WTI (Nov) $91.71 -$1.97, Brent (Nov) $95.38 -$1.17, Diff -$3.67 +80c.
USNG (Nov) $2.95 +5c, UKNG (Nov)* 109.5p +7.5p, TTF (Nov) €42.190 -€2.71.
No surprise that Brent is unchanged today after a good week and with expiry of the November contract tonight and of course the quarter end. Also the start tomorrow of the National Day Golden Week holiday brings with it a mix of possibilities, the economy shuts all week but a great deal of travel occurs and jet fuel usage will rise.
Stories are abounding that the Saudis might release some crude if prices breach $100 but if it were me I would wait and see…
2023 Half-Year Results
Average Gross Daily Production up 12% YoY and Total Revenues1 & Adjusted EBITDA2 both up 8% YoY
Savannah Energy PLC, the British independent energy company focused around the delivery of Projects that Matter, is pleased to announce its unaudited half-year results for the six months ended 30 June 2023.
Andrew Knott, CEO of Savannah Energy, said:
“I am pleased to report robust results for the first six months of 2023, which demonstrate our continuing ability to deliver strong operational performance. Average gross daily production increased by 12% to 25.3 Kboepd, while Total Revenues1 and Adjusted EBITDA2 both increased by 8% during the first half of the year.
The expansion of our Renewable Energy division has continued apace, with several new projects added to our development portfolio in the first half of the year. We now have up to 676 MW of projects in motion across three countries as we quickly move towards the achievement of up to 1 GW+. At the same time, we continue to progress our proposed acquisition of PETRONAS International Corporation Limited’s energy business in South Sudan, with the intention to publish an AIM Admission Document in Q4 2023.
We continue to deliver on our strategy and remain unequivocally an “AND” company, seeking to deliver strong performance both for the short AND long term across multiple fronts, and pursuing growth opportunities in both the hydrocarbon AND renewable energy areas.”
This is indeed a very strong operational performance and the figures tell the story. Production was up 12% and Total Revenues and EBITDA up 8% were incredible in a highly competitive market. Add to that new and extended gas contracts with strong momentum carrying through to H2, note Notore, since extending their contract in July for another 12 months have already taken more than twice their daily average nominated amount of gas at 26.3 MMscfpd vs 10 MMscfpd, and up to 676 MW of renewable energy projects now in motion across three countries as SAVE moves quickly towards up to 1GW+ of projects in motion.
As ever there is much going on at Savannah, we have seen the first disclosure report for Sustainability Accounting Standards Board published today which ticks another important box. Also as previously announced the Company continues to advance the various workstreams required to complete the acquisition of PETRONAS International Corporation Limited’s energy business in South Sudan which should be another really valuable asset.
It is also worth mentioning the $1m investment in Fenikso, (formerly Lekoil) which has turned out to be spectacularly successful. The restructuring of the agreement has meant that Savannah will receive up to $16.3m over the course of the next nine years and have already fully recovered the initial investment with payment from Fenikso of $1.3m to date.
Savannah are continuing to do extremely well despite some current political tensions in Africa, such as in Niger where the recent coup has resulted in some delays to the well test programme. Despite this I think that CEO Andrew Knott and his team consistently deliver on the strategy and are building a substantial and important business on the continent.
· Average gross daily production from Nigerian operations was 25.3 Kboepd, a 12% increase from 22.5 Kboepd during H1 2022. Robust customer demand led to a 15% increase in gas production from the Uquo Field to 138.5 MMscfpd (H1 2022: 120.3 MMscfpd);
· Strong safety record, with our Nigerian operations recording one million working hours without a Lost Time Injury;
· Gas sold to eight principal customers, with a number of new and extended gas contracts agreed, including:
o An agreement with Amalgamated Oil Company Nigeria Limited (“AMOCON”), whereby Savannah’s Accugas subsidiary agreed to purchase up to 20 MMscfpd of gas from AMOCON over the course of the next ten years for onward sale to our gas customers (with deliveries having commenced in May); and
o New gas sales agreement with Shell Nigeria Gas Limited (“SNG”) and a contract extension with Shell Petroleum Development Company of Nigeria Limited (“SPDC”);
· This strong momentum continued post-period end with contract extensions signed with Central Horizon Gas Company Limited (“CHGC”), First Independent Power Limited (“FIPL”) and Notore Chemical Industries PLC (“Notore”) for a total of up to 85 MMscfpd;
· Up to 676 MW of renewable energy projects now in motion, including agreements signed during the period for the up to 75 MW Bini a Warak Hydroelectric Project in Cameroon and for the development of two proposed solar photovoltaic power plants in Niger with combined capacity of up to 200 MW; and
· First disclosure report for Sustainability Accounting Standards Board (“SASB”) published today here.
