Malcy’s Blog – Oil price, Zephyr Energy, Sound Energy, Longboat Energy, Cornerstone Resources Group & finally

WTI $106.19 -$3.33, Brent $111.74 -$2.91, Diff -$5.55 +42c.

Author @mgrahamwood

USNG $6.86 +5c, UKNG 185.0p -20.0p, TTF €133.130 +€5.959

Oil price

A dip in crude prices as the market got a closer look at Sleepy Joe’s latest cunning plan for popularity by November which is to suspend gasoline taxes to the tune of 18 cents a gallon. The plan is to embarrass the states at local level to also hold off on their taxes which might get the cut to nearer 50c a gallon.

If it works and the summer is in any way normal then when everyone goes back to work and school in the autumn crude demand might fall but it might be wishful thinking. After all, at some stage he has to buy back all the SPR crude that he has sold to try and play King Canute…

Zephyr Energy

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

Highlights

A transformational period in which Zephyr evolved from a single project exploration company into a self-sustaining, cash generating, oil producing group with a balanced portfolio of operated and non-operated assets in two established U.S. oil producing basins.

Paradox Project, Utah, U.S. (operated asset)

  • First flowing hydrocarbons from the Company’s State 16-2 LN-CC well, a historical and operational milestone after many years of investment in the project.
  • Sproule completed Competent Persons Report (“CPR”) which highlighted the scale and resource potential of the project:
    • 2P Reserves: First Paradox Basin Proved Reserves of 2.1 million barrels of oil equivalent (“boe”)
    • 2C Resources: 27 million boe
  • Prospective resources from overlying reservoirs: 203 million net unrisked boe (68 million boe risked with a weighted-average 33% chance of success)
  • Preparations are well underway for the commencement of a high impact three-well drilling programme to further delineate the scale of the project.

Williston Basin, North Dakota, U.S. (non-operated assets)

  • Following the completion of several discrete acquisitions, the Company now has a cash-generative non-operated portfolio with working-interests in 219 wells in the Williston Basin, North Dakota, U.S.
  • First quarter 2022 sales from the portfolio were over 1,600 barrels of oil equivalent per day (net to Zephyr) with corresponding revenues of US$11.5 million.
  • Non-operated portfolio expected to have turnover of US$35-40 million in 2022, providing significant operating cash flow available for reinvestment into the Paradox project development.

Financial

  • The Group reports a net profit after tax for the year ended 31 December 2021 of US$0.8 million, reflecting the initial cashflows from its non-operated asset portfolio.
  • Revenues for the year from the non-operated asset portfolio were US$6 million with a gross profit of US$3.3 million.
  • At 31 May 2022, the Group had cash and cash equivalents of US$11.9m (which includes cash receipts from the non-operated portfolio for the month of May 2022 which were received in early June 2022).

Corporate

  • In February 2022, the Company announced that it had raised a further US$17.4 million (before expenses) through the placing of new Ordinary Shares in the Company, along with raising US$28 million through a senior debt facility. The net proceeds from these debt and equity instruments were used to complete the Group’s US$36 million acquisition of non-operated assets in the Williston Basin and to fund further drilling activity across the portfolio.
  • In line with the Company’s ESG objectives, Zephyr achieved carbon-neutrality across its operational footprint (through the purchase of Verified Emission Reduction credits (or “VERs”)) prior to its published goal of 30 September 2021.

Rick Grant, Zephyr’s Non-Executive Chairman, said: 

“The period under review was a time of substantial progress in the ongoing transformation of Zephyr. During this period the Group evolved from a single project exploration company into a self-sustaining, cash generating, oil producing group with a balanced portfolio of operated and non-operated assets located in two established oil producing basins in the U.S.

“The 2022 fiscal year promises to be an equally exciting time for our Shareholders as we aim to bring our State 16-2LN-CC well into commercial production and commence our proposed three well drill programme on the Paradox project. A successful drilling programme will see the Group further defining the Paradox project and materially increasing its reserve base in the project, and expected to deliver significant cashflows. This activity will be fully funded by cashflows from our non-operated asset portfolio in the Williston Basin, North Dakota, U.S. (the “non-operated portfolio”), which was formed during the period under review through a number of discrete acquisitions with the main purpose of funding our proposed activity on the Paradox project.

“Our forthcoming activity across all our operations will be carried out consistent with our core values of being responsible stewards of investors’ capital and responsible stewards of the environment.”

