WTI (Oct) $89.55 -$2.09, Brent (Nov*) $95.64 -$2.20, Diff -$6.09 -$1.58.
USNG (Oct) $9.12 +90c, UKNG (Oct) 454.99p -80.01p, TTF (Oct) €229.505 -€46.29.
Another bad day for oil as economies around the world got worse, in China there are many more Covid lock ins and signs of a slow down in the economy as in Germany.
Wentworth has announced its interim financial results for the six months ended 30 June 2022. AII dollar values are expressed in US dollars unless stated otherwise.
Dividend Declaration and Financial
· lnterim dividend of $1.45 million declared, an increase of 10% from H1 2021 ($1.32 million) or 15% on a per share basis, bringing the total distribution to shareholders to $7.9 million in the last 12 months
o dividend distribution of $5.5 million
o share buyback of $2.4 million representing approximately five per cent of the issued share capital (8.3 million shares)
o expected FY dividend distribution for 2022 would equate to a yield of approximately 9.0% based on the current share price
· Revenues grew 32% to $15.45 million (H1 2021: $11.7 million), due to sustained high levels of production at Mnazi Bay and higher gas price due to inflationary price mechanism
o low operational cost of production maintained at $0.45/Mscf (H1 2021: $0.49 Mscf); largely fixed insulating the Company from cost inflation
· Adjusted earnings before interest, taxes, depreciation, amortization, and exploration (EBITDAX) increased by 43% to $9.6 million (H1 2021: $6.7 million)
· Strong financial position with $27.4 million cash (H1 2021: $22.8 million) and zero debt
· Tanzania Petroleum Development Corporation (“TPDC”) continues to remain fully current with all invoices for gas sales
· Tanzania Electric Supply Company (“TANESCO”) continue to settle arears
· Health and safety of employees, partners and local communities continues to be a top priority for Wentworth. On 2 August 2022, the Company celebrated six years without a Lost Time lncident (LTI)
· Average daily production of 92.3 MMscf/day (gross) during the first six months of 2022, represents a record performance; a 14.9% increase from the same period in 2021
· Average daily production for Q2 2022 was 86.3 MMscf/day (gross), above the high end of guidance; demonstrating the increased demand even across the traditional rainy season
· Wentworth’s share of Gross 2P Reserves estimated to be 135.2 Bcf, with a post-tax NPV10 of $108.9m as at 31 December 2021
· The gas compression project is advancing with a contractor selected to perform the pre-FEED studies
· Upcoming slickline and perforation operations during H2 2022 have the potential to support and add field production volumes
· Growth within Tanzania, to capitalise on Wentworth’s in-country track record, continues to be a key focus as the Company seeks to leverage improving demand dynamics and strong operational performance
· In June 2022, the Company reached an agreement with Scirocco Energy plc (“Scirocco”) to acquire its 25% non-operated working interest in the Ruvuma Production Sharing Agreement in Tanzania. On 12 July 2022, the Company announced that Scirocco was informed by its partner ARA Petroleum Tanzania Ltd (“APT”) of its intention to exercise its pre-emption rights in relation to the Proposed Acquisition under the terms of the Joint Operating Agreement. On 31 August 2022, Scirocco announced it had entered into binding agreements with APT with a view to completing the disposal by 31 December 2022. This pre-emption remains subject to approval by the Government of Tanzania
· The proposed pre-emption clearly demonstrates the potential of the Ruvuma asset alongside Wentworth’s ability to identify value and negotiate favourable transactions in Tanzania
· Wentworth remains committed to identifying and pursuing further opportunities within the country and the region
· Wentworth proudly sponsored the fourth Tanzania Energy Congress in Dar es Salaam in early August. The congress aimed to accelerate and stimulate market demand and drive new investment opportunities, through local, regional and international partnerships
· A robust ESG framework underpins Wentworth’s operations as evidenced in the Company’s second Sustainability Report, published in April 2022 in accordance with the Sustainability Accounting Standards Board
· This Sustainability Report was formally presented to key in-country stakeholders in August 2022 to complement Tanzania’s wider sustainability ambitions
· Wentworth continues to play a crucial role in increasing energy access to communities across the country and acting as a key partner for the Government of Tanzania to deliver on its ambition to provide universal energy access in Tanzania by 2030, in line with the UN Sustainable Development Goals
· Continued progress on our community-focused carbon credit programmes with Vitol SA, aimed at offsetting all Mnazi Bay Scope 1 and Scope 2 emissions and partially offsetting Scope 3 emissions
· Developing a climate strategy to ensure effective measurement and mitigation of climate-related impacts is a key focus for 2022
· An active member of the United Nations Global Compact (UNGC): underlining Wentworth’s commitment to operating responsibly
