Malcy’s Blog – Oil price, PetroTal Corp, Tower Resources, Coro Energy, Echo Energy, NewMed Energy & finally

WTI (Feb) $79.86 +$1.47, Brent (Feb) $85.28 +$1.25, Diff -$5.42 -22c.

Author @mgrahamwood

USNG (Feb) $3.41 -28c, UKNG (Feb) 160.0p -14.25p, TTF Feb) €60.5 -€3.5.

Oil price

A big rise from oil last week although Brent is still in contango. China is helping as predicted and latest stats show a bigger use of crude in December.

PetroTal Corp

PetroTal has announced a fully funded 2023 capital investment program of $125 million that is expected to generate significant after-tax, pre debt service free cash flow of $55 million in 2023.  Combined with the year-end 2022 cash balance of over $100 million, other working capital inflows, and contracted 2023 cash inflows of $57 million from Petroperu, the Company expects to have approximately $240 million of available cash to repay the Company’s debt, accrued interest, and initiate a capital return program to shareholders through a combination of share buybacks and dividends.  All amounts are quoted in US dollars.

2023 Key Highlights and Objectives(1,2)

·    Target 2023 production growth of 15% to 19% above 2022 levels, equivalent to 14,000 and 15,000 barrels of oil per day (“bopd”) with similar associated sales volumes.  Should additional sales capacity become available mid-year, the Company may be able to increase late 2023 production to approximately 17,000 bopd;

·    Generate EBITDA of $220 million, based on the forward strip price of Brent oil for 2023 (at Dec 30, 2022), representing an average of $84/bbl;

·    Drill and complete three horizontal development wells and one water disposal well in 2023, and complete two workovers of previously drilled wells;

·    Invest in production infrastructure to support future development and production, including additional oil storage and water injection systems, the construction of a new west drilling platform (“L2 West Platform”), enabling future drilling until the end of 2025 and spending on erosion control for the Company’s site; 

·    Generate after-tax free cash flow (before all debt service) of approximately $55 million, net of an estimated $40 million in corporate tax and related obligations;

·    Become debt free in Q1 2023 from full payout of the remaining $80 million in bonds and thereafter maintain a minimum liquidity balance of $50 million, distributing out available cash that exceeds this amount through a share buyback and dividend program;

·    Allocate an estimated $7.5 million in social trust payments in 2023 and another $10 million in other G&A related community projects.

(1)      See “Non-GAAP Financial Measures”

(2)      The Company’s bonds restrict any shareholder returns until fully paid out

Drilling and Completion Summary

PetroTal will invest approximately $69 million in drilling and workover activities in 2023.  The Company’s first operation will include a new water disposal well to enable the Company to have approximately 120,000 barrels of water per day (“bwpd”) disposal capacity throughout 2023 and 140,000 bwpd by Q4 2023 once pumping infrastructure installation has been completed.  PetroTal will subsequently drill wells 14H and 15H between mid-February 2023 and the end of June 2023.  Drilling of the Company’s third horizontal well in Q4 2023 will enable sales maximization should the Northern Peruvian Pipeline (“ONP”) be operational near the end of 2023, and/or Brazilian sales exports expansion targets are achieved.

Facilities Budget

In 2023, PetroTal will focus on water management facilities, erosion control, construction of the L2 West Platform, and finish a new oil/diluent storage tank.  PetroTal was thoughtful in the composition and quantum of its 2023 facilities budget ensuring critical infrastructure is completed earlier in 2023 with more flexible projects starting in H2 2023.

Block 95 Expansion Budget

A total of $3 million is budgeted for permit approvals and seismic preparation for the Block 95 expansion. During 2022, the Company was able to better technically assess the potential of its broad portfolio of Block 95 leads verifying various exciting subsurface features.  While waiting for permit approvals, PetroTal will continue to evaluate the Company’s deep portfolio of exploration assets for ways to maximize shareholder value.

Community Investment Budget

PetroTal will allocate nearly $18 million in 2023 for social and community programs comprised as follows:

·    2.5% social trust – approximately $7.5 million (various projects as approved by the trust)

·    $10 million in G&A and OPEX allocated to the following key projects in the community:

o Community erosion control,

o New community lodging infrastructure,

o Process facilities for agricultural products in Puinahua,

o Diesel supply for Bretana community power generation; and,

o Bretana community electricity generator maintenance.

