WTI $68.15 -$10.24, Brent $72.72 -$9.50, Diff -$4.57 +45c, NG $5.45 +37.9c, UKNG 240.0p +11.02p
By Malcolm Graham-Wood
That was the week that was, it started well with rises across the board and that continued as the news about the release of SPR actually pushed the price up, no trade to speak of on Thursday and then Covid took over on Friday, also notably in thin volume. The prices above show that effect and oil ended the week down around 7 dollars and this morning has recouped some $3+ of that….
The Opec+ meeting is still on Thursday but the technical committee scheduled for tomorrow has been pushed to Wednesday so that participants can take on board the Omicron information. My best guess is that at the moment demand hasn’t yet been hit, at least not in the US where gasoline usage and domestic flights were at a record level in Thanksgiving week and give Opec+ all options open to them.
The idea of sticking with the status quo and adding another 400/- b/d is the stand pat move and Mr Novak has suggested today that there is no need to change but my thoughts are that a cut in that monthly number might be a prudent move that also is not seen to be toeing the White House line…
PetroTal has advised that a 7.5 magnitude earthquake hit northern Peru early Sunday, November 28, 2021, with the epicentre approximately 98km from the town of Santa Maria de Nieva and 400km from Bretana.
PetroTal’s production facilities were not damaged, and the Company reported no injuries related to the earthquake. Earthquakes are relatively common in Peru and PetroTal’s development platform and related facilities are designed to withstand earthquakes of equal or greater scale.
The social unrest disruption, as reported by the Company on November 24, 2021 remains ongoing, with production rates being managed to align with remaining storage capacity. Further updates will be provided as and when known.
San Leon has provided the following update on the proposed reorganisation to consolidate Midwestern Oil and Gas Company Limited’s holding in the Company and Midwestern Leon Petroleum Limited into a single holding in the Company. The Potential Transaction also includes, inter alia, proposed further debt and equity investments to be made by San Leon in Energy Link Infrastructure (Malta) Limited (“ELI”).
San Leon has been informed that Eroton Exploration and Production Company Limited, in which San Leon currently has an indirect 39.2% economic interest, has signed a non-binding term sheet with Africa Import Export Bank (“Afrexim”) for a prospective US$750,000,000 senior secured reserve-based lending facility. The purpose of the proposed facility, in addition to refinancing Eroton’s current senior bank debt (of approximately US$196 million), is to provide funding which will be used by Eroton to acquire an additional 18% interest in OML 18 from two of the other partners in OML 18, subject to agreeing documentation and relevant consents, thereby taking Eroton’s interest in OML 18 to 45% (the “Proposed Eroton Transaction”). Eroton is also the operator of OML 18.
San Leon currently has a 40% equity interest in MLPL with the remaining interest in MLPL being owned by Midwestern. MLPL has a 100% equity investment in Martwestern Energy Limited, which in turn has a 98% economic interest in Eroton.
As part of the Potential Transaction San Leon would increase its indirect economic interest in Eroton from 39.2% to 98% and, following completion of the Proposed Eroton Transaction, San Leon’s indirect economic interest in OML 18 would increase from the current 10.58% to 44.1%. Given that the Proposed Eroton Transaction is to be financed through a debt facility, it is not expected that the consideration payable under the Potential Transaction (being an issue of new shares in the Company to Midwestern), will be impacted. As previously announced, it is expected that, inter alia, as part of the Potential Transaction, the amounts currently owed to San Leon by MLPL (pursuant to the loan notes) will be eliminated.
The heads of terms for the Potential Transaction (the signing of which was announced on 12 July 2021) are being updated to reflect a proposed restructuring of Midwestern’s indirect holding in ELI (which is currently held through a joint venture) to facilitate the proposed transfer of this holding to San Leon as part of the Potential Transaction. There is expected to be no economic impact on the Potential Transaction from San Leon’s perspective in respect of Midwestern’s restructuring of its holding in ELI.
The parties continue to work with their respective advisers to prepare the necessary transaction documentation in relation to the Potential Transaction (including publishing an AIM admission document, given that the Potential Transaction will be classified as a reverse takeover under the AIM Rules for Companies (the “AIM Rules”)) and to carry out due diligence.