· Independently, and together with in-country stakeholders and partners, Wentworth’s Corporate Social Responsibility (CSR) projects aim to address issues impacting communities close to Mnazi Bay and the wider Mtwara region
· Strong Tanzanian demand for power is anticipated throughout H2 2022, primarily driven by:
o An increase in overall power demand nationwide;
o Stable demand from existing, and the connection of new, industrial customers; and
o Below average rainfall within the catchment area serving hydroelectric dams, consequently reducing hydro generation
· Current average daily production at or slightly above the high end of production guidance is expected to continue during H2
Katherine Roe, CEO, commented:
“We are pleased to have announced another strong set of results. A robust balance sheet, record H1 production and a 10% increase in our interim dividend demonstrates our focus on delivering responsible growth whilst simultaneously increasing our considerable shareholder returns though our dividend policy and buyback programme. We are upbeat about the outlook for the remainder of 2022 and beyond, as we look to create value for Tanzania, shareholders and our wider stakeholders.
“We were delighted to be able to demonstrate our commitment to engaging with our stakeholders in-country at the Tanzania Energy Congress in August, which illustrated Tanzania’s commitment to encouraging investment and growth in its energy sector – synonymous with the Government’s business-friendly approach.
“As we look to increase scale and drive growth, we will continue to consider high quality opportunities on accretive terms, both within Tanzania and the broader region. Whilst disappointed that the acquisition of an interest in Ruvuma has been disrupted, having agreed terms that reflected the current risk reward balance of the asset, we have demonstrated our ability to identify value and negotiate favourable transactions in Tanzania.”
This is a first class set of figures where production of 92.3 MMscf/day (gross) during the first six months of 2022, represents a record performance; a 14.9% increase from the same period in 2021 and beat the whisper in the market.
This is also above the current guidance for the full year of 75-85 MMscf/day but with maintenance and operational work on the project a wise call to leave it at current levels. As to the dividend it has been increased to 8 cents for the first half which is a 15% increase per share and gives WEN a dividend yield of some 9%. Add to that the company completed a share buyback of $2.4 million representing approximately five per cent of the issued share capital (8.3 million shares) and still has plenty of cash.
Another interest box worth ticking is that the gas price which is determined by the US CPI number which is at present running at some 8.5% and announced in January 2023 will also add to the financials already looking very strong.
The disappointment of Ruvuma is understandable but Wentworth have both organic and inorganic opportunities and as a trusted partner of the Tanzanian Government will continue to build at Mnazi Bay and capitalise on projects in country.
Wentworth will continue to meet the increase in local demand, take its chances on new and existing fields and above all build a sustainable future. It will build its cash flow so that it will be in a very strong position and as was pointed out on the call at the very least 50% of the market cap. Management remains first class and Wentworth a leading company in a fast growing country as transition to gas in Africa is crucial.
San Leon Energy
San Leon has announced the following update in relation to its forthcoming Proposed MLPL Reorganisation and the Further ELI Investments, as defined in the Company’s AIM Admission Document published on 8 July 2022.
On 8 July 2022 the Company announced that it had entered into a series of agreements with Midwestern Oil & Gas Company Limited to consolidate Midwestern’s holdings in San Leon, Midwestern Leon Petroleum Limited and Energy Link Infrastructure (Malta) Limited into a single holding in San Leon (together the “Proposed Midwestern Reorganisation”). In addition, San Leon announced further conditional investments in ELI. Taken together the Proposed Midwestern Reorganisation and Further ELI Investments are collectively referred to as the “Proposed Transactions”. The Admission Document set out details of the Proposed Transactions and the Proposed Transactions were approved by shareholders at an extraordinary general meeting of the Company held on 5 August 2022.
Extension of timeline for New Eroton Debt Facilities
Completion of the Proposed MLPL Reorganisation is subject to a number of conditions, details of which were set out in the Company’s announcement of 8 July 2022 and in the Admission Document. Several of these conditions have been satisfied, notably the publication of the Admission Document and approval of relevant matters pertinent to the Proposed Transactions by shareholders at the Company’s extraordinary general meeting held last month.
