Malcy’s Blog – Oil price, Arrow Exploration Corp, Predator Oil & Gas, Longboat Energy & finally

WTI (Oct) $97.01 +$3.95, Brent (Oct) $105.09 +$4.10, Diff -$8.08.

Author @mgrahamwood

USNG (Sept) $9.35 +6c, UKNG 600.0p +60.26p, TTF €260.0 -€39.99

Oil price

Oil had a big bounce yesterday in thin volume and was also up on the week as well. The usual reasons are plain to see, Wall Street shed over 1,000 points after the hawkish comments by the Fed Chief Jerome Powell.

Also there are other problems emerging, riots in Baghdad have worried markets about Iraq’s 4m b/d and the Iran talks are not yet finalised.

Arrow Exploration Corp

Arrow has announced the filing of its unaudited interim Financial Statements and Management‘s Discussion and Analysis for the quarter ended June 30, 2022, which are available on SEDAR. All dollar figures are in U.S. dollars, except as otherwise noted.

The first six months of 2022 saw the Company deploy the capital it raised at the time of its Admission to AIM on a successful two well drilling campaign at Rio Cravo on the Tapir Block. The better than forecasted results from this drilling campaign and the subsequent generation of positive cashflows in Q3 means Arrow is pleased to be committing to a further drilling program. Commencing in Q4 2022, the Company expects to drill up to three further wells at Rio Cravo and plans a two well program on the Carrizales Norte Structure on the Tapir Block. A letter of intent has been signed with a drilling contractor to execute the planned five well program on the Tapir Block. Along with workovers to other existing wells, the Company will seek to tie in the East Pepper well in Q4 2022, confirming Arrow remains on target to increase production to 3,000 boe/d within 18 months of AIM Admission. The Company anticipates being able to support the planned 2023 CAPEX program with current cash and cashflow from operations. Arrow continues to focus on growth and improving its balance sheet and free cash flow.

2022 SECOND QUARTER INTERIM RESULTS

FINANCIAL AND OPERATING HIGHLIGHTS

⁽¹⁾ Non-IFRS measures – see “Non-IFRS Measures” section within the second quarter 2022 MD&A

⁽²⁾ Long term restricted cash not included in working capital

DISCUSSION OF OPERATING RESULTS

The Company’s second quarter 2022 average corporate production decreased by 29% to 899 boe/d, compared to the first quarter 2022 average production of 1,144 boe/d. This decrease was largely attributable to the West Pepper well in Alberta, Canada, which was brought on production in December 2021 and has been recently affected by a third party’s temporary processing facility constraints. Arrow’s production on a quarterly basis is summarized below.

 For the three months ended June 30, 2022, the Company’s average production mix consisted of crude oil and natural gas production in Colombia of 575 bbl/d (2021: 264 bbl/d) and 2,398 Mcf/d (2021: 373 Mcf/d), along with minor amounts of natural gas liquids from Arrow’s Canadian properties.

During the quarter, the Company successfully drilled the RCE-2 and RCS-1 wells, which were put into production and have contributed to the increase in Colombia’s crude oil production.

DISCUSSION OF FINANCIAL RESULTS

During Q2 2022 the Company continued to realize good oil and gas prices, as summarized below.

⁽¹⁾ Non-IFRS measures – see “Non-IFRS Measures” section within the MD&A

OPERATING NETBACKS

The Company also continued to realize good operating netbacks, as summarized below.

⁽¹⁾ Non-IFRS measure

Arrow realized better operating netbacks quarter-over-quarter, increasing to $49.18/boe in the second quarter of 2022 from $20.16/boe in the first quarter of 2022. This increase is due to higher crude oil production and better netbacks from natural gas.

During Q2 2022, the Company incurred capital expenditures in connection with the drilling of the RCE-2 and RCS-1 wells. At the end of the quarter, Arrow had a positive working capital position of $5.6 million and a cash position of $7.4 million, which are expected to fund the Company’s expenditure plan for the foreseeable future.

I said last week that I like Arrow a great deal and these figures only serve to add to my warm feelings towards them. Following recent drilling news production has increased and targets have been achieved ahead of plans and I’m sure there is running room ahead.