In accordance with Rule 14 of the AIM Rules, the Company’s ordinary shares will remain suspended from trading on AIM until such time as either an AIM admission document is published or an announcement is released in the event that the reverse takeover in contemplation is not proceeding.
Given the need for binding contractual documentation and applicable regulatory consents, there can be no guarantee at this stage that the Potential Transaction (including the proposed debt and equity investments by San Leon in ELI) or the Proposed Eroton Transaction will be entered into or, if entered into, that they will complete.
Oisin Fanning, CEO of San Leon Energy, commented:
“Eroton’s new loan term sheet and its consequential proposed acquisition of an additional interest in OML 18 demonstrates the widespread and ongoing support for OML 18 as a world class oil and gas asset. We stand to be a further beneficiary of this following the conclusion of San Leon’s proposed acquisition of 100% of MLPL. Our advisers are continuing to work on the transaction documentation and Eroton’s planned refinancing marks an important milestone.”
Whilst it remains irksome that the work on the documentation continues and the shares remain suspended, there continues to be added value for San Leon shareholders building throughout the process and with it the potential for a substantial distribution to shareholders in due course.
Eco (Atlantic) Oil & Gas
Eco announces that Gil Holzman, Chief Executive Officer and a Director of the Company, acquired 100,000 common shares in the Company on 26 November 2021 at a price of CAD0.266 per share (TSXV).
Following the Share Purchase, Gil Holzman is beneficially interested in, in aggregate, 8,589,124 Common Shares representing approximately 4.3 per cent. of the Company’s issued share capital.
It is always good to see executive management getting out the wallet and investing in shares in cash in the companies that they run and this is no exception. With over 4% of the company Gil Holzman is putting his money where his mouth is and he certainly doesn’t lack confidence in Eco Atlantic and 2022 has an exciting look about it…
Zenith has announced that it has entered into an Option Agreement with Noble Hill-Network Limited (“NHNL”), a private Nigerian oil and gas company.
NHNL is the sole, 100% holder of a Risk Service Contract for the development of the North-West Corner of OML 141 in Nigeria, defined as the Risk Service Contract Area, which covers 105 square kilometres of the Niger Delta region and contains the potentially highly productive Barracuda and Elepa South oilfields, as well one prospective field with an estimated 232.7 million barrels of discovered oil (Degeconek 2019 CPR).
Andrea Cattaneo, Chief Executive Officer of Zenith, commented:
“We are delighted to have signed an Option to acquire an exclusive material interest in NHNL, the sole holder of the RSC for OML 141, containing the Barracuda and Elepa South Oilfields, following our ongoing due diligence exercise.
The near-term drilling of B-5 is an opportunity for Zenith to rapidly achieve a material progression in its development by exploiting the considerable production potential of the Barracuda oilfield. We view the risk profile of drilling B-5 as low to medium primarily, amongst other factors, due to the strongly confirmed presence of hydrocarbons in nearby wells accessing the same formations.
Further, it should be noted that the Option, and its potential exercise, are not subject to external approvals or other bureaucratic procedures resulting in delays, meaning that Zenith and NHNL can speedily progress in executing operational activities.
We are confident in our ability to finance the Option by using multiple sources of funding, specifically funding from pan-African financial institutions.
Finally, while this transaction would represent the largest single investment in Zenith’s history, it will in no way divert attention away from our development in Tunisia, and especially in the Republic of the Congo, where we expect to finally achieve significant progress in due course.”
People who know Mr Cattaneo are aware that he has ambitions to grow Zenith and this is certainly another step in that direction. As he points out in his statement this move does not mean that recent portfolio activity is going to suffer, indeed I suspect that they remain all systems go. I hope to interview him in a few days and he can explain his latest moves.
In the Prem leaders Chelski drew with the Red Devils who confirmed Ralf Rangnick as their new interim manager. Liverpool kept the pressure on beating the Saints 4-0 and the Noisy Neighbours beat the Hammers 2-1 at the Emptihad Stadium.
Elsewhere there were wins for the Bees against the Toffees, the Gooners saw off the Magpies, the Eagles lost 1-2 at home to the Villa and the Foxes beat the Hornets 4-2.
The opinions expressed here are those of the author
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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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