Malcy’s Blog – Oil price, Coro Energy, PetroMatad, Jadestone Energy & finally

WTI (June) $71.55 -31c, Brent ( July) $75.58 -28c, Diff -$4.03 +3c. 

Author @mgrahamwood

USNG (June) $2.58 -1c, UKNG (June) 65.8p -2.74p, TTF (June) €29.375 -€0.72.

Oil price

Oil rose last week for the first time in a while as a feeling that with the recovery coming in 2H 2023 visibility in an oil price rally might be imminent. For a few weeks the market says we will continue to have debt ceiling worries but that is time limited and are you sure it could happen…?

On the supply side the Turkish pipeline is not open, Canada is down due to the Alberts wildfire and the Baker Hughes rig count on Friday saw oil units down 11 to 575. With WTI for June expiring tonight and the driving season starting on Memorial Day which is one week today.

Finally just watch natural gas which in my view has been significantly oversold, the recent small rally should continue and with the IEA coming out with a very positive call this morning it’s next winter you should worry about, not this one…

Stop press. Chevron buy PDC Energy for $6.3 billion in all-stock deal as predicted here recently. More tomorrow….

Coro Energy

Coro has announced its final results for the year ended 31 December 2022.

FY2022 Highlights

·      Coro resumed and increased gas production from its Italian onshore operations to benefit from the rise in gas prices in Italy resulting in a profit of US$ 2.6m for the year and a cash benefit to the Group

·      To capture the inherent value of the Italian natural gas portfolio and a structural increase in gas prices an option to acquire the business for up to Euro 7.5m was granted to Zodiac Energy plc. This option was exercised with the parties entering into a Sale and Purchase Agreement in March 2023  

·      Continued progress toward commercialising the Mako gas field (Duyung PSC, Coro 15% interest), with the Duyung PSC operator focused on key commercial workstreams including approval of an updated Plan of Development as announced in November and continued focus on progressing a binding Gas Sales Agreement

·      In Vietnam successfully completed Coro’s first rooftop solar project of 3MW following signing a 25-year Power Purchase Agreement which commenced delivering electricity in October. A further 3.25MW potential acquisition was announced in November.

·      In the Philippines planning and permitting activities continued for both renewable solar and wind projects. An application for a WESC (Wind Energy Service Contract) was submitted and the installation of a Lidar to collect data    

·      The Company’s Luxembourg listed EUR 22.5m Eurobond secured notes were restructured in 2022 and now mature in April 2024

·      Stephen Birrell joined as a Non-Executive Director and James Parsons transitioned to Executive Chairman. Fiona MacAulay and Andrew Dennan stepped down from their Non-Executive roles. Mark Hood transitioned to Non-Executive Director. 

Post Period End

·      A Sale and Purchase agreement was entered into in March 2023 with Zodiac Energy plc to acquire the Company’s producing Italian gas portfolio for up to Euro 7.5m

·      The Operator of the Duyung PSC announced it had engaged a global investment bank with a proven track record in similar transactions to lead a farm-down process for the divestment of a portion of its interest in the Duyung PSC. The Operator advised bids are expected to be received during the second quarter of 2023. Coro may participate pro rata in the farm-down process as various drag and tag along clauses exist in the Joint Operating Agreement. Coro may also entertain a full exit, depending on the terms offered.

·    Naheed Memon joined the board as a Non-Executive Director with Mark Hood stepping down. 

Coro eventually completed the Italian gas portfolio this March after waiting to take advantage of higher gas prices.

At Duyung all options are all still available and whilst this asset has been on the market for as long as I can remember it looks like Coro are keeping an open mind on its participation, however monetisation is key in order to get the debt sorted.


Petro Matad has provided the following operational update.

Key Company Updates

·    Rig arrival and Velociraptor 1 spud are forecast during the first half of June.

·    Mobilization of site construction equipment to the Velociraptor 1 well location has commenced.