· Total Revenues1 increased by 8% to US$138.7 million (H1 2022: US$128.7 million);
· Adjusted EBITDA2 increased by 8% to US108.2 million (H1 2022: US$100.3 million);
· Adjusted EBITDA2 margin strong and stable at 78% (H1 2022: 78%);
· Operating expenses plus administrative expenses4 of US$27.4 million (H1 2022: US$24.5 million);
· Profit after tax (including contribution from discontinued operations) of US$46.8 million (H1 2022 loss after tax: US$20.5 million); and
· Net debt position at period end of US$443.4 million (FY22: US$404.9 million) with Leverage5 broadly stable at 1.9x (Year-end 2022: 1.8x).
· Total Revenues1 guidance reiterated at ‘greater than US$235 million’;
· Group Operating expenses plus administrative expenses4 guidance reiterated at ‘up to US$75 million’; and
· Total capital expenditures guidance reduced from ‘up to US$60 million’ to ‘up to US$30 million’, reflecting the rephasing of certain planned capital projects in Niger and Nigeria.
South Sudan Acquisition Update
Further to the Company’s announcement on 27 July 2023, the Company continues to advance the various workstreams required to complete the acquisition of PETRONAS International Corporation Limited’s energy business in South Sudan (the “PETRONAS Acquisition”) and now intends to publish an AIM Admission Document in respect of the PETRONAS Acquisition on or before 15 December 2023, following such point the Company will seek restoration to trading on AIM of its ordinary shares.
Savannah remains committed to the 35 MMstb (Gross 2C Resources) R3 East oil development in South East Niger. As previously announced, the intention was to carry out a well test programme on our principal discoveries in Q4 2023. However, following recent political events, this timeline will be subject to further revision due to restrictions imposed by the Economic Community of West African States on Niger, which has resulted in the closure of the border between Benin and Niger. This has created logistical challenges for companies operating in Niger and, specifically for Savannah, in relation to the importation of the necessary equipment to complete our planned well test programme. A further update in relation to timing will be provided in Q4 2023.
Savannah continues to progress the up to 250 MW Parc Eolien de la Tarka wind farm project, with all key required studies either complete or at an advanced stage. Savannah also announced the signing of an agreement for the development of two proposed solar photovoltaic power plants, each up to 100 MW in scale, during the period and work is at an initial stage on these projects.
Divestment of Interest in COTCo
On 20 April 2023, Savannah announced that its wholly owned subsidiary, Savannah Midstream Investment Limited (“SMIL”), had signed a Share Purchase Agreement with the national oil company of Cameroon, Société Nationale Des Hydrocarbures (“SNH”) for the sale of 10% of the issued share capital in Cameroon Oil Transportation Company (“COTCo”). The cash consideration for the shares was US$44.9 million and SMIL also retained the right to the dividend attaching to the shares up to the payment date of the consideration. Formal completion of the sale shall occur upon satisfaction of certain conditions precedent related to amendments to the bylaws of COTCo. Please refer to Note 20 of the interim financial statements for further information on the accounting treatment of the transaction.
Following the Annual General Meeting held on 30 June 2023, Steve Jenkins retired as Chair but remains on the Board as an independent Non-Executive Director. Joseph Pagop Noupoué was appointed Non-Executive Chair, having joined the Board as a Non-Executive Director in April 2023. Sylvie Rucar retired as a Non-Executive Director from the Board post-period end due to personal reasons.
As previously detailed, in 2022 Savannah invested approximately US$1 million (“the Initial Investment”) in Fenikso (previously known as Lekoil Limited) and, under the terms of the restructuring agreements negotiated between Savannah and Fenikso entered into in December 2022, the Company will receive payments of up to US$16.3 million over the course of the next nine years. Post-period end, Savannah has fully recovered the Initial Investment with the receipt from Fenikso of payments totalling US$1.3 million to date.
Chad Assets Update
As previously disclosed in the Group’s 2022 Annual Report, the Republic of Chad nationalised the Group’s interests in Chad owned by its subsidiaries, Savannah Chad Inc (“SCI”) and Savannah Midstream Investment Limited (“SMIL”), (the “Chad Assets”) by way of a law passed on 31 March 2023 (the Nationalisation”). This confirmed an announcement of the President of Chad of 23 March 2023.
The actions of the Republic of Chad are in breach of the upstream conventions to which SCI and the Republic of Chad are, amongst others, party, together with a breach of the convention between Tchad Oil Transportation Company (“TOTCo”) and the Republic of Chad. Further details are provided in Notes 2, 22 and 23 of the financial statements. Disputes under the upstream conventions and the TOTCo convention are subject to the jurisdiction of ICC arbitral tribunals, seated in Paris. SCI and SMIL have commenced ICC arbitral proceedings against the Republic of Chad to seek full recompense for the loss that they have and will suffer as a result of the nationalisation of the Chad Assets.
Following the period end, a dispute has also arisen among the shareholders of COTCo. SMIL has initiated appropriate court and ICC arbitral proceedings to protect its interests as a shareholder in COTCo.
