Malcy’s Blog – Oil price, Chariot Ltd, Pharos Energy, Hurricane Energy, Getech Group & finally

WTI $109.59 -$2.81, Brent $109.11 -$2.82, Diff + 48c, USNG $8.37 +7c

By Malcolm Graham-Wood

UKNG 178.0p -6.95p (June), TTF €93.5 -€3.6

Oil price

Oil fell as Covid in China re-emerged in various places including Beijing but to me the risk in China is undoubtedly the other way, ie by quite how much will China demand when and it is when, its economy recovers. The other thing that I am very concerned about is that of refined products, starting in the USA.

The EIA inventory stats showed a slightly smaller draw in crude stocks of 3.4m barrels but crucially a bigger fall than expected in gasoline of 4.8m b’s. Refinery runs of 91.8% were 1.8% higher as refiners work flat out to provide enough gasoline not only for the domestic market, only 10 days away from Memorial Day and with it the start of the driving season, but also for the export market.

The worry here is that domestically, where signs of demand growth for products are more than robust, but also for foreign markets such as Europe where every drop is more than enthusiastically consumed. Any change in circumstances, which could be as varied as driver demand or perish the thought a bad hurricane season, would change the downstream market completely. And by the way Mr Biden if you need products in a hurry there is no substantial  magic reserve you can draw on to get gasoline prices down. What price retail prices in the blog over the next few Tuesday?

Finally as Chancellor Sunak ponders his options to ease the inflation worries a windfall tax on oil companies has been suggested and so far repudiated by the Government. However the response by the UK majors to their sudden riches has been so atrocious that even those who would never normally countenance such fiscal reactions reach for the tax claw. Management has been abysmal for some years as they sit on bloated G&A and corporate greed that in the last few months they have made no realistic attempt to say just how they could help, except of course to cut capex in the UK. Leave it to the independents and we will do what is necessary and provide the increased oil and gas for the domestic market.

Chariot

Chariot has announced that further to the Company’s announcement released at 4.38 p.m. on 18 May 2022, the accelerated bookbuild has closed and the Company has conditionally raised gross proceeds of US$25.5 million (£20.4 million) through the successful Placing of, and Subscription for 113,333,334 New Ordinary Shares, in each case at the Issue Price of 18 pence per Ordinary Share.

In addition to the Placing and Subscription, and as set out in the Launch Announcement, the Company proposes to raise up to a further US$4 million (£3.2 million) by the issue of New Ordinary Shares pursuant to an Open Offer to Qualifying Shareholders at the Issue Price on the basis of 1 Open Offer Share for every 47 Existing Ordinary Shares held on the Record Date. Qualifying Shareholders subscribing for their full entitlement under the Open Offer may also request additional Open Offer Shares through the Excess Application Facility. Details of the Open Offer and the action to be taken by Qualifying Shareholders to subscribe for Ordinary Shares under the Open Offer will be set out in the Circular, which will be sent to Shareholders on 23 May 2022.

The gross proceeds include US$0.6 million (£0.5 million) conditionally raised from certain of the Company’s Directors, as part of the Subscription.

The Placing Shares and Subscription Shares represent in aggregate 14 per cent. of the Company’s Existing Ordinary Shares. The Issue Price of 18 pence per New Ordinary Share is equivalent to the closing mid-market price of 18 pence per Ordinary Share on 17 May 2022.

The net proceeds of the Fundraise will be used to:

·    Advance the engineering and design of the Anchois Gas Development, including FEED project, project financing, gas sales and updated reserves report, to reach FID

·    Progress renewable power pipeline, strategic partnering and new venture opportunities

Commenting on the Fundraising, Adonis Pouroulis, Acting CEO of Chariot, said:

“We are delighted to have completed this oversubscribed Placing and Subscription, subject to shareholder approval at the forthcoming General Meeting, and we welcome our retail investors who would like to also participate through the Open Offer. Management have further supported the Company in this fundraise so we remain fully aligned with our shareholder base, demonstrating our commitment and belief in the value and future growth of our business. We are excited about moving the Anchois development towards FID and we look forward to updating the market in this regard, as well as with our progress across our wider portfolio.”

Chariot is in a very strong position right now and this significantly oversubscribed raise proves the point. Retail investors should dive into the Open Offer as I am led to believe that in the placing existing shareholders followed their money and then some, and new big and highly respectable shareholders joined in but were massively scaled down even at the placing price which was at no discount.

