Malcy’s Blog – Oil price, Angus Energy, Sound Energy, Zephyr Energy, Scirocco Energy, SDX Energy & finally

WTI $96.03 -20c, Brent $100.58 -49c, Diff -$4.55 -29c, NG $6.36 +33c, UKNG 235.0p u/c

By Malcolm Graham-Wood

Oil price

Not much to add, the bureaucrats in the EU haven’t yet got around to banning Russian hydrocarbons and the Chinese and the Indians are still buying crude with blood on their hands…

Angus Energy/Sound Energy

Angus Energy plc 

Sound Energy plc not to proceed with possible offer for Angus Energy Plc

Termination of Formal Sale Process and update on Strategic Review

Sound

The Company notes the announcement made by Sound this morning in which it confirms it does not intend to make an offer under Rule 2.7 of the City Code on Takeovers and Mergers to acquire Angus.

End of Formal Sale Process  

On 6 January 2022, Angus Energy plc announced that it was undertaking a review of the strategic options. These options include, but were not limited to, a sale of the Company which will be conducted under the framework of a “formal sale process” in accordance with the Takeover Code. 

The Company now announces that whilst it will continue its strategic review at the asset level only, as explained below, it has ended the “formal sale process” of the Company which it had commenced previously in accordance with Rules 2.4 and 2.6 of the Takeover Code. Accordingly, the Company is no longer in an offer period as defined by the Takeover Code.

George Lucan, CEO, commented:

“Our Competent Persons Report of October 2021 gave a P90 valuation of £24 million (P50 of £34 million) to our interest in Saltfleetby, since which time confidence in our ability to achieve First Gas in June has risen, and the wider market has reflected this in our own share price.

After lengthy discussions on a possible combination with Sound, which we consider to have had merit, we were unable to agree terms.

The Company is pleased to continue discussions with two actively interested parties for part or all of our Licence interest at an asset level.  However, in the light of a strongly supportive economic backdrop and in constant pursuit of shareholder value, we are now formally closing out our Formal Sales Process as regards potential Offers for the shares of Angus Energy plc although we remain in a Strategic Review period whilst those discussions continue at an asset or licence level.”

The process that Angus started is slowly whittling down the potential suitors, either for the company or for its assets and accordingly the Formal Sales Process is now at and end. For Sound, as I understand it, very amicable talks could not quite add up enough for the asset or the company to become part of their international business.  However in Morocco they are making real progress on Phase 2 and connecting their gas in Morocco to the GME pipeline which itself, with its transit links to Europe, are not lost on European energy buyers…

For Angus although the FSP is at an end, the sale process continues with regard to ‘all or part of the assets continues with two actively interested parties’. The company make it clear that there is substantial value at Saltfleetby at asset level and discussions will continue, with first gas due in June and some debt related hedges coming on in due course, the Angus share price has reflected that positive contribution.                     

With potential buyers are now doing their final sums I would imagine that it will not be long before we get to the final act in this play. Angus has done well from all this, since it announced the process the shares more than tripled to 1.55p and they had a raise at 0.8p so the shareholders should be happy pretty much whatever happens. It is a good advertisement for proactive management and George Lucan and team can be pleased with their part in it all. 

With recent international events domestic gas is now much more valuable, cheaper to deliver and with hugely less carbon footprint assets than anything from abroad such as LNG. Angus in whatever form will continue I suspect and maybe even with Saltfleetby

Zephyr Energy

Zephyr has provided an update on hydrocarbon production from its non-operated asset portfolio in the Williston Basin, North Dakota, U.S.