Zephyr has reported its unaudited interim results for the six months ended 30 June 2023.
During H1 2023, and in the period since, Zephyr invested significant capital into the development of its flagship operated project in the Paradox Basin, Utah, U.S. while also substantially growing its portfolio of non-operated assets in the Williston Basin. All investment activity was in line with the Company’s strategy of generating and compounding cash flow from its non-operated portfolio in order to fund the development of the Paradox project, with the ultimate goal of opening up the next prolific onshore U.S. oil and gas play.
The Company’s board of directors remain committed to delivering long-term value to Shareholders, while upholding the Company’s core values of being responsible stewards of Shareholders’ capital and of the environment in which it operates.
· During H1 2023, capital expenditure across the Paradox project and the Williston assets totalled US$21.6 million.
· Revenues for H1 2023 were US$13.4 million, and were driven by the Company’s hydrocarbon production from its Williston assets:
o Revenues for H1 2023 were lower than those in the comparative interim period, reflecting the standard decline rates expected from the Williston assets and the lower commodity price environment during H1 2023.
o Following significant investment in H1 2023, non-operated revenue and production are forecast to increase in the second half of the 2023 financial year when the non-operated wellbore interests operated by Slawson Exploration Company (“Slawson” and the “Slawson wells” ) come online.
· Adjusted earnings before interest, tax, depreciation, depletion and amortisation, unrealised foreign exchange gains and unrealised gains on hedging contracts (together “Adjusted EBITDA”) for H1 2023 was US$6.5 million.
· At 30 June 2023, the combined carrying value of the Company’s Paradox project and Williston assets was US$103.2 million (30 June 2022: US$75.9 million), demonstrating the scale of investment made in the asset portfolio over the last twelve months.
· The Company’s gross borrowings at 30 June 2023 were US$33.7 million and net borrowings (gross borrowings less cash and cash equivalents) were US$27.5 million.
· During H1 2023, the Company hedged production volumes of circa 69,000 barrels (“bbls”) with a realised gain of US$1.2 million on these contracts.
Paradox project (operated asset)
· The Company completed the acquisition of the remaining 25% working interest in the Paradox project, increasing its working-interest to 100% across approximately 46,000 gross acres. Based on the increased working interest, the Competent Persons Report (the “CPR”) prepared by Sproule International (“Sproule”) in 2022 estimates the Paradox project to contain:
o Net 2P Reserves: Proved Reserves of 2.6 million barrels of oil equivalent (“mmboe”) net to Zephyr, an increase from 2.1 mmboe.
o Net 2C Contingent Resources: 34 mmboe net to Zephyr, an increase from 27 mmboe.
o Net 2U Prospective resources from overlying reservoirs: 270 net unrisked mmboe net to Zephyr, an increase from 203 net unrisked mmboe.
· The State 36-2 LNW-CC well (the “State 36-2 well”) was drilled and encountered significant flowing hydrocarbons upon intersecting the Cane Creek reservoir.
· During subsequent preparations for a production test on the State 36-2 well, the Company experienced a major well control incident. The incident, which resulted in the uncontrolled release of hydrocarbons over a period of four days, was ultimately brought under control safely and with no injuries and no significant environmental damage.
· At present, the State 36-2 well remains static and under control.
· During the incident and subsequent well control efforts, multiple joints of the well’s 2 7/8-inch production tubing were compressed and/or compromised, and Zephyr’s operations team has been working methodically to remove and inspect the remaining joints while keeping the wellbore static. Recently, operations to retrieve the damaged tubing have progressed much slower than expected due to the poor condition of the tubing, as exhibited by the multiple damaged and buckled joints retrieved that led to the need for milling operations and resulted in shorter retrievals per trip.
· While the Company is continuing to attempt to remove the remainder of the production tubing, it has, in parallel, commenced discussions with its insurer to assess alternative options for realising the significant potential productivity of the reservoir at this location. Alternatives being discussed include both a potential sidetrack from, or a re-drill of, the original well.
· As previously reported, the Company retains comprehensive well control insurance coverage, and the Board expects to recover substantially all costs associated with the well control incident, including those associated with any sidetrack or re-drill scenario. Discussions with its insurer continue and the Company will update the market in the event a new course of action is deemed to be appropriate.
o To date the Company has recovered over US$3.7 million from its insurer in respect of the well control incident.
· In September 2023, the Company was notified by Dominion Energy, Utah, LLC (“Dominion”) that its gas supply pipeline from the Northwest Gas Pipeline system to the Green River area (the “pipeline”) will be operational in the early part of the fourth quarter of 2023, and that the pipeline will also be available to accept natural gas volumes from third-party sources, slightly ahead of original timeframe estimates. The completion of the Dominion pipeline is a welcome development which will enable the export of natural gas volumes from Zephyr’s Paradox project.
Williston assets (non-operated assets)
· Zephyr continues to deliver on its strategy to acquire working interest positions in value accretive, high-quality, high-margin production assets with significant near-term growth potential in the Williston Basin.