In order to acquire additional interests in OML 18 and take its economic interest to 45% of OML 18, Eroton proposes to enter into new senior secured reserve-based lending facilities totaling US$750 million (the “New Eroton Debt Facilities”), to be provided to Eroton by a lending consortium headed by Afreximbank. Whilst this process has advanced it remains a complex procedure with several interested parties and, as a result, additional time is needed to finalise the loan agreements and ancillary documentation. Consequently the condition relating to the New Eroton Debt Facilities, which had been due to be finalised by 31 August 2022, has now been extended to 30 September 2022 by agreement with Midwestern. Aside from the extension of timing, the structure of the New Eroton Debt Facilities remains in accordance with the description set out in the Admission Document.
The board of San Leon remains confident that the Proposed Transactions will complete by or during the final quarter of this year, as originally set out in the Admission Document.
Having watched this transaction over many months I am not surprised that there are further delays, only to be expected in a deal of such complexity. San Leon is an investment that will repay many times over but patience here is a virtue, the company are on record to say that they will pay out a significant portion of income, that will indeed be very significant.
Scirocco Energy (AIM: SCIR), the AIM investing company targeting attractive assets within the European sustainable energy and circular economy markets, notes the update issued today by Aminex PLC on operations at the Ruvuma PSA, in which Scirocco holds a legacy 25% non-operated working interest.
Seismic and commercial activities continue to progress under the direction of the operator, ARA Petroleum Tanzania Limited:
· Over half of the seismic data has now been acquired over the Ntorya location and, at the current rate of activity, it is expected that the acquisition programme will be completed by the middle of October 2022.
· Sufficient seismic data regarding the drilling location of the Chikumbi-1 (“CH-1”) well has now been acquired, and processing and interpretation of such data is almost complete with further updates to be provided in due course.
· On behalf of the Ruvuma joint venture partners, APT has agreed in principle with the Government of Tanzania to an addendum to the Ruvuma PSA. The Ruvuma PSA, as with all other PSAs in Tanzania, contained fiscal terms (profit share, royalty, and taxations rates) only for the production of oil. Fiscal terms for the production of gas were required to be agreed upon separately.
· Negotiations on the gas sales agreement between the Ruvuma partners and the Tanzania Petroleum Development Corporation for the sale of gas from the Ntorya gas field to the TPDC commenced recently in Tanzania and are currently ongoing.
Tom Reynolds, Scirocco’s CEO commented:
“It is pleasing to see the positive progress reported today by Aminex, which is supportive of Scirocco’s ongoing exposure to the success case of the project as part of the contingent elements of the agreement for the Company’s divestment of its interest in the asset to APT.”
Excellent news for Scirocco, the deal is going through and the company can press on with its sustainable energy and circular economy market investments, the flag has dropped here…
Gulf Keystone Petroleum
Gulf Keystone, a leading independent operator and producer in the Kurdistan Region of Iraq, today announces its results for the half year ended 30 June 2022.