There is more to come from RCS-1 and RCE-1 as new zones are tested and there is  a 5 well programme on the Tapir Block and also 2 low risk wells at Carrizales Norte are ahead of schedule. What is undeniable is that the company is throwing off cash, and even news from Canada is coming as a pleasant surprise and the CPR last week showed a significant increase in reserves.

For some reason last week the shares dipped on the news for some reason but have already recovered as one might expect. Since appearing back in October at 6.25p they have already nearly trebled but I consider that there is a great deal of upside especially as I have heard that there might be a visit for analysts down the line. Watch this space….

Predator Oil & Gas

Inquiry needed on Minister Ryan’s mishandling of Ireland’s security of energy supply
Viable options which could ease pressure on energy and gas supply continue to be ignored by the Department of Environment, Climate and Communications
A major public inquiry may be required into the lack of Government engagement with viable options which could have prevented Ireland’s mounting energy crisis. That’s according to CEO of Mag Mell Energy Ireland, Paul Griffiths, who today (30.08.22) called on Minister Eamon Ryan TD to explain his continued non-dialogue with energy companies putting forward solutions to ease pressure on supply.
Key decisions Mag Mell Energy Ireland has been calling on the Minister to engage on include:
• The renewal of existing licences that have not been deployed for exploration of gas.
• Decommissioning of the Kinsale Gas Pipeline to be taken off the table.
• Approval for a gas storage project proposed for Ram Head, Co. Cork.
• Government buy-in to the offshore importation of non-fracked LNG via Kinsale.

Mr Griffiths was commenting ahead of Minister Ryan’s appearance before the Oireachtas Committee on Environment alongside the Commission for Regulation of Utilities (CRU) and Eirgrid. He said:

“In light of skyrocketing energy costs and an uncertain winter ahead, the Minister must address how his department let Ireland’s electricity grid fall into such a precarious state. Minister Ryan also has questions to answer over his ongoing refusal to engage with and fully consider all options which would relieve the situation, including liquified natural gas (LNG). We’re close to a point now where lack of engagement will necessitate a public inquiry into the decision-making process of the Minister’s department over the past three years.
“Furthermore, there has been a concerning failure by Minister Ryan and his Department to communicate across Government on the increasing volatility of Ireland’s energy supply, particularly with respect to gas. This was evidenced by recent comments by An Taoiseach, Michéal Martin TD in stating he was surprised to learn about the current state of the electricity grid. We know that potential supply shortages were repeatedly flagged by energy experts, the CRU and Eirgrid long before the Russian invasion of Ukraine. This begs the question as to why the problem was ignored by Minister Ryan and his department with no definitive action taken? Ultimately leaving the consumer and Irish economy to pay an increasing heavy cost.”
Government climate action ambitions in trouble
Referring to the Government’s climate action ambitions, Mr Griffiths said: “In the short and medium term the Government’s climate action policy is in tatters. CO2 emissions are rising due to increased burning of dirtier fossil fuels like coal and oil for power generation to meet the shortfall in availability of cleaner gas-fired power generation. At the same time the public is being asked by Minister Ryan to make significant lifestyle sacrifices. The Government needs to get its own house in order on CO2 emissions from power generation by implementing a clear future strategy for security and affordability of gas before unfairly asking others to make personal sacrifices.”
Option to reuse Kinsale infrastructure for offshore importation of LNG ignored
In April 2020, Mag Mell Energy Ireland tabled a proposal with Minister Ryan and the Department of Environment, Climate and Communication (DECC) to repurpose existing infrastructure at the Kinsale Head Gas Field for the offshore importation of non-fracked LNG.

