WTI (Oct) $85.73 +62c, Brent (Nov) $92.00 +65c, Diff -$6.27 +3c.
USNG (Oct) $7.75 +1c, UKNG 270.0p -20p, TTF €177.36 -€5.5
Oil price
Whilst oil tickled up yesterday it was still down by around a dollar and a half last week. It is a difficult time of year but most of all the actions of the Fed in its two day meeting starting today are hanging over the market. Consensus on the Street is for another 75 bp’s but over 25% of the finest analysts are going for 100 points or higher.
The product markets are under pressure at the moment as one might expect at this time of the year, too early to guess the weather and how the distillate stocks are bearing up and with the Fed hanging over it few traders will take on Mr Powell.
San Leon Energy
San Leon noted the announcement made on 19 September 2022 by Decklar Resources Inc. has in Canada. San Leon has a 11% shareholding in Decklar Petroleum Limited, the local subsidiary of Decklar operating in Nigeria, and has also made a US$5.5 million loan to DPL, via 10% per annum unsecured subordinated loan notes.
Part of the text of Decklar’s announcement is set out below:
Decklar Resources is pleased to provide an update on operational activities relating to the transportation and export of crude oil produced from the Oza Oil Field in Nigeria.
Decklar and its co-venturer Millenium Oil & Gas Company Limited are pleased to announce that the 7,800 barrels of crude oil previously delivered to the Umugini Pipeline Infrastructure Limited crude handling facilities has now been delivered to the Forcados crude oil export terminal. The 7,800 bbls are ready for export pending the completion of certain repairs to the offshore loading system. In the meantime, an additional 30,000 bbls has been produced from the Oza Oil Field and is currently being stored in tanks at the Oza-1 wellsite. These 30,000 bbls will be the initial barrels transported to the new export facilities, as detailed below. Once part of this crude has been shipped from the Oza Oil Field tanks, the Oza-1 well will be brought back onto production, with the ultimate goal being the provision of a stable, ongoing supply of crude oil into new alternative export facilities.
Decklar and Millenium are also pleased to announce that an agreement has also been reached to transport and sell Oza Oil Field crude oil to a company that owns and operates a small crude oil refinery in Edo State, Nigeria. The agreement provides for an initial sale of 10,000 bbls. The parties are also in discussions to increase the sale quantity to 30,000 bbls and to possibly agree a minimum monthly quantity of barrels of Oza Oil Field crude to be sold to the oil refinery. It is anticipated that all required government permits will be finalized and in place in the next 3-4 weeks
Separately, agreements have been executed to truck crude oil from the Oza Oil Field to a 45,000 barrel tank farm located in Akwete. The short-term goal is to transport approximately 1,100 barrels of oil per day from the Oza Oil Field to the storage tanks at Akwete. Once the volumes at the Akwete oil tank exceed 15,000 barrels, barges will load and transport the crude to an offshore floating storage and offloading unit.
The barging to an FSO will provide Decklar and Millenium with the ability to produce and transport larger and more stable volumes of crude oil from the Oza Oil Field and avoid the use of pipelines in areas that continue to have problems with availability, delays and losses. While the trucking and barging of crude oil involves more complex logistics, it is expected to be more reliable and cost effective than trucking and pipelines. It is anticipated that the required government permits can be finalized and in place for oil to start being transported to the Akwete oil storage tank in the next four to five weeks. All efforts are being made to expedite and complete the necessary arrangements and obtain the required approvals.”
Things are continuing to look up for San Leon and the partners as oil is being sold now and will increase in due course. Also the oil is getting through without losses and inconvenience, it is quite amazing how much oil doesn’t find its way through to its final destination under old rules.
Jadestone Energy
Jadestone reports today its unaudited condensed consolidated interim financial statements, as at and for the six-month period ended 30 June 2022.
Paul Blakeley, President and CEO commented:
“Jadestone delivered record financial results in the first half of 2022, with production increasing by c.50% compared to the first half of 2021, driven by a full period contribution from the Malaysian assets acquired in August 2021 and the impact of the Montara drilling programme in the second half of 2021, albeit offset by an unplanned shutdown at Montara early in 2022 due to a compressor engine failure. Revenues and adjusted EBITDAX increased by 63% and 113% respectively, due to the increase in production volumes and higher realised oil prices. As a result, we ended the period with a net cash balance of US$161.6 million, an increase of almost 40% compared to year-end 2021. Jadestone remains debt free.
