Malcy’s Blog – Oil price, Savannah Energy, Deltic Energy, Trinity Exploration & Production & finally

WTI (June)* $79.24 -$1.66, Brent (June) $83.12 -$1.65, Diff -3.88 -3c* WTI May expiry.

Author @mgrahamwood

USNG (May) $2.22 -14c, UKNG (May) 95.49p -6.43p, TTF (May) €40.35 -€2.15.

Oil price

Oil drifted yesterday and has more today after when questioned in TV interviews a number of Fed officials gave the feeling that the May meeting must continue to bash inflation and so a rate rise is now nailed on which rallied the dollar.

On the better side was the inventory number which for crude was a draw of 4.581m barrels, much better than the whisper which was for a fall of 1.1m. The modest build in gasoline seems to indicate building ahead of the driving season which is only 6 weeks away and if you remember the retail prices from earlier in the week demand is pushing prices sharply higher, for oil, all is not lost…

Savannah Energy

Savannah Energy PLC, the British independent energy company focused around the delivery of Projects that Matter in Africa, is pleased to announce that its wholly owned subsidiary, Savannah Midstream Investment Limited (“SMIL”), has signed a Share Purchase Agreement (“SPA”) with the national oil company of Cameroon, Société Nationale Des Hydrocarbures (“SNH”), relating to the sale by SMIL and purchase by SNH of 10% of the issued share capital (the “Shares”) in Cameroon Oil Transportation Company S.A. (“COTCo”) (the “Transaction”).

COTCo owns and operates the 903km Cameroon section of the Chad-Cameroon export pipeline, the Kome Kribi 1 floating storage and offloading facility and related infrastructure. The pipeline has a 250 Kbopd nameplate capacity and is the only international export route for oil production in Chad. During 2022, COTCo transported an average of 124 Kbopd of crude oil valued at an estimated US$4.6bn at the prevailing Brent crude oil prices.

In consideration for the sale of the Shares, SNH will pay a cash consideration of US$44.9 million (the “Consideration”) to SMIL. The Consideration, when received, will be used by the Savannah group for part repayment of existing debt facilities.

Completion of the transfer of the Shares from SMIL to SNH will result in SMIL shareholding in COTCo reducing from 41.06% to 31.06%. Completion shall occur upon satisfaction of certain conditions precedent related to amendments to the bylaws of COTCo and is expected to occur in H2 2023. SMIL will retain the right to the dividend attaching to the Shares until the date of payment of the Consideration.

Pursuant to the terms of the SPA, SNH and SMIL have pledged, inter alia, their support of one another as shareholders in COTCo.

This seems like a pretty good deal for SAVE, selling 10% of the shares in COTCO to SNH for $44.9m will enable some payment of the existing debt facilities. Savannah will keep 31.06% and the dividend until the date of payment.

Deltic Energy

Deltic has announced its audited results for the year ended 31 December 2022 (‘FY 2022’) and that it has released a results presentation.  The results presentation is available on the homepage at the Company’s website: www.delticenergy.com.  

Highlights

·    Transformational gas discovery at Pensacola on Licence P2252 in the Southern North Sea (“SNS”).

 Pensacola represents one of the largest natural gas discoveries in the SNS in over a decade.

 Discovery contains P50 Estimated Ultimate Recovery of 302 BCF of gas (90 BCF net to Deltic).

 Well opens a new Zechstein play in this mature basin.

 Working closely with partners to progress this significant discovery to appraisal.

 Considering options in relation to Deltic’s 30% interest including potential full or partial monetisation, and appraisal and development.

·    Committed to second potentially high impact exploration well on the Selene prospect.

 Selene is the largest undrilled structure of its kind in this part of the SNS, with an estimated P50 recoverable resource of in excess of 300 BCF (150 BCF net to Deltic).

 Deltic anticipates that Selene will be drilled around the middle of 2024.

·    Deltic-Capricorn Joint Venture (“JV”) continues to progress technical work across five SNS licences. The key focus across the licences has been the Carboniferous play, in which multiple leads and prospects exist, as well as estimated significant volumes of Gas Initially in Place totalling in excess of 2 TCF.

·    Completed the Phase A work programme to significantly de-risk the Syros prospect located in the Central North Sea, and a farm-out process, which commenced in late 2022, is ongoing.

·    In September Deltic successfully raised £16 million via an oversubscribed equity placing and open offer.

