Malcy’s Blog – Oil price, San Leon Energy, Touchstone Exploration, Rockhopper Exploration & finally

WTI (May) $69.96 -94c, Brent (May) $75.91 -78c, Diff -$5.95 +16c. 

Author @mgrahamwood

USNG (Apr) $2.15 -2c, UKNG (Apr) 105.01p +5.07p, TTF (Apr) €43.1 +€2.62.

Oil price

Oil is now at the dictat of the banks and you know what I think about that lot. Whilst the Shermans have their own problems today they are enjoying the spotlight being on Europe, specifically Germany…

But after the Fed, followed by the UK and others in cutting rates no one seems to know which way rates are going, Mr Market is betting on lower rates maybe even quite soon.

San Leon Energy

San Leon has announced a further update in relation to: i) its current refinancing discussions and ii) the proposed transactions with Midwestern Oil & Gas Company Limited (“Midwestern”) and the Company’s further conditional investments in ELI (together the “Proposed Transactions”).  Details of the Proposed Transactions were announced by the Company on 8 July 2022.

Update on the refinancing discussions

As announced by the Company on 20 December 2022, the Company was expecting to conclude a refinancing with a preferred alternative funding partner early in 2023. Discussions have advanced since then, albeit much slower than anticipated, both with this partner and also with a second potential lender.  However, the Company is now in final discussions and expects to complete the refinancing in the near term.  Further announcements will be made as and when appropriate.

Pending completion of the refinancing, the Company has received only very limited cash inflows and as a result continues to take steps to manage its overheads. These cashflows are contributing towards the day to day running of the business but several creditors remain outstanding, predominantly related to the ongoing transactions with Midwestern and ELI, as described more fully below.  The Company is maintaining a regular dialogue with these creditors and keeping them informed of the expected conclusion of the refinancing. The Company’s creditors are not currently putting the Company under undue pressure and the board of directors (the “Board”) is confident that all creditors will be settled following the conclusion of the proposed refinancing referenced above

In addition to the proposed refinancing, and as confirmed in the Company’s recent announcement on 13 March 2023, San Leon continues to explore a potential sale of its non-core investments in Decklar Petroleum Limited, although the completion of that sale remains subject to the purchaser finalising its own funding arrangements. With documentation substantially agreed, San Leon has been advised by the purchaser that, once the purchaser’s funding is in place, completion will take place within a matter of days.  Nevertheless, the timing is outside of the Company’s control at present and further announcements will be made as and when appropriate.

Update on the Proposed Transactions

The Board continues to believe that the Proposed Transactions will be transformational for the Company and it continues to work towards their completion. However, the Board notes the recent challenge by NNPC Limited and OML 18 Energy Resource Limited of the operatorship of Oil Mining License (OML) 18 (“OML 18”), details of which have been announced by the Company on 7 and 13 March 2023. In addition, the Board notes that Eroton is in the Nigerian Law courts challenging the matter and expects the case to be resolved shortly.  San Leon expects that the New Eroton Debt Facility (details of which were announced on 8 July 2022) is unlikely to be completed whilst the legal action is ongoing but the Company understands that the documentation is in final form and, consequently, expects that completion could follow relatively shortly thereafter.

The Proposed MLPL Reorganisation was previously expected to be concluded by 31 March 2023 but, in light of the above and the pending conclusion of San Leon’s refinancing, San Leon now expects completion of the Proposed Transactions to be in the second quarter of this year and the long stop dates of the various underlying agreements, currently set for 31 March 2023, will shortly be extended by mutual agreement.  Further announcements will be made by the Company as appropriate.

In addition, pending the potential refinancing described above, the Company has not yet been able to progress the Further ELI Investments.

Recent events have made what is already a slow moving affair even slower, the intervention of NNPC into the process in OML 18 will now likely be on hold until that is settled but completion is still expected to happen albeit with some long stop dates extended. 