· H1 2023 sales volumes averaged 1,225 barrels of oil equivalent per day (“boepd”).
· H1 2023 revenues totalled US$13.4 million.
· H1 2023 gross profit (after operating and transportation expenses, production taxes, gains from derivative contracts and excluding DD&A) was US$9.6 million demonstrating the high margins realised from the produced barrels.
· At 30 June 2023, 223 wells in Zephyr’s portfolio were available for production. Net working-interests across the portfolio now average 7% per well, equivalent to 15.1 gross wells in total.
· The wellbore interests operated by Slawson, acquired by Zephyr in the second half of 2022, are fully drilled and completed. Production from these working interests is forecast to be online in the fourth quarter of 2023 (“Q4 2023”), following completion of surface facilities on the well pad. These wellbore interests are estimated by management to contain 2P reserves, net to Zephyr, of 550,000 barrels of oil equivalent (“boe”) and will provide a significant near-term production boost to the Company when they come online.
· In addition, Zephyr has elected to participate in ten new wells operated by Continental Resources Inc (“Continental” and the “Continental wells”). The wells are located in a highly attractive area of the Williston Basin. The CAPEX associated with these wells will be funded from the Company’s existing cash resources.
· In June 2023, the Company raised US$3.9 million (before expenses) through the placing and subscription of 90,000,000 new ordinary shares of 0.1 pence each in the Company (“Ordinary Shares”). The net proceeds from the placing and subscription are being used to fund working capital requirements at the Paradox project.
· Zephyr remains carbon neutral on a Scope 1 basis across its operations, through the purchase of Verified Emission Reduction credits (“VERs”).
Colin Harrington, Chief Executive of Zephyr, said:
“The period under review was an active time for Zephyr, during which we invested significant new capital into both the Williston assets and the Paradox project. We expect to see initial returns from this investment commencing in Q4 2023 when the Slawson wells come online, and continuing to the point of first sustained revenues from the Paradox project when we complete and tie in our recently drilled wells.
“While our progress on the Paradox project has been impacted by the well control incident on the State 36-2 well, the incident also illustrated the significant and larger production potential of the overall project.
“Over the next period we will continue the work required to transform the Paradox project into a revenue generating development, and we are delighted that the Dominion Energy pipeline – which crosses our leasehold position – has now been completed and will shortly be ready to accept third party natural gas volumes.
“Looking ahead, with a diverse portfolio of cash flowing assets, potential for substantial future organic growth, a solid financial footing and a talented and dedicated team of employees, we continue to be extremely optimistic about Zephyr’s future.”
The take from this announcement will inevitably focus on the Paradox Basin and the State 36-2 well but it is wise to also take a look at the significant investment in the non-operated portfolio in the Williston and the more recently acquired Slawson wells. These will now kick-in in Q4 this year and with the initial flush production benefitting from current $90+ oil will meaningfully contribute to the company’s finances which was the original plan.
As for the Paradox the focus has been on the size and the speed of the project to continue to attempt to remove the remainder of the production tubing, it has been incredibly slow and has meant that the company has in parallel, commenced discussions with its insurer to assess alternative options for further progress.
It is very pleasing to note that the insurers are being highly supportive with regard to a change in tactic for this process which might involve a side-track or even re-drilling the well. But it should be borne in mind that the well encountered a huge fracture network in what is likely to be a highly productive area and will realise the significant potential productivity of the reservoir at this location.
So, with the board still very confident in the larger Paradox opportunity, and having Dominion now finished with their pipeline is another key piece of the bigger puzzle and removes an element of risk many shareholders were worried about.
For Zephyr it is the bigger picture for hitting apparent economic hydrocarbons, so far they are two from two and also have a third data point in the recently re-opened 28-11 well. The resource here, albeit virgin territory, looks contiguous across the entire asset position which is further reason to be extremely optimistic.
I therefore remain highly confident that Zephyr will learn from this well and its, remember, operational problems and will manage them into revenue producing longer term successes. The share price reaction today is far from understandable, buying here will for those with a slightly longer term approach, will reap significant rewards.
Scirocco has announced its unaudited interim results for the six months ended 30 June 2023.
· In line with the Investing Policy approved at AGM in July 2021, the Company continued to support Energy Acquisitions Group Limited (“EAG”), where Scirocco has a 50% ownership interest, to identify additional investment opportunities building on the acquisition by EAG of 100% of Greenan Generation Limited (“GGL”) and associated 0.5 MWe Anaerobic Digestion (“AD”) plant located in County Londonderry, Northern Ireland. AD is a process that creates biogas, a renewable energy source that will help the UK deliver on its decarbonization commitments
· During the period, GGL has seen lower average wholesale power prices than the same period in 2022 and experienced reduced operational uptime driven by an intermittent fault. These effects were partially offset by higher ROC payments linked to inflation adjustments
• Revenue for H1 2023 was £574k compared to £544k for the same period in 2022, an increase of 5.5% year on year.
