Malcy’s Blog – Oil price, DEC, Genel, Angus, Longboat, Afentra, Coro, Lamprell, UOG & finally

WTI $98.26 +$2.23, Brent $102.78 +$2.20, Diff -$4.52 -3c, NG $6.28 -8c, UKNG 227.0p -8.0p

By Malcolm Graham-Wood

Oil price

The Friday rally was as the punters believed that Russian exports were 3m b/d, now we all know that is a fairy story and with Strategic reserves being sold as is Russian oil and gas to the EU supply is actually right. CNBC today reported that three tankers full of Russian crude were headed for landing in the US.

With China still locked down demand is eased and with India buying the slack off Russia the oil price will continue to drift, this morning it is another 3 bucks off.

And worth digging out the article in yesterday’s Sunday Telegraph by Ineos Chairman Sir Jim Ratcliffe who explains why he will fund a test fraccing site…

Diversified Energy Company

Diversified Energy Company has announced the publication of its 2021 Sustainability Report. The updated report, available on the Company’s web site (div.energy), provides comprehensive insight into Diversified’s programs and progress across a range of environmental, social, and governance focus areas. The Company featured several highlights of its 2021 Sustainability Report on 22 March 2022 in its full year results release and 2021 Annual Report.

Key Highlights:

•     Expanded emissions reduction activities:

◦     Project Fresh initiative improves accuracy of emissions-producing asset inventory using measured emissions, reducing reliance on default, often much higher, theoretical factors

◦     Deployment of 600 handheld leak detection devices enhances ability to identify and remediate unintended emissions, primarily in upstream assets

◦     Successful pilot and expanded use of light detection and ranging (LiDAR) aerial surveillance to detect and drive emission reductions, primarily in midstream assets

•     Enhanced emissions reporting and reduction commitments:

◦     Revised 2020 reported methane emissions intensity 62% lower to 1.6 MT CO2e/MMcfe1 (Prior 2020: 4.2 MT CO2e/MMcfe)

◦     Reduced 2021 methane emissions intensity 6% vs revised 2020 to 1.5 MT CO2e/MMcfe, with opportunities to reduce further as the Company expands its Project Fresh initiatives into its Central Region

◦     Engaged ISOS Group, Inc. to independently verify its 2021 greenhouse gas emissions (“GHG”), affirming the Company’s IPCC-reported emissions at a moderate level II assurance in accordance with AA1000 Assurance Standard

◦     Accelerated commitment to reduce Scope 1 methane emissions intensity 30% by 2026 and 50% by 2030 (vs. revised 2020 baseline)

◦     Accelerated commitment to achieve net zero Scope 1 and Scope 2 GHG emissions by 2040 (previously by 2050)

◦     Expanded alignment with the recommendations of the Task Force on Climate-Related Financial Disclosures

•     Social program highlights:

◦     Expanded diversity initiatives with new applicant tracking system and targeted recruiting in diverse communities within the Company’s operating footprint

◦     Contributed $1 million to community outreach efforts during 2021 and committed up to $2 million in 2022, in addition to the Company’s existing commitments to fund scholarships, internships and vocational training opportunities

•     Governance program highlights:

◦     Enhanced corporate polices for Environmental, Health & Safety, Corporate Responsibility and Human Rights

◦     Published new, Board-approved corporate polices for Climate Change, Employee Relations and Business Partners

◦     Increased Board diversity to ~38% female with October 2021 appointment of Sylvia J. Kerrigan, improving the Company’s ranking by the FTSE Women Leaders Review

◦     Increased the Board’s climate change expertise with a growing emphasis on climate when determining capital allocation aligned with the Company’s strategy

Commenting on the report, CEO Rusty Hutson, Jr. said:

“Through our commitment to operational efficiency, production optimisation and asset stewardship, sustainability has always been an integral part of Diversified’s DNA. Our 2021 Sustainability Report highlights our successes and ambitious outlook for the robust ESG agenda we featured at our Capital Markets Day in November 2021. With a sustainable business model grounded in stewarding existing wells and infrastructure, we strive to optimise production from existing assets while reducing emissions, which enables us to meet rising natural gas demand without reliance on newly drilled wells. As the title of our Sustainability Report suggests, we are poised to thrive as we play a critical part of the evolving energy transition. By expanding our portfolio of low decline producing assets, extending our vertical integration to improve efficiency while continuously reducing emissions, and delivering consistent shareholder returns through the cycle, we offer a unique opportunity for ESG-focused investors who support a reduction of GHG emissions. We remain committed to exceeding the expectations of our stakeholders and look forward to providing continued updates on our progressive ESG initiatives.”

