WTI (Jan) $76.93 -$3.05, Brent (Feb) $82.52 -$2.89, Diff -$5.75 +16c.
USNG (Jan) $5.57 -71c, UKNG 345.0p -10.0p, TTF (Jan) €136.18 -€5.22.
Oil price
With the EU, G7 and Opec+ news in the market yesterday oil started strong but the ISM services number overall jumped two points to 56.5 for November, with business activity hitting an 11-month high and that sent the Fed watchers into orbit and the market and everything with it into tailspin.
For those dedicated to the retail gasoline price in the US it is nearly a seminal moment, last week a gallon of Chevrons finest will cop you $3.39, down a full 14.4c on the week and 40 cents on the month, impressive stuff but at only up 4.9c y/y it is nearly back to even steven…
Touchstone Exploration
Touchstone has announced that the Company launched a private placement in Canada (the “Canadian Private Placement”) at 5 p.m. EST on December 5, 2022 to raise a minimum of C$7.5 million (approximately US$5.5 million and £4.5 million) up to a maximum of C$10 million (approximately US$7.4 million and £6.1 million) at a price of C$0.90 (approximately 54.5 pence) per Common Share (as defined below) of no par value (the “Canadian Placement Shares”).
The Company further announces a proposed placing in the UK (the “UK Placing”) to raise approximately US$5.5 million (approximately £4.5 million and C$7.4 million) through the issue of Common Shares (as defined below) of no par value (the “UK Placing Shares”) with institutional and other investors in the United Kingdom at a price of 54.5 pence per UK Placing Share (approximately C$0.90) (the “Placing Price”).
The Canadian Private Placement and the UK Placing (collectively, the “Fundraise”) are expected to raise aggregate gross proceeds of between US$11 million (approximately £9 million and C$14.9 million) and US$13 million (approximately £10.6 million and C$17.5 million) to allow Touchstone to accelerate its Ortoire exploration and development program.
In the event of excess demand, the Company reserves the right to increase the size of the UK Placing and/or the Placing Price. The UK Placing is being completed by way of an accelerated book building process (the “Bookbuild”) and UK Placees (as defined below) will be subscribing for Common Shares pursuant to the terms and conditions set out in the Appendix to this announcement. Shore Capital and Canaccord (each as defined below) are acting as Joint Bookrunners in connection with the UK Placing.
The Bookbuild in respect of the Canadian Private Placement and the UK Placing is expected to close on or around 3.00 p.m. London Time (10.00 a.m. EST) on December 6, 2022 but the timing of the closing of the Bookbuild for the UK Placing is at the absolute discretion of the Joint Bookrunners and the Company.
Background to the Fundraise and Use of Proceeds
In recent years, the Company has been focusing on its successful exploration and development program on the Ortoire block, onshore in the Republic of Trinidad and Tobago (Touchstone 80% working interest), which has identified significant natural gas discoveries at the Coho and Cascadura projects and an oil discovery at Royston.
Touchstone recently completed the development of its facility at Coho and announced initial natural gas production on October 10, 2022, with the Coho-1 well delivering average net natural gas sales of 7.3 MMcf/d (approximately 1,212 boe/d) over 19 operational days in October.
On August 16, 2022, the Company received a Certificate of Environmental Clearance (“CEC”) to conduct development operations within the Cascadura area of the Ortoire block from the Trinidad and Tobago Environmental Management Authority. The CEC approved the construction of a multi-well surface production facility with a designed production capacity of 200 MMcf/d of natural gas, 5,000 bbls/d of associated liquids and 200 bbls/d of produced water, with a storage capacity of 8,800 barrels of liquids on the Cascadura A wellsite. In addition to the facility, the CEC includes the drilling of up to eight wells on two additional well pads (Cascadura B and C) and the establishment of associated pipelines and infrastructure within the Ortoire block.
Construction of the Cascadura surface facility and associated infrastructure required to bring production online from the two existing Cascadura wells is in progress. Once production at Cascadura is online, which the Company anticipates will be by the end of the first quarter of 2023, initial gross aggregate natural gas and associated liquids production from the Cascadura-1ST1 and Cascadura Deep-1 wells, based on previous well tests, has been forecasted at approximately 11,500 boe/d (9,200 boe/d net).