Touchstone Exploration

Touchstone reports its operating and financial results for the three months and year ended December 31, 2022. Selected information is outlined below and should be read in conjunction with our December 31, 2022 audited consolidated financial statements, the related Management’s discussion and analysis and our December 31, 2022 Annual Information Form, all of which will be available under our profile on SEDAR ( and on our website ( Unless otherwise stated, all financial amounts herein are rounded to thousands of United States dollars.

Fourth Quarter 2022 Financial and Operating Highlights

·      Achieved initial natural gas production from our Coho-1 well, which produced average net volumes of 5,729 Mcf/d (955 boe/d) in the quarter and contributed $1,114,000 of net natural gas sales.

·      Produced quarterly average volumes of 2,229 boe/d, a 67 percent increase relative to the 1,336 boe/d produced in the prior year equivalent quarter.

·      Realized petroleum and natural gas sales of $9,919,000 compared to $8,212,000 in the prior year equivalent quarter, reflecting natural gas sales from Coho and a 12 percent increase in average crude oil pricing in the fourth quarter of 2022.

·      Generated an operating netback of $4,319,000, representing a 17 percent increase from the prior year equivalent quarter. Operating netbacks were $21.05 per boe, a 30 percent decrease from the $29.96 per boe reported in the fourth quarter of 2021, attributed to natural gas volumes brought online in the quarter.

·      Recognized current income tax expenses of $1,092,000 in the quarter compared to $208,000 in the fourth quarter of 2021, driven by $979,000 in supplemental petroleum tax expenses based on our average realized crude oil price exceeding the $75.00 per barrel threshold in the period.

·      Reported funds flow from operations of $691,000 in the quarter compared to $1,309,000 in the prior year equivalent quarter, as a $637,000 increase in operating netbacks was offset by increased general and administration, term loan interest and current income tax expenses.

·      Recognized a net loss of $1,921,000 ($0.01 per basic share) in the quarter compared to net earnings of $6,514,000 ($0.03 per basic and diluted share) reported in the same period of 2021, principally driven by $6,323,000 of impairment reversals (net of tax) recorded on December 31, 2021.

·      Following the December Canadian and United Kingdom private placements that raised net proceeds of $12,269,000, we exited the quarter with a cash balance of $16,335,000, a working capital surplus of $4,992,000 and a principal balance of $27,000,000 remaining on our term credit facility, resulting in a net debt position of $16,008,000.

Annual 2022 Financial and Operating Highlights

·      Commissioned and delivered natural gas from the Coho facility on October 10, 2022, representing the first onshore natural gas field to come onstream in Trinidad in 20 years.

·      Reported average daily production volumes of 1,581 boe/d, reflecting an 18 percent increase from 2021. Relative to 2021, the 2022 annual increase was attributed to incremental natural gas production from the Coho-1 well, as average 2022 crude oil and liquids production were consistent with 2021 levels.

·      Generated funds flow from operations of $3,540,000 (2021 – $4,172,000) and an annual operating netback of $19,281,000 or $33.42 per boe (2021 – $13,031,000 and $26.55 per boe).

·      Recognized a net loss of $3,197,000 ($0.01 per basic share) compared to net earnings of $5,719,000 ($0.03 per basic and diluted share) in 2021, primarily attributed to $6,323,000 in impairment reversals (net of tax) recognized in the prior year based on increased forecasted crude oil pricing.

·      We executed an incident-free $11,330,000 capital program, primarily focused on completing the Coho natural gas facility and progressing construction of the Cascadura natural gas and liquids facility. Cascadura facility construction operations commenced in October 2022 following receipt of all required regulatory approvals.

·      Formally executed an extension of the exploration period of the Ortoire licence to July 31, 2026, allowing us to continue exploration activities on acreage that have not been deemed commercial. The gross 1,317-acre Coho area and the gross 2,377-acre Cascadura area were previously approved for commercial development in February 2021 and March 2022, respectively.