I don’t always comment as such on these reports but in recent times they have become much more important in the minds of investors making decisions with regard to stock selection and for DEC it has become a particularly important part of the business.

When I was with the company in Houston in November it was made perfectly clear that sustainability was front and centre in their policy making and to make it clear came from the board down through the whole company. This report confirms and delivers that and commits DEC to ESG policy at the very top of industry standards.

Genel Energy

Genel has announced that all payments have now been received from the Kurdistan Regional Government relating to oil sales during December 2021.

Genel’s share of those payments is as follows:

(all figures $ million) Payment
Tawke 17.3
Tawke override 8.8
Taq Taq 2.5
Sarta 2.2
Receivable recovery 4.6
Total 35.4

Following the receipt of the receivable recovery payment, Genel is now owed $97 million from the KRG for oil sales from November 2019 to February 2020 and the suspended override from March to December 2020. The reduction from the figure stated on 11 March 2022 is due to the offsetting of payables due to the KRG, as noted in our 2021 full-year results.

Regulation report from Genel and very much as expected. Genel continues its very strong run and even at around 200p is exceptional value. 

Angus Energy

Angus has announced that it has has raised, in aggregate, gross proceeds of £675,000 through the placing of 61,363,634 Ordinary Shares to certain investors at a price of 1.1 pence per share, conditional only on Admission.

The net proceeds of the Placing will be applied towards working capital and general costs.

Admission and Total Voting Rights

Application will be made to the London Stock Exchange for admission of the Placing Shares to trading on AIM. It is expected that admission will become effective and dealings in the Placing Shares commence on AIM at 8.00 a.m. on 14 April 2022 (or such later date as may be agreed between the Company and the Bookrunner, but no later than 28 April 2022).

The Placing Shares will be issued fully paid and will rank pari passu in all respects with the Company’s existing Ordinary Shares.

Following Admission, the total number of Ordinary Shares in the capital of the Company in issue will be 1,368,650,514 with voting rights. This figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company’s share capital pursuant to the Company’s Articles.

George Lucan, CEO, commented: 

“When we entered the Formal Sales Process in January we had expected that a result would have been concluded by this time.  In view of the extended due diligence exercise being performed by bidders for some or all of our interest in Saltfleetby and to meet legal, advisory and G&A costs, this issue of shares, representing less than 5% of the enlarged capital of the Group, is being undertaken to ensure that the Group remains funded until a more substantial revenue stream is available from Saltfleetby. “

This is a very wise move by Angus, during a process when management are busy dealing with prospective bidders as well as costly lawyers and other advisors it is easy to lose sight of the balance sheet and it would be wrong to come out at the end, in whatever the final shape improperly financed. 

My comments below are from Friday’s blog and apply as much today as then, I stand by my views. 

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 have 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

Longboat Energy

Longboat has announced the commencement of drilling operations on the Cambozola exploration well (Company 25%) in Norway.

Cambozola is the primary prospect located in the PL1049/PL1049B/PL1049C licences in the Northern North Sea, in an area with significant existing infrastructure and just c. 30 km northwest of Longboat’s Kveikje discovery, announced on 5 April 2022.

Cambozola is a play opener and one of the largest gas prospects to be drilled in Norway in 2022. In particular, the turbidite sand lobes of Lower Cretaceous age stand out as amplitude anomalies on seismic data. Gross unrisked mean prospective resources for the entire Cambozola prospect have been estimated at 159 mmboe1. In the event of a successful discovery on Cambozola, there will be follow-up prospectivity on the licences.

The drilling of the Cambozola well 34/9-1Soperated by Equinor, is being undertaken by the Deepsea Stavanger semi-submersible drilling rig and is expected to take up to 14 weeks to drill.

Helge Hammer, Chief Executive of Longboat, commented:

“Following on from our success on Kveikje announced last week, I am pleased that we have now commenced drilling operations on the sixth exploration well in our drilling programme.

