WTI (Oct) $81.63 +47c, Brent (Oct) $85.86 +37c, Diff -$4.23 -10c.
USNG (Oct) $2.79 +22c, UKNG (Oct)* 95.35p +9.72p, TTF (Oct) €38.365 +€0.89.
*September contract expiry
Oil price
After a pair of excellent inventory stats where crude drew over 10m barrels each the best news was actually not that those numbers beat the whisper but that in total stocks are some 15m b’s below the 5 year average. And whilst products were mixed they too are well below 5 year averages and with Labor Day on Monday in the US signalling the end of the driving season, demand is still very high.
US jobs data were well below the whisper, 177/- vs 200/- call and +371/- in July. Experts say that US rates may now be on hold. And Chinese PMI’s were mixed, just creeping up to the magic 50 level. Finally the coup in Gabon shouldn’t affect oil much despite the Country being a member of Opec the odd 350/- b/d isn’t going to change much…
And finally…readers will remember my annual comments around this time of year. It was 44 years ago this week that I stepped off the train in Edinburgh shiny and ready to join Wood Mackenzie as a graduate trainee, they were great then, they still are, as for me………!
Union Jack Oil
Union Jack has announced that operations have commenced on the Wressle-1 well to install a downhole jet pump and associated surface facilities as part of the planning to optimise future production.
Union Jack holds a 40% economic interest in the Wressle development.
Operations began with a slickline programme, which has now been completed, where downhole pressure and temperature gradients were acquired. The work programme includes recompleting the well for the installation of a downhole jet pump and the siting of associated surface equipment.
The operations are scheduled to take approximately three weeks and production from Wressle-1 is expected to be reinstated during late September 2023.
Data obtained from these activities will be incorporated into the ongoing work by ERC Equipoise Ltd and the expected beneficial impact on production of the artificial lift from the jet pump will be included within their independent Competent Person`s Report, the details of which will be announced once this work is completed.
David Bramhill, Executive Chairman, commented:
“Industry sources indicate that over 90% of oil wells employ artificial lift during their life-cycle, therefore, the natural sequence of the installation of a jet pump on the Wressle-1 well offers a reliable method of ensuring the continued operation and the optimisation of its future production performance.”
Europa Oil & Gas
Europa has announced that operations to install artificial lift on the Wressle 1 well (“W1”) (in which Europa has a 30% interest) have commenced.
The operations began with a slickline programme where downhole pressure and temperature gradients were acquired. Slickline operations have now been completed and the ongoing work programme includes recompleting the well for installation of a downhole jet pump and installing the associated surface equipment. It is expected that these operations will last around three weeks and that production from the W1 well will be reinstated in late September 2023.
The downhole data obtained from these activities is being incorporated into the ongoing work by ERC Equipoise Ltd and the impact of the artificial lift will be included in the independent Competent Person’s Report which will be announced once this additional work is completed.
Will Holland, Chief Executive Officer of Europa, said:
“We have been working closely with our partners at Wressle to identify ways of maximising the field’s performance and the installation of a jet pump to provide artificial lift has been under consideration as a potential production enhancement programme for some time. In addition, planning for the Wressle development drilling programme continues, which will access the Penistone reserves and utilise the existing infrastructure. I am very pleased that work is under way and look forward to updating shareholders on our further progress in due course.”
Nothing much to add here, the installation of a jet pump is the natural progression in the life of an oil well and by doing this, as mentioned above, the operator is able to improve flow rates and enhance long term recovery.
Wressle has been fantastic performer in recent months throwing off much needed cash for the partners, this should mean that from next month that revenue should increase. Both UJO and EOG show the signs of excellent value.
Gulf Keystone Petroleum
Gulf Keystone has announced its results for the half year ended 30 June 2023.
Jon Harris, Gulf Keystone’s Chief Executive Officer, said:
“GKP’s operational and financial performance in the first six months of 2023 was materially impacted by the suspension of Kurdistan crude exports following the closure of the Iraq-Turkey Pipeline in March and continued delays to KRG payments. As a result, we shifted rapidly from a focus on driving profitable production growth to preserving liquidity, suspending all expansion activity and aggressively reducing expenditures across the business.
In July, we commenced local sales and partially restarted production. Since then, we have increased gross average sales to around 23,100 bopd towards the end of August. At current realised prices of around $30/bbl, we are able to cover our current estimated H2 2023 monthly net capex, operating costs and other G&A run rate of about $6 million while increasing our flexibility to manage accounts payable. We continue to actively pursue further increases in local sales and cost reductions and retain the flexibility to reduce operational activity and costs if sustainable local sales do not materialise to an acceptable level.
While no official timeline has been announced, we continue to believe that the suspension of exports will be temporary and that the KRG will resume oil sales payments in due course. In the interim, we remain focused on protecting the interests of GKP’s stakeholders by preserving liquidity and engaging as a company and industry with the KRG and other key parties.”