• EBITDA for H1 2023 was £151k compared to £202k for the same period in 2022 reflecting lower average wholesale prices and operational interruptions and a general increase to the plant service and feedstock contracts.
· The Company continued to engage with Tanzanian government authorities to progress the completion of the divestment of its 25% working interest in the Ruvuma asset following the agreement with ARA Petroleum Tanzania announced on 31st August 2022. The total consideration for the sale is up to $16 million:
• Initial consideration of US$3 million payable on completion of the sale, which is expected during October 2023;
• US$3 million payable upon final investment decision being taken by the parties to the Ruvuma Asset Production Sharing Agreement or the JOA as the case may be, which given progress made to date at the asset is expected to be received by year end 2023;
• Deferred consideration of up to US$8 million payable in the form of a 25% net revenue share from the point when Ruvuma commences delivery of gas to the gas buyer;
• Contingent consideration of US$2 million payable on gross production reaching a level equal to or greater than 50Bcf.
· The Company announced on 2 March 2023 that significant progress had been achieved by the operator APT to deliver first gas from the Ruvuma field by the end of 2023;
· The approval process has taken longer than originally anticipated and the Company announced on 25 May 2023 that it had agreed with its counterparty APT to extend the longstop date to 31 August 2023 to provide additional time to achieve the necessary government consents;
· The Prolific Basins financing facility outstanding balance was settled in full during the period through cash instalments paid in connection with the Amendment and Repayment plan announced on 11 October 2022. The facility is now fully repaid;
· The Company disposed of part of its remaining shareholding in Helium One realizing c. £142k in proceeds during the period;
· As part of an ongoing focus on ensuring that the Company has the correct board composition to support the implementation of the investment policy Muir Miller and Don Nicolson submitted their notice to step down from the board and Niall Roberts, a candidate recommended by the Company’s largest shareholder GP Jersey was appointed to the board on 1st March 2023 and Matt Bower, GP Jersey’s appointed representative, was appointed to the board on 27th April 2023;
· Continued the Company’s focus on cost discipline and cash preservation in order to deliver completion of Ruvuma; and
· Held cash at 30 June 2023 of £295k
Post Period Highlights:
· On 12 July 2023 the Company provided an operational update regarding the Ruvuma asset noting the significant progress made by the JV in the development of the Ruvuma license which provides improved clarity regarding the timing of contingent payments under the sale arrangements between ARA Petroleum Tanzania and Scirocco.
· On 3 August 2023, The Company announced that it had received the tax clearance certificate relating to the Ruvuma transaction from the Tanzanian Revenue Authority.
· The company successfully recovered 1 million Helium One shares which had been “trapped” after Pello Capital entered administration in October 2022. These shares were sold during August 2023 delivering net proceeds of c. £75k.
· On 29 August 2023, the Company announced that whilst significant progress had been made delivering the necessary approvals from the relevant Tanzanian government authorities it had agreed with its counterparty APT to extend the longstop for the Ruvuma transaction to 30 September 2023 to allow sufficient time to achieve the final approval from the Minster of Energy.
· On 28 September 2023, the Company announced that whilst it was actively engaged with Tanzanian government authorities including the Ministry of Energy to deliver the necessary approvals required to complete the transaction, it had agreed with its counterparty APT to extend the longstop for the Ruvuma transaction to 20 October 2023 to allow sufficient time to achieve the final approval from the Minister of Energy.
Commenting on the Interim Results, Alastair Ferguson, Non-Executive Chairman said:
The first half of 2023 has seen the Company continue to focus on selling its legacy natural resources assets to provide capital to invest within target assets in the European sustainable energy and circular economy markets.
Although the sale of its legacy interest in Ruvuma has taken longer than originally anticipated to complete, we are now focused on delivering completion. The proceeds of the divestment – both at completion and any future contingent payments – will be available for reinvestment in assets which comply with the company’s investment policy.
With the imminent completion of the Ruvuma sale, the company is expected to accrue cash resources over the coming months supporting new investment activities.
We now look forward to engaging with stakeholders to deliver the investment plan going forward.”
With the continued but not unexpected delay in the completion of the Ruvuma process, Scirocco has had to pause, hopefully not for long, before cracking on with the investment in the ‘European sustainable energy and circular economy market’ targets.
I am looking forward to that time as the initial investments look to be of some interest and will make Scirocco a unique and exciting investment.
Beacon has announced its Interim Results for the six months ended 30 June 2023.
Mark Rollins, Non-Executive Chairman of Beacon Energy, commented:
“During the period, the Board has worked tirelessly and has made excellent progress in delivering the Company’s strategy which is to pursue the acquisition of value enhancing opportunities to develop and grow a self-funding upstream oil & gas company.