In addition to the development of the Cascadura facility, the Company has a portfolio of further exploration and development drilling targets at the Ortoire block. In order to allow the Company to continue to accelerate these prospective exploration, development and production opportunities while the Company’s cash balance and cash flows from operations are being allocated towards the Cascadura facility construction, Touchstone is seeking to complete the Canadian Private Placement and the UK Placing in order to side track Royston-1ST1 to drill and test the intermediate and subthrust sheets of the Herrera Formation. Net proceeds will also be applied to bring forward the drilling and potential completion of the Cascadura-2 development well.
The funds raised will strengthen the Company’s balance sheet and the Company also intends to use a portion of the net proceeds for working capital purposes as it continues constructing the Cascadura facility.
Details of the UK Placing
The UK Placing is being completed within the Company’s existing share issuance authorities. Shore Capital and Corporate Limited and Shore Capital Stockbrokers Limited (together, “Shore Capital”) and Canaccord Genuity Limited (“Canaccord”) (Shore Capital and Canaccord together, the “Joint Bookrunners”) will be conducting an accelerated book building process, in respect of the UK Placing. The book will open with immediate effect. Shore Capital and Canaccord have entered into an agreement with Touchstone (the “Placing Agreement”) under which, subject to the conditions set out therein, Shore Capital and Canaccord will agree to use their respective reasonable endeavours to procure subscribers for the UK Placing Shares at the Placing Price. The UK Placing is subject to the terms and conditions set out in the Appendix to this announcement, including the completion of the Canadian Private Placement. Members of the public are not entitled to participate in the UK Placing. The Placing Price represents a 13.5 percent discount to 63 pence, being the closing price of the Common Shares on the AIM market of the London Stock Exchange (“AIM”) on December 5, 2022.
The UK Placing Shares will, when issued, be credited as fully paid and will rank pari passu in all respects with Touchstone’s existing issued common shares of no par value each (“Common Shares”). The number of UK Placing Shares to be allotted and issued by the Company pursuant to the UK Placing will be determined at the close of the Bookbuild. It is envisaged that the Bookbuild will close no later than 3.00 p.m. (London Time) on December 6, 2022 but the timing of the closing of the Bookbuild and allocations are at the absolute discretion of the Joint Bookrunners and the Company. Details of the final number of UK Placing Shares and the Placing Price will be announced as soon as practicable after the closing of the Bookbuild. The UK Placing is not being underwritten. The UK Placing is conditional upon the completion of the Canadian Private Placement and the admission to trading and settlement of the Canadian Placement Shares. The Placing Price for UK Placees (as defined below) pursuant to the UK Placing has been translated at a fixed exchange rate of £1.00 to C$1.65 such that it will be the same price in pounds sterling equivalent as for placees participating in the Canadian Private Placement.
Details of the Canadian Private Placement
The Canadian Private Placement is separate to and is being managed distinctly from the UK Placing. UK investors are not entitled to participate in the Canadian Private Placement. The placement of the Canadian Placement Shares in Canada is not conditional upon the completion of the UK Placing nor on the admission to trading and settlement of the UK Placing Shares.
Admission and Settlement
Application will be made for the Canadian Placement Shares and the UK Placing Shares to be admitted to trading on AIM (“Admission”) and the Toronto Stock Exchange (the “TSX”). It is expected that Admission will take place at or around 8.00 a.m. (London time) on December 14, 2022 (or such later date as may be agreed between the Company, Shore Capital and Canaccord). The UK Placing is conditional upon, inter alia, the completion of the Canadian Private Placement and Admission becoming effective. The UK Placing is also conditional upon the Placing Agreement not being terminated in accordance with its terms.
UK Placing Shares issued in connection with the UK Placing will be subject to a four-month and one day restricted hold period which will prevent such UK Placing Shares from being resold in Canada, through a Canadian exchange or otherwise, during the restricted period without an exemption from the Canadian prospectus requirement. Any such UK Placing Shares will otherwise be freely transferable.
This announcement should be read in its entirety. In particular, you should read and understand the Appendix and the information provided in the “Important Notice to Investors” section of this announcement.
Touchstone is powering ahead on a number of fronts, only recently they started production at Coho where the no 1 well has delivered average net natural gas sales of 7.3 MMcf/d (approximately 1,212 boe/d) over 19 operational days in October which is impressive.
