WTI (Oct) $93.74 +$3.38, Brent (Oct) $100.22 +$3.74, Diff -$6.48 +23c.
USNG (Sept) $9.309 -37c, UKNG (Oct) 560.0p -20p, TTF €270.70 -€3.88.
A big rise yesterday based on the interview that I reported on in the blog with the KSA Energy Minister. The Opec+ meeting on 5th September may become a long and drawn out one, whilst not being able to make their targets in the main, asking for new, lower quotas will be another kettle of fish altogether. Indeed note Kuwait ‘out of the blue’ saying that they have just reached their production target…
Elsewhere some production issues from Kazakhstan emerged after badly repaired damage to moorings at the CPC terminal. Today’s rise follows on from the API stats which showed an unexpected crude draw of 5.6m barrels, the EIA numbers later are unlikely to echo that.
Rockhopper, is pleased to provide the following update on its ICSID arbitration with the Republic of Italy:
· Successful arbitration award
· Compensation of EUR 190mm
· Plus interest at EURIBOR + 4%, compounded annually from 29 January 2016 until time of payment
The arbitration panel unanimously held that Italy had breached its obligations under the Energy Charter Treaty entitling Rockhopper to compensation. The award is final and binding on the parties. Italy has 120 days to apply for an annulment of the award, which can only be annulled in limited circumstances. Under a legal agreement with the Falkland Island Government Rockhopper is prevented from making any form of distribution.
All costs associated with the arbitration were funded on a non-recourse (“no win – no fee”) basis from a specialist arbitration funder. After payments due to the arbitration funder, Rockhopper expects to retain approximately 80% of the award (assuming full recovery of the award). Further analysis is required to establish the tax treatment on any payments related to the award.
Samuel Moody, CEO commented
‘We are delighted to have won our case. A huge amount of work has been involved since we acquired Mediterranean Oil & Gas Plc in 2014 and commenced the Arbitration in 2017. I would like to pay tribute to our team for their dedication over such a long period. We will update the market in due course once we have been able to analyse fully the results of the arbitration and its full, very positive financial implications for Rockhopper. This positive milestone builds on our recent transaction with Navitas and while work still needs to be done on Sea Lion, we believe after collection of the award, it will make a material contribution towards our share of the development costs.‘
This is an outstanding success for Rockhopper and brings forward the development of Sea Lion where Navitas are, I understand, keen as could be to get on with things. As for the valuation of RKH it should show a clean set of heels to the pack, after all at $100 Brent Sea Lion looks like a dream.
Arrow Exploration Corp
Arrow has provided an operations update and announce the results of the 2022 mid-year reserve evaluation by Boury Energy Consultants Ltd. as at 30 June 2022.
· Proved (1P) Reserves:
o PDP reserves increased 25% to 1.292 MMBls mainly from the Tapir Block.
o 1P reserves also increased by 17% to 3.567 MMBls reflecting the positive results from the recent drilling campaign.
o 1P Net Present Value, before tax, discounted at 10% (“NPV-10”), is significantly higher with an increase of 164% to US$ 77.7 million.
· Proved plus Probable (2P reserves)
o 2P reserves increase to 7.864 MMBls of oil.
o NPV-10 increased to US$ 150.4 million from US$ 84.1 million as at December 31, 2021, a 79% increase.
· Proved plus Probable plus Possible (3P reserves):
o 3P reserves volume increase to 11.759 MMBls.
o NPV-10 grew 67% to US$ 223.6 million from US$ 133.9 million as at 31 December 2021.
· Oil price and new hydrocarbon accumulations resulted in positive additions in reserves in all categories.
· Additional drilling targets have been identified as a result of the H1 2022 drilling campaign. A five well program will initiate in Q4 2022 with two wells in pursuit of further low risk exploitation on the RCE structure. As well, two wells are planned to develop the Carizales Norte structure A downdip well will also be drilled at RCE to test the stratigraphic nature of the oil accumulation. This well will also serve as a water disposal well.