The data we have gathered during the drilling of the SCHB2(2.) well indicates the potential for substantial reserve and production upside for the Stockstadt Mitte segment – up to and potentially more than the High Case (5.8 mmbbls) outlined in the Company’s December 2022 CPR which clearly bodes well for the long-term value we believe we can realise from the asset.
With the SCHB-2(2.) now safely and successfully completed, the Company’s priority is establishing flowrates through clean-up of the wellbore, and eventual installation of an Electrical Submersible Pump.
Based on the technical data acquired through the drill which demonstrated the high quality reservoir encountered at the well location, the Company’s technical analysis indicates that with a successful clean-up operation and implementation of artificial lift initiatives, the well has the potential to deliver in the region of 900 bopd net production to Beacon. At those flow rates, the Company would expect to deliver operating cash flows in excess of US$1.5 million per month (assuming $80/bbl Brent).
I would like to thank our new and existing shareholders for their ongoing support of the Company, management team and our strategy. We are very excited about the year ahead with an active work programme designed to create long-term value for Beacon’s shareholders.”
Beacon looks to be in a very interesting place indeed. After the operating problems on the well they have got good technical data from the drill bit and are clearly excited about the potential of production of some 900 b/d net which equates to the $1.5m per month at $80 Brent.
The recent fundraising seems to have gone very well, easier than the first I imagine and has also brought in Union Jack as a 3%+ shareholder and a highly supportive one at that I suspect, after all Beacon have been looking for a partner to develop the German acreage.
With the shares still down at 0.15p the chances of appearing in the next Bucket List are growing all the time.
SDX has announced its unaudited financial and operating results for the six months ended 30 June 2023. All monetary values are expressed in United States dollars net to the Company unless otherwise stated.
H1 2023 Highlights
· Net Production, 3,291 boe/d (459 bbls/d and 17.0 mmscf/d)
· Out of three wells completed across SDX’s portfolio in the year to date, two were put on production during H1 2023.
· Carbon intensity of 4.5kg CO2e/boe at operated assets during H1 2023.
· Gross Profit / Netback of $10.1 million, EBITDAX of $8.1 million and operating cash flow (before capex) of $0.9 million.
· Capex $2.9 million.
The first half of 2023 saw a number of strategic and operational initiatives. The key senior management hires, the securing of additional funding, improvements in commercial terms in Morocco and progress in selling our Egyptian assets has brought a new focus and clearly defined strategy to the Group. We enter the last part of 2023, and head into 2024, well placed to deliver long-term sustainable returns to shareholders.
In May 2023, we announced our new Executive team with the appointment of Daniel Gould as Managing Director, William McAvock as CFO and Lesley Maclean as Head of Corporate Development. The new team brings a wealth of experience of the sector and will be focused on delivering on growth initiatives that will create long-term sustainable value.
The first half of 2023 was in many ways a period of revitalising the SDX story. With a new strategy that is based on developing a hybrid energy producer, the Company announced that it is selling its Egyptian assets and I am pleased to say that the process remains firmly on track and the disposal, if completed, would constitute a fundamental change of business pursuant to AIM Rule 15, because the consideration, as currently calculated in the Heads of Terms, will significantly exceed the market cap Consideration Test threshold. The disposal will allow the Company to address some of the legacy issues inherited from the past and allow the Company to develop its organic and inorganic growth story in Morocco and beyond.
During the first half of 2023, the Company negotiated a syndicated convertible loan agreement for up to $3.25 million, which was signed after the end of the six months period, in July 2023. To date, $2.5 million has been drawn for the purposes of reducing outstanding debt to the European Bank for Reconstruction and Development (EBRD), the Moroccan drilling campaign and for general corporate purposes.
Subsequent to the period end, in September 2023, the Company entered into a non-binding heads of terms with DIKA MOROCCO AFRICA, its largest offtaker and a 100%-owned subsidiary of Citic Dicastal, which is a subsidiary of Citic Group, a Chinese holding company with a corporate portfolio approaching $1 trillion, to prepay for SDX’s gas deliveries in Morocco. The initial terms of the agreement envisage the receipt of approximately $2 million by the end of September 2023. These funds are planned to be used towards the drilling costs of the KSR-21 well and for general corporate purposes. A further heads of terms for a larger prepayment amount is currently under negotiation and is expected to be agreed and funds drawn by early 2024. The Company plans to direct this second prepayment towards funding a further multi-well back-to-back drilling programme. This type of back-to-back drilling, which allows development of gas behind pipe (booked reserves), further increases operational efficiency, reduces costs and ensures that immediate and future demand can be met.
In February 2022, the Company sold 33% of the shares in Sea Dragon Energy (Nile) B.V., the entity that holds its interests in the South Disouq concession, to Energy Flow Global Limited (“EFGL”) for a consideration of $5.5 million. From 1 February 2022, the Company owned 67% of Sea Dragon Energy (Nile) B.V. with the remaining 33% held by EFGL as a non-controlling interest.