In addition the company are now ready to accelerate the drilling program which entails getting a development drilling campaign up and running at Cascadura which contrary to market gossip, is not behind schedule and so far I am expecting first gas in 1Q 2023. In addition to that the company is heading back to Royston in order to prove up the existing oil discovery
The raise appears to have been very well supported by existing and new institutional investors who can see, like me that this is a perfect time to be backing Touchstone, it looks opportune to back Touchstone at what I feel is going to be a very good year.
PS
Touchstone has announced that further to the Company’s announcements dated December 5, 2022 and December 6, 2022 regarding the private placement in Canada and the proposed placing in the United Kingdom, Touchstone has raised aggregate gross proceeds of approximately US$13 million (approximately £11 million and C$18 million) through the placing of a total of 19,924,400 new Company common shares of no par value, at a price of 54.5 pence per Fundraise Share (C$0.90 per Fundraise Share in respect of the Canadian Private Placement).
Of the aggregate common shares to be issued pursuant to the Fundraise, the Company has placed 8,704,400 new common shares with investors in Canada at the Placing Price, raising gross proceeds of approximately US$5.8 million (approximately £4.8 million and C$7.8 million), and 11,220,000 new common shares with institutional investors in the United Kingdom (the “UK Placing Shares”), at the Placing Price, raising gross proceeds of approximately US$7.5 million (approximately £6.1 million and C$10.1 million).
Paul R. Baay, President and Chief Executive Officer, commented:
“I am pleased to confirm the completion of our fundraising, with strong support from both existing and new shareholders. The Fundraise allows us to accelerate our exploration and development program on the Ortoire block, which has yielded excellent results to date. With Coho having recently been brought onto production and facility construction at Cascadura underway, we are making substantial progress towards becoming an energy production company of significant scale, with a range of additional exploration prospects. The Fundraise allows us to accelerate certain aspects of our exploration and development strategy while we focus resources on bringing Cascadura onto production. I look forward to updating shareholders on our progress.”
A very good raise by TXP which will deliver the most exciting parts of the portfolio in short order, it could be amongst the best performers of 2023…
Scirocco Energy
Scirocco has provided an update on the divestment of the Ruvuma asset, where Scirocco has entered into an agreement to sell its 25% interest to ARA Petroleum Tanzania.
The Tanzanian Fair Competition Commission has now granted its unconditional approval for the transaction and issued the Company with the Merger Clearance Certificate. The issuance of the certificate is an important step towards completion of the asset divestment.
The Company continues to engage with stakeholders across the Tanzanian government agencies whose approval is required as part of the completion process. The Board now considers it more likely that completion will be achieved in Q1 2023 rather than December 2022 as previously guided, due to likely disruption around the upcoming festive period.
The Company remains in discussions with all stakeholder groups and will continue to provide updates to the market accordingly.
Tom Reynolds, Scirocco’s CEO commented:
“We are pleased to report this positive development today as we progress towards the completion of the divestment of Scirocco’s interest in Ruvuma to APT. We continue to work closely with Tanzanian authorities and counterparties and look forward to completing the transaction in Q1 2023.”
Given that tomorrow is the Scirocco Investor relations day it is convenient that they have updated on Ruvuma ahead of presentations on the EAG JV and the new-ish strategy and the opportunities that it presents. I have been invited to the presentation and am looking forward to it and meeting the management team.
The company say that the first-year performance of the Greenan asset demonstrates the low risk, cash generative nature of these AD plants – the performance of which has been optimised through the operating techniques and investments delivered by EAG which enhance the margins.
The company are getting on with life after Ruvuma and are now pursuing the new, focused strategy and the market opportunity is very compelling. SCIR is considered well placed to pursue the opportunities through its EAG vehicle, and they are currently working up a compelling pipeline of opportunities that they can go after in the near-term – and the model of bite-sized buy-and-build provides economies of scale as they implement the technical enhancements across a wider portfolio.
Tomorrow will be interesting, management will be keen to portray ‘new’ Scirocco as a company that is cheap as chips on a basic valuation metrics when one considers the firm and contingent elements of Ruvuma, the EAG investment which is generating FCF for the JV and the residual holdings in He1 and Corallian.
Anyone can attend the presentation, the agenda includes a presentation by Tom Reynolds, CEO of Scirocco and Chris Kerr, MD of EAG. The event will be followed by an informal drinks reception hosted by Scirocco’s Board of Directors.