PetroTal’s recently signed trust addendum unifies and aligns local communities in the operating district together as one.  As a result of these successful negotiations, we anticipate a significant reduction in social unrest driven downtime in 2023, signaling an alignment between communities, the Government of Peru and the Company.

Production Guidance

PetroTal forecasts an average production and sales range of 14,000 bopd to 15,000 bopd for 2023.  The production forecast considers a 5% social unrest driven downtime assumption, no access to the ONP, a constrained dry low river season (starting in mid Q3 2023 running until mid Q4 2023), and a barge route normalization period in January 2023.  Current production in the field from January 8 to 14, 2023 has averaged 11,506 bopd as barge transportation routes have started to normalize from extensive December 2022 backlogged oil loadings.

Guidance on Operating Expenses

The Company is anticipating total Operating Expenses (“OPEX”) to be under $9.00/bbl for 2023.  Expected fixed and variable OPEX run rates have increased over 2022 levels, due to a higher producing well count, power needs and inflation pressures.  Materially offsetting these increases are significant savings on barging, diluent, and COVID-19 costs compared to prior years.

Fixed lifting costs totaling approximately $37 million ($7.55/bbl) for 2023 and include:

·    Fuel

·    Various field and camp contract services

Variable transportation costs totaling $5 million ($1.02/bbl) for 2023 and include:

·    Gross diluent costs and diluent transportation – $0.50/bbl

·    Barging – $0.52/bbl

Variable transportation costs will be negligible in 2023 as no ONP oil sales are forecast.  The Brazilian export sales are FOB Bretana and all transportation costs are deducted in the net realized oil price.

Cash Flow Guidance(1)

Assuming an $84/bbl average 2023 Brent oil price, PetroTal expects to generate $255 million of net operating income (“NOI”) and $220 million of EBITDA, net of $27 million of G&A ($5.10/bbl), and $7 million of G&A related community and social costs.  The resulting after tax free cash flow1 (prior to all debt service) is expected to be $55 million and is net of approximately $40 million of expected corporate tax in 2023. 

(1) See “Non-GAAP Financial Measures”

2023 Quarterly Production and Capital Profile (Mid-point)







Oil wells completed

2 (14H & 15H)

1 (16H)


Workovers completed

2 (2XD & 1XD)


Water disposal wells

1 (4WD)


Average Production (bopd)






Total CAPEX (millions)






PetroTal 2023 Budget Summary ($ millions, unless otherwise stated)(1)


 Budget Range (Mid-point)

Brent Price ($/bbl)


Production (bopd)






Derivative settlements








2023 Free cash flow


December 31, 2022 unrestricted cash

+ $104

Anticipated warrant exercise proceeds

+ $10

Petroperu scheduled payments

+ $57

Other forecast net working capital inflows

+ $15

Total accessible cash in 2023 (prior to all debt service and return of capital)


1) See “Non-GAAP Financial Measures”

Returning material cash to shareholders in 2023

Subject to market conditions and quarterly review, PetroTal anticipates returning all available cash in excess of $50 million to shareholders in 2023, through a combination of share buybacks and a material/progressive dividend policy.  The Company will commence its return of capital program post retirement of the Company’s corporate bonds of $80 million, which is expected to occur by the end of Q1 2023.  A normal course issuer bid and dividend declaration could commence in March 2023, in accordance with the Toronto Stock Exchange trading policies. 

Q4 2022 Production and Operations Update

PetroTal’s Q4 2022 oil production was approximately 954,400 barrels (10,374 bopd), reflective of constraints during much of October and November 2022 due to low river levels, and the river blockade.  Once the river blockade was cleared, the Company was able to ramp production from 1,667 bopd to 20,301 bopd in just two days and subsequently produce an average of 20,766 bopd from December 15 to 31, 2022.  PetroTal exited the year producing 23,709 bopd on December 31, 2022 and was able to fill a backlog of barges that were on standby nearby the field.  Production in 2022 averaged 12,200 bopd, representing 36% growth over 2021’s average of 8,966 bopd.