Corporate production as of August 15, 2022, is approximately 1,450 boe/d. Production from the RCE-2 well is approximately 540 bbls/d net (1,080 bbls/d gross) producing from the C7A and C7 stringer zones. Production from the RCS-1 well is approximately 190 bbls/d net (380 bbls/d gross) producing only from the new C7B zone at this time. In addition, organic growth opportunities for Arrow are advancing, with the RCE-3 and RCE-4 wells on the Tapir Block in Colombia expected to commence drilling in Q4 2022. Additional completions will be performed in Q4 on the RCE-1 and RCS-1 wells to further exploit known hydrocarbon accumulations. Current production from the RCE 1 and RCS 1 wells is ahead of forecast in aggregate.
Arrow expects to re-complete the RCE-1 well, in the C7 stringer zone. Arrow is currently just producing from the C7B zone at RCS-1 and plans to re-complete this well, expecting to open the C7A and C7 stringer zones in Q4 2022. This will have a material impact on overall RCE production.
The West Pepper well, owned 100% by Arrow and located in Canada, is producing at 240 boe/d currently, with production curtailed due to third party facility constraints. Expectations are that production will return to approximately 450 boe/d in September 2022. In Q3 2022, Arrow expects to tie-in the East Pepper gas well in Canada (100% owned by Arrow). This second well, along with continuing and expected robust natural gas prices in North America, is expected to further enhance the value of the Pepper field.
In addition to the 3D seismic survey Arrow purchased earlier this year, the Company intends to execute on a 130 square kilometer 3D seismic survey on the northwest section of the Tapir block in Colombia. This will further delineate low risk exploration fault structures that have been identified on 2-D seismic data. The shooting of this seismic survey is expected to begin in Q1 2023.
2022 Mid-year Reserves Exercise
NPV-10 values increased 164% for 1P and 79% for 2P reserves.
The recent drilling campaign in Rio Cravo (Tapir Block, Colombia) was very successful, resulting in the Company finding four more hydrocarbon accumulations and increasing its 1P oil reserves from 236 MBbls to 853 MBbls of oil. These results allow Arrow to better understand the continuity of the reservoirs in RCE and provide a foundation for the next phase of exploitation and material reserve additions at RCE.
Total Arrow reserves increased from 3.04 MMBOE to 3.56 MMBOE for 1P, and from 7.42 MMBOE to 7.86 MMBOE for 2P.
2022 Mid-Year Reserves Summary
Marshall Abbott, CEO of Arrow Exploration Corp., commented:
“Arrow delivered an increase in volumes and values in all reserve categories. We are pleased with the results of the BouryGEC independent reserves evaluation, which reinforces the significant value of our Colombian and Canadian assets.”
The moment that Arrow landed in London with its first day of dealing on 25th October and a raise at 6.25p I was impressed with its accumulated acreage position in Colombia where readers know I have a soft spot for.
Since then they have comprehensively delivered the goods and today announce a significant increase in reserves as highlighted above, with 1P NPV-10 up 164% to $77.7m and up in all categories. With new drilling targets on the RCE structure and the Carizales Norte as well as a downdip well at RCE that make up a 5 well programme in Q4 2022 worth waiting for.
Clearly a very busy time operationally for Arrow which has led to beating of expectations and already a meaningful increase in reserves which drive a very decent increase in the value of the company. The new CPR is better than I expected after such a short space of time boding well for the valuation.
Arrow is another company that hasn’t been in London long but its high quality management are already renowned for delivering on expectations across the portfolio. Since 1st day of dealings in October, when the equity was placed at 6.25p the shares have pretty much tripled and are now just off the top at 16.75p having inexplicably fallen by some 13% on these results. The chart looks great and can only get better and the prospect of an analyst visit might reward even more.
Coro Energy plc, announces that it has entered into an Option Agreement with an existing operator in Italy to purchase the Company’s Italian natural gas asset portfolio for up to EUR 7.5M.
