Malcy’s Blog – Oil price, Genel Energy, Hurricane Energy, President Energy, Echo Energy, IGas Energy & finally

WTI $70.94 -$1.42, Brent $74.42 -$1.40, Diff -$3.48 +2c, NG $3.81 -1c, UKNG 260.45p – 0.94p

By Malcolm Graham-Wood

Oil price

Oil is up again today by over a dollar after yesterdays fall. That was as omicron worsened but so far actual hospitalisations have been low, it’s a bit like mild flu apparently, that we should be able to live with for goodness sake.

Inflation in the USA today was the highest since 1982 at 6.8% but yesterday’s jobless numbers were a  good guide . The Iran talks may be back on but given enriched uranium is being made seems like somewhat of a joke…

Genel Energy

Genel has provides the following update on the Bina Bawi and Miran Production Sharing Contracts. Further to Genel’s announcement of 20 August 2021 that notices of intention to terminate the Bina Bawi and Miran PSCs had been received from the Ministry of Natural Resources of the Kurdistan Regional Government (‘KRG’), Genel has received from the KRG formal notices purporting to terminate the PSCs. The KRG has also stated that, pending resolution of the dispute as to whether such notices are effective to terminate the PSCs, it will not perform those obligations under the PSCs that would enable Genel to progress the development of the Bina Bawi and Miran fields.

Since entering into the PSCs in February 2017, Genel has made every effort to engage with the KRG on the development of the Bina Bawi and Miran fields and has submitted numerous development proposals to the KRG for its approval. However, the KRG has for some time made clear its intention not to permit the development of the fields in accordance with the terms of the PSCs.

In these circumstances, the Board has concluded that it is left with no practical alternative but to accept that the PSCs are terminated as a consequence of the KRG’s repudiatory breach and to claim compensation from the KRG. Genel’s claims are substantial and will be brought in a London seated international arbitration to be commenced in accordance with the disputes process set out in the PSCs.

Genel has a long and constructive relationship with the KRG, and continues to work with the KRG on the development of our other assets, as we look to deliver our mutual goal of increasing production in the KRI for the benefit of all stakeholders.

Genel will update the market on future developments. Following the termination of the PSCs, the balances associated with holding title to these PSCs will be derecognised and therefore removed from the balance sheet.

There is little to add here, the matter is sub-Judice and there is no comment from the company to add to the barest of facts. Over the years I have grown used to the slow progress of Bina Bawi and Miran but genuinely thought that the offer to develop the oil in order to pay for the gas was more than reasonable business practice. 

Quite what happens here is anyone’s business, investment so far by Genel is substantial and this is an asset for sale with a billion dollar law suit attached. Genel are trusted local partners and have spent considerable time and money getting to this stage, what’s not to like?

Recent cases like that of Cairn and of course Dana in Kurdistan show that The State is not impregnable but common sense would indicate  that jaw jaw is better, and cheaper than war war.

Hurricane Energy

Hurricane has announced that, following the convertible bond repurchase announced on 8 December 2021, its subsidiary Hurricane GLA Limited has completed the repurchase of an additional U.S.$28.5 million in aggregate principal amount of the Company’s U.S.$230,000,000 7.50 per cent. Convertible Bonds due 2022 (the “Bonds”) (of which U.S.$137,016,000 (excluding the Bonds held by Hurricane GLA Limited pending cancellation) in aggregate principal amount are outstanding) for a total consideration of U.S.$27.3 million, including accrued interest.

 The Bonds were acquired from Stifel Nicolaus Europe Limited and will be surrendered for cancellation. Following cancellation of all purchased Bonds, the Company will have further reduced its aggregate principal amount of the Bonds outstanding to U.S.$108,507,000 and lead to a further net saving in debt repayment and interest charges of U.S.$2.8 million.

 The Company will continue to evaluate its liability management options which may include further Bond repurchases from time to time, subject to market conditions.

 This notification does not constitute or form part of an offer to sell or purchase, or a solicitation of an offer to sell or purchase, the Bonds or any other securities.

Antony Maris, CEO of Hurricane, commented:

“The net savings from the Bond repurchases over the past week have been of significant benefit to the Company. We will continue to take advantage of the volatility in the oil price and the economic indicators, and any inbound offers from the holders of the Bonds, to reduce further our outstanding debt, whilst maintaining an appropriate cash position. While bridging any funding gap for the repayment of the Bonds remains a challenge, we will continue to look at all the options available to us to meet our debt repayment obligations and maximise the value of our assets.”

President Energy

President has provided an update in relation to the proposed spin off an IPO of Atome Energy PLC.

 Highlights

 • Expected details of dividend in specie and dividend schedule set out below

 • Atome to be valued pre money at £20 million

 • Atome to raise up to £9m by way of placing, and a subscription through PrimaryBid, at 80p per share

 • Executive management of Atome, led by Olivier Mussat, the former Chief Investment Officer of Global Energy at the World Bank’s International Finance Corporation (“IFC”), to meaningfully subscribe in the placing 

 • Non-executive Chairman of Atome, Peter Levine to meaningfully subscribe and also provide a standby equity facility to Atome at the placing price at no cost to Atome or President to support the successful fundraise

 • Proposed dividend in specie, placing by SP Angel and subscription through PrimaryBid

Management participation and standby equity facility

It is pleasing to report that the executive management of Atome led by the CEO, Olivier Mussat, the former Chief Investment Officer of Global Energy at the IFC, part of the World Bank Group is to meaningfully subscribe in the placing, demonstrating conviction in Atome and its prospects.