On the fundamentals the raise is designed to get Anchois to FID, including FEED costs and gas sales, as well as future CPR requirements and will be value accretive. On the power side it progresses the pipeline, adds to strategic partner selection and provide opportunities for further ventures. 

The shares have already bounced some 12% from the placing price and I can easily see it sailing through the recent 25p high. Indeed I stand by what I have been saying since ‘new Chariot’ emerged and that is of being a multi-bagger from that 10p level, right now I suggest that a target price of 100p a share is not inconceivable…

Pharos Energy

Pharos has issued the following Trading and Operations update in advance of the Company’s AGM today at 0900 BST. The information contained herein has not been audited and may be subject to further review and amendment.

Summary

·      Group working interest production for the four months to end of April 2022 was 8,291 boepd net

 Egypt production 2,391 bopd

 Vietnam production 5,900 boepd

·      Commencement of the main El Fayum multi-year and multi-well development programme in Egypt

·      Drilling two TGT infill development wells in Vietnam H2 2022

·      Drilling one CNV well in Vietnam H2 2022

·      Final results of 3D seismic processing in Block 125 expected July 2022

·      Group revenue for January – April 2022 was $89m prior to hedging loss of $11m

·      Cash balances as at 30 April 2022 of c.$42m (YE2021: $27.1m), net debt of c.$43m (YE2021: $57.5m)

·      Forecast cash capex for full year of c.$29m, post carry in Egypt starting 21 March 2022

·      2022 working interest production guidance:

 1,350-1,800 bopd in Egypt (equivalent to gross production of 3,000-4,000 bopd)

 5,000-6,000 boepd in Vietnam, unchanged from 16 March 2022 Preliminary Results announcement

 Jann Brown, Chief Executive Officer, commented:

“The completion of the farm down of our Concessions in Egypt, announced on 24 March, means that we are now fully funded to move forward with our new partner IPR such that we can in time access the full 2P reserves base. The capex programme and production guidance for Egypt provided for this year reflect the challenges in the local rig markets, while in Vietnam a rig has been secured for the drilling programme due to commence in H2 2022. With our corporate cost base reset, our carried position in Egypt and the fast payback on investments in Vietnam, we are well positioned to deliver strong cash flow and drive value for our stakeholders.”

Pharos is now in a good place, Egypt is finally sorted and lower, more realistic production guidance appears to be in place for long term ‘access to the reserve base’. As for the Vietnam situation it remains the jewel in the crown and with further drilling almost imminent I can see significant increase in revenues from there. 

The shares are some 40% off the recent peak which should be easily recoverable and with visibility towards the uptick in Vietnam Pharos is an attractive investment at current hydrocarbon prices. 

Hurricane Energy

Hurricane has updated on Lancaster field operations and net free cash balances as of 30 April 2022.

Lancaster Field Operations Update

The following table details production volumes, water cut and minimum flowing bottom hole pressure for the 205/21a-6 (“P6”) well during April 2022.

April 2022 Lancaster Field Data

P6

P7z(1)

Oil produced during the month (Mbbls)

273

Average oil rate (bopd)

9,099

Water produced during the month (Mbbls)

210

Average water cut(2)

43%

Well gauge pressure (psia)(3)

1,578

1.       The 205/21a-7z (“P7z”) well was not on production during April 2022

2.       Expressed as total water produced divided by total fluid (oil and water) production

3.       Pressure reported is the monthly minimum from well downhole gauge

 As of 17 May 2022, Lancaster was producing c.9,100 bopd from the P6 well alone with an associated water cut of c.44%.

There was no lifting of Lancaster crude in April. The next cargo is anticipated to be lifted later in May 2022.

Financial Update

As of 30 April 2022, the Company had net free cash of $92 million compared to the last reported balance of $106 million as of 31 March 2022. During the month, there was a net movement of $3.2 million from free cash into restricted funds in line with the terms of the Aoka Mizu FPSO Bareboat Charter extension.  $78.5 million of Convertible Bonds remain outstanding and are due in July 2022.

As stated in our Annual Results announcement on 28 April 2022, the Board is now confident that the bond will be repaid in full in July 2022, with the Company forecasting to be holding net free cash of at least $60 million following the repayment, assuming oil prices remain at over $90/bbl.