Following structural increases in global gas prices, the Company relaunched its Italian gas asset portfolio earlier in the year. The Italian Portfolio has since delivered significant free cash flows for the Group.
The Company however remains primarily focused on South East Asia and the significant growth and investment opportunities the region provides. Following unsolicited approaches in respect of the Italian Portfolio, in expectation of near term and long awaited developments on the Duyung PSC and with a view to capturing the value inherent in the Italian Portfolio following recent gas price rises, the Company has awarded a five-month option, with potential for a two-month extension, to Zodiac Energy plc, a privately owned Italian gas operator. The Option holder has the right to acquire 100% of the issued share capital of Coro Europe Limited, the Company’s wholly owned subsidiary which in turn holds 100% of the issued share capital of Apennine Energy S.p.A, the Group entity holding the Company’s interests in the Italian Portfolio.
· Total receipts from a disposal pursuant to the Option of up to EUR 7.5M, of which EUR 6.0M would be paid in cash at or prior to completion, and further contingent payments of up to an aggregate of EUR 1.5M through a 10% net profit interest in the Italian Portfolio over the three years from the date of completion of any disposal of the Italian Portfolio under the Option Agreement.
· The Company retains full ownership and cash flows from the Italian Portfolio prior to the completion of the disposal. The Italian Portfolio produced approximately 0.6 mmcf/d in Q2 2022 net to the Company (approximately 100 boepd) and generated free cash flows to the Company in July 2022 of EUR 0.45 million.
· The Optionholder has already paid a non-refundable EUR 0.3 million deposit in respect of the award of the Option.
· Any proposed disposal of the Italian Portfolio under the Option would be subject to Coro shareholder approval pursuant to Rule 15 of the AIM Rules for Companies.
The Option holder has paid to the Group EUR 0.3 million in respect of the award of the Option. Should the Option holder exercise the Option, a consideration payment of EUR 5.7 million would be payable and, on any disposal of the Italian portfolio by the Company, Coro would retain a 10% net profit interest in the Italian portfolio for a period of 3 years from the effective date of a disposal subject to an aggregate NPI cap of EUR 1.5 million.
Prior to the completion of a disposal, which would be conditional inter alia, upon the negotiation and entry of a sale and purchase agreement, regulatory approvals and Coro shareholder approval under Rule 15 of the AIM Rules for Companies, Coro retains full ownership and economic entitlement to the Italian Portfolio. The Option Payment is non-refundable save for circumstances where, inter alia, the Company’s shareholders do not approve a disposal of the Italian Portfolio to the Option holder.
Following an exercise of the Option and the completion of a subsequent disposal by the Group of the Italian Portfolio, Coro would be able to release its parent company guarantee covering the abandonment liability of the Italian Portfolio.
James Parsons, Coro’s Chairman, commented:
“The proposed divestment is fully in line with the Company’s strategic objectives, enabling Coro to focus exclusively on growing its oil, gas and clean energy portfolio in South East Asia where demand for energy and the opportunity for material expansion remain very strong.
The proposed divestment provides an immediate cash payment and the ability to retain cash flows from the Italian Portfolio in the near term prior to any disposal, whilst also securing a fixed priced exit. The combination of the Option cash consideration, the retained NPI and the cash flows delivered by the Italian Portfolio under Coro’s continued ownership in the current gas price environment, would be expected by the Board to represent approximately EUR 10 million.
We look forward to updating investors both in respect of developments regarding the Italian Portfolio, the Option and on our projects in South East Asia in due course.”
The moving of focus to South East Asia exclusively is wisely timed, getting a much higher price for the Italian assets makes the original sale falling through most fortuitous and gives a welcome filip to the finances overall.
There is also a management shake-up, Mark Hood moves to the NED bench and also Chairs the Philippines business whilst COO Mike Carrington is now MD – renewables with Leonardo Salvadori MD Oil & Gas.
The opinions expressed here are those of the author
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