The event will be hosted at Buchanan’s offices at 107 Cheapside, London, EC2V 6DN on 7 December from 3pm until 5pm, please sign up by emailing [email protected]
Echo Energy
Echo has provided an operational update regarding progress in the reactivation of three wells in the Chorillos field, announced by the Company on 10 November 2022.
This three well reactivation programme is in addition to the Santa Cruz Sur production and infrastructure enhancement plan first announced by the Company on 7 July 2022 (the “Enhancement Plan”) and has been prioritised by the Santa Cruz Sur partners in seeking to further increase liquids production from the Chorillos field.
As previously announced, three candidate wells (Cho-10, Cho-13, Cho-19) had been offline for four years due to surface constraints and were identified for reactivation without use of the workover rig. Recently completed infrastructure upgrades had removed prior constraints, enabling these wells to be brought back into production.
The Company is pleased to announce that operations to reactivate the three wells have now been successful and safely completed and each of the three wells is now producing oil through surface lines to a field-storage tank.
Surface commissioning has now begun and, given the length of time that these wells have been offline, infrastructure integrity is being fully confirmed. This is expected to take several weeks, during which time the flow rate from the wells will be at intentionally reduced levels to enable the surface infrastructure to be fully tested under production conditions.
Following successful commissioning, each well will then be independently assessed with a mobile test unit, to confirm the yet to be determined flow-potential of this cluster.
The Company looks forward to continuing to update shareholders on further progress on these operations and in respect of the Enhancement Plan.
Martin Hull, Chief Executive Officer of Echo Energy, commented:
“The three well reactivation plan is an important operational development for our Santa Cruz Sur Assets. These wells were offline at the time of and prior to Echo’s acquisition of an interest in Santa Cruz Sur in 2019 and our ability to safely, and successfully, reactivate these wells back to production is a great example of the breadth of the low-risk opportunity set that exists within our assets.
“This three well programme is in addition to the previously announced Santa Cruz Sur production and infrastructure enhancement plan and in light of the initial success, we look forward to executing similar opportunities, of which we believe there to be many, in the future. We remain committed to delivering on our strategy to grow production and look forward to reporting further progress.”
This is an interesting tease from Echo who have reactivated the three wells as promised and it looks like a smart operational feat to hopefully bring them back to production. But there is no flow rate or production guide so the market will have to wait, hopefully not long.
United Oil & Gas
United has announced the spudding of the ASW-1X exploration well in the Abu Sennan licence, onshore Egypt. United holds a 22% non-operating interest in the Abu Sennan licence, which is operated by Kuwait Energy Egypt.
ASW-1X exploration well
Following mobilisation of the Sino Tharwa-1 rig to site, the operator of the Abu Sennan licence, KEE, has notified the Joint Venture (“JV”) partners that the ASW-1X well has commenced drilling. This exploration well is the fifth and final well to spud in the 2022 drilling campaign and is targeting un-risked mean recoverable resources estimated by United at c. 8 mmbbls gross in multiple reservoirs. The ASW-1X prospect has been de-risked by the HF36-5X discovery made in an adjacent block in 2020, and by the results of the 2022 seismic reprocessing on the Abu Sennan licence, which has provided improved imaging and definition of the ASW targets. If successful, the well is expected to be quickly tied into existing facilities, adding additional production and revenue for the Company.
United Chief Executive Officer, Brian Larkin commented:
“The ASW-1X well is targeting significant recoverable resources across multiple separate horizons. This key exploration well fits with the JV’s exploration strategy of not only directly targeting significant volumes, but also for the potential to de-risk a number of other similar structures in this part of the licence. In the case of a commercial discovery, ASW-1X would be completed as a production well and, subject to the granting of a development permit, be brought into production thereafter.”
Does what it says on the tin, a potentially exciting opportunity for UOG, deserved after recent disappointment.
And finally…
In the World Cup yesterday Croatia beat Japan on pens and Brazil cruised past South Korea. Right now Portugal are playing Morocco are playing Spain and tonight Portugal play Switzerland.
It’s the night of the long knives in Rugby Union as Wayne Pivac has been sacked by Wales and replaced by Warren Gatland and Eddie Jones has been replaced by England.
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.