Highlights

• Assets purchased in the recent US$36 million Williston Basin acquisition, which completed on 17 February 2022, are now fully integrated into Zephyr’s portfolio and first monthly revenues from the Acquisition have been paid to Zephyr from Whiting Petroleum Corporation, the operator of the assets.
• At the end of March 2022, Zephyr had 185 wells available for production, including 7 wells which came online during the first quarter of the year.
o An additional 16 wells are expected to be brought online and be available for production over the next six months.
• Q1 operational production rates from the Company’s Williston Basin portfolio averaged 1,643 barrels of oil equivalent per day net to Zephyr, ahead of previous expectations and representing a record-breaking production quarter for the Company.
o 80% of produced volumes were oil
• In total, Zephyr received circa US$6 million in cash flow (net to Zephyr) from its non-operated portfolio in March 2022, the first month in which revenues from the Acquisition were paid in conjunction with Zephyr’s existing portfolio.

Colin Harrington, Chief Executive of Zephyr, said:

“It is almost exactly twelve months since we announced Zephyr’s first non-operated acquisition in the Williston Basin, and I’m absolutely delighted with the rapid growth and strong cash flows generated by the five portfolio acquisitions completed to date. Our non-operated portfolio is now an excellent balance of 185 low-risk, high margin working interests  alongside strong operators, with another 16 wells expected to come online over the
next six months.
“This highly attractive portfolio, assembled prior to the current increase in the commodity price environment, is now delivering substantial cashflows which will enable the ongoing development of our flagship Paradox project – at a time when we are in the midst of planning a three well drilling programme for the second half of this year.

“I am thrilled that we received circa US$6 million of cashflow in March, the first full month of integrated revenues, and I’d like to thank our management team and the Operator of the wells for their efforts in completing the Acquisition integration so quickly.”

“It’s an exciting time for Zephyr and we look forward to keeping Shareholders regularly updated on progress in the near term and, in particular, we look forward to receiving and releasing the results from our Paradox Basin Competent Persons Report in the coming days. As always, we will continue to strive to be responsible stewards of our investors’ capital and responsible stewards of the environment in which we work.”

This is yet more exceptional news from Zephyr who within weeks of completing the Williston Basin acquisition have announced net production of 1,643 b/d, a record for the company. Of this c. 80% is oil and it provided total cash flow of some $6m net in March from the 185 wells available for production 7 of which came on in Q1 and 16 which are due in the next 6 months. 

This cash flow was bought to finance the drilling programme at the Paradox Basin but before the recent oil price move which has made it all the smarter. The CPR is due before long and I too look forward to that and without presuming anything I imagine that in a short space of time the Zephyr portfolio will look very smart indeed. 

The shares are creeping back up towards 7p after spending a couple of months at around 5p which was understandable indigestion post the raise for the deal and with all of the doubters off the register the shares are now ready to motor, and motor they will.

Scirocco Energy

Scirocco has provided the following update on its Tanzanian oil and gas operations. The Company intends to issue a broader operations update covering all of its activities later in the month.

Ruvuma

The Company is pleased to update the market that operations progress on the Ruvuma PSA (25% non-operated interest) in Tanzania, with the seismic acquisition programme and preparations for the drilling of the Chikumbi-1 (“CH-1”) well, under the direction of the operator, ARA Petroleum Tanzania Limited (“APT”). 

Alongside the ongoing seismic operations, APT has further advanced the well planning for the CH-1 well with all long lead items contracts now executed. APT reports a target spud date for the CH-1 well in November 2022.  

As previously announced, APT’s revised mapping and internal management estimates suggest a risked prospective gas in place (“GIIP”) for the Ntorya accumulation of 3,024 Bcf (gross basis, mean case), in multiple lobes to be tested, and a prospective, risked recoverable gas resource of 1,990 Bcf (gross basis, mean case) considerably in excess of the Joint Venture’s carried resource assessment – presenting significant upside opportunities in the well.

Kiliwani North

The Company also notes that Aminex PLC, the operator of the Kiliwani North Development Licence (“KNDL”) in which Scirocco holds an 8.39% non-operated working interest, today announced that any future drilling is contingent upon an improved seismic resolution of the prospective target structures. Additionally, the operator has reached an agreement with Pan African Energy Tanzania (“PAET”) to utilise their high-resolution 3D seismic campaign, targeting a mid-year start, to receive approximately 12.5km² of valuable new high-resolution 3D coverage over KNDL, at no cost to the Kiliwani North joint venture. PAET will be acquiring high-resolution 3D seismic over the adjacent producing Songo Songo field, and the Kiliwani North joint venture will allow PAET to partially overlap the KNDL area to enable full-fold processing of the new 3D dataset up to the Songo Songo and KNDL boundary.

