supply to our Trans Amadi Plant sooner than anticipated and thank Savannah for their continued support in ensuring that FIPL remains committed to efficient power generation in Nigeria“.

More excellent news from Savannah as they power ahead with sales to the Trans Amadi station, plenty of growth is coming through from SAVE at the moment. 

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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