Malcy’s Blog – Oil price, Advance Energy, ACP Energy & finally

WTI $86.61 -74c, Brent $89.34 -62c, Diff -$2.73 +12c, NG $6.26 +$1.99, UKNG 222.4p -3.6p

By Malcolm Graham-Wood

Oil price

As usual, at the moment not much more to add, the Ukraine is simmering with much going on behind the lines. The Fed are talking tightening and rates will rise, they are taking so long to get on and do it…

Cold weather is hitting the east coast with a big ‘Nor’easter’ bomb cyclone bringing snow and ice to the region from Portland and Boston all the way down to Atlanta. Chicago needless to say is frozen, take a look at the natural gas price.

Advance Energy

Advance Energy has provided the following corporate update:

 Key Points:

·      The Board has implemented measures to reduce the Company’s cost base by over 50%

·      CEO Leslie Peterkin to leave the Company to support cost cutting measures

·      Larry Bottomley to assume Interim CEO role to drive new ventures

·      The Company remains fully funded for the current calendar year with no debt

·      The Board has refocused the strategy for the Company and is actively progressing a pipeline of value accretive opportunities within this new strategy

Following the recent results of the Buffalo-10 well, the Company has undertaken a review of its cost structure in order to significantly reduce costs.  The Board has implemented measures to reduce the Company’s costs by over 50% through a number of initiatives, including reducing salaries and Director fees by over 60%.  To support these initiatives, CEO Leslie Peterkin has decided to resign from the Company with immediate effect, and he will be replaced on an interim basis by current Non-Executive Director Larry Bottomley.

Following completion of the Buffalo-10 well and the settlement of associated authorised costs, and supported by the initiatives to reduce the cost base, the Board believes it has sufficient liquidity to progress new business development through the current calendar year.

The Board has refined the strategy for the Company, which is to create a self-funding oil & gas production company to take advantage of growth opportunities being generated as industry players reshape their portfolios to manage energy transition to net-zero emissions.

By concentrating on non-operated cash-generative assets and capitalising on the current deal pipeline, the Company aims to lever the time and cost expended in assessing potential new ventures over the last year built on the Board’s extensive industry relationships. Ranging from Europe, Africa and the Far East, the opportunities the Company is assessing are suitable for debt or vendor financing, and the Company is currently -funded to mature these options.

The Board is confident that it will enter into an agreement on at least one opportunity in its pipeline this calendar year.

Commenting on the update, Non-Executive Chairman, Mark Rollins, said:

We thank Leslie for his efforts since the inception of Advance Energy, including his decision to leave the Company in order to reduce its cost base.  The Board fully recognises the disappointment of recent events and being wholly aligned with shareholders, recognises what needs to be done to stabilise and re-build.  Advance Energy retains a high quality and well-connected Board which is progressing a compelling business development pipeline.

“I would also like to thank Larry for stepping into the role of leading the Company through this next stage of delivering new business, no doubt with the energy and enthusiasm that he has brought since joining the Company at the RTO.”

Outgoing CEO Leslie Peterkin added:

“The outcome of the B-10 well was a huge disappointment given the significant input that went into the project and the high degree of confidence that it would result in a commercial development.  To support the Company with its efforts to reduce the cost base, I have decided to step down, and leave the Company in the very capable hands of the remaining Board who I have no doubt will steer Advance Energy through these near-term challenges and set the Company on a new long-term growth path.”

Incoming Interim CEO Larry Bottomley added:

“Advance Energy has an exciting set of opportunities in the business development pipeline and a motivated and high quality Board focused on growing the Company. Reducing the cost base leaves the Company with sufficient cash and no debt, and importantly allows more time to assess and progress this pipeline.

“The Board are committed to delivering assets from the business development pipeline and excited by the opportunity it offers, and we look forward to updating the market as these progress.

 The failure of the Buffalo-10 well has claimed its first victim at the company, CEO Leslie Peterkin is leaving after shareholders lost a great deal of money on the unsuccessful well. I have a great deal of sympathy with him but it is a falling on sword moment not often taken by industry executives, much respect due.

I also looked at the data and felt that the potential return was very much within the risk/reward ratio which only goes to show how that data can make fools of all of us. I have had a great deal of time for Leslie Peterkin in the last few months and wish him well. 

I can say that one of the reasons for my positive stance was the high quality of the board of directors, from the Chairman through CFO and NED’s in particular Larry who has taken interim charge and Stephen Whyte who has a good deal of expertise in areas that Advance will be looking at now. The company is fully funded with no debt and able to assess potential new projects as they are presented.