The proposal has the capacity to supply one third of Ireland’s peak gas demand, directly replacing gas from the depleting Corrib Gas Field.
The proposal includes the procurement of two floating storage and regasification units (FSRU) which can moor to the subsea end of the Kinsale Gas Pipeline 50km beyond the horizon. Imported LNG can be brought back to its gas state onboard the FSRUs at the mooring point and transferred through the subsea pipeline to the associated national grid connection point. With no additional onshore infrastructure required, the proposal will have less environmental and cost impact than other proposed land-based energy infrastructure such as the Shannon LNG terminal.
Mr Griffiths said: “Its incredibility disappointing that there has been no engagement from Department officials on the Mag Mell proposal since it was initially presented to them over two years ago. Furthermore, we’ve received radio silence from Minister Ryan despite ongoing attempts to explain in detail the unique opportunity the Kinsale Gas Pipeline offers Ireland. Had the offshore importation and storage option for non-fracked gas been implemented when it was first presented, this winter’s energy emergency and price inflation could have at least been ameliorated.
Future planning for secure backup gas supply
“Unfortunately, we’re in a position where there is no quick fix for the winter ahead. However, time is very much of the essence if we are to avoid a situation where Ireland becomes 100% reliant on a single source of gas supply via the UK pipeline. Alarmingly, this appears to be the scenario Minister Ryan is sleepwalking into as the Corrib Gas Field depletes over the next four years. Sole reliance on a single external gas supplier means Ireland will relinquish any control it has on price and supply needlessly increasing volatility and risk. Any UK price hikes will inevitably impact the Irish consumer.”
Mr Griffiths concluded: “Proposals like Mag Mell and others give Ireland more options on where we source gas supply and most importantly at what price. Mag Mell still offers the quickest solution in terms of implementation before Corrib depletes and maximises use of our existing gas energy infrastructure. In addition, the proposal offers Ireland a distinct competitive advantage while providing secure, cost-effective back-up energy support in the transition to a green grid. It is critical that our policy makers accept that renewable energy needs to be backed up by gas fired generation. There should be no surprise in that.
“If anyone is naive enough to believe that this will not be a recurring situation going forward for several years at least then they cannot understand the geopolitics of gas. Nor do they understand how exposed Ireland is relative to the rest of the EU to security of gas supply. Gas will be required for electricity generation for many years to come when renewables cannot meet the grid demand due to weather constraints. It is critical that Minister Ryan and DECC take accountability of the situation by engaging with all options at this juncture. A point I’m hopeful members of the Oireachtas Committee on Environment will emphasise today.”

No comment needed from me…

Longboat Energy

Longboat has announced the commencement of drilling operations on the Copernicus exploration well (Company 10%) in Norway.

Copernicus is the primary prospect located in license PL1017, which lies on the Utgard High in the Vøring Basin region of the Norwegian Sea.

The drilling of the Copernicus well 6608/1-1S, operated by PGNiG Upstream Norway AS, is being undertaken by the Deepsea Yantai drilling rig and is expected to take up to eight weeks to drill.

A further announcement will be made when drilling operations have been completed.

Helge Hammer, Chief Executive of Longboat Energy, commented:

“We are pleased to commence the drilling of the second of three fully-funded, gas-focused exploration wells, with the drilling of the Oswig well, the first well in the series, also currently underway.

“Longboat Energy’s exploration programme offers shareholders a unique opportunity to gain gas weighted drilling exposure targeting net mean prospective resource potential of 70 mmboe¹ with an upside case of 142 mmboe.”

This represents the continuation of the exciting drilling programme from Longboat which could generate a substantial addition to the NAV and of course the share price which looks decidedly attractive to me. 

A little while ago I interviewed CEO Helge Hammer and to listen again to his analysis of these wells and Longboat strategy can listen again by clicking on this link.

Core Finance CEO interview: Helge Hammer of Longboat Energy

And finally…

After taking a hit for new parts 7 drivers were relegated but Max still ended up in 14th place on the grid and made up the gap and won easily from Perez and Sainz. Lewis apologised for going off in lap 1 although having described his car as ‘undriveable’ on Saturday he probably can be forgiven for smacking up the motor.

After being tanned by the Proteas in the first test at Lords England returned the favour by beating them by an innings at Old Trafford, what happens at The Oval we wonder although my investment in day 4 tickets for that now looks very unwise.

In the footy there were wins for the Red Devils, the Seagulls, Chelsea, the Noisy Neighbours, the Gooners, the Hammers, Spurs and of course Liverpool who restarted their season by putting 9 on the Cherries. That was enough for manager Scotty Parker to get the sack although to face City, the Gooners and Liverpool in 3 of your first 4 games back in the Prem seems a bit harsh. In sympathy I notice that Dundee Utd also sacked their manager this morning after a 9-0 defeat..

And finally, 43 years ago today I stepped off the overnight sleeper at Waverly station in Edinburgh and headed for 68 Queen Street to join Wood Mackenzie, the start of my enjoyable career in the energy industry…!

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