“Longboat Energy’s remaining 2022 exploration programme offers shareholders a unique opportunity to gain gas weighted drilling exposure targeting net mean prospective resource potential of 66mmboe1 with an additional 246 mmboe of upside.”

Regulation spud announcement with little to add except for the obvious fact that this is just c. 30 km northwest of Longboat’s Kveikje discovery announced last week with its nearby infrastructure. A potentially huge gas structure is on offer here and a lengthy 14 week drill.

Afentra

Afentra confirms that Sonangol E.P  has announced that Afentra has been selected as preferred bidder to purchase interests in Block 3/05 and Block 23. This follows the announcements on 8 October 2021 and 3 February 2022 that the Company had submitted a non-binding expression of interest for the two blocks which resulted in the subsequent suspension of Afentra shares.

During the first quarter of 2022, Afentra has continued to progress the Sale & Purchase Agreement negotiations with Sonangol and are pleased to now be selected as preferred bidder for both blocks. The next steps will involve finalising the SPA and completing the final due diligence required on the Acquisition. There is, however, no guarantee at this stage that an agreement between the two companies will be reached.

If Afentra ultimately proceeds with the Acquisition, it would be classified as a reverse takeover transaction in accordance with Rule 14 of the AIM Rules for Companies. Trading in Afentra shares will remain suspended until either the publication of an AIM admission document, or until confirmation is given that Afentra’s participation in the bid process has ceased.

The Company will make further announcements as appropriate. 

Nothing I can add to this announcement except that it has been a long time suspended as the market waits patiently for the deal that Paul Mc Dade has hopefully done. 

Coro Energy

Coro has announced the entry into a 25 year Power Purchase Agreement for its rooftop solar project in Vietnam.

The PPA has been entered into by Coro Renewables Vietnam (85% owned by Coro and 15% owned by Coro’s local partner Vinh Phuc Energy JSC) and will see Phong Phu, a listed Vietnamese high volume manufacturer of textiles, purchase 3MW of electricity annually from the previously announced 5MW  project for the 150MW rooftop solar project previously announced.

Electricity will be supplied under the PPA, once the solar equipment is installed, at 7.3 US cents (equivalent) per kWh with a 1% annual escalator.   The PPA is expected to generate aggregate revenues between US$9m and US$11m over the 25 year duration.

Mark Hood, Coro’s CEO, commented:

“I am delighted that we have now signed our maiden supply contract in Vietnam which, on the back of the re-birth of our Italian portfolio, re-enforces our energy transition strategy with both gas and renewables taking centre stage.  We can now look forward to revenues from both transition fuels.”

It’s been a funny old week for Coro as the CEO says with the rebirth of the Italian portfolio and now the project in Vietnam. I look forward to seeing what is coming next. 

Lamprell

Lamprell is pleased to announce that it has entered into a Memorandum of Understanding with NOV, a leading energy services company, to support its delivery of three 1 gigawatt (GW) offshore floating wind farms for Cerulean Winds, the UK-based floating offshore wind farm and green hydrogen infrastructure developer. 

Under the terms of the MoU, NOV has stated its intent to use Lamprell as its provider for the fabrication, assembly and outfitting in relation to the construction of NOV designed tri-floaters to be used as floating foundations for the three wind farms. 

NOV and Lamprell will work closely to support and develop UK local content goals and will engage together in discussions with UK supply chain and UK yard(s) interested in participating in the projects, and able to offer suitable solutions.

In June 2021, Cerulean applied to develop a 3GW+ floating wind turbine project at sites West of Shetland and in the Central North Sea.  NOV was named as the first of Cerulean’s major delivery partners for fabrication for this proposed 200+ turbine development and will act as the exclusive provider of floating and mooring systems.  If approved, the project is anticipated to be commissioned in 2026.

Christopher McDonald, CEO of Lamprell said

“Today represents an important milestone for our floating wind ambitions.  Our long history in the traditional oil & gas sector has stood us in good stead for our transition into the renewables space where we have been active since 2007.  Offshore floating wind is a natural progression for the business and represents another step in the realisation of our strategy and establishing our credentials in the UK market.  We look forward to supporting NOV in the development of this transformational project for the industry and Scotland.” 

Joe Rovig, President of NOV Rig Technologies, said: 

 “We are very pleased to have Lamprell on board with us as a partner for Cerulean’s major infrastructure development. Lamprell’s track record in offshore wind will complement our UK and European infrastructure and personnel and we look forward to making a joint contribution towards decarbonising the UK Offshore sector.”