Despite all this, recent operational performance at Montara has been disappointing, especially given the substantial upgrade and repair work done to date. As previously announced, the field is currently shut-in as we progress a remediation plan for the Montara Venture FPSO following defects identified earlier this year. The plan involves emptying, cleaning, inspecting and, where necessary, resolving any defects in the tanks and hull of the FPSO. In particular, we are moving ahead with the permanent repair of 2C crude oil cargo tank and 4S ballast tank whilst prioritising entry and activity in other tanks in preparation for operational readiness. As we focus on safety and integrity, this activity will continue until we can ensure a safe and reliable restart of the FPSO. In parallel, we are making good progress in the appointment of, and work scope for, the independent reviewer, who will work with us to provide final assurance to Jadestone and the regulator on our remediation plans and operational readiness prior to the restart of production operations. While we understand that the lack of a firm restart date is frustrating for many of our stakeholders, our focus is on the remediation plan and its successful execution which, in turn, will restore confidence in the significant remaining value we see at Montara.
We have also initiated a fundamental review of our hull and tank inspection and repair regime, which will include our maintenance approach, operating systems and organisational structure. As a near-term action to assist management, Jadestone’s Board of Directors has established a special subcommittee, which will work closely with Company’s executive and senior operations leadership, providing both additional support and challenge, while the Montara FPSO hull and tank remediation work is in progress. This will include weekly progress updates and reports.
The balance sheet strength we have built in recent years, and the confidence in our existing asset portfolio and its planned growth, means we are well-positioned to weather the Montara shut-in without any anticipated impact on our investment programmes, inorganic growth, or near-term shareholder returns. We expect capital expenditures for the year to be in line with guidance of US$90.0 – 105.0 million. We have also taken the decision to increase the interim dividend by 10% to US$3.0 million and, subject to market conditions, we intend to complete the US$25.0 million share buyback programme launched in August and which has so far returned an incremental US$4.9 million to shareholders. The next phase of the shareholder returns strategy announced in June will be determined by the timing of production restart at Montara, our portfolio’s operational performance, realised oil prices, and the timing and scale of incremental inorganic growth opportunities.
The Company continues to deliver on its growth strategy. In June, we took a final investment decision on the Akatara gas development on the Lemang PSC in Indonesia, with activity at the site now well underway. Separately, the acquisition of the outstanding 10% stake in the Lemang PSC is expected to complete soon. In July, we announced the acquisition of a non-operated interest in the producing Northwest Shelf (“NWS”) oil project offshore Australia, and are making good progress towards closing this transaction in Q4 2022.
Our strong balance sheet underlines the success of our business model, supporting our planned investments for growth, and while the recent Montara asset incident is unfortunate, we are determined to fix it and deliver the original value proposition vindicating our strategy in the Asia Pacific region.”
There is not much to add to my previous notes about Jadestone that are not covered in this expansive report and very long conference call. The bottom line is that despite a good 1H production of 15,008 b/d guidance is now 11,000-13,000 which should be on the safe side.
Management are rightly making sure everything is done properly and are not trying to expedite anything, a good thing as the regulator will now decide that hence the caution on the guidance. The progress at the rest of the portfolio is overshadowed by the shut-in and it is clearly disappointing for the team.
As I have said before, the company is very strong, the balance sheet supports the 10% increase in the divvi and the buy-back continues, all good news for shareholders, add to that the fact that the Montara barrels are deferred and not lost and should reappear ‘in 2023’ and this should be a transient problem despite how gutting it clearly is.
Predator Oil & Gas
Predator notes the announcement yesterday by the Department of the Environment, Climate and Communications of the “Review of the security of Ireland’s electricity and natural gas systems”.
The Company notes that Floating Storage and Regassification Units (“FSRU’s”) are now being considered as options for the import of Liquefied Natural Gas (“LNG”) to support security of energy supply.
Following the publication of the Review the Company intends to submit the Mag Mell FSRU Project, which it has been working on for the past two years, to the public consultation process which will run until the 28th October.
The Review can be found at:
https://www.gov.ie/en/consultation/dbe14-review-of-the-security-of-energy-supply-of-irelands-electricity-and-natural-gas-systems/
Paul Griffiths, Executive Chairman of Predator Oil & Gas Holdings Plc commented:
“The public recognition that FSRU’s are being considered as an option for Ireland’s security of gas supply during the Energy Transition is a major breakthrough for the Company and its shareholders. This follows several months of intensive marketing of our Mag Mell project, beginning at the National Energy Summit in Dublin in April this year and culminating in our “White Paper”.
We are pleased to be at the forefront of developing pragmatic solutions for the Energy Transition. We look forward to continuing to work with our international and domestic collaborators to demonstrate the uniqueness of Mag Mell as a potential option for the development of a FSRU facility by repurposing existing infrastructure.”
I think the correct phrase is ‘I told you so’ as Mr Griffiths has been banging this particular drum for a very long time.