This coverage, which represents over 40% of the critical area of the licence, will enable the operator to link the new high-resolution 3D data to its existing 2D seismic legacy data which currently covers the KNDL with an irregular seismic grid. This should significantly improve both fault resolution and reservoir horizon mapping; both considered to be essential to understand the compartmentalised nature of the reservoir.

Commenting on the operational progress, Scirocco CEO Tom Reynolds said:

“The operational progress made by both operators on our Tanzania oil and gas asset represents long awaited activity on both blocks which are significant value catalysts for Scirocco shareholders. We are excited about the schedule of work activity in 2022 and beyond in Tanzania and look forward to being able to update the market further as to the progress of ongoing operations.”

This is a mirror of the AEX release and is in line with recent pronouncements from the operator with updated seismic data. I am expecting news before long from Scirocco on Tz and EAG which last time I saw was also looking exciting. 

SDX Energy

SDX has announced the spudding of the MSD-20 infill development well on the Meseda field. This well is the third in a fully funded 13-well development drilling campaign on the Meseda and Rabul oil fields in the West Gharib concession in the Egyptian Eastern Desert. The campaign is aimed at growing production to c.3,500 – 4,000bbl/d by early 2023.

The MSD-20 infill development well on the Meseda Field (SDX: 50% working interest) spud on 5 April 2022 and is targeting the Asl Formation reservoir at approximately 3,180ft TVDSS. It is estimated that the well will take around six weeks to drill, complete and tie-in to the existing infrastructure. MSD-20, with an expected cost to drill and tie in of US$0.9-US$1.0 million (gross), is anticipated to come on-line and produce at around 300bbl/d (gross), which would immediately contribute to Group cashflow and result in a payback period of five to six months at current oil prices. The Company expects to update the market on its result in mid-May.

The first two wells in the campaign, MSD-21 and MSD-25, have been tied-in and are contributing to production.

Mark Reid, CEO of SDX, commented:

“I am pleased that we have spud MSD-20, the third well in the campaign, so quickly after bringing MSD-21 and MSD-25 onto production, which is testament to the efficiency of the operations team in country and bodes well for the rest of the campaign. West Gharib is a very high margin asset in our portfolio with a Netback of US$37/bbl at US$71/bbl Brent in FY2021. Given this, it is our intention to execute this 13-well campaign as quickly as possible to significantly boost production and cashflow from these fields. In line with this aim, a second rig has been contracted and is currently on location at the next well, MSD-24, which should be operating soon. I look forward to updating the market further as the campaign progresses.”

I commented on SDX yesterday and nothing has changed since then, the company needs these wells to come in but there is corporate action in them there hills I would bet a dollar to a wet doughnut…

And finally…

The Masters continues at The Augusta National and as expected the Tiger was on the prowl yesterday.

This weekend it’s the F1 Australian GP in Melbourne and no surprise Chas Clerc is leading from le Brat and the Mercs are well off the pace in 11th and 13th..

Over at Aintree the Grand National meeting continues and Minella Times with Rachael Blackmore aboard would repeat last year’s win despite having a much bigger weight this time.

In the Prem nothing is going to beat what is without doubt the biggest fixture of the season and will more than likely decide the title when Liverpool visit the Emptihad on Saturday afternoon. Elsewhere Chelsea are at the Saints, the Gooners host the Seagulls, the London derby sees the Bees hosting the Hammers and Spurs go to the Villa.

Last night in the Boropa Cup the Hammers got a 1-1 draw against Lyon and will have to do better in the second leg away next Thursday. Rangers went down 1-0 at Sporting Braga.

Finally it’s the Rugby Europeans Champions Cup with all the top teams in action. Both the Quins and the Tigers have tricky away legs in France on Sunday.

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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