Highlights to 30 June 2023 and post reporting period
Operational
· Shaikan Field exports remain suspended following the closure of the Iraq-Turkey Pipeline (“ITP”) on 25 March 2023
· Production & trucking operations started at PF-1 in July and expanded to include PF-2 in August to support increasing local sales:
o c.4,900 bopd gross average sales for the period from 19 to 31 July increased to c.16,300 bopd for the period from 1 to 29 August
§ 1-18 August: c.12,100 bopd; 19-29 August: c.23,100 bopd
o Average realised prices of around $30/bbl, in line with local market pricing
o Advance payments received for local sales
o While the priority remains local sales, GKP retains the option to restart exports quickly once the pipeline reopens
· Gross average production in H1 2023 of 23,256 bopd (H1 2022: 44,941 bopd)
o Prior to the ITP closure, production and operational activity had been increasing. 2023 gross production averaged 49,165 bopd between 1 January and 24 March 2023 and 53,682 bopd between 1-24 March, including five days in excess of 55,000 bopd
· All expansion activity in the Shaikan Field halted and UK and Kurdistan headcount reduced:
o All drilling, well workover, facilities expansion and well pad preparation activity remains suspended
o 55% reduction in expat workforce, with further reductions under review
o 50% of local workforce on reduced hours in July, partially offset in August due to step up in local sales
o 20% deferral of Executive and Non-Executive Director salaries and fees from July
· Rigorous focus on safety maintained
o No Lost Time Incidents for over 225 days
o Continuing to progress critical safety upgrades and maintenance activity
Financial
· H1 2023 financial performance materially impacted by the suspension of exports and continued delays to KRG payments
o In response, the Company has moved quickly to preserve liquidity by aggressively reducing capital expenditures and costs while proactively managing accounts payable
· Decline in Adjusted EBITDA and profitability driven by the suspension of exports and lower realised prices in Q1 2023
o 84% decrease in Adjusted EBITDA to $34.2 million (H1 2022: $208.6 million)
o Loss after tax of $2.9 million (H1 2022 profit after tax: $162.8 million), reflecting the decrease in Adjusted EBITDA and an impairment charge of $13.9 million (H1 2022: $0.4 million) related to the IFRS expected credit loss determined on overdue receivables from the KRG of $151 million net to GKP for production from the months of October 2022 to March 2023
o Revenue down 70% to $79.6 million (H1 2022: $263.6 million), reflecting a 48% decrease in gross production in the period to 23,256 bopd and a 39% decrease in weighted average realised prices to $51.3/bbl for crude sales prior to the suspension of exports (H1 2022: $84.3/bbl)
o Operating costs of $18.9 million (H1 2022: $18.9 million), with increased expenditure in Q1 2023 due to higher production offset by a 36% quarter-on-quarter reduction in Q2 2023 as production was shut-in and non-essential maintenance activity deferred
· Free cash outflow of $9.9 million (H1 2022 free cash flow: $177.3 million), reflecting lower Adjusted EBITDA and delays to KRG payments
o Revenue receipts of $65.7 million (H1 2022: $272.4 million) related to invoices paid for crude sold in August and September 2022
o Net capex of $47.0 million (H1 2022: $41.8 million), reflecting completion of SH-17 and SH-18, well workovers, well pad preparation, long lead items and the expansion of production facilities
o Net capex decreased 67% to $11.7 million in Q2 2023 relative to Q1 2023 as the Company suspended all expansion activity
· $25 million interim dividend paid in March (H1 2022 dividends: $190 million) prior to the cancellation of the proposed final 2022 ordinary annual dividend of $25 million
· Cash balance of $82.1 million at 30 August 2023 with no debt
o Includes GKP’s entitlement for local crude sales and $8 million related to buyer advance payments collected by GKP
Outlook
· GKP remains focused on preserving liquidity by continuing to reduce costs, exploring opportunities to increase local sales, pursuing other liquidity options, including inventory sales, and proactively managing accounts payable
· Current estimated aggregate net capex, operating costs and other G&A monthly run rate of around $6 million in H2 2023, 65% lower vs the average monthly run rate in Q1 2023
o Estimated 2023 net capex of $60-$65 million (previous guidance: $70-$75 million), reflecting June net capex $10 million lower than expected due to continued cost reduction efforts
o Estimated net capex for H2 2023 less than $15 million, comprising safety critical and contractual commitments
· Current local sales volumes and realised prices enable GKP to cover its estimated monthly net capex, operating costs and other G&A of around $6 million and provide increased flexibility to manage accounts payables
· While there appears to be significant local demand for Shaikan Field crude, volumes and prices remain difficult to predict
· If sustainable local sales do not materialise and absent other revenue sources, GKP would take further actions to preserve liquidity
o Additional opportunities have been identified to reduce the monthly expenditure run-rate by up to $2 million; however, these could potentially delay a timely return to full production
o GKP may also consider additional sources of liquidity as necessary, including external financing
· While no official timeline has been announced, GKP continues to believe that the suspension of exports will be temporary and that the KRG will resume oil sales payments in due course
o Political negotiations continue regarding the restart of the Iraq-Turkey Pipeline, the implementation of the approved 2023-2025 Iraqi Budget and the creation of an Iraqi Oil & Gas Law
o The KRG has assured GKP and other International Oil Companies (“IOCs”) operating in Kurdistan that Production Sharing Contracts will be honoured and receivables will be repaid
After reading this extensive statement and joining the webcast with a detailed presentation on show I don’t think that we have learned anything new. The pipeline shut on 25th of March and since then costs have been cut to the bone, now running at $6m per month. The only good news is that GKP are now selling around 23/- b/d of oil locally which covers the costs.