In February 2023, the Company and EFGL, at the request of EGAS, entered into agreement with EFGL to repurchase the 33% of the shares in Sea Dragon Energy (Nile) B.V. and signed a Deed of Assignment to assign 33% of its 55% interest (18.15% interest) in the South Disouq concession to EFGL. The consideration agreed represented 33% of the working capital of Sea Dragon Energy (Nile) B.V. as at February 2023. From February 2023, the Company owned 100% of Sea Dragon Energy (Nile) B.V., which owned a 36.85% interest in the South Disouq concession.
In South Disouq, Egypt, we undertook workover operations on SD-3X and SD-4X wells, recompleting the wells to shallower reservoirs to maximise recovery and on IY-2 to restart production.
In West Gharib, Egypt, we continued with our workover operations on the existing wells to maximise recovery from this field.
Subsequent to the end of the period, in August 2023, we announced the signing of the heads of terms for the disposal of all the Company’s Egyptian assets to a large multinational operator with existing Egyptian upstream interests. This strategic decision allows the Company to focus on the optimisation of its Moroccan portfolio, including the diversification into the transition energy sector.
In Morocco, we produced approximately 0.4 billion cubic feet (69,249 barrels of oil equivalent) during H1 2023. Gas and energy demand in general in the region remains high and, in June 2023, we renegotiated the gas sales agreement with one of our key customers and received a higher gas price for production with effect from 1 May 2023.
In September 2023, we commenced drilling the Ksiri-21 (“KSR-21”) well in Sebou Central of the Gharb Basin, Morocco. The KSR-21 well has reached its total vertical depth of 1,955 metres (1,966 metres measured depth) targeting a prospect within the Hoot formation, which is one of the main producing formations in the area. Drilling and wireline logging data confirm the presence of gas charged sands within the targeted reservoir section. The reservoir interval will now be perforated to undergo a short testing period before being brought onto production to supply existing gas offtakers.
We thank all our stakeholders and shareholders for their support over the last period, as we work tirelessly to revitalise the business and deliver long-term sustainable value to shareholders. We would also like to express our condolences to all those affected by the devastating earthquake in Morocco earlier this month and continue to offer our support.
Interim Executive Chairman
Very little to add to these historic figures, there has been much news around from the revamped SDX in recent weeks and as Jay says above, they are working to revitalise the business and deliver ‘long-term value for shareholders’.
§ January 2023 – Institutional placing for up to $6 million via a Facility Agreement with Energy Exploration Capital Partners LLC (“EECP”) to initially raise $1.25 million. The facility provides for further convertible advances of up to $4.75 million subject to certain conditions;
§ March 2023 – Share issuance in accordance with the terms of the investment deed with EEPC, of 102,543,067 new ordinary shares of 0.001 pence each. The purchase price of 0.12 pence (0.15¢) per Ordinary Share for the settlement amount of $150,000 had been prepaid by EEPC as part of the January 2023 advance;
§ April 2023 – Cameroon operational update covering:
o An application to Minister of Mines, Industry and Technological Development (“MINMIDT”) for a one-year extension of the initial exploration period of the Thali PSC;
o Discussions with rig owners and operators to secure rig availability to drill at NJOM-3;
o Potential financing via a term loan of approximately $7 million with BGFI Bank Group (“BGFI”) and asset-level financing with other parties;
o Revised resource estimates and risks for the reservoirs connected to the NJOM-1 and the NJOM2 discovery wells, increasing total risked pMean prospective resources to 35.4 million barrels (“bbls”);
o The deployment of Paradise® software to conduct detailed attribute analysis of the reprocessed 3D seismic data, identifying and adding further confidence to the oil and gas fluid content of target reservoirs in the Njonji-1 and Njonji-2 fault blocks.
§ May 2023 – Placing and subscription of 4,600,000,000 new ordinary shares at 0.05p to raise £2.3 million (gross) with the Company’s Chairman and CEO, Jeremy Asher, subscribing for 100,000,000 new Ordinary Shares in the Placing for £50,000;
§ June 2023 – Namibia technical update on basin modelling work undertaken across offshore blocks 1910A, 1911 and 1912B of the PEL96 License. The results highlighted the potential oil-prone sources and migration pathways for oil charge across multiple prospects as well as the potential for stratigraphic traps in the Dolphin Graben.
Again, nothing to add really to these figures which show a continued determination by Jeremy Asher and team to deliver on his long held plans in Cameroon and Namibia.
IOG yesterday announced that, after extensive consideration of the Company’s current financial situation following underperformance of the developed assets and the resulting creditor position, the Board has now regrettably concluded that IOG plc should be placed into administration in order to preserve the value of the business for creditors. Accordingly, a notice has been filed with the Court today notifying the Company’s intention to appoint administrators of IOG plc as soon as reasonably practicable.
