WTI (Aug) $104.22 +$1.62, Brent $ (Sept) $107.35 +$1.08, Diff -$3.13 -54c.
USNG $7.48 +1c, UKNG (Aug) 216.53p +17.91p, TTF (Aug) €158.25 -€1.35
Having been down when the blog published yesterday morning by nearly two dollars a decent recovery took place and as can be seen above the rally meant a nearly four buck swing on the day. The API stats showed a crude and gasoline build with distillates drawing 2.2m barrels ahead of today’s EIA data.
Material Increase in Gas Resources Offshore Morocco
Increase to 1.4 Tcf in total remaining recoverable resources (2C plus 2U) at the Anchois Project
Range of targets de-risked in a basin-scale exploration portfolio with multi TCF potential
Chariot has announced the results of Independent Assessments on its gas resources offshore Morocco, incorporating the results of the recent successfully drilled Anchois-2 appraisal and exploration well. The Independent Assessments have been made by Netherland Sewell & Associates Inc. on the Anchois Gas Field and further selected exploration prospects in the Lixus Offshore licence and the adjacent Rissana Offshore licence with material resource upgrades reported across the portfolio.
These resource upgrades underpin:
· the Company’s decision to fast-track its field development plans;
· the associated exploration programmes to deliver further growth from the portfolio; and
· Chariot’s focus on developing a significant energy resource, prioritising the growing demand within Morocco’s domestic market, and potentially supplying surplus gas to Europe.
Anchois Gas Field:
• 82% increase in 1C contingent resources from 201 Bcf to 365 Bcf
• 76% increase in 2C contingent resources from 361 Bcf to 637 Bcf
• 49% increase in 2U prospective resources to 754 Bcf in three undrilled targets with an improvement in the probability of geological success, now ranging from 49 to 61 %
• Total remaining recoverable resource at Anchois (2C plus 2U) now stands at 1.4 Tcf
Additional Lixus Prospects:
• Updated assessments on two key undrilled prospects (Maquereau, and Anchois West) with improvements in both prospective resource potential and probability of geological success and the newly identified Anguille prospect, which are all part of the same tertiary gas play as the Anchois gas field
• Combined, 2U prospective resources of 838 Bcf with an estimated probability of geological success ranging from 30-52%, with closely related additional targets in the areas surrounding the prospects
• The total remaining recoverable resources (2C plus 2U, comprising audited and internal Chariot estimates) in the entire Lixus portfolio stands at approximately 4.6 Tcf
• Early assessment of the areas covered by 3D seismic, provides a total 2U prospective resource of over 7 Tcf, combining a high-graded prospect ‘Emissole’ within the lower risk Anchois tertiary gas play and multi Tcf prospects in a higher-risk Mesozoic play, inherited from Chariot’s legacy Mohammedia Offshore licence area.
Duncan Wallace, Technical Director of Chariot Limited, commented:
“This independent assessment report confirms that following the drilling of Anchois-2, we have a growing resource base from which we can fast track our gas development towards material cashflows and provide gas to meet Morocco’s growing energy demand.
These resource upgrades across our Moroccan portfolio are a significant step forward. As well as confirming the increased scale of our discovery at Anchois, this independent assessment has also corroborated the multi Tcf opportunity that sits within the basin in our Moroccan licences and served to de-risk a number of high potential future targets in Lixus.
We remain fully focused on bringing Anchois into production as quickly as possible and are working hard across all aspects of the development plan required to reach FID. We are committed to realising the value of this gas field as well as continuing to prove up the significant scope of our wider resource base from the Moroccan portfolio.”
This is an incredible announcement with a new report on Lixus showing that the whole area continues to grow and provide the opportunity for Chariot to fast-track the development and move to cash flow and revenues sooner than expected.
I am not going to repeat the numbers in the RNS above, save to say that they are material across the board. No one needs reminding that this is about as valuable a gas project as it is possible to have in the portfolio, it will be a company maker for Chariot who it should be remembered also have a substantial business in assisting mining companies in Africa transition to renewable energy sources for their operations.