 I have been a big fan of Lamps for a very long time and have been able to see through the massively cyclical nature of the business, even recently when I thought that its very interesting tie-up with the Saudis and of course the IMI jackup orders. With the money and credibility invested in the oil & gas business and its historical expertise it is now on the verge of something big, or so I thought.

Or is it? I am really not sure whether the management at Lamprell know whether it is Christmas or Easter, from recent announcements they are clearly moving into offshore wind and are trying to park the years of investment by its Middle East oil & Gas customers. They have announced that they are considering selling the oil & gas business I assume because the offshore wind sector is now more appealing and they can’t make it work with the financial commitments to the Saudis.

The final fly in the ointment is the financial situation, they have delayed the results so that ‘the board can continue to progress potential financing and strategic options’ which always strike terror in the hearts of investors. To be honest I havent got a clue any more about what is going to happen any more, maybe I never did. It was always a brilliant supplier of top quality new and refurbed rigs to a blue chip client list in the hottest part of the hydrocarbon world. Now it looks like that is being dumped for offshore wind-provided it can be funded. 

The shares have been a dire performer, the high of just under 70p last June is now 26p and whilst the news on the wind front is good and they still have an oil & gas business which should fetch decent money those plusses have to offset the concerns about financing. The good news is that I still for some reason rate the board which is probably a huge non sequitur…

United Oil & Gas

UOG has announced that the sale of 100% of the share capital of UOG Italia Srl to PXOG Marshall Limited, a subsidiary of Prospex Energy PLC for a consideration of €2,164,701 has now completed, having received the final approvals from the Italian Authorities. UOG Italia Srl holds a 20% non-operated interest in the Podere Gallina licence, which contains the Selva gas development project.

United has received the completion payment of €2,190,966, which is the balance of the consideration plus a working capital adjustment from the effective date of €134,500 less the deposit of €108,235 which was received on 10 August 2021.

Completion of the transaction means that United will exit activities in Italy and therefore will no longer be liable for its share of the Selva gas development capital expenditure of approximately €800,000.

The proceeds from this transaction and the other portfolio management initiatives further strengthens the  balance sheet. This combined with higher oil prices, means that United is well placed to capitalise on building  scale through its current portfolio and new business opportunities.

United’s Chief Executive Officer, Brian Larkin commented:

“We are pleased to have completed the sale of  the Italian asset with our joint venture  partner on the licence, Prospex Energy. The  proceeds of this transaction along with other divestments strengthen our balance sheet to support our growth strategy. We have re-focused our portfolio on our core areas which provides us with a platform for organic growth and also a base from which we can evaluate further growth opportunities in 2022 and beyond. We wish Prospex Energy and all stakeholders of the Selva project well during its development”.

There is little doubt that if I was going to be on one side of this deal it would be that of UOG but then that is because of my very longstanding concerns about anything ever getting done in Italy. Every few years a window is opened ajar and that is when things happen in Italy, well done to UOG for getting out with the sun shining.

I spoke to Brian Larkin this morning and with the Egypt package going very well and even Jamaica looking slightly better, the company is indeed in a very strong financial position. 

However I did say to Brian that whilst this is a good deal and that he is in a strong position that is not the be all and end all and that if I was a shareholder I would be wanting the company to be partaking in $100 oil and 230p a therm gas. I know Egypt is good but either by organic growth or M&A activity I would want something to be pulled out of that hat..

And finally…

Scottie Scheffler won the Masters, it always looked like it but McIlroy put up a spirited charge to finish runner-up with 64.

In the Grand National the favourite was beaten by long shot Noble Yeats ridden by Sam Waley-Cohen on his last ever race.

In the F1 another exciting Grand Prix was won by Charlie Clark with Cheka second and ironically the Mercs 3rd and 4th. Seeing the Brat Max breaking down is always a shocking sight but seeing Horner’s face always makes it worthwhile…

In the Prem the Noisy Neighbours and Liverpool drew 2-2 again and the battle at the top stays tight. Next week they face each other in the FA Cup semi-final which someone has to win. Elsewhere in the top 6 Chelsea won but with Spurs not playing the Gooners, the Red Devils and the Hammers all lost.

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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