·      Responsible operations remained a top priority throughout 2022, as Touchstone had no lost time injuries and released its second sustainability report encompassing the 2021 year. We proactively responded to the June 2022 vandalism incident that resulted in a crude oil spill and are pleased to report that all reclamation efforts were completed in September 2022.

Post Period-End Highlights

·      Net average natural gas volumes from Coho-1 were 900 boe/d and 864 boe/d in January 2023 and February 2023, respectively.

·      Daily crude oil sales averaged 1,286 bbls/d in January 2023 with a realized price of $66.48 per barrel and averaged 1,341 bbls/d in February 2023 with a realized price of $67.14 per barrel.

·      The National Gas Company Of Trinidad and Tobago Limited (“NGC”) notified us that they expect to be ready to receive first natural gas from the Cascadura facility on or about June 30, 2023. We remain on track to complete the Cascadura facility prior to this date to ensure production can commence as soon as NGC is in a position to receive first natural gas.

·      We safely reached budgeted total depth of our Royston-1X sidetrack well on the Ortoire block on February 24, 2023. The well has been cased, and we expect to commence production testing in late March 2023.

·      In January 2023, we entered into an asset exchange agreement for certain onshore Trinidad assets with a privately held Trinidadian entity. Pursuant to the agreement, we agreed to swap our operated 100 percent working interests in the Fyzabad, San Francique and Barrackpore producing blocks for the counterparty’s working interest in the Rio Claro, Balata East and Balata East Deep Horizons blocks for no cash consideration with the asset exchange becoming effective upon closing. The agreement remains subject to certain closing conditions, including receipt of applicable regulatory approvals and an extension of the Rio Claro licence.

Financial and Operating Results Summary


Three months ended December 31,

% change

Year ended December 31,

% change


















Average daily production



Crude oil(1) (bbls/d)








Crude oil and liquids (bbls/d)






















Average realized prices(3)



Crude oil(1) ($/bbl)









Crude oil and liquids ($/bbl)



















Production mix (% of production)



Crude oil and liquids





Natural gas(1)





Operating netback ($/boe)(2)



Realized commodity price(3)































($000’s except per share amounts)





Petroleum and natural gas sales









Cash (used in) from operating activities









Funds flow from operations(3)









Net (loss) earnings







Per share – basic and diluted









Exploration capital expenditures







Development capital expenditures







Capital expenditures(3)









Working capital surplus(3)





Principal long-term bank loan





Net debt(3) – end of period







Share Information (000’s)



Weighted average shares – basic







Weighted average shares – diluted






Outstanding shares – end of period






(1)    In the table above and elsewhere in this announcement, references to “crude oil” refers to light and medium crude oil and heavy crude product types combined; references to “NGLs” refers to condensate; and references to “natural gas” refers to conventional natural gas, all as defined in National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (“NI 51-101”). Refer to “Advisories – Product Type Disclosures” for further information.

(2)    In the table above and elsewhere in this announcement, references to “boe” mean barrels of oil equivalent that are calculated using the energy equivalent conversion method. Refer to “Advisories – Oil and Natural Gas Measures” for further information.

(3)    Non-GAAP financial measure. Refer to “Advisories – Non-GAAP Financial Measures” for further information.

This is historic data and not what the TXP story is all about, indeed the sunlit uplands are shining on Cascadura and I remain locked on a target price of 200p to make Touchstone one of the big winners this year. 

Rockhopper Exploration

Rockhopper notes the recent update published by Navitas Petroleum LP on Sea Lion development progress, which included an independent resource report conducted by Netherland Sewell & Associates, showing reduced upfront capex, reduced life of field costs, and increased recoverable resources.

Rockhopper had previously highlighted that there was scope to reduce the overall capex, including the pre first oil capex, of the Sea Lion development. Rockhopper has been presented by Navitas a revised development plan and has been provided the associated NSAI Independent Report. The key highlights from this work and other corporate updates are provided below.