Indeed for Morocco, who are encouraging the development of much needed domestic natural gas, the terms of business are second to none. Indeed seeing that Algeria has committed to increasing its natural gas to Italy, Chariot’s prolific find is as valuable as it gets.
Chariot shares are a steal, they have come some way from a year ago but have drifted lately along with other sector favourites but this stock was always going to be a multiple bagger, I would suggest at 20p today a multiple of at least 5, more likely a good deal more.
San Leon Energy
San Leon has announced that, further to the Company’s AIM Admission Document published on 8 July 2022, the documents in respect of the New ELI Investment have now been signed by the relevant parties, being ELI Malta and San Leon Energy Financing.
The New ELI Investment comprises of:
(i) the New ELI Loan from San Leon to ELI of US$16,000,000 at a coupon of 14% per annum over four years and repayable quarterly following a one-year moratorium; and
(ii) the New ELI Subscription at nominal value of a further 10 per cent. of ELI’s diluted share capital.
Details of the New ELI Investment, which remains conditional, amongst other things, on San Leon shareholder approval at the EGM convened for 5 August 2022, were announced by the Company on 8 July 2022 and can be found in the Admission Document which is available on the Company’s website: https://www.sanleonenergy.com.
Confirmation of the ELI loan documents having been signed is further good news for San Leon as the loan brings a sensible coupon as well as an investment in ELI. Final approvals just waited on now and in due course the SLE share price will rise significantly.
Pharos has issued the following Trading and Operations update in advance of the Company’s half-year results on 14 September 2022. The information contained herein is not audited and may be subject to further review and amendment.
· Group working interest H1 production 7,961 boepd net:
o Egypt production 2,100 bopd
o Vietnam production 5,861 boepd
· 2022 Full year Group working interest production guidance remains unchanged from 19 May 2022 trading update:
o 1,350-1,800 bopd in Egypt (equivalent to gross production of 3,000-4,000 bopd)
o 5,000-6,000 boepd in Vietnam
· Group revenue for H1 2022 of c.$129m before hedging loss of c.$17m
· Cash balances as at 30 June 2022 of $47.5m, net debt of $38.1m
· Forecast cash capex for the full year of c.$29m, post carry in Egypt
· Planning well advanced for TGT & CNV development drilling programme, due to commence in September 2022
· Work on 3D seismic processing in Block 125 in Vietnam nearing completion
· Development drilling continues in El Fayum, drilling rig secured on long-term contract
· Commencing today and announced separately, initiation of $3m share buyback programme
Jann Brown, Chief Executive Officer, commented:
“The first half of 2022 has seen us deliver on both our strategic and operational objectives with strong progress made on all fronts across the portfolio. In Egypt, following the farm-out to IPR, investment has recommenced and production levels are starting to rebuild. Securing a rig on long-term contract positions us for continuous drilling in El Fayum over the next year and beyond, to monetise the significant 2P reserves base under the enhanced fiscal terms secured. In Vietnam, the three well development drilling programme is on track to commence in September, focused on sustaining production levels in the current high netback, fast payback environment. These operational plans build on the strong cash flows generated in H1 2022 and give us the confidence to allocate capital to commence a share buyback programme, announced today, in recognition of the significant discount value we see in our shares at the current price. Value creation and shareholder returns remain top of our agenda and we remain focused on the near term opportunities in the current portfolio.”
All appears to be in good nick at Pharos and that’s no surprise, the management is first rate and the assets are very good and in particular fit for purpose. The production number beat the whisper, mainly due to the IPR deal mechanics so whilst guidance is unchanged it looks pretty solid.
The metrics are good, with the oil price as it is cash flow is good, debt is down and the balance sheet is so strong that a $3m buy-back has been announced. Three development wells are upcoming in Vietnam and three wells in Egypt as well mean that investment plans are well and truly back in play.
Serica has provided the following operations update.
Bruce Field Well Interventions
Serica’s first ever Light Well Intervention Vessel campaign has concluded without any safety incidents or environmental issues. This campaign is part of our ongoing programme to add value and extend the life of our Bruce facilities.
