Malcy’s Blog – Oil price, Sound Energy, FAR Ltd, Getech, Pharos Energy & finally

WTI $114.93 +$5.66, Brent $121.60 +$6.12, Diff -$6.67 +46c, NG $5.23 +4c, UKNG 275.0p +33.0p

By Malcolm Graham-Wood

Oil price

The big rise yesterday has been followed today by a $2 fall in morning trading today. All talk is about quite how much Russia are managing to sell in world markets what is not in doubt is the $40 discount they are taking for it. If it had not been for Covid China may have bought more and India are taking plenty of Russian crude, ironically it means that those countries not buying Russian are suffering from a double whammy, they don’t have the crude and those who are buying it are getting it for $80/barrel.

Once it is sorted one might expect Russia to start suffering with say 2m b/d down and no spares or ways of keeping its ageing infrastructure going. NATO is meeting today with Sleepy Joe in from the US, who have put more sanctions on overnight against Russian men and money. I bet Joe doesnt reiterate his comments from the election campaign when he said ‘I will end fossil fuel’…

Sound Energy

Sound has announced its audited final results for the year ended 31 December 2021.

HIGHLIGHTS

Development of the Moroccan Tendrara Production Concession

·      Phase 1 Micro LNG project

o  10-year take or pay Gas Sales and Purchase agreement signed with Afriquia Gaz

o  Execution of $18.0 million loan facility from Afriquia Gaz (with 6% annual coupon and a 12-year term)

o  Post period end issue of notice to proceed to Italfluid, an EPC contractor providing lease, operate and maintain facilities

·      Phase 2 Gas (pipeline) development

o  10-year take or pay Gas Sales and Purchase agreement signed with ONEE, a key milestone to monetise the gas resources at Tendrara

Exploration and growth

·      Extension of Anoual exploration permit duration from 8 to 9 years

·      Acquisition of Schlumberger Silk Route Services Limited

Corporate

·      Successful restructuring of €28.8 million corporate loan notes

·      Reduction in administrative expenses by approximately 42% compared with 2020

·      Equity subscription by Afriquia Gaz of £2.0 million

·      Receipt of circa €183,000 first payment for disposal of Badile in Italy

·      Post period announcement of a possible offer for Angus Energy plc

Graham Lyon, Executive Chairman said:

“2021 was a year of delivery in pursuit of monetising our significant discovered gas for our Phase 1 mLNG project. This included the successful conclusion of a number of major agreements and the delivery of key project milestones that very clearly demonstrated our commitment to delivering against our promises. During 2022, we will continue to work tirelessly to deliver additional value for our shareholders through meaningful progression on both the Phase 1 mLNG project and the Phase 2 gas pipeline development in our energy transition strategy in order to deliver increased future Company growth. I look forward with confidence to delivering a similarly productive 2022 for Sound on behalf of all of its stakeholders.”

There is little doubt now about quite how much has been achieved by Graham Lyon and his team at Sound, in the world of Covid in 2021 much was actually done. The ground has been broken at Tendrara for the micro LNG project and the phase 2 pipeline project is seemingly following hot on its heels. 

Sound has turned itself round from being an explorer to a development company, in addition, I am sure that 2022 will have a lot of activity all supporting the growth of the company. Accordingly Sound deserves a rerating in the market place as I’m sure that this is only the start for ‘new Sound’. 

Far

FAR Limited (ASX:FAR) (‘the Company’) an independent, Africa focused, oil and gas exploration company, advises that Catherine Norman has been given notice of termination from her role as Managing Director, effective immediately and has resigned as a director of the Company. Independent Chairman Patrick O’Connor will oversee the business during a period of transition.

With more than three decades’ Board and senior management experience across multiple industries including mining and oil & gas exploration, Mr O’Connor will manage the corporate activities of the Company to support FAR as it continues to progress its strategy to unlock shareholder value. Ms Norman will also be available during her 12-month notice period to assist with any transitional matters as required, in accordance with her employment contract.

Commenting on the executive change, Mr O’Connor said:

“The time has now come for a fresh perspective to ensure the Company explores every opportunity to realise value for shareholders. On behalf of the Board I’d like to thank Catherine for her significant contribution to the company. The Board will update shareholders shortly on its strategy that seeks to reflect the underlying asset value in the FAR share price.”

Well this is a surprise but not a shock as they say, over the years Far has been involved in some potentially substantial projects and I would say that they have been very unlucky not to have rewarded shareholders big time, indeed when the Senegal negations were going on I really thought that they would hit the jackpot. A combination of hindrance from supposed partners and greed from others left Far on the courtroom steps in a deal that I and others thought they should end up winning. 

But the board has decided that recently she hasn’t been appreciated by shareholders and institutions left the register. Also given that Far is effectively back to square one, the directors have decided that she is not the one to start again from scratch and it is better to start again with a new CEO. 

So when the board came to decide this move they had an idea of where the company might go and despite heroic efforts by such as the Meridian representative who was I understand very loyal, wanted the company to go forward under new management. Far has had its ups and downs in recent years and I for one thought that it was extremely unlucky and as as Napoleon famously said I know he’s a good general, but is he lucky? 