The Company’s first drilling operation in 2023 will be to drill and core its fourth water disposal well (“4WD”) at a cost of approximately $16 million and with an estimated completion by the end of March 2023.  The Company anticipates exporting approximately 245,000 barrels to Brazil and Iquitos in January 2023 and is in discussions to sell approximately 450,000 barrels in February.

Well 12H continues to naturally flow at strong rates having produced at an average rate of 6,012 bopd since January 8, 2023.  The well has averaged 3,861 bopd during its first 27 days of production, with the majority of time being off pump to clean out drilling fluids.

Liquidity Update

At December 31, 2022, the Company had approximately $120 million in total cash, of which $16 million is restricted.  At the end of 2022, accounts payable were approximately $64 million, and estimated accounts receivable were $105 million, with $75 million from Petroperu and $30 million of current receivables from the Company’s Brazilian trading partner.  As announced on December 9, 2022, PetroTal finalized a repayment schedule with Petroperu related to the $64 million true-up revenue owed to the Company from the June 2022 Bayovar export.  PetroTal has now received payments totaling $16.1 million, with remaining monthly payments expected until full repayment on August 1, 2023. 

Pareto Securities 2023 London Conference and Private Investor Event

PetroTal will present at the upcoming Pareto Securities London Conference on January 18, 2023.  An updated corporate presentation can be found on the Company’s website:

In addition, PetroTal will host a private investor event in London on January 19, 2023 which is now fully subscribed.  The Company will post the presented materials on its website shortly after the meeting.

Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:

“The approved 2023 budget allows PetroTal to return a large portion of its current market capitalization to shareholders, while still delivering meaningful annual production growth in a tactical way.  The Company’s 2023 budget uses an average $84/bbl Brent oil forecast, and has the flexibility, should oil prices be lower, to adjust non-core components of its capital program.  Similarly, it allows for production flexibility in the event that oil export conditions improve during the year.  This will ensure return of capital stability in 2023 and beyond.”

This is a detailed and conservative analysis by PetroTal which shows just how substantial the company is becoming and indeed how undervalued the shares are. The fully funded capital budget of $125m for this year, which will generate substantial cash flow which with the end 2022 cash balance of over $100m, deliver a paydown of the company’s debt and ensure substantial distributions to shareholders via dividends and share buy-backs. 

Fourth quarter 2022 beat the company’s guidance with production of 10,374 bopd which we know had been previously depleted due to seasonal low river levels (which I was told was a one-off and not due to  climate change) and the river blockade. Indeed, following clearance production ramped up very quickly and by the end of December were producing some 23,709 bopd and fill the backlog of barges. In addition the 12H well has been performing very well. 

The guidance has been issued with immense caution, as mentioned the dry summer, the potential outage of the ONP as well as maintenance and social downtime so investors should be able to see substantial  upside from these matters. My own oil price forecasts are higher than the $84 used here but the company has also signalled that it has the flexibility to change its investment numbers depending on cash flow.

I’m looking forward to the sell out investor event on Thursday, apart from anything else it’s a joy to see the PetroTal management in person, they are a top team. As for the share price target, I’m very happy with my 150p in the book, after all its about to have $100m thrown at it…

Tower Resources

Tower has announced the completion of an institutional placing to Energy Exploration Capital Partners, a U.S.-based institutional investor, pursuant to an investment deed (the “Deed”).

Institutional Placing:

The Placing will initially raise US$1,250,000 as a placing to the Placee of new ordinary shares (with nominal value of 0.001p each) in the Company worth US$1,362,500. Following the initial placing, the Placee will invest, at the request of the Company, up to US$1,750,000 in the aggregate for Shares worth US$1,907,500 in the aggregate, no earlier than three months and no later than eight months after the initial placing (such period, the “Commitment Period”, and collectively, such investments, the “Second Placing”). If required by the Company, a further US$3,000,000 may be raised from the Placee for Shares worth an equivalent amount, with the Placee’s consent. Further information regarding the Placing is set out below.

The proceeds from the Placing will be used by Tower to fund work programme commitments in respect of its licenses in Cameroon, Namibia and South Africa as well as for general working capital purposes.