The initial well (Bruce M1) was re-entered for the first time since 1998. After a successful scale removal and water shutoff, a significant reperforation and new perforation campaign was executed and the well returned to production. Production rates from the well have increased from around 400 boe/d before intervention to over 1,800 boe/d in July 2022.
A similar programme was followed on the second well (Bruce M4) and production rates for the well have been increased from around 450 boe/d to over 2,400 boe/d.
The results from these two wells are at the upper end of the range of expectations and it is expected that there will be an uplift to our independently assessed reserves. This programme has increased confidence that further uplift can be achieved from future well interventions. Capital investment in the Bruce and Keith fields qualifies for investment relief under the recently announced Energy Profits Levy.
Plans to perform similar interventions on other Bruce and Keith wells, both subsea and from the platform, are now being accelerated.
Operations have commenced on the high-impact and potentially transformational North Eigg exploration well. This gas prospect is located close to Serica’s operated fields and infrastructure and is estimated to contain 60 mmboe (P50) and potentially over 236 mmboe (P10) of recoverable resources (both unrisked). It shares many geological similarities with the adjacent Rhum field. It is clearly defined on 3D seismic which is interpreted as a structural trap sealed against the East Shetland bounding fault.
The well is being drilled by the Transocean Paul B. Loyd Jr. harsh environment semi-submersible drilling rig with results expected in October 2022.
If successful, the development scheme could be via a tie-back to the nearby Serica operated and 98% owned Bruce facilities. Tying back to Bruce would minimise development emissions, reduce overall carbon intensity of the Bruce facilities and extend infrastructure life.
Earlier this month Columbus reached the milestone of having produced one million barrels of oil equivalent gross. Although production rates have been lower than anticipated, the field continues to benefit from strong commodity prices.
Production performance in 2022 is benefitting from the significant investment in the Rhum R3 well reintervention, the Columbus development project and now the LWIV campaign. Serica’s average net production in July has averaged over 29,150 boe/d and YTD average net production is 26,832 boe/d. Over 85% of our net production is gas.
2022 Full Year production guidance remains unchanged at between 26,000 and 30,000 boe/d. This guidance includes the impact of the planned summer shutdown season when key maintenance will be performed on Serica’s producing assets.
Commodity Prices and Hedging
Commodity prices, particularly gas, have continued to be highly volatile but realised prices have remained strong. Benchmark NBP and Brent prices have been as follows:
The 2022 YTD gas price has averaged 177p/therm which is significantly higher than the 2021 full year average of around 113p/therm. This is before the impact of price hedging.
Serica continues to maintain a modest gas price hedging programme with approximately 25% of gas and liquids production covered in the first half of 2022 dropping to around 20% in the second half, thereby allowing the company to benefit from full market prices on some 80% of its gas and liquids production. No new gas hedges have been added for the past year.
Mitch Flegg, Chief Executive of Serica Energy, commented:
“I am delighted with the significant progress that Serica has continued to make during 2022. The impact of the substantial investment programmes undertaken in the last three years has seen increased production levels providing responsibly sourced gas to the UK domestic market, protecting security of supply, and reducing the UK’s reliance on imports as part of the transition to a lower carbon future.
Commodity prices have been exceptionally strong during the period with a resulting positive impact on income.
Serica has no debt, limited decommissioning liabilities and with growing cash reserves is well positioned to continue to invest in further projects and other opportunities to add shareholder value. We have just completed a well intervention campaign on Bruce that has boosted net production by over 3,000 boe/d and provides further evidence of the value in Serica’s assets that can be realised through measured and expert operatorship.
Operations have also commenced on the North Eigg exploration well with potential for transformational results, while we are now accelerating further well intervention work on Bruce and Keith following the success of the recently completed campaign.”
Nothing that can be taken away from this detailed update from Serica today. Operationally excellent with a strong commodity price giving a fair wind and very solid finances have led to Serica beating the market whisper. Add to that a potentially huge exploration well at North Eigg and the company is very well placed and should have an exciting second half.
South Africa were comfortable winners of the first ODI yesterday, on Ben Stokes’ finale as a one day player.
Tonight England play Spain in the Women’s Euros quarter final.
The opinions expressed here are those of the author
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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