·    Documentation proposing the certification of the Block XX Exploitation Area as Special Purpose Land for submission to Cabinet is being prepared by the ministries responsible.

·   Negotiations with the Government for a new block in Mongolia’s 2023 Exploration Tender Round are continuing.

Block V Exploration

Mobilisation of equipment to prepare the drilling location and to set-up the camp for Velociraptor 1 operations has commenced. All required equipment for the well is in the country. The water source well for the operation has also been prepared for production. All activities are planned to be completed in advance of rig arrival which is forecast by contractor Major Drilling to arrive at site in early June and to spud the well by the middle of the month. The Velociraptor 1 well is expected to reach the prognosed total depth of circa 1500 metres in circa 30 days following which the well will be logged and the results evaluated. In the event of encouragement in the well, the rig contract allows for follow up with an appraisal well. All permits are in place for Velociraptor 1 and the contingent appraisal drilling.

Velociraptor 1 is targeting an inversion anticline with recoverable resource potential of 200 million barrels and the adjacent Oviraptor and Tsagaanraptor prospects would be significantly de-risked by success and have the potential to triple the resource potential on the exciting Raptor Trend. Whilst there has been very little exploration drilling done in this part of Mongolia, Velociraptor 1 is located 7 km south of the Snow Leopard 1 well drilled by Petro Matad in 2018. This well found excellent oil source rocks and oil shows and proved that there is a working petroleum system in the Taats Basin in which the Velociraptor prospect is well located to receive hydrocarbon charge.

With the well cost estimated to be less than $2 million, with attractive fiscal terms and a low cost onshore operating environment, Velociraptor 1 is an excellent opportunity in global oil exploration.

A further notification will be issued once Velociraptor 1 has spudded.

Block XX Exploitation Licence

Documentation prepared by the Ministry of Mining and Heavy Industry (MMHI) for submission to Cabinet to secure approval to certify the Block XX Exploitation Area as a Special Purpose Area was completed. However, the Ministry of Construction and Urban Development has insisted that as the ministry responsible for land issues, the Cabinet submission must come from them. As a result, they are repeating the step of asking all other ministries for comments after which we expect they will make the submission. The loss of more time whilst this is done is frustrating but highlights the fact that this is the first oil project to be put through this bureaucratic process based on regulations introduced in 2017 and the authorities involved have no obvious precedent to follow. The Company continues to push at all levels to underscore the importance of this licence for the Company and industry in Mongolia.

At the local level, the Company continues to engage with stakeholders and has also offered support to the province which is suffering from wildfires on the steppe due to recent dry conditions.

2023 Exploration Licencing Round

Negotiations with the Mineral Resources and Petroleum Authority of Mongolia (MRPAM) on the application for a block in Phase 1 of the 2023 open tender exploration licencing round continue. Discussions on changes to the Production Sharing Contract (PSC), on the proposed work programme and on fiscal terms have been completed. This part of the process involved a visit to the UK and to the Isle of Man by representatives of MMHI and MRPAM and we were honoured to be accompanied on the trip to the Isle of Man by the Mongolian Ambassador to the UK. Petro Matad continues to review other blocks in the tender round with a view to potentially submitting further block applications on those it high grades.

Mike Buck, CEO of Petro Matad, said:

“Preparations to drill Velociraptor 1 are well advanced and we are excited to spud in June and to explore the potential of the Raptor Trend.

“It is highly frustrating that the good work done by MMHI on the certification of the Block XX Exploitation Area as Special Purpose Land is now having to be repeated, but it is essential that the process is followed in full compliance with legislation. Shareholders can be assured that we are continuing to provide all input and assistance to the authorities in securing the certification.

“The recent visit to UK with senior representatives of MMHI and MRPAM provided an excellent opportunity to further strengthen our relationships with both organisations and we were honoured to be joined by H.E. Ambassador B. Enkhsukh, Mongolia’s ambassador to the UK, on the visit to the Company’s corporate agents in the Isle of Man.”

