Malcy’s Blog – Oil price, Jersey Oil & Gas & Chariot Oil & Gas

WTI $40.60 +35c, Brent $42.43 +51c, Diff -$1.83 +16c, NG $2.10 -4c

By Malcolm Graham-Wood

Jersey Oil & Gas

Interims from JOG this morning, the only key number is the strong cash position of £8.9m at the year end which is £1m ahead due to cost discipline. The key highlights in the period include ‘significant progress in respect of the Concept Selection work for the Company’s flagship Greater Buchan Area development project’.

This includes selection of the preferred development concept, a new production facility at the Buchan platform meaning that they will be able to accommodate fluids from nearby platforms via subsea tie-backs and export of hydrocarbons will be via pipeline to existing nearby infrastructure.

Enhanced subsurface understanding means P50 technically recoverable 2C resources of more than 138 MMstb and P50 prospective resources of over 200 MMstb. What is most comforting is that the Buchan oil field has been dynamically modelled and history-matched to 36 years of production data

It should also be borne in mind that there is also a significant exploration portfolio with 4 drill-ready exploration prospects with combined P50 prospective resources of 196 MMstb, in close proximity to the planned Buchan hub. Also JOG has added ownership to their GBA portfolio in recent months through acquisitions and a recent licence award.

As we look ahead JOG has a lot of interesting progress to report, expect finalisation of the development plan for GBA, an update on the ‘exciting near field exploration potential’ showing very decent upside and of course the launch of the planned GBA funding/farm-out process expected in Q1 2021.

Andrew Benitz, CEO of Jersey Oil & Gas, commented:

“The Greater Buchan Area is a multi-faceted project and it is exciting to see the results of the hard work of our project team now coming together. Work is ongoing to finalise the development plan of our core project, with optimisation work on production phasing and on decisions regarding area collaboration, both for production volumes and power solutions.

JOG is clearly in a very good place and much work has been done over the summer which is a tribute given the COVID-19 setbacks. The management have shown that the company has a substantial and extremely valuable hub at Buchan and shareholders should be very pleased with today’s update.

Chariot Oil & Gas

Chariot has unveiled interims today, the Group remains debt free and had a cash balance of US$5.8 million at 30 June 2020 (US$9.6 million at 31 December 2019), with no remaining work commitments across the portfolio. Whilst the Company retains the Central Blocks, Namibia and BAR-M Blocks, Brazil and will continue to host data-rooms for potential partnering, a non-cash impairment charges totalling US$66.7 million have been recorded against the full book value of Namibia and Brazil.

In the accompanying interview CFO Julian Maurice-Williams notes strongly that this is a non-cash impairment. Other administrative expenses of $1.7 million (1.5 million) are slightly higher than the prior period reflecting one-time restructuring costs incurred in the period which are importantly, expected to decrease annual cash overhead from c.US$4.5 million to c.US$2.5 million which is impressive.

A new Executive Team has been appointed with ‘new values, mission and energy to create growth and deliver positive change through investment in projects that are driving the energy revolution’. I have interviewed the CFO and Technical Directors and the link is below. In the interview, and in the work I did in preparation it is clear that the acting CEO has made significant changes at senior level and it is they who will take Anchois forward, Lixus is a most exciting gas project with excellent quality reservoirs of high quality gas.

The partnering process, clearly affected to some extent by the virus, has clearly shown that a great number of interested parties across many different disciplines and that bodes very well for ongoing funding and gas marketing. Much work has been going on with the Pre-FEED study commissioned and ‘optimised development concept finalised with a major engineering consultancy with initial reference base case economics highly encouraging.

The upgrade of audited total remaining recoverable resource to in excess of 1 Tcf for Anchois, representing a 148% increase (comprising 361 Bcf 2C contingent resources and 690 Bcf 2U prospective resources), announced recently makes Anchois a key part of the company’s immediate future and new ventures are being evaluated, defined by Chariot’s values, strengths and the scalability of the opportunities.

Adonis Pouroulis, Acting CEO of Chariot commented:

 “This is an exciting phase in the evolution of the Company as the new team takes action to drive the Lixus opportunity forward and bring in value-accretive new ventures that play into the energy transition theme. With each day that passes more potential in the Lixus licence is uncovered, delineating a major gas resource with strong ESG credentials and national significance for Morocco.

Africa is the one continent where population growth and demand for power are rising rapidly and are projected to continue to rise throughout this century. With this, Chariot is ideally placed with its Moroccan gas development foothold to reach out and invest into other alternative projects that embody our core values, demonstrate our vision and create value for shareholders as we seek to make the Company more relevant to future energy needs.

The work the team has undertaken to advance the Anchois project during the period, in what is shaping up to be a multi-Tcf prospective licence area, has served to enhance its commerciality and bring a highly scalable, fundable development opportunity onto the radar of institutional financing. We look forward to further project endorsements and hope to announce more progress in the coming months as the gap narrows between the market’s perception of the Company and what management feel is currently a vastly undervalued clean energy investment proposition.”

So, Chariot has been working hard on Lixus which looks a better prospect every time I hear from the company. Without the virus we would be further ahead but it looks to be a really prospective asset and the Moroccan gas market remains potentially one of the best for those with gas assets.

Core Finance interview: Julian Maurice-Williams and Duncan Wallace of Chariot Oil & Gas

(The opinions expressed here are those of the author, a columnist for Share Talk.)

Malcolm Graham-Wood

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