Highlights to 30 June 2022 and post reporting period
· Strong safety performance, with no Lost Time Incident (“LTI”) recorded for 315 days
· 2022 year to date gross average production increased by 3.6% to c.45,000 bopd as compared to the FY 2021 average of 43,440 bopd
· Continued to progress delivery of our 2022 work programme:
o SH-15 drilled and brought online in April 2022 in record time
o SH-16 (formerly SH-M) and SH-N well pad completed in preparation for resumption of drilling
o Well workovers and interventions completed on two wells to optimise production rates
o Progressing preparatory work for the expansion of the production facilities, including procurement activities for the installation of water handling capacity
· Resumed drilling activities late August with the spud of SH-16:
o Targeting production start-up into PF-2 towards the end of the year
· Free cash flow more than doubled to $177.3 million (H1 2021: $66.7 million), driven by the strengthening oil price and continued production growth, enabling the Company to deliver against its strategic commitment of balancing investment in growth with shareholder returns
· Dividends declared of $215 million in 2022, providing shareholders with a sector-leading dividend yield of 36% based on GKP’s closing price on 30 August 2022
· Significant increase in Adjusted EBITDA and profitability in H1 2022:
o Adjusted EBITDA up 122% to $208.6 million (H1 2021: $93.8 million)
o Profit after tax up 151% to $162.8 million (H1 2021: $64.8 million)
o Realised price up 93% to $84.3/bbl (H1 2021: $43.7/bbl)
o Gross average production increased 3% to 44,941 bopd (H1 2021: 43,516 bopd)
o Revenue up 102% to $263.6 million (H1 2021: $130.7 million)
o Gross Opex per barrel of $2.9/bbl (H1 2021: $2.4/bbl), at low end of 2022 guidance of $2.9-$3.3/bbl
· Net capex of $41.8 million (H1 2021: $14.1 million), primarily related to the drilling of SH-15, well interventions and workovers, well pad construction, procurement of flowlines and plant expansion activities
· $354.4 million net to GKP received year to date from the Kurdistan Regional Government (“KRG”) for crude oil sales and revenue arrears, with the arrears balance related to the November 2019 to February 2020 invoices fully recovered
· $100 million outstanding bond redeemed in August, leaving the Company debt-free and eliminating annual interest costs of $10 million
· Robust balance sheet maintained with cash balance of $112.0 million at 31 August 2022
· 2022 gross average production guidance reiterated at 44,000-47,000 bopd
o Continuing to optimise production through prudent management of existing well stock, delivery of well workover and intervention programme and addition of SH-16
· Gross Opex guidance of $2.9-$3.3/bbl remains unchanged
· Increasing 2022 net capex guidance from $85-$95 million to $110-$120 million
o Primarily driven by the drilling of SH-16 and initial procurement activities related to the installation of water handling capacity
· While timing of Field Development Plan (“FDP”) approval remains uncertain, we continue to engage with the Ministry of Natural Resources (“MNR”) towards project sanction and are progressing the tendering process for the Gas Management contract. We are also monitoring the potential impact of global supply chain pressures and logistical challenges on the costs and schedule of the FDP
· We continue to monitor the long running dispute between the Federal Iraqi Government and the KRG on the management of oil and gas assets in Kurdistan. Our operations currently remain unaffected
· The Company has announced an ordinary dividend policy of at least $25 million per year and, with free cash flow, is committed to maximising distributions taking into account various factors, including investment levels required to achieve production targets, deliver profitable growth and satisfy PSC obligations, and preserve adequate liquidity to manage geopolitical, KRG payment and market uncertainties
· Today we are declaring an interim dividend of $25 million, increasing total dividends declared in 2022 to $215 million:
o $25 million interim dividend is equivalent to 11.561 US cents per Common Share of the Company and is expected to be paid on 7 October 2022, based on a record date of 23 September 2022 and ex-dividend date of 22 September 2022
· Assuming timely payment of invoices and continuing strong oil prices, we expect continued robust cash flow generation, which would provide flexibility to consider funding future capital expenditures and further distributions to shareholders, while preserving adequate liquidity
· With continued progress towards implementing the FDP, the Company expects to firm up the future estimated timing and levels of investment and review the dividend policy
With such a strong cash flow, Brent was up 65%, GKP has every opportunity to pay a big dividend and has done so today, another $25m today making $215m this year so far. Debt is paid down and the company debt free, arrears have been paid by the KRG but in the background the dispute between Erbil and Baghdad continues.
Reabold announces that, further to its announcement of 4 May 2022, Corallian Energy Limited continues negotiations with the potential purchaser for the acquisition of its entire issued share capital.
As part of the Potential Sale process, Reabold had entered into a conditional sale and purchase agreement to acquire Corallian’s working interest in all the non-Victory licences within the Corallian portfolio. The SPA gave the right to both Corallian and Reabold to terminate the SPA if the Potential Sale had not completed by 31 August 2022. Given negotiations with regard to the Potential Sale remain ongoing, neither Reabold nor Corallian intend to terminate the SPA.
Not much to say, I’ve had a lot of inbound recently given that today was meant to see the conclusion of the deal but I think that it is only the extensive legals that have held the deal up, after all Reabold want the non-Victory licences and therefore need to conclude this deal.
Last night in the Prem the Gooners kept up their great start beating Villa 2-1, the Cherries had a lovely 0-0 against Wolves, Forest lost 6-0 at the Emptihad, the Hammers drew 1-1 with the Spurs and Liverpool just got home 2-1 against the Magpies.
Tonight the Foxes host the Red Devils.
The opinions expressed here are those of the author
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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