·    Net cash outflow from operations and investing activity for the year of £4.7 million (2021: £1.8 million), with £2.1 million relating to the drilling of the Pensacola well.

·    Cash position of £20.4 million at 31 December 2022 (2021: £10.1 million) with no debt. Cash position of £15.1 million (unaudited) at 31 March 2023.  The Pensacola well cost was £12.8 million of which £5.6 million of the total well costs are to be billed by the JV Partner subsequent to 31 March 2023.

·    Participated in the UK’s 33rd Offshore Licensing Round, with Deltic submitting multiple applications for blocks and part blocks in both the Southern and Central North Sea focused on bolstering and diversifying its portfolio.

Graham Swindells, Chief Executive of Deltic Energy, commented:

“2022 saw a fundamental shift in the delivery of Deltic’s business model as the Pensacola well started drilling in November, subsequently being announced as a highly material gas discovery in February this year. Pensacola entirely vindicates our long-term business strategy of identifying high-value exploration assets at a very early stage and bringing them to fruition. We are now in the enviable position of deciding how best to appraise and develop this 300 BCF discovery alongside our partners, and delivering value for shareholders.

Moreover, we continue to advance our second potentially high-value asset, the Selene gas prospect, also located in the Southern North Sea. Together with our partner Shell, we expect to drill this similar sized prospect to Pensacola in the summer of 2024. With this drilling activity coupled with additional prospectivity from the rest of our portfolio and potential new licence awards, I believe the future looks extremely positive for Deltic, especially at a time when the UK should rightly be focused on its longer-term energy security.”

These are historic results with all that goes with them, as I always say its what is ahead that counts. And no more so than for Deltic shareholders who have seen the shares fall by some 60% in the last six months, a time that included the Pensacola discovery which some thought might have delivered for shareholders.

I am writing now, as although I have found that whilst the company has been reluctant to speak, let alone meet, meant that I previously couldn’t even cover the stock. Today I thought that the price performance has been so bad and that the discovery so good that along with other possible gems in the portfolio I should take another look, you never know it might prompt the company to reach out.

So, the two JV’s with Shell are pretty decent stuff, 302 bcf discovered at Pensacola(30%) and also a bonus potential oil find currently being evaluated but in the presentation at 50 MMboe which makes the area properly valuable and of course they will be drilling an appraisal well in late 2024/early 2025. 

For Selene(50%) they have 318 bcf plus 53 MMboe of oil in the resource estimate, a find here would enjoy added value as there is Shell owned infrastructure to the shore, they will drill the exploration well here end of 2024. A find here and the company would do what it is doing now, trying to partner up, and farm-down with a staged reduction in the licences whilst maintaining the upside whilst mitigating costs. 

I’m not sure I like the look of the Capricorn situation but that is easy to say after the event, indeed the signs are that they are paying for immediate needs at the moment but at least Deltic admit that things ‘aren’t ideal’ given the total mess that Capricorn is right now. What an awful legacy the situation at Capricorn is turning out to be leaving…

Deltic should be much higher, they are being held back by a combination of, ironically being in with Shell, who will do things at their own pace and at their cost structure, deemed to be a hindrance by many investors and of course that the wells on Selene and Pensacola will take another two years to prove up what might be a pretty substantial prize. But, as they say, patience is a virtue…

Trinity Exploration & Production

Trinity has provided this update to its announcement of 12 April 2023 regarding Trinity’s Bravo Platform in the Trintes Field, offshore east coast Trinidad on Monday 10 April.

Following approval from the Ministry of Energy and Energy Industries, received on Monday evening 17 April, the Company successfully restored oil production from all previously producing wells on the Bravo platform during Tuesday 18 April.

As previously announced, Alpha and Delta platforms restarted oil production from all previously producing wells on Tuesday 11 April 2023. 

Prior to the incident, oil production from the Bravo platform accounted for approximately 350 bopd.  Total Trintes field production is approximately 1,010 bopd.

Good news from Trinity after the short unexpected break. 

And finally…

Last night the Noisy Neighbours were at Bayern where they picked up a 1-1 draw making them 1-4 winners overall. Tonight in the Boropa Cup the Red Devils are in Sevilla but after giving away 2 late own goals at Old Trafford may find the 2-2 starting score too much. In the Plate the Hammers host KAA Gent and after a 1-1 away will fancy their chances.

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


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