Further, to support a successful fundraise, in addition to participating directly and likewise meaningfully in the placing, Peter Levine, the non-executive chair of Atome, through his  PLLG Investments Limited vehicle has agreed not only to subscribe in the placing but also to provide Atome with a standby equity facility of up to £3m. Under the facility Atome have will the right to require PLLG Investments Limited to subscribe for new Atome Shares at the issue price of 80p per Atome Share in the 18 months from Admission. The facility is being provided without any fees or other payments to PLLG Investments Limited or Peter Levine. The exercise of the facility will be at the reasonable opinion of the directors of Atome if required to fund the working capital needs of Atome‎. Peter Levine is also chair of the Company.

There are fuller details and a timetable in the RNS that describes the fundraise and what it is all about, as always please ensure that all details are checked bore taking any action. 

Echo Energy

Echo yesterday provided an operational update regarding its Santa Cruz Sur assets, onshore Argentina for Q4 2021 to 30 November 2021.

Daily operations across the asset base in Santa Cruz Sur and the delivery of produced gas to industrial customers under contract have continued uninterrupted during the first two months of Q4 2021. Production over the period from 1 January 2021 to 30 November 2021 reached an aggregate of 523,735 boe net to Echo, including 74,605 bbls of oil and condensate and 2,695 mmscf of gas.

As a result of the completion of capacity increasing infrastructure works, gas production in November 2021 averaged 7.1 MMscf/d net to Echo, an increase over the 6.7 MMscf/d net production rate during the previous month.

Net liquids production in the first two months of Q4 2021 averaged 255 bopd, and is an increase of 31% over Q1 2021 levels prior to the commencement of production optimisation and the bringing of shut in wells back on line. The benefit of both infrastructure maintenance and the previously announced commercial focus on high-quality blends at Santa Cruz Sur has also led to an increased frequency of oil sales during Q4 2021 to date, with total liquids sales net to Echo in  quarter four to date of 16,855 bbls (Q3 2021 total of: 15,050 bbls).  This increase in liquids production has helped to offset the expected natural decline in gas production over the year.

The Company looks forward to updating shareholders on production levels on a quarterly basis going forward.

These look like good enough figures from Echo but I am surprised that there was no comment from the CEO. 

IGas Energy

IGas is pleased to announce that it has become part of an academic – industry consortium called Net Zero RISE. Its aim is to repurpose existing onshore oil and gas infrastructure as research sites for carbon sequestration, hydrogen storage and closed-loop geothermal technologies.

The consortia brings together Newcastle, Oxford and Durham Universities with industry partners, including IGas and has been established to support the UK’s energy transition to Net Zero by reusing onshore infrastructure that is available now.
IGas has also recently been invited by the OGA to take on a core role in the Bacton Energy Hub Project’s Regulatory Special Interest Group (SIG).

The Bacton Energy Hub is envisaged to play a major role in the UK’s energy future through the production of hydrogen from natural gas (with associated capture and storage of carbon dioxide) and from electrolysis powered by renewable and nuclear energy. The Regulatory SIG is led by Hydrogen East.

IGas will also be contributors to the Infrastructure SIG, led by Xodus and the Hydrogen Supply SIG, led by Summit Exploration and Production.

Commenting Stephen Bowler, CEO, said

“IGas continues to leverage its existing operational expertise as the UK’s largest onshore operator and use its existing assets and skill set to play an important role in the UK’s transition to net zero.

The UK onshore regulatory regime is complex and comprehensive and we have a strong track record of responsible and safe development and ongoing compliance. IGas brings extensive experience of developing complex energy projects to the Bacton project.”

There is nothing like the feeling you get when you join an academic – industry consortium especially when the words net zero are in the title. These are especially exciting when the aim is to ‘repurpose existing onshore oil and gas infrastructure as research sites for carbon sequestration, hydrogen storage and closed-loop geothermal technologies’. 

Taking away the tongue in cheek for which I apologise, I couldn’t resist it, one recognises that IGas can bring its experience over many years of work onshore and these are important groups and I congratulate the team…

And finally…

The denouement of the 2021 F1 Championship happens at the Yas Marina in Abu Dhabi on Sunday and the title is neck and neck although Max has more wins, only appropriate in the odd case of 2 DNF’s…

In the test match England fought back overnight, out for 147 with Aussies scoring 415 England are 220-2 wit Root 86* and Malan 80*. This is still 58 runs behind.

Racing this weekend is today and tomorrow at Cheltenham and decent cards. Thank goodness that the court case midweek went against the ‘bullying and harassment’ which has been part of weighing room etiquette for so long. I love racing but some of these practices need putting to bed and soon. Enjoy your 3 years off fella.

The Prem starts tonight as the Hornets visit the Bees, tomorrow sees the Noisy Neighbours hosting Wolves, the Saints are at the Gooners, Chelski entertain Leeds for old times sake, Liverpool welcome back Steve Gerrard with his Villa Manager coat on and the Red Devils are at Carrow Road. Sunday sees the claret and blue derby between Burnley and the Hammers, the Foxes host the Magpies and the Toffees are at the Eagles.

The opinions expressed here are those of the author

Malcolm Graham-Wood

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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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