Sea Lion Phase 1 and 2 Development

Highlights of the new Sea Lion development plan, as provided by the Operator, assuming a leased FPSO and a 100% working interest, are as follows:

2C Contingent Resources (Development Pending) phase 1 and 2 development concept

·    23 wells

 Phased drilling

 18 wells in phase 1 with 11 of them pre first oil

 Five additional wells in phase 2, approximately 42 months post first oil

·    Total barrels developed: 269 million

·    Plateau production rate: 80,000 bbls/d

·    Peak rate: 100,000 bbls/d

·    Total capex: US$2.2bn

·    Phase 1 capex: US$1.8bn

·    Pre first oil capex: US$1.3bn

Per barrel cost – life of field

·    Capex: US$7.50

·    Opex: US$20.10

·    Total cost: US$27.60

The new development plan, which the Operator continues to optimise and is subject to change, adopts a staged approach and represents a material reduction in both upfront and life of field cost when compared to the previous development scheme, while still achieving a plateau production rate in the initial stage of approximately 80,000 bbls/d, a peak production rate of approximately 100,000 bbls/d and recovery of over 269 MMbbls of oil  (2C Development Pending) out of 712 MMbbls (2C Total). 

The new development plan proposes 18 wells to be drilled in phase 1, 11 of these coming before first oil. The phase 2 drilling campaign will add a further five wells approximately 42 months after first oil. Those later wells will also be tied into the FPSO to extend the production plateau.

Having successfully re-defined the project, work will now focus on refining the financing plan with a view to reaching FID during 2024. In the meantime, technical work streams continue to further refine the project, with Navitas focused on driving further project optimisations. Based on a redeployed FPSO, a timeline of 30 months is envisaged from FID to first oil, with drilling anticipated to commence approximately 12 months post FID.

Navitas published the NSAI Independent Report which is available in Navitas’ 2022 Annual Report, and contains the following resource estimates:

1C (MMbbls)

2C (MMbbls)

3C (MMbbls)

Development Pending




Development Unclarified








The Development Pending category of 269 MMbbls 2C is the phase 1 and 2 development outlined above. The Development Unclarified category of 443 MMbbls 2C are the additional resources contained on the North Falkland Basin held by Navitas and Rockhopper, including Sea Lion and Isobel/Elaine, that could be developed under future phases but for which there is currently no published development plan.

The NSAI Independent Report contains analysis of cash flows and NPV on the phase 1 and 2 development net to Navitas. Based on the NSAI Independent Report data, the joint venture NPV10 of  the development of 269 MMbbls is US$4.3 billion on a post royalty and pre-tax basis, at US$77 Brent.

Rockhopper holds a 35% working interest in Sea Lion and associated North Falkland Basin licences and benefits from various loans from Navitas in relation to the development, which are detailed in the Appendix below.

Resource Disclosure

As previously disclosed (including in Rockhopper’s 2021 Annual Report), Rockhopper believed it was possible to materially reduce pre first oil capex from the previously estimated US$1.8 billion (assuming a leased FPSO) and overall project capex by taking actions such as reducing the number of wells drilled pre first oil and reducing the number of drill centres.

The last independent resource report commissioned directly by Rockhopper was the ERCE 2016 Report which had an estimated 2C value of 517 MMbbls. The Navitas commissioned NSAI Independent Report used an updated approach and assumptions to the ERCE 2016 report.

Rockhopper is not an addressee and has not been party to the production of the NSAI Independent Report. The NSAI Independent Report has been produced to PRMS standards. Rockhopper’s technical team which includes Lucy Williams (BSc Geology, MSc Petroleum Geology, Chartered Geologist) has had limited opportunity to review the NSAI Independent Report but endorses the work conducted and conclusions drawn. Rockhopper is delighted at this additional third-party validation of the potential of the North Falkland Basin and of Sea Lion to produce significant quantities of oil.

