Malcy’s Blog – Oil price, Gulf Keystone Petroleum, President Energy, Atome Energy & finally

WTI $72.38 +$1.51, Brent $75.02 +$1.14, Diff -$2.64 -37c, NG $3.77 -15c, UKNG 315.0p -20.0p 

By Malcolm Graham-Wood

Oil price

Back and forth, up yesterday, down today oil is following Omnicron cases which still appear to be plentiful but so far very few deaths like last time.

Gulf Keystone Petroleum

Shaikan Field Development Plan 

 Following extensive constructive engagement with the Ministry of Natural Resources, Gulf Keystone and its partner Kalegran B.V.  have submitted a draft FDP to the MNR. The FDP includes the continued ramp-up of Jurassic oil productionan appraisal of the Triassic reservoir and a Gas Management Plan to more than halve CO2 per barrel by eliminating routine flaring.

The FDP is subject to review and final approval by the MNR, the timing of which is uncertain given the scale of the project. Final investment decision is also subject to approval of both Boards of Directors of Gulf Keystone and MOL, and the Company will provide an update at the appropriate time.

Operational

 Following over 660 days without a Lost Time Incident, we were disappointed to have an LTI during drilling operations in October. Following the incident, we have completed a full investigation and have put in place a number of remedial actions

Gross average production from the field in 2021 to date of c.43,300 bopd, in line with tightened 2021 guidance, with record gross average production in October of 45,654 bopd

SH-14 has been drilled, completed and is currently being hooked-up, following delays caused by equipment failures and wellbore issues in the subsequent side-track

Following the rig move from the SH-13/SH-14 well pad, an acid stimulation programme is now underway on SH-13 to access the broader fracture network in the reservoir after an area of low fracture connectivity was encountered. Acid stimulation is commonly used in carbonate reservoirs such as Shaikan

Activities are ongoing to start production from SH-13 and SH-14 and the increase in gross production towards 55,000 bopd, subject to well productivity, is now expected in January

Preparations are ongoing to spud SH-15 (formerly referred to as SH-G) which is now expected to be brought onstream in Q2 2022

Planned installation of two electric submersible pumps deferred to 2022 after successful trial of lower cost jet pump solution at SH-10 and stronger than expected SH-11 reservoir performance

 Financial

$283.2 million ($221.7 million net to GKP) received from the Kurdistan Regional Government in 2021 to date for payments of crude oil sales and recovery of outstanding arrears. $32.4 million of the original total net arrears balance of $73.3 million has now been recovered

The delayed payment for September 2021 crude oil sales and arrears (gross: $37.8 million; net to GKP: $29.6 million) is expected to be paid shortly

Following the payment of the $50 million interim dividend on 8 October 2021, $100 million of dividends have been distributed to shareholders in 2021, in line with the Company’s strategy of balancing investment in growth with shareholder returns

Robust balance sheet, with a cash balance of $176 million as at 16 December 2021

 Outlook

 On track to meet tightened 2021 average gross production guidance of 42,000 to 44,000 bopd

2021 net Capex guidance lowered from $75-$85 million to approximately $55 million, principally due to the revised spud date of SH-15 and deferral of installation of SH-10 and SH-11 electric submersible pumps, partially offset by the higher cost of SH-14

2021 gross Opex guidance of $2.5 to $2.9/bbl remains unchanged

With continuing strong oil prices and cash flow generation, there may be opportunities to consider further distributions to shareholders and to optimise the capital structure

Jon Harris, Gulf Keystone’s Chief Executive Officer, said:

We are pleased to announce that we have submitted a draft Field Development Plan to the Ministry of Natural Resources. While the timing of FDP approval is uncertain given the scale of the project, this is an important step forward to develop the significant potential of the Shaikan Field while more than halving CO2 per barrel by eliminating routine flaring.