In the context of the existing bond waiver which expires on 29 September 2023, discussions have been held with a representative group of senior secured bondholders and their advisors regarding a potential additional capital injection and associated restructuring of the Company. Discussions are intended to continue during the Administration with a view to a potential restructuring solution that protects the operating subsidiaries, which are not being placed into administration.
In light of the above, the Company has requested a suspension of trading in its ordinary shares on AIM with effect from 2.10 pm on 28 September 2023. The Interim Results for the six months ending 30 June 2023 will not be released.
Esa Ikaheimonen, Chair of IOG, commented:
“The Board are extremely disappointed to draw this unavoidable conclusion, having worked exhaustively to overcome the Company’s financial circumstances. We have not found a viable solution that would provide a return to shareholders. We regret the impact this outcome will have on our many stakeholders. I want to thank everyone involved, especially the IOG team, for their efforts through this very challenging period.”
There is no doubt about the sincerity of Esa’s comments above but the move they have made has opened up discussions with regard to a restructuring or recapitalisation of the company. The key point is that the plc is going into administration and not the subsidiaries so IOG might continue but probably not as we know it Jim.
Prax Exploration & Production PLC has provided its first update to Deferred Consideration Unit (“DCU”) holders under the terms of the agreement dated 8 June 2023, based on the performance of Prax Upstream Limited (formerly Hurricane Energy Plc) and its subsidiaries (“Prax Upstream”) in the four month period from 1 March 2023 to 30 June 2023.
The DCUs confer an entitlement for holders to receive 17.5% of all future net revenues earned by Prax Upstream from 1 March 2023 until 31 December 2026, including from both the Lancaster Oil Field and from any acquisitions made by Prax Upstream, capped at a total of 6.48 pence per DCU (being c.£129.1 million in aggregate). The DCU payments will be paid biannually in arrears, approximately 90 days after the end of each 6 month period (those periods ending on 30 June and 31 December each year).
Production from the Lancaster Oil Field, the only producing asset currently in Prax Upstream, resulted in sales of 539,244 barrels of oil during the four months from 1 March 2023 to 30 June 2023.
Gross revenues for the period were $45,801,204.35, with net revenues being $43,903,875.95 after the related costs for transportation, freight, port, inspection, testing and marketing charges are adjusted for. The Deferred Payment for the period based on 17.5% of net revenues equates to £6,150,478.94 which in turn equates to a payment of £0.00309 (0.309p) per DCU. The Deferred Payment Calculation Statement can be viewed in full here. The payments will be paid to Prax DCU II Holders on 30 September 2023.
Prax Upstream continues to pursue upstream acquisition opportunities and will provide an update to DCU holders when definitive progress is made.
DCU II Holders will receive the payment via their Crest account or, if holding share certificates, via cheque in the post.
DCU I Holders will receive loan notes in the post.
Alessandro Agostini, Head of E&P – Europe and Africa at the Prax Group said:
“Following the completion of the acquisition of Hurricane Energy in June, we are very pleased to deliver the first payment tranche to DCU holders. In line with previous guidance, the Lancaster Oil Field production continues to follow its natural decline. We had a successful turnaround during the month of August and current production is around 7,000 bopd. The transition of ownership has been smooth and we are pleased to have welcomed numerous Hurricane employees into the Group.
As has been stated previously, our goal is to participate in further deals in the UK North Sea in order to continue to deliver value to the DCU holders. Any significant progress made in this regard will be announced to the market via the Prax website.”
I’m including Prax today for the first time as today’s announcement is the first payment to the DCU holders and they will have been keen to see that Prax stood by their word and delivered as promised. I had the opportunity to speak to Alessandro Agostini this morning and Prax is clearly a company on the move.
Obviously with Prax being a private company there are limited opportunities for investors but I was reminded that the DCU’s are traded and post this payment it looks like they will trade a bit more.
For further information on the DCUs and to sign up for future press releases in relation to the DCUs, please visit the Prax Group’s website: https://www.prax.com/information-for-holders-of-dcus/
The long wait is over and the Ryder Cup has started today at the Marco Simone Golf Club in Rome. Europe started well and were 4-0 up after the foursomes but the USA are mounting a strong fight back this afternoon.
In the footy tomorrow sees a virtually full set of games, Villa host the Seagulls, the Gooners visit the Cherries, the Toffees entertain the Hatters, the Red Devils host the Eagles for the second time this week, the Bar Coders host Burnley, the Blades go to the Hammers, Wolves host the Noisy Neighbours and Liverpool go to White Hart Lane. Sunday just sees Forest v the Bees.
Surrey completed their successful defence of the County Championship yesterday, the pennant flies over The Oval again.
And the RWC continues with New Zealand v Italy tonight, tomorrow the Pumas play Chile, Fiji play Georgia and Scotland play Romania. Sunday sees the Wallabies hoping to beat Portugal and the Springboks play Tonga.
Excellent racing at Newmarket tomorrow and Frankie has a couple of great rides at Longchamp.
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