ACP Energy

ACP Energy Plc is a newly formed company set to capture value accretive opportunities in the oil & gas industry.  The Company is pleased to announce that admission to trading on the London Stock Exchange’s Main Market, Standard Segment, via a Special Purpose Acquisition Company (“SPAC”), will take place and dealings will commence at 8.00 a.m. today under the ticker ACPE.L.

Strategy

The Company will focus on acquiring opportunities within the upstream segment of the oil and gas industry, in areas such as appraisal, development and production, focusing particularly on projects with identified oil and/or natural gas reserves and resources.

The Company has identified the following criteria for the purpose of reviewing and evaluating opportunities:

  • Sectoral Focus: ACP intends to focus on opportunities in the upstream oil and natural gas sector. The Company will have a particular focus on producing assets, that require additional investment to increase the production and reserves base. The Company believes that there are significant opportunities in the upstream oil and gas sector and, in particular, existing producing assets that will generate value for Shareholders. ACP, together with its advisers, has extensive global networks within the sector from which to solicit and assess opportunities.
  • Development Profile: The Company intends to focus on producing assets that have not received sufficient investment capital due to either local fiscal issues or previous downturns in commodity prices. Such assets will likely have had some development work undertaken to establish a minimum base of production or resource which, for whatever reason, now requires further funding, in order to either fully develop the opportunity or to either return it to or increase its production. ACP therefore expects to focus on opportunities where the asset will be revenue generating, either immediately upon acquisition or within a reasonable timeframe following completion of the work program.  The Company believes that this strategy will balance investment risk against generating long-term shareholder value.
  • Geography: The Company does not propose to limit its search to any specific geographic location; however, the geographic location of any investment opportunity will be suitable for institutional investment within the London market.  The assets may be located anywhere in the world, but the Company will primarily be looking at opportunities in proven hydrocarbon producing jurisdictions with established oil and gas infrastructure
  • Opportunity Identification: The Company, through its broad range of contacts plans to identify, originate, structure and finance oil and gas transactions that generate value for its shareholders. The Company will use its internal research to identify and assess potential opportunities and will then initiate discussions directly or via market contacts and professional advisers.
  • Operator: Following the completion of an Acquisition, the objective of the Company is to be involved in the operations of the acquired business. The Company envisions that additional opportunities will be available to it by taking an active role in the management through appraisal activity, operational improvements, capacity expansions and funding working capital.  Operational management is anticipated to provide superior insight into a particular sector or operating region allowing value accretive complementary acquisitions to be made.
  • Value Creation: The Company’s long-term aim is to create shareholder value by investing in projects with dependable cashflows and build a portfolio where there is large potential upside in value by providing vital finance and expertise enabling an asset or business to achieve its full potential. ACP is committed to the highest standards of governance and to fulfilling its corporate responsibilities by making meaningful economic and social contributions in the areas where it operates.

Paul Welch, ACP Energy Plc’s Chairman, commented:

“We are very pleased to have successfully listed ACP on the London Stock Exchange, via a Special Purpose Acquisition Company.  ACP is focused on acquiring hydrocarbon producing assets that are either in production or near to production, bringing swift cash flow generation and ensuring early business stability. Whilst listing is an important milestone, we now begin the work of bringing our collective experience to bear in identifying significant acquisition opportunities upon which we can grow the business.  At a time of transition in the energy markets, there remains a significant global demand for new sources of oil and gas. Throughout this period, the Board is committed to the highest standards of Environmental, Social and                        Governance practices and looks forward to providing further updates to the market in due course.

I caught up with Paul Welch (previously of Chariot and SDX Energy) this week, as he has re-joined London’s Main Market launching ACP Energy via a SPAC.  I get the impression that ACP is very much a jumping off point for Paul and his team’s next adventure. The preparation for this has been two years in the making, with lots of DD and scoping work completed, with the plan now to pursue a number of ‘upstream targets’ that will deliver value for shareholders.

As we know with Paul, it will be hard charging from here! He has the bit firmly between his teeth and is looking to get things done in short order.  So, we can expect to see acquisitions closed, wells drilled, discoveries made, production increased…etc. Paul was slightly coy when I spoke to him, but rumour has it that ACP has a wide remit and is eyeing up “unloved” producing asset opportunities in Latam (with the team already having the backing of several large US funds).

As ever, it is good to have Paul and his energy back in the London market and I look forward to hearing how things progress for them over the rest of 2022.  I will keep a careful eye over the team’s progress, I’m sure it won’t be long before things start to get going. 

And finally…

With no Premiership this weekend so the little darlings can ‘rest’ there is a full Championship card and many exciting games to watch. Or go to a number of very exciting Premiership Rugby Union games over the period.

Racing is a good card at Cheltenham and Doncaster but small fields are a nightmare.

And at 8pm tomorrow England take on the Windies in T20 game 4.

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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