Other Corporate Updates

Ombrina Mare Arbitration

In August 2022, pursuant to an ICSID arbitration which commenced in 2017, Rockhopper was awarded approximately €190 million plus interest and costs following a unanimous decision by the ICSID appointed arbitral Tribunal that Italy had breached its obligations under the Energy Charter Treaty (the “Award”).  

Rockhopper submitted a letter to the Italian Republic in September 2022 formally requesting payment of 247 million, representing the Award amount plus accrued interest from 29 January 2016 to 23 August 2022 and costs. Interest was paused for four months following the date of the Award (being 23 August 2022) and is now accruing at EURIBOR + 4% which Rockhopper estimates at between 1.25 million and €1.5 million per calendar month. Interest compounds annually.

As announced, Italy requested that this Award be annulled in October 2022. When Italy applied for the Award to be annulled, a provisional Stay of Enforcement was automatically put in place by ICSID pursuant to the ICSID Convention and Arbitration Rules.  

Following Italy’s request to seek annulment of the Award, an ad hoc Committee was constituted to hear relevant arguments and make a ruling on Italy’s application for a continuation of the provisional Stay of Enforcement pending the determination of Italy’s request to annul the Award. A hearing on whether the ad hoc Committee will continue or lift the provisional Stay of Enforcement was held on 6 March 2023, with a decision expected in the next few weeks. The decision on whether to continue or lift the provisional Stay of Enforcement is unrelated to the merits of Italy’s annulment request.

A final hearing in relation to Italy’s request to annul the Award is scheduled to take place in Q1 2024.  Guidance given by Rockhopper in the Company’s 31 October 2022 announcement that the entire annulment process is likely to take 18-24 months from that date remains in place.

Rockhopper is currently paying all legal costs associated with the annulment.

Issue of Options

As referred to at the time of the 2022 capital raise, Rockhopper has issued 4.5 million options at 7.0p per share outside of the Rockhopper group in connection with the delivery of the Sea Lion project. These options vest in three tranches of 1.5 million each at project sanction, first oil, and 12 months post first oil.

Samuel Moody, Chief Executive Officer of Rockhopper, commented:

“We are delighted with the revisions Navitas has made to the previous Sea Lion development plan.  To reduce upfront estimated capex by such a significant amount and reduce life of field costs to under US$30 per barrel while increasing recoverable resources and maintaining a peak plateau of 80,000 barrels a day is hugely encouraging progress. 

“Our cooperation with Navitas is making real progress technically and commercially, and we believe the newly reworked Sea Lion project represents an eminently financeable proposition, despite all the well-known political challenges. We have developed a strong relationship with Navitas and will continue to work closely to support them as required as we progress together towards sanction at Sea Lion. 

“Simultaneously, work continues on contesting the annulment application put in by Italy and, while there can be no guarantees, we remain confident in the merits of our legal case.

“Although risks remain on both Sea Lion and Ombrina Mare, following a very strong 2022 for the business, we are more confident on positive progress than for a number of years.”

Although not technically a report for them this is very good news for Rockhopper and NSAI have produced better numbers, ‘material cost cuts’ and reduced life of field costs, indeed just what I used to say to Tony Durrant at every Premier analysts meeting…(Only joking Tony, sort of!)

This is massively impressive to reduce break even from 45 bucks to less than $30 and makes the Sea Lion development considerably easier to finance. With this good news and the flip of the coin on Ombrina Mare yet to come at 10.43p RKH may start to look like an interesting turn of the head…

And finally…

A really barren weekend for sports fans with hardly any quality fixtures. The international break means that England started against Italy in the Euro qualifiers and won over there for the first time in 60 years last night. All the home nations are playing over the next few days, sometimes twice.

No decent racing, no F1, cricketers are back home and we had to see the draft for the grubby Hundred yesterday, imagine that circus pushing an Ashes series out of the way for the whole of August…

Even rugby is back to normal, the Tigers host Brizzle, Quins are at the Sarries, London Irish host the Saints and the Chiefs visit the Rec.

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.