With Velociraptor 1 still on track for spudding in June at least MATD holders have some excitement coming up soon. With TD in around 30 days plus logging and testing they won’t have long to wait for what is a significant well for the company. The company is ready for any result including appraisal drilling in case of success. 

As for the further delays to Block XX you couldn’t make it up, each time it is ready to go another obstacle is placed in the road and one wonders if the certification will ever be completed. Finally the company continue to progress their application for a Block in the 2023 Licence Round. 

The shares have roughly tripled this year, excluding dilution from the raise, ahead of the Velociraptor drilling, so with no backing from Block XX the well has assumed the status of Atlas holding the value of MATD on its shoulders, no pressure there then…

Jadestone Energy

Jadestone has announced that it has signed a new US$200 million reserves-based lending facility with a group of four, reputable, international banks. The facility also provides for an uncommitted accordion of US$160 million, subject to incremental availability of bank debt. The RBL facility is expected to close shortly following the satisfaction of outstanding conditions precedent.

The RBL facility has a 4-year tenor and, as usual, is subject to bi-annual redeterminations to determine available debt capacity, which will vary over time depending on several parameters including oil prices, operating performance, hedging, future acquisitions and abandonment estimates. Under current assumptions, borrowing capacity under the RBL facility is constrained prior to the Akatara field being integrated as a producing asset, after which it will increase significantly. Both Jadestone and the RBL Banks can initiate additional redeterminations when appropriate.

The RBL facility pays interest at 450 basis points over the secured overnight financing rate, plus the applicable credit spread. Jadestone will also pay customary arrangement and commitment fees. The facility incorporates standard terms and conditions for RBL facilities, including a parent company financial covenant of maximum total debt of 3.5 times annual EBITDAX.

The RBL facility will first be used to repay the US$50 million Interim Facility, which will be fully drawn on 22 May 2023. The RBL facility will also fund the Company’s operations and capital investment program, particularly the Akatara gas project onshore Indonesia, and can be also used for general corporate purposes.

Paul Blakeley, President and CEO commented:

“We are very pleased to have achieved this milestone financing with four international banks, providing a significant debt facility in support of our strategy as a responsible operator in the Asia-Pacific region. The banks recognise that our strategy fits well within the energy transition and have worked closely with us to ensure we deliver on environmental and operating performance objectives.

This facility forms an important stepping stone as we focus on delivering our key growth objectives including infill drilling in Malaysia and executing the Akatara gas development project. Production from Akatara will bring significant incremental debt capacity when integrated into the RBL facility, and the ramp-up of Akatara’s cash flow is also projected to drive a deleveraging of our balance sheet. While we remain focused on operational performance and delivery of guidance from our producing portfolio, additional acquisitions of producing assets are also on our horizon, in an environment that is increasingly active, and the RBL may support this too.”

Given my view that JSE is one of the best managed company in the sector who have built up a portfolio to be envied in Asia with significant organic and non-organic growth it is a natural that this RBL is installed to help with its growth. 

But the market’s confidence is low and I thought that the share price fall had finished at the 70p level, but with the recent fall taking it to below 50p it is time to get the buying boots on. 

And finally…

In the end the Prem was decided without the need for the Noisy Neighbours to kick a ball. Forest beat the Gooners 1-0 on Saturday afternoon and City celebrated beating Chelsea with the B team yesterday. Relegation will be key this week, the Hammers beating Leeds 3-1 yesterday meant that they and the Foxes are favourites to go down with the Saints.

Brooks Koepka won the PGA for the LIV team and Scheffler came 2nd to regain No 1 spot in the world from Rahm.

In the NBA… The Miami Heat went 3-0 up in the Eastern conference finals last night after mauling the Celtics again. The Denver Nuggets hold a 3-0 lead over the Lakers in the West. Lebron James finally looking his age? The blog will not comment until the series is over…

Author @mgrahamwood

Disclaimer & Declaration of Interest
The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. The writer may or may not hold investments in the companies under discussion

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