This is a no-brainer, here are the facts from the company. ‘Net free cash balances as of 30 April 2022 – the Board is now confident that the bond will be repaid in full in July 2022, with the Company forecasting to be holding net free cash of at least $60 million following the repayment, assuming oil prices remain at over $90/bbl – As of 17 May 2022, Lancaster was producing c.9,100 bopd from the P6 well alone’

The valuation of Hurricane that produces 9/- + b/d at c. $110 per barrel with no debt soon and a new tidy contract for the FPSO sorted and a very low G&A is anything you want it to be. The one thing it isn’t is £180m as per today’s share price, do the math. It could be a vehicle for a bigger player in the market or itself start moving amongst the smaller fish in the pond, what would a wealthy parent do for it?  Nice offices next to a pub too…

Getech

Getech has announced its Final Results for the 12 months ended 31 December 2021.

Highlights

A transformational year, investing for future growth.

Key financial highlights

·     FY2021 revenue rose c. 20% to £4.3m (2020: £3.6m);

·     Orderbook grew by 25% to £3.3m at 31 December 2021 (31 December 2020: £2.7m);

·     Annualised recurring revenue* stable at £2.1m at 31 December 2021 (31 December 2020: £2.1m);

·     Cost base increased to £6.5m, through equity funded low carbon investment (2020: £5.2m);

·     Loss for the year of £1.6m, adjusted for exceptional items** (2020: £1.5m loss);

·     Reported loss for the year of £1.9m (2020: £1.6m loss); and

·     Strong net cash*** position of £5.1m at 31 December 2021 (31 December 2020: £1.4m).

Key corporate and operational highlights

·    Repositioned strategy with new ‘locate-develop-operate’ business model designed to accelerate a secure and sustainable path to decarbonisation;

·    Expanded the application of geoscience data and software products into essential tools enabling the energy transition and enhancing the security of energy supply;

·    Acquired a green hydrogen developer, and secured the first two development projects;

·    Developed key strategic partnerships with Shoreham Port, SGN Commercial Services (SGN), Eversholt Rail and the Highland Council; and

·    Continued to invest in new talent and skills.

Strong outlook

·    Focused on accelerating the global energy transition and ensuring a secure supply of energy; all whilst delivering transformative shareholder value through:

 expanding our robust pipeline of products and services for the energy transition;

 ambition to establish at least 500MW of new geoenergy and green hydrogen assets by 2030 by:

§ replicating and scaling up our green hydrogen asset development model, both in UK and internationally;

§ building strategic partnerships to secure and develop geothermal energy projects; and

§ pursuing energy co-location opportunities in the critical minerals sector.

 Getech CEO, Dr Jonathan Copus commented:

“2021 was a transformational year for Getech, during which we invested to diversify the application of our world-leading petroleum products into new geoenergy and green hydrogen growth sectors. We also established a new ‘locate-develop-operate’ business model.

We delivered this against a turbulent macroeconomic backdrop that continues to highlight the urgent need for the world to significantly increase energy investment. To ensure energy security and the transition to a low carbon future, governments have materially increased their clean energy targets and are fast-tracking policies to accelerate the pace of energy system investment.

In this environment, demand for Getech’s products increased – revenue grew 20% and our orderbook expanded by 25%. We also acquired a hydrogen development company, H2 Green, and signed a range of valuable strategic partnerships, securing exclusivity over our first two hydrogen development projects.

Building on this momentum, our ambition is to establish a portfolio of at least 500MW of new geoenergy and green hydrogen assets by 2030. These could save c.2 million tonnes of CO2 production annually, and would deliver transformational value to our shareholders.

Getech moved into 2022 with confidence and we look forward to building our position in a primary energy market that is undergoing unprecedented change and growth.”

Getech is an interesting hybrid stock that is a good vehicle for playing the low carbon future and particularly in the geoenergy and green hydrogen areas. These figures show a highly creditable increase in revenue which is backed by a growing order book. Accordingly the shares which have nearly doubled since September 2021 should continue to rise on ratings and also rarity value.  

And finally…

Rangers went almost all the way last night but lost to Eintracht on pens.

Tonight in the Prem the Toffees host the Eagles, Burnley go to Villa and Chelsea host the Foxes.

Last night in the League 2 play- offs Mansfield beat Northampton Town and will play the winner of tonight’s game between Port Vale and Swindon where it is 1-2 from the first leg.

And the US PGA is underway at the Southern Hills Country Club in Tulsa, Oklahoma.

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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