Production performance has been strong, reaching a record monthly average high in October, and we are on track to meet our tightened 2021 gross average production guidance. With our leverage to oil prices and low cost base, strong production has translated into robust cash flow generation. We have experienced operational challenges with SH-13 and SH-14 and, subject to well productivity, we are now targeting to increase gross production towards 55,000 bopd in January.”

President/Atome

President Energy (AIM: PPC), the energy company with a diverse portfolio of energy assets provides an update in relation to the spin-off and IPO of Atome Energy PLC (“Atome”).

Successful completion of fundraise by Atome Energy PLC

Atome to be valued at £20 million pre new money

Details of dividend in specie in Atome

Atome Fundraising

Atome has successfully completed its fundraising (subject to Admission) through its brokers and PrimaryBid, and has raised up to £9 million at 80p per Atome Share subject to as below.

Importantly, this amount has been determined by the Directors as sufficient to progress the business of Atome and reach the point of Final Investment Decision in respect of both of the projects without further funding requirements. 

Of the £9 million, the sum of £6 million has been raised in the placing and Peter Levine through PLLG Investments Limited has agreed to provide Atome with a standby equity facility of up to £3 million if needed for the balance.

The facility will permit the minimum necessary dilution for all shareholders in Atome as the facility will only be exercised if in the reasonable opinion of the Directors of Atome it is required to fund further working capital needs. 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, Peter Levine or any associated entity.

The Company expects that Atome will publish its Admission Document later today, and Admission is expected to occur on 30 December 2021 as planned.

 Proposed dividend in specie

On 10 December 2021, the Company announced the proposed terms of the dividend in specie of ordinary shares of Atome (“Atome Shares”) to Shareholders who are on the Company’s register of members at the close of business on the day immediately prior to Admission (“Record Date”), such Shareholders being referred to as “Qualifying Shareholders”. President Energy currently beneficially holds ordinary shares in Atome representing 85% of Atome’s current issued share capital.

The expected timetable relating to the proposed dividend in specie and the ratio of entitlement to shares in Atome is set out below. The Company confirms that the entitlement ratio (“the Ratio”) is as previously announced as follows:

 1 Ordinary Share in Atome for every 169 Ordinary Shares in President held on the Record Date

Based on the existing issued ordinary share capital of 25 million Atome Shares, the Company will therefore distribute 12,177,955 Atome Shares to shareholders. The Company’s retained interest in the enlarged issued capital of Atome following completion of the in specie dividend at Admission will be approximately 27.9%

Shareholders are reminded that they must seek and rely on their own financial or professional advice as to taxation in whichever jurisdiction they are located and that in certain locations it may not be possible for them to receive or benefit from any such dividend. Accordingly, the Company makes no representations or warranties in respect of any such regards.

Rob Shepherd, Finance Director commented,

“We are absolutely delighted that the Atome team has successfully completed the fundraise ahead of the forthcoming spin-off and IPO. President commenced evaluating renewables opportunities in mid 2020 and focused in on hydrogen shortly thereafter so to see what has been achieved within some 18 months is really pleasing. A very experienced team has been assembled at Atome and two exciting projects in Paraguay and Iceland have been secured and are being progressed at speed, a process that can now be further accelerated towards Final Investment Decision in both countries with the funding secured.

We are of course extremely grateful for the considerable financial support being offered to Atome by Peter Levine, something that we at President have been significant beneficiaries of that has enabled us to progress projects that otherwise wouldn’t have been possible. His support for Atome in challenging circumstances means that the high quality team there can now focus on creating the significant value that sits within the business, for the benefit of all of us both as Atome and also as President shareholders.”

 And finally…

The Prem this weekend has been demolished by Covid, tomorrow only Villa v Burnley and Leeds hosting the Gooners remain and on Sunday the Noisy Neighbours go to the Magpies and Liverpool visit White Hart Lane.

In the test match Australia declared at 473-9 and by the close England were 17-2 and rescued by rain…

Racing is at Ascot and Haydock Park

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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