Jeremy Asher, Tower’s Chairman and CEO, commented:

“We are very pleased to announce this placing to EECP. The placing has been structured specifically to fit alongside the intended bank financing led by BGFI Bank Group, which is presently awaiting group credit committee approval. The timing and amounts are flexible, to enable us to accommodate other sources of financing if we wish, and to adapt to the final schedule of the NJOM-3 well on the Njonji structure in our Thali PSC area in Cameroon. We are continuing to discuss alternative rig options for this critical well, which will be targeting the appraisal and testing of 18 million barrels (pMean) of Contingent Resources and will also be penetrating additional potential reservoirs containing further prospective resources unconnected to the original two Njonji discovery wells. We are excited to be moving forward with this transformative project.”

Slowly but surely Jeremy Asher is putting the final pieces of the funding for the Thali PSC well in Cameroon and this time it’s not him signing the cheque either. Last time I saw Jeremy Asher back in Cape Town he remained positive and really rather laid back, the upside remains substantial…

Coro Energy

Coro has provided an update in relation to fourth quarter revenues from its Italian natural gas portfolio and in relation to the Company’s South East Asian renewables portfolio.

Italy Divestment

As announced on 24 August 2022, the Company has granted an option to Zodiac Energy plc to purchase the Italian portfolio for a remaining €5.7 million (having received a non-refundable €0.3 million upon award of the option). The option period expires towards the end of March 2023 and current activity is focused on finalising the SPA. The Company retains full ownership and cash flows from the Italian portfolio prior to completion of the disposal.  

2022 Italian Portfolio Production

Production from the Italian portfolio continued in line with expectations during Q4 2022, following record quarterly revenues in the preceding quarter, with a total of 1.37 million Scm of natural gas produced during Q4 2022. Production from the Italian portfolio during 2022 is summarised below:


Natural gas production






Average realised

gas prices per Scm (EUR)

Q1 2022




Q2 2022




Q3 2022




Q4 2022




FY 2022



In the week ended 8 January 2023, Italian portfolio production averaged 21,091 scm/day, a 50% increase from the annual average in 2022 of 13,979 scm/day.

As previously announced, production re-commenced at Bezzecca on 8 November 2022 and the field has been producing at a stabilised rate of just over 15,000 scm/day since 18 November 2022 – with strong pressure support giving good indications for the long-term field performance. Since 11 September 2022, Italian portfolio production has however reflected intermittent production from Sillaro following the previously announced sand clogging episodes in the tubing. Several solutions are currently under review to resolve the issue.

Between 1 March 2022 and 30 November 2022, despite Bezzecca production only re-commencing in November 2022 and recent intermittent production from Sillaro, the Italian portfolio has still generated approximately €2.1 million of free cash flow which has been distributed to Coro and largely utilised to fund the Company’s pilot 3MW Vietnam rooftop solar project, whilst additional cash flows (in addition to the €2.1 million distributed to Coro) have also funded expenditures during the period in Italy to increase production to current levels and provided additional cash retained in Italy for working capital purposes.


Further to the Company’s announcement on 25 November 2022, the Company continues to negotiate its second new build rooftop solar project and work through due diligence on the previously announced acquisition of an energised 3.25MW rooftop solar portfolio close to Saigon.


The Company announced on 12 October 2022 that it expected to apply for the Philippines Department of Energy’s Wind Energy Service Contract (“WESC”) in respect of an area of interest for the onshore Oslob Wind Power Project in Oslob, Cebu in November 2022. The application was filed on 18 November 2022 and the Company has now been advised that the application for the WESC has passed all of the technical and legal criteria. However, the application has been rejected on a technicality relating to the under-capitalisation of the local Philippine subsidiary responsible for the application.  Coro intends to capitalise the local subsidiary as required and resubmit the application. Further announcements will be made, as appropriate, in due course.

Nothing to add here.

Echo Energy

Echo provided on Friday an operational update regarding its Santa Cruz Sur assets, onshore Argentina, for the quarter ended 31 December 2022 (“Q4 2022”).

Operational Update

During Q4 2022, daily operations in the field at Santa Cruz Sur continued to deliver produced gas and liquids to key industrial customers and total 2022 cumulative production from Santa Cruz Sur, net to Echo’s 70% interest, reached an aggregate of 532,302 boe (including 101,574 bbls of oil and condensate and 2,584 MMscf of gas).