By any standards this was an amazing year for Zephyr, they became profitable after success at the  Paradox Project and and investing in production from the Williston Basin which will provide enough income to drill more wells in Utah. 

The second half will see that drilling programme recommence at the Paradox and with some liquids being sold to local refineries and gas to the crypto facility at a time when hydrocarbons had not expected to be on production. 

The next few months will see that PB drilling programme intended to define its size and deliver significant production and of course a decent increase in reserves. The shares below 4p are scandalously cheap and fully funded with excellent management who having met them yesterday are highly confident of making Zephyr a truly huge company in quick time, watch this space…

Sound Energy

Sound has announced that it has entered into an Arrangement and Mandate letter with Attijariwafa bank of Morocco  under which the Company has mandated the Arranger in relation to the arrangement of debt financing in relation to the development of Sound Energy’s Tendrara Production Concession.

Pursuant to the Agreement, the Arranger has been mandated, and provided with exclusivity by the Company for a period of eight months, to arrange a long-term senior debt facility with a term of no more than 12 years of up to 2.250 billion Moroccan dirhams (approximately US$250 million) for the partial financing of the currently estimated 3.000 billion Moroccan dirhams (approximately US$330 million) phase 2 development cost of the Tendrara Production Concession.

 During the term of exclusivity, the parties will seek to negotiate binding terms for the Financing within 120 days of entry of the Agreement. The Agreement envisages that any Financing arranged pursuant to the Agreement may be provided directly and/or partially underwritten directly by the Arranger or by third parties.

Graham Lyon, Sound Energy’s Executive Chairman, commented:

Today’s announcement confirms the support Sound Energy has with local financiers to undertake the Tendrara pipeline project development. Attijariwafa bank is a leading bank in Morocco and has provided Sound Energy with a compelling case to seek to provide the majority of Project Finance for the development. The Company is also progressing potential vendor financing, secondary subordinated debt and partial asset disposal options to fulfil the remaining element of Project financing required to achieve year end FID. This mandate is a significant step towards reaching Final Investment Decision unlocking further the value of Tendrara Concession to Sound Energy shareholders, that can aid the provision of economical and secure gas supply for the local Moroccan power production and domestic markets.  Domestic gas supply remains a highly credible energy source for Morocco amongst the difficult geopolitical situation of international energy supply”.

Good news here from Sound who continue to deliver as they move strongly towards the creation of significant value at Tendrara. In market with huge requirements for gas and fiscally as competitive as anywhere Sound are progressing nicely towards rewarding very patient shareholders. 

Longboat Energy

I was fortunate enough to be able to interview Helge Hammer, CEO of Longboat Energy yesterday amidst the strike ridden UK. The link is below, Helge was on good form and Longboat looks in good nick. 

Core Finance CEO interview: Helge Hammer of Longboat Energy

Cornerstone Resources Group

Cornerstone, a gas development company focused on creating substantial growth from low-carbon production, is delighted to receive North Sea Transition Authority (“NSTA”) confirmation of the finalisation of the Assessment Phase of the Abbey Field Development.

The Abbey Field, on which the Company is planning to drill three horizontal production wells, received confirmation of the Assessment Phase based on its Concept Select Report on 21 June 2022. The next step is for Cornerstone to now submit the Field Development Plan which it a anticipates will be within the next few weeks.

Peter Young, Chief Executive Officer of Cornerstone Resources Group commented:

“I am pleased that the NSTA has no objection to our Concept Development Plan for the Abbey development. The full Field Development Plan is at an advanced stage and we look forward to submitting this to the NSTA in the near future.  This is an important step towards bringing on stream a much-needed domestic gas resource to the UK and these maiden cashflows will support further advancement of our broader gas portfolio.”

Not really blog material as not yet quoted but Peter Young is putting CRG together and will be coming to a market near you before long I suspect…

And finally…

The third test between England and New Zealand has started this morning at, get this, ‘The Clean slate Headingly’ I mean what do they take us for? Anyway the Kiwis won the toss, batted first and are 65-3 at lunch.

And it looks like John Gosden has done what I never thought he would and fired Frankie Dettori. After an accepted below par Royal Ascot by Frankie it looked like Jonny G had buried the hatchet but by jocking off the housewives favourite at Newmarket next Saturday it looks like it was just waiting to be buried into Dettori.  Shame as mistakes always happen and John and the boy Thady haven’t exactly been on sparkling form this season…

The opinions expressed here are those of the author

Author @mgrahamwood

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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