Malcy’s Blog – Oil price, Eco (Atlantic) Oil & Gas, SDX Energy & finally

WTI $120.93 +26c, Brent $122.27 +26c, Diff -$1.34 u/c.

Author @mgrahamwood

USNG $8.61 -24c, UKNG 160.50p +12.5p, TTF €85.415 +€2.915.

Oil price

Oil up yesterday and about a dollar better again this morning. All the usual factors are influencing, perhaps Libya is getting worse with output falling again, it’s now around 100/- b/d. That wont help Opec+ at the next meeting although I’m still of the view that mostly they can’t fill the gap and even the ones who can are keeping it in their back pocket.

The 2 day Fed meeting starts today and there are now whispers of a 75bp rise, like the Bank of England, who also meet this week, they have been well behind the 8 ball reading this particular situation.

Lots more info in next 48 hours, the Opec and IEA monthly reports and the API and EIA inventory reports, I hope people read the product stats as much as the crude numbers…

And its retail gasoline day and it gives me no pleasure to say that the average across the USA has tipped over the crucial 5 dollar mark. A gallon of Exxon’s finest will set you back $5.006 which is up 13.0 cents w/w, it is up 51.5c m/m and $1.937 y/y. In the West Coast it is $5.868, take out California it is still $5.428.

Eco (Atlantic) Oil & Gas

Eco, and JHI Associates Inc. have  mutually agreed that Eco will no longer proceed with the proposed acquisition of the balance of the issued share capital of JHI not currently held by it. JHI holds a 17.5% participating interest in the Canje Block offshore Guyana.

While all the main commercial points were agreed upon in keeping with the Commercially Binding Term Sheet announced on 14 March 2022 (including the proposed issuance of 127m new common shares of Eco to JHI shareholders), it was not possible to agree on the terms of lock-up arrangements required by Eco, designed to restrict and control any subsequent immediate sale of the consideration shares to be issued to the shareholders of JHI, to provide Eco Atlantic’s shareholders with the appropriate levels of protection in such a transaction. As a result, the Board of Eco Atlantic has decided not to progress with the acquisition at the current time.

Gil Holzman, Co-Founder and CEO of Eco Atlantic commented:

“With the exclusivity period of our JHI negotiations ending last night, we have terminated the JHI proposed acquisition. We are unable to proceed without the appropriate protection for our shareholders that such lock-up arrangements were designed to provide.  We look forward to remaining a significant shareholder in JHI with over 7% of the company and, as such, retain exposure to the potential of the Canje Block. We wish the JHI management the best of luck in growing and monetizing the business to benefit all shareholders.  Notwithstanding termination of discussions, we and JHI may re-evaluate the proposed acquisition at a future date.

We look forward to commencing our drilling campaigns planned in the prospective Block 2B in South Africa and Guyana this year and providing further corporate updates as appropriate.”

Always a danger sign when existing directors don’t want to lock-up their shares in a takeover so in my view huge congratulations to the Eco board for calling their bluff and walking away. They have been prepared to avoid any potential collateral damage to shareholders which would happen if they took the risk of the JHI directors knocking out stock ahead of the Gazania spud in September with the dilution risk that would present. 

With the combination of a stake in the Canje through the existing holding in JHI, the recent successes in South Africa and the exciting corporate actions increasing Eco’s exposure down there I’m glad the board took the decision they did and of course probably told the JHI directors that they know where to find them should they change their minds…

SDX Energy

SDX has issued the following trading and operations update in advance of the Company’s AGM today at 10.00 am BST. The information contained herein has not been audited and may be subject to further review and amendment. All monetary values are expressed in United States dollars net to the Company unless otherwise stated.

Year to date 2022 Operations Highlights

·      Average entitlement production as at 31 May 2022 of 3,778 boe/d was 10% higher than mid-point 2022 market guidance of 3,425 boe/d.

·   Production in Morocco and at South Disouq was above 2022 guidance, with West Gharib below due to mechanical issues with a previous rig that is now being replaced. West Gharib production is expected to increase in the second half of the year.

·    In South Disouq, the planned three-well campaign has been successfully completed with three discoveries being made. SD-5X has been brought online ahead of schedule and is now contributing to production and cash flow. SD-12 East is undergoing a pressure build up test with MA-1X testing expected to commence in the coming days.

·    Condensate production from SD-5X is also better than expected at gross 100-110 bbld/d compared to pre-drill expectations of 25-30 bbl/d.

·   Based upon the results of the recent South Disouq drilling campaign, Management has reassessed the remaining prospectivity in South Disouq and has identified gross unrisked P50 prospectivity of 145 bcf of which c100bcf is in acreage that requires re-award by the Egyptian state.

·    In West Gharib three wells have been successfully completed with production already commenced from the MSD-21 and MSD-25 wells. The recently completed MSD-24 well is expected to commence production in the next four weeks and operations are continuing at the MSD-20 well.

·    In Morocco, preparations continue for the recommencement of the drilling campaign that was suspended in December 2021. The first of up to seven wells to be drilled in the next year is expected to spud in July 2022

·    In February 2022, the Company announced the disposal of 33% of the shares in the entity that holds its interests across its South Disouq concession for US$5.5 million which has been fully received.

Year to date 2022 Financial Highlights

·      Closing cash as at 31 May 2022 was US$15.2 million

·      Capex as at 31 May 2022 of US$8.3 million, reflects:

 US$5.2 million for the three-well drilling campaign at South Disouq split between: US$1.8 million for the drilling and completion of the SD-5X well, US$2.2 million for the drilling and completion of the SD-12 East well and US$1.2 million for the drilling of the MA-1X well.

 US$1.2 million of pre-drilling and standby costs associated with the re-commencement of the Moroccan drilling campaign, US$0.3 million on the SAH-4 workover as well as US$0.3 million of infrastructure works; and

 US$1.3 million of West Gharib drilling costs across the MSD-20, MSD-21, MSD-24, and MSD-25 wells.

Mark Reid, CEO of SDX, commented:

“I am very pleased to report a strong operational and financial performance update ahead of this year’s AGM.  Our drilling results in South Disouq and West Gharib over the past five months have been excellent with six successful wells and with operations ongoing on another well at West Gharib.  A one hundred percent success rate to date. Our drilling success in South Disouq in particular has enabled us to identify further material prospectivity in and around our leases.  Production continues to be above guidance and we have further grown our cash balance to US$15.2 million as at 31 May 2022.”

Probably the last comment on SDX before the company is taken over, although for the life of me I can’t find anything in the statement that even indicates that a raid has taken place which is funny really..

And finally…

Last night the Warriors beat the Celtics without this time any help from Steph Curry and go 3-2 up in the series. On thursday night they can win the series in the Garden or if the Celtics win at home they head back to the Bay in the decider.

The second cricket test is close, currently New Zealand are 282-9 looking to bat it out or set a hard target for England, right now all four results remain possible.

And of course Royal Ascot starts today, uncertainty about the presence of the Queen but little doubt about the quality of equine participants.

The opinions expressed here are those of the author

Author @mgrahamwood

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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