During Q4 2022, net liquids production averaged 298 boepd whilst net gas production averaged 7.3 MMscf/d. Net daily production averaged 1,522 boepd during the quarter. The combined Q4 2022 oil and gas production levels were the highest quarterly levels achieved in 2022 and reflect the measures undertaken under the Company’s Production and Infrastructure Enhancement Plan (the “Plan”) to improve infrastructure. Liquids production during Q4 2022 was the ninth continuous quarter of production growth, and a 12% production increase over Q1 2022. Average liquids production over the course of 2022 was 278 bbls per day, 25% higher than that in the previous year.


Aggregate Net Production


Average Net Production rate (boe/d)

Aggregate Net Liquids Production (bbls)

Average Net Liquids Production rate


Aggregate Net Gas Production


Average Net Gas Production


Q1 2022







Q2 2022







Q3 2022







Q4 2022














As previously announced on 10 November 2002, the scheduling of activities under the Plan is currently being optimised from cash flow at the asset level in order to maximise the benefit of funds available. Given the success of the Plan to date, the Company is also looking at options to increase working capital availability which can be used for the benefit of accelerating production increases in early 2023 under the Plan. These production increases target the reactivation of a total of approximately 30 or more wells in Santa Cruz Sur which, when combined with the infrastructure upgrades under the Plan, could result in further increases to net production.

The Company looks forward to updating shareholders on further progress on production growth under the Plan.

Martin Hull, Chief Executive Officer of Echo Energy, commented:

“I am pleased to report that we continue to make progress with our Plan. This is a strong set of quarterly production results, with liquids production showing a ninth continuous quarterly increase. This production growth is a direct result of the infrastructure investments that we made under the Plan during 2022. We remain committed to delivering on our strategy to grow production and are looking at working capital options that can build on the initial success of the programme and accelerate production growth from Santa Cruz Sur. I look forward to reporting further progress that will deliver value to our shareholders.”

The Plan is working, or so it seems and the investment is paying off which can only mean that the next phase is imminent… 

NewMed Energy

We note the issuance of the circular by Capricorn on 13 January 2023, ahead of its General Meeting on 1 February 2023, to which NewMed Energy – Limited Partnership  would reiterate that it continues to believe that the current terms and conditions of the proposed business combination with Capricorn are the most compelling option for all relevant stakeholders. The proposed business combination will create a company with a differentiated, gas-led business of scale, offering growth, regular returns to shareholders and a path through the energy transition, with a longer-term position in renewables and the hydrogen economy.

Accordingly, NewMed is continuing to promote the proposed business combination, on its existing terms, on a best and final basis, and is working together with Capricorn to obtain the required approvals with the aim of bringing the business combination to the vote of its unitholders at a General Assembly in the first quarter of 2023.

Regardless, together with its advisers, NewMed will continue to consider its alternative strategic options, with the objective of maximising value for its unitholders.

A holding statement by the looks of it and nothing to do with the article in The Sunday Times yesterday which suggested that Legal & General Investment Management is to announce that it is to vote against the takeover of Capricorn Energy. 

Also the ensuing vote called by Pallister to eject most of the Capricorn board is likely to be supported by LGIM. Legals have said that it is ‘an unusual step’ for them to vote against the board but it had communicated concerns on governance, future strategy, executive pay and environmental risks for nine months and had been advised by Capricorn that if it didn’t like it then they should sell their shares. 

Clearly in addition to question marks about the above concerns it appears that Capricorn are not aware that the holding being in the index tracking fund has somewhat different responsibilities…

And finally…

The Premiership is hotting up already, with a 0-2 win at Spurs the Gooners are 8 points clear of the Noisy Neighbours who lost at the Theatre of Dreams. The Magpies beat Fulham which keeps them  in third and the Seagulls beat Liverpool keeping them above them and Chelsea.

Author @mgrahamwood

Disclaimer & Declaration of Interest
The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. The writer may or may not hold investments in the companies under discussion

Linking Shareholders and Executives :Share Talk

If anyone reads this article found it useful, helpful? Then please subscribe or follow SHARE TALK on our Twitter page for future updates. Terms of Website Use All information is provided on an as-is basis. Where we allow Bloggers to publish articles on our platform please note these are not our opinions or views and we have no affiliation with the companies mentioned

Weekly Newsletter

Sign up to receive exclusive stock market content in your inbox, once a week.

We don’t spam! Read our privacy policy for more info.