Getech

Getech has announced that it has won new contracts with leading mining companies to explore for sedimentary copper, iron oxide-copper-gold deposits, and other minerals critical to the delivery of the Energy Transition.

These contracts result from investment by Getech to expand the application of geoscience and data products that the Group originally developed as petroleum solutions – positioning them as essential tools in locating and developing new critical mineral deposits.

Using its proprietary data and workflows, Getech can identify the specific factors responsible for the location and economic concentration of energy and critical minerals. This information is delivered and managed through Getech’s unique platforms, such as Globe, which contain the Group’s world-leading gravity and magnet datasets and earth systems knowledge.

The total initial value of these new contracts is c. GB£110,000, which adds to Getech’s existing revenue from the mining sector. The Company’s focus is to use its new critical mineral products to expand revenue generation and where appropriate, explore equity participation in off-grid energy solutions.

Getech’s Chief Executive Office, Dr Jonathan Copus, commented:

“As we leverage our flagship products and world-leading data to unlock value in new markets, these sales demonstrate the versatility of our foundation products and solutions, and their adaptability in locating and de-risking different commodities across a wide range of geographies.

Against the current complex geopolitical backdrop, we see Getech’s ability to locate and define new geographically-diverse sources of critical minerals as essential to delivering a secure and sustainable energy transition. This is driving an expansion of interest in our unique offering, and as a trusted partner providing integrated local solutions to global energy challenges, this also presents us with opportunities for participation in these projects.”

Important contract wins from Getech today expanding the application of Getech’s geoscience and data products. Initially developed for the petroleum industry, the ability to adapt to energy transition suits the time. 

Getech are doing all the right things finding and defining new sources of critical minerals much needed in these days of energy transition. The results will mean higher revenues or even taking an equity stake where appropriate in off-grid energy solutions. 

Pharos Energy

Pharos has announced that it has been notified of the signature by the Egyptian Minister of Petroleum and Mineral Resources of the Deeds of Assignment in relation to its Egyptian El Fayum and North Beni Suef Concessions. The Minister’s signature of the Deeds of Assignment, which occurred on 21 March 2022, was the remaining condition to completion of the farm-out and sale of a 55% working interest share and operatorship in each of the Assets to IPR Lake Qarun Petroleum Co, a wholly owned subsidiary of IPR Energy AG.  Accordingly formal completion of the Transaction has now taken place.

As set out in the announcement of 15 September 2021, the firm consideration payable to the Group at completion is US$5 million, US$2 million of which was received as a deposit on signing of the farm-out agreements relating to the Assets. The Group will also receive, going forward, a disproportionate funding contribution from IPR Lake Qarun of US$38.425 million net to Pharos (to be adjusted for working capital and interim period adjustments from the effective economic date of 1 July 2020). In addition, the Group will be entitled to contingent consideration depending on the average Brent Price each year from 2022 to the end of 2025, capped at a maximum total payment of US$20 million. Pharos will continue to receive its retained 45% working interest share of all revenues, both cost oil and profit oil, throughout.

As announced on 13 January 2022, Jann Brown assumed the role of Chief Executive Officer with effect from 23 March 2022, the date of receipt of the signed Deeds of Assignment from the Minister. Jann is now one of two executive directors of Pharos, alongside Chief Financial Officer Sue Rivett. On the same date, Ed Story and Dr Mike Watts resigned as directors of Pharos, with Ed assuming a new role as President of the Group’s Vietnam business. The information in this paragraph is provided in accordance with the notification requirements of LR 9.6.11R and LR.9.6.12R of the Listing Rules.

 Jann Brown, Chief Executive Officer, commented:

“I am delighted that we have now completed the farm-out transaction with IPR, a key step in reshaping both our portfolio and our financial position, and one which sets Pharos on a path to a new phase of growth in Egypt. IPR’s long track record of success in Egypt, the enhanced field economics agreed with the Egyptian General Petroleum Corporation in January, plus the carry over our remaining 45% interest all combine to put us in the right place to deliver the full potential from these assets. We look forward to working closely with IPR, EGPC and our joint Operating Company (Petrosilah) to grow production, cash flow and the value of our Egyptian Assets.

It is truly an exciting time to take over the reins at Pharos. I look forward to continuing to work with Ed to maximise the value from our assets in Vietnam and would like to take this opportunity to thank Mike for his considerable dedication and contribution to Pharos over many years.”

Nothing really to add here today, Pharos are now game on for building in Vietnam and funding it from this deal in Egypt. I wish Jann Brown all the best and also for Mike’s hard work, I think the outlook for Pharos is very positive. 

And finally…

The 3rd and final test starts today in Grenada, with grass on the pitch the Windies have won the toss and inserted England, this could be over very soon……………..

Tonight it’s the World Cup qualifier and Wales play Austria.

The opinions expressed here are those of the author

Malcolm Graham-Wood

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


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