Despite recent talks in each Capital there are no firm sightings of a deal but as has been said all along it’s too big a show not to get back on and when it does GKP will be able to pick up where they left off, so prophets of doom need not apply.
Coro Energy
Coro has announced that it has received the £1M proceeds due from the sale of ion Ventures Holding Ltd announced on 24 August 2023. It also announces that, further to the successful Wind Energy Service Contract (“WESC”) award in the Philippines, it has contracted the meteorological (“met”) mast for its 100MW onshore Oslob Wind Power Project.
The Company has two development stage renewables projects in the Municipality of Oslob in the province of Cebu, Philippines; a 100MW onshore solar project and a 100MW onshore wind project. The Company has an entitlement to 88% of the future dividends from these projects. As announced on 24 August 2023, the Company has recently been awarded a WESC for the wind project.
The fabrication, installation, and maintenance of the met mast, which has been designed to meet both local and international standards and conforms to IEC 61400-12-1, is being provided by the leading Philippine met mast specialist, Coastal Renewables Limited at a total cost of US$263,000 including taxes. It is anticipated that data collection will commence by the end of 2023. The wind resources estimates that result from the deployment of the met mast are a critical input for project finance.
The Company wants to develop these projects through to energisation however does expect to have other alternatives available including regional project finance and an outright sale of the projects (noting the liquid market for such projects at RTB with Philippine valuations around US$120,000/MW to US$200,000/MW).
The existing LiDar (laser wind detection analysis) will continue to support the met mast data, being deployed at individual wind turbine locations to add further precision to the available wind resource estimates.
Michael Carrington, Managing Director of Coro Renewables, commented:
“The deployment of a met mast marks our next significant investment in the project, enabling us to further quantify the wind resource and de-risk the project.”
Coro are moving on with their proceeds from the Ion Ventures Holding investment and following the WESC award in the Philippines is contracted the met mast for the Oslob Wind Power Project.
i3 Energy
i3 has announced the unaudited results for its period ended 30 June 2023.
HIGHLIGHTS AND OUTLOOK
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H1 2023 HIGHLIGHTS |
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Average Production |
20,640 BOEPD (H1 2022: 18,950) |
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2PDP and 2P Reserves |
65.7 & 181.5 MMBOE (At 1 January 2023) |
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Revenue (net of royalties) |
£75.5 MILLION (H1 2022: £101.6 MILLION) |
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Net Operating Income (“NOI”)(1) |
£38.9 MILLION (H1 2022: £68.8 MILLION) |
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Acquisitions & Capex(1) |
£27.2 MILLION (H1 2022: £23.7 MILLION) |
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FCF(1) |
(£2.9) MILLION (H1 2022: £24.7 MILLION) |
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Profit Before & After Tax |
£14.5 & £10.9 MILLION (H1 2022: £20.5 & £14.7 MILLION) |
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Adjusted EBITDA(1) |
£38.6 MILLION (H1 2022: £38.8 MILLION) |
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Basic and Diluted EPS |
0.91 and 0.90 PENCE (H1 2022: 1.30 & 1.20 PENCE) |
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H1 2023 Dividends Declared |
£10.2 MILLION (H1 2022: £6.9 MILLION) |
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2023 Canadian Capital Programme |
DRILLED 8 GROSS (5.5 NET) WELLS |
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UK Assets |
EVALUATING A ONE-WELL DEVELOPMENT OF SERENITY |
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(1) Non-IFRS measure. Refer to Appendix B.
HIGHLIGHTS
Financial Highlights
· H1 2023 revenue (net of royalties) of £75.5 million (H1 2022: £101.6 million), net operating income (1) of £38.9 million (H1 2022: £68.8 million), and cash flow from operations of £24.3 million (H1 2022: of £48.4 million).