Trinity Exploration.
Trinity announces its unaudited interim results for the six-month period ended 30 June 2022.
2022 Year to Date Strategic Highlights
H1 2022 saw production levels broadly maintained and the Company benefit from stronger operational cash flows due to higher realised oil prices, with the impact of these partially offset by the effect of hedging instruments. The Company’s oil price hedge payment exposure reduces and unwinds in H2 2022 and there are no hedging instruments in place currently for 2023. In addition to continuing its programme of recompletions and workovers which kept production stable, the Company commenced its fully funded onshore drilling operations. The first two wells successfully encountered target reservoir sections as prognosed, confirming our pre-drill expectations, and are currently on production test. The Company is preparing to move onto the third well of the planned six well campaign.
Onshore
Onshore continues to be a robust set of assets with a break-even price of USD 18.5/bbl (H1 2021: USD 17.9/bbl) even after observing inflationary increases from the supply chain. Successful analysis and interpretation of the 3D Seismic across all our onshore Blocks, including PS-4 which was acquired in December 2021, has de-risked our drilling campaign that commenced in June 2022.
East Coast
The Company has continued to refine its plans for Galeota via a staged development initially exploiting the 9.77 mmbbls of 2P reserves in the Trintes field. This approach reduces risk and capex and offers a shorter timeframe to achieve production.
Galeota’s 40.39 mmbbls 2C resources offer the potential for future phase of development or optimisation of the development. The Company is hopeful that the Government of Trinidad and Tobago will conclude its deliberations and provide further details on reforms to Supplemental Petroleum Tax (“SPT“) in the near term and this will facilitate potential coventurers to fully assess the economics of the opportunity when the Galeota farm down process recommences.
Corporate
The Board wishes to advise shareholders of its intention to announce a new Capital Allocation Policy during H1 2023, once the outcome of the six well drilling campaign has been assessed. This is likely to include:
· Payment of a regular dividend that will help inform future capital allocation decisions whilst not impeding the Company’s growth potential; and
· A buy-back programme that will flex depending on commodity prices.
Further details on Trinity’s Capital Allocation Policy will be provided in conjunction with the preliminary results for 2022. In the interim, the Board is also considering a modest share buyback programme, and expects to provide further guidance in due course.
Jeremy Bridglalsingh, Chief Executive Officer of Trinity, commented:
“The first six months of 2022 was a period of consolidation for Trinity, positioning the Company strongly for the second half of the year and beyond. Stable production and higher oil prices boosted our revenues in the period, the benefit of this will be fully felt when our hedges expire at the end of 2022. Towards the end of the first half the Company commenced a potentially transformational drilling programme onshore Trinidad. The six-well programme is ongoing, with drilling of the most notable wells, a horizontal well and a deeper appraisal well, due to start in the coming months. I believe this has the potential to meaningfully increase our scale, and as such prove to be the start of one of the most exciting periods in the Company’s history. I am also pleased to announce the Company’s intention to implement a new Capital Allocation Policy which is likely to include the payment of a regular dividend and a share buy-back programme to further deliver value to our shareholders.”
This is only a part of the extensive RNS announced today but the first half was disappointing again with production down and extensive hedging eating into profits. Hopefully the drilling programme which seems to be successful will arrest the decline.
The Capital Allocation Policy looks very good but the payment of dividends and share buy-backs might be some way away based on figures here today. There is also the added pressure of the upcoming licensing round onshore Trinidad which the company will be eager to participate in I imagine.
Providence Resources
Further to a resolution of the shareholders at its AGM on 27th July 2022, the Board of Providence Resources P.l.c. the Irish based energy company, confirms that its name change to Barryroe Offshore Energy plc, is anticipated to take effect on 27th September 2022.
The Company’s new ticker will be BEY as of 27th September 2022 and the website address, (including the investor relations content and the information required by AIM Rule 26), will be available at www.barryroeoffshoreenergy.com
You couldn’t make it up as they say, faced with the possibility of renaming Providence Resources, an admirable thought indeed some bright spark has come up with the name Barryroe Offshore Energy.
It has been called a few things in the many years I have followed it but for the time being it should be named after a mythical creature or maybe a mirage as one finds in the desert. ..
And finally…
Not that many sporting fixtures at the weekend when minds focused on the funeral of QE11.
In the prem there were wins for Villa, Fulham, Noisy Neighbours, Spurs, the Gooners and the Toffees. The Magpies drew with the Cherries.
The English tour of Pakistan starts today with the first of 7 T20’s, I mean…England won the toss and Pakistan are batting having scored 136-4 after 17 overs.
The opinions expressed here are those of the author
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
