WTI (Sept) $90.50 +$2.39, Brent (Oct) $96.59 +$2.94, Diff -$6.09 +55c.
USNG (Sept) $9.18 -6c, UKNG (Sept) 453.50p -1.5p, TTF €241.10 +€11.25.
With hardly any company news this week the silly season has been worse than normal and the oil price has moved around on very small volumes.
So picking through the news we started with Saudi Arabia saying that they were investing in increasing capacity from the current 12m b/d to 13m. It turned out that we needn’t worry about the funding of this as Aramco reported a quarterly profit of some $48.4bn…
From the US a number of stats were mainly supportive, the Baker Hughes rig count showed a fall of 1 unit overall but a rise of 3 in oil, not yet positive enough although the EIA did report a rise of 100/- to 12.2m but probably won’t be sustained. Retail gasoline continues to fall, it is now nicely below $4 a gallon. Finally the EIA inventory stats were very positive with a huge 7m draw in crude and a useful 4.6m draw in gasoline as motorists return to their automobiles in late summer.
Elsewhere the long shadow of the Iran talks hung over the sector, both sides appeared to want to play hardball, the US side put up what they said was a fait accompli and not for negotiation, Iran came back with a counter…? It might just be that the EU’s sanctions which are due to hit come early December could offset a return from the Gulf country.
I met with senior management of DEC this week while they were over and whilst there is nothing specific to update after recent results I am happy to report that the policy of strong growth and a priority of rewarding shareholders is very much to the fore.
I would not be surprised to see further accretive acquisitions, either in upstream assets or in ESG and the path to net zero is now looking to be an important one and with financing via sustainability-linked loans all the boxes are being ticked.
Finally I mentioned after those interims and the updated presentation that I liked the fact that the company felt strongly that the share price has ‘decoupled from commodity prices’, not unusual I agree but a valid point. The disconnect between the share price and the long-term natural gas price does indeed create an opportunity and that is with the shares having risen recently by some 35% since July 6th.
With such strong asset backing provided by the long term hedged gas reserves, and associated cash flow, the excellent management continues to drive the business hard and I am convinced that they are in the right place to deliver the shareholder returns they have and that the shares have plenty of upside in them from here.
Gran Tierra has announced that it has, through its wholly owned subsidiaries Gran Tierra Energy Colombia, LLC and Gran Tierra Colombia Inc., entered into a credit facility of up to US$150 million. The facility replaces Gran Tierra’s previous credit facility that had a borrowing base of US$150 million. The new facility is with Trafigura, a market leader in the global commodities industry, and has a final maturity date of August 15, 2024, which may be extended to February 18, 2025 if certain conditions are met.
Highlights of the new facility include:
- An initial commitment of US$100 million with a potential option of up to an additional US$50 million;
- The loan is secured by the economic rights over certain contracts together with Gran Tierra’s Colombian commercial establishment; and
- Interest payable on the facility is based on a SOFR risk-free rate plus a margin of 6.00% per annum.
In connection with the new facility, certain of Gran Tierra’s wholly owned subsidiaries have also entered into commercial contracts for the purchase by Trafigura of crude oil from Gran Tierra’s producing fields located in Colombia. The repayment of the new facility will be made by way of deductions of the price payable by Trafigura for the crude oil delivered under such contracts.
Ryan Ellson, Chief Financial Officer of Gran Tierra, commented today:
“We are very pleased to have successfully closed a new credit facility with Trafigura. In conjunction with our strong operating cash flows and $109 million of cash on hand at June 30, 2022, the new facility will provide the Company with additional liquidity and financial flexibility.”
A good deal by GTE here and as with other similar ones negotiated around the sector a facility whereby the lender also buys the, in this case Colombian, offtake.
SDX yesterday announced its unaudited financial and operating results for the three and six months ended 30 June 2022. All monetary values are expressed in United States dollars net to the Company unless otherwise stated.
H1 2022 Key Highlights:
· Production of 3,724 boe/d, 2% higher than mid-point of recently increased full year guidance of 3,480 – 3,795 boe/d
· Out of nine wells drilled across SDX’s portfolio in the year to date, six are now producing, one, MSD-27 has now completed drilling and another, MSD-20, is drilling ahead. These two wells should add a further gross 400 to 500 bbl/d to our West Gharib production in the next four to six weeks. The final well, MA-1X, is undergoing testing and analysis.
· EBITDAX of US$15.3 million and operating cash flow (before capex) of US$10.4 million
· Capex US$12.2 million compared to full year guidance of US$25.5 – 27.0 million.
· Net Cash position of US$12.8 million (unaudited) as at 30 June 2022
· Carbon intensity of 3.8kg CO2e/boe in H1 2022, one of the lowest rates in the industry
· Aleph Commodities Limited introduced as new cornerstone shareholder. Assisting with strategic review, expansion and financing plans with a focus on increased production, reserves and shareholder returns
Mark Reid, CEO of SDX, commented:
“The results for the last quarter have been both positive and encouraging with our production from Morocco and South Disouq ahead of our guidance and the drilling success seen at South Disouq earlier in the year already contributing to cashflows. Whilst mechanical issues with a rig at West Gharib mean that production is slightly lower than forecast, our success with the remainder of the wells, including as announced today, MSD-27, means that we are now achieving gross production of approximately 2,400-2,500 bbl/d from this concession, and we are set to continue to add valuable barrels to our production mix as the year progresses.
We believe that continued strong operational performance from the Company has been overshadowed to some degree by corporate news in the past quarter, with the proposed combination with Tenaz Energy ultimately not progressing and the introduction onto the Company’s register of a new group of shareholders led by Aleph Commodities Limited. We are very pleased to welcome the Aleph shareholders as long-term investors who are aligned with Management’s strategy of growth and increasing returns for all SDX stakeholders. We look forward to updating the market further as we work with our shareholders to map out what will be an exciting future for the Group.”
As Mark says in his comments above the operational performance has been pretty good with the one exception at West Gharib. He also says that it has been overshadowed by corporate activity.
I would contend from what I know about the company being touted around for the best part of two years they are well rid of the previous major holders and are hoping that things are about to change. Let’s hope that Aleph have the cheque book out otherwise it will more of the same.
In the test match the Proteas are in a strong position having taken a big lead into the second innings where England are 124 behind with 9 wickets left.
Tomorrow sees racing from York and Sandown, York has been good this week but the Strad is out of york today.
In the footy tomorrow sees Spurs hosting Wolves, the Eagles entertaining Villa, Forest go to the Toffees, the Foxes host the Saints, the Gooners go to the Cherries and in the West London derby the bees visit the cottagers.
On Sunday a famous fixture as Leeds host Chelsea, the Hammers entertain the Seagulls and the Magpies host the Noisy Neighbours.
And rumours abound that Jim Ratcliffe is considering taking a stake in the Red Devils, anything that gets rid of those grim Glasers is fine with me and if he can get rid of them for once and for all that better still.
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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