· Successfully completed the new CAD 100 million, 3-year, first lien Debt Facility with Trafigura Canada Ltd. (a subsidiary of Trafigura Pte Ltd.) and redeemed the H1 2019 Loan Notes in full.
(1) Non-IFRS measure. Refer to Appendix B
Dividends
· During the first half of 2023, i3 declared total dividends of 0.855 pence/share (totalling £10.215 million).
· In June 2023 the Company revised its annual dividend guidance from a monthly equivalent of 0.1710 to 0.0855 pence per share, to be paid quarterly, which annualises to approximately £12.3 million based on the number of ordinary shares outstanding as at 30 June 2023.
Operational Highlights
· Average H1 2023 production of 20,640 barrels of oil equivalent per day (“boepd”) for the six-month period (9% higher than 18,950 boepd achieved in H1 2022) while exiting H1 above 22,000 boepd.
· Average Q2 2023 production of approximately 18,529 boepd, representing a 5% decrease from Q2 2022, was more favourable than anticipated given that approximately 3,100 boepd was offline for the quarter due to restrictions associated with the Alberta wildfires, unanticipated apportionment issues associated with the Pembina Peace Pipeline liquids line and the scheduled turnarounds and debottlenecking projects.
· Post May / June curtailments, Company production has recovered with a July average rate of 22,065 boepd.
· Drilled 8 gross wells (5.5 net) wells during H1 in the Company’s core Central Alberta, Wapiti and Clearwater assets as part of the 2023 capital programme.
· CO2e emission reduction initiatives continued with electrification of 12 well sites in Carmangay and Retlaw.
· Responsive corporate action throughout Alberta and British Columbia during the May and June wildfire situation, focussing on the protection and safety of field staff, industry partners, emergency responders and the impacted communities, while minimizing production downtime and ensuring asset integrity.
• As a result of the wildfires, certain facilities were periodically shut-in with resultant calendar day downtime estimated at 1,650 boepd and 385 boepd, respectively for May and June.
· i3 performed 20 operated turnarounds on its facilities in Central Alberta, to ensure the regulatory compliance and integrity of its assets.
• The turnaround operations were completed on time and within budgeted forecasts, and affected June’s production by 7,230 boepd.
· The Company’s Q1 Wapiti Cardium programme is now producing unrestricted, with peak initial production (“IP”) rates exceeding GLJ’s Proved Plus Probable forecasts.
OUTLOOK
A summary of key events which occurred after the reporting period are presented in note 19 to the financial statements. The Group’s focus for the remainder of 2023 will be on three key areas:
1 The growth of i3’s Canadian business through the deployment of capital into its large established undeveloped reserves base, operational excellence to improve uptime and field performance, and strategic upsizing in core areas;
2 Maintaining flexibility to adapt to economic challenges while maximizing total shareholder return; and
3 Conducting operations safely and in an environmentally secure manner.
The Group continuously evaluates opportunities to strengthen its balance sheet while maintaining tight control of its costs and working capital position.
Majid Shafiq, CEO of i3 Energy plc, commented:
“H1 2023 was another very active period for i3. We completed our planned Q1 capital program, drilling 8 gross (5.5 net) wells in our Central Alberta, Wapiti and Clearwater acreage, re-financed our outstanding loan notes which were due in May with a new CAD 100 million loan facility and successfully conducted 20 planned operated facility turnarounds, whilst safely managing our operations during the recent extended period of wildfires in Alberta. Our asset base continues to perform well, having averaged 20,640 boepd in H1, 9% higher than the same period last year and exiting H1 at greater than 22,000 boepd, and with 2P reserves of 182 mmboe provides a solid platform for growth.
Commodity price weakness in the first half of the year meant the Company revised its 2023 capital and dividend programme in June having declared £10.215 million in dividends to our shareholders in H1. Improvement in commodity prices in July and August and future pricing, has resulted in an increase of around 20% in our forecast for full year net operating income to USD 90 to 95 million. Price volatility has also resulted in potential opportunities for growth via M&A and we continue to monitor the market to ensure our capital allocation for the remainder of the year is optimised. We are confident that our business model, allied with our asset base and the skills and dedication of our staff, will continue to create and extract value through the commodity price cycle.”
Last time I wrote about i3 things were looking grim, production and revenue were down leading to cuts in the dividend. It looks like things are slowly picking up and under the circumstances 2Q production was only down 5% and with a good July which has continued into August.
Accordingly it looks like i3 look back to better value, at 12p I would suggest that they are definitely back into buying range.
And finally…
England easily beat New Zealand in the first T20 last night with Malan and Brook , who may be fighting it out for the final batting slot at the ODI World Cup in India scoring most of the runs.
And Rangers went down big time at PSV ending Champions League hope leaving the Noisy Neighbours, the Gooners, Red Devils, Bar Coders and of course Celtic in tonight’s draw.
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
