Malcy’s Flash blog, Wentworth Resources, Chariot Ltd, IGas Energy, Eco (Atlantic) Oil & Gas

A flash blog today, with two early meetings followed by a couple in the smoke any missed announcements will be covered tomorrow or after meetings.

By Malcolm Graham-Wood

Wentworth Resources

Wentworth has announced its audited financial results for the year ended 31 December 2021 along with its proposed final dividend declaration for the full year 2021. All values are expressed in US dollars unless stated otherwise.

Wentworth confirms that its Sustainability Report 2021 has been published and is available on the Company’s website at www.wentplc.com.

HIGHLIGHTS

Financial

·    Another year of exceptional operational and financial performance with record production in Q1 2022

·    Declaring a final dividend of 1.16 pence per share ($2.7 million); a total dividend distribution in respect of 2021 of 1.73 pence per share ($4.0 million) representing a yield of approximately 8.0% (calculated on an annualised basis), an increase from 2020 total distributions of $3.8 million

·    Share buyback programme to support capital return philosophy initiated in December 2021 and c. $2.6 million returned to date

·    Revenues increased by 26% to $23.8 million (2020: $18.9 million), underpinned by long-term fixed gas price contracts and strong production

·    Adjusted EBITDAX increased by 40% to $13.6 million (2020: $9.6 million)

·    Net profit increased by 79% to $6.1 million (2020: $3.4 million)

·    Increasingly robust balance sheet, remaining debt free with a cash balance of $22.8 million (2020: $17.8 million)

Operational

·    5 years without a Lost Time Incident (LTI) and no operational disruption due to COVID-19

·    Average gross daily gas production of 81.6 MMscf/d (2020: 65.5 MMscf/d) exceeded guidance which was revised upwards in June 2021

·    Low operational cost of production of $0.54/Mscf

·    Wentworth gross 2P Reserves estimated to be 135.2 Bcf with an after-tax NPV10 of US$108.1 million, as at 31 December 2021

Corporate

·    Expanded commitment to established capital return policy with implementation of share buyback programme

·    Tanzania-focused growth continues to be a key focus to capitalise on existing operational track record

·    Increased strength and diversity of the Board and management with appointment of Independent Non-Executive Director and Chief Operating Operator

Sustainability

·    Wentworth’s domestic natural gas continues to play a critical role in increasing energy access to communities across Tanzania and remains 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 commitment to our local communities through our corporate social responsibility efforts and dedicated foundation programmes

·    Publication of Sustainability Report 2021 including disclosure in accordance with the Sustainability Accounting Standards Board

·    First year of independent assurance of our greenhouse gas emissions disclosed in line with the Greenhouse Gas Protocol; Wentworth’s carbon intensity per boe of 0.29 kg CO2 e/boe is one of the lowest reported in the London E&P sector

·    Partnership established with Vitol to develop SDG aligned community-focused carbon credit programmes in Tanzania to offset all our Mnazi Bay Scope 1 and Scope 2 emissions and partially offset Scope 3 emissions from 2022

·    Membership of the United Nations (UN) Global Compact, underlining Wentworth’s commitment to operating responsibly

Dividend

The Directors propose that a final dividend of 1.16 pence per ordinary share be paid, subject to shareholder approval at the Company’s Annual General Meeting, to the holders of the ordinary shares who are on the register of members of the Company at 6.00 p.m. on 1 July 2022. The proposed final dividend will bring distributions to shareholders with regard to the financial year ended 31 December 2021 to $4 million, in line with the Company’s stated commitment to a sustainable and progressive dividend policy. If approved by shareholders, the dividend will be paid according to the timetable below.

Ø Ex-Dividend Date:               30 June 2022

Ø Record Date:                          1 July 2022

Ø UK Payment Date:               29 July 2022

2022 Outlook

·    Production guidance for 2022 has been set at 75 – 85 MMscf/d, raising the guidance band by 5 MMScf/d across the board compared to 2021

·    The contracted price for gas produced at Mnazi Bay production has increased from $3.35/MMbtu to $3.44/MMbtu; effective from 1 January 2022

·    Operational costs of production remain low at $0.54/Mscf

·    The Company continues to explore and evaluate growth opportunities both within the Mnazi Bay licence and the greater geographical region to support increasing in-country demand for natural gas

Q1 2022 Operations Update

·    The Mnazi Bay Gas field produced 29.8 Bcf during 2021, an increase of 25%  over 2020 production

·    Mnazi Bay has an estimated 423.3 Bcf of remaining economically recoverable gross 2P sales

·    The Mnazi Bay Gas field achieved a new quarterly average daily production record of 98.5 MMcf/d in Q1 2022, surpassing the previous record of 91.5 MMcf/d set during Q4 2021

·    As of 1 April 2022, the Mnazi Bay facility has safely operated for 2,060 days (5.6 years) without a Lost Time Incident

·    Mnazi Bay Gas facility is expected to be shut-down for up to 10 days in Q2 2022 to allow for scheduled maintenance on the gas gathering system

Katherine Roe, CEO, commented:

“2021 was an excellent year across the board for Wentworth during which we demonstrated our commitment to responsible growth whilst increasing considerable shareholder returns. We are delighted that through our progressive dividend policy and active share buyback programme we saw a record $6 million returned to shareholders in 2021. Our ability to deliver on this is underpinned by our robust financial position, no debt and ongoing cash generation.

“We are also very pleased to have seen record production for the year with a 25% increase in average daily production compared to 2020. This underscores the quality of our asset as well as highlighting the improvements in industrial demand in Tanzania enabling us to further increase our production guidance for 2022. We are also very proud of our exceptional health and safety record. 2021 marked five years without an LTI and it remains an absolute priority to sustain this performance year in, year out.

“We believe in the value opportunity from aligning business and society interests. As such, we are committed to playing a significant role in supporting Tanzania’s commitment to deliver universal energy access by 2030, aligning with the UN’s ambitions. We continue to be well-positioned alongside our JV Partners, Maurel et Prom and TPDC, to deliver on this and be a key part of the solution to supply  growing demand.

“We would like to thank our shareholders and stakeholders for their continued support as we look to continue to deliver on our strategy of responsible, sustainable growth through delivering reliable, domestic energy supply to communities across Tanzania.”

This is another cracking set of numbers from Wentworth who have yet again delivered a first class operational performance with production up 25% on 2020 and financials to match. This was endorsed by the pay-out which gave a total dividend distribution in respect of 2021 of 1.73 pence per share ($4.0 million) representing a yield of approximately 8.0% (calculated on an annualised basis), an increase from 2020 total distributions of $3.8 million. Add to that the buy-backs and the total return of some $6m which rises to in excess of $11m since the return to the dividend list and you can see that the returns policy are meaningful and ‘a real differentiator’. Finally it would make a great deal of sense to roll over the buy-back programme when the discussion next comes up at the board. 

With excellent growth prospects in Tanzania where GDP is forecast at 5.8% and Wentworth and its partners account for 50% of the country’s natural gas supply, it is no wonder why the company is full of confidence. There is strong and continued growth from industrial customers in many areas which adds to the bullish feel of gas sales going forward. 

The company has one of the best environmental performances in London and the strategies for Partnership established with Vitol to develop SDG aligned community-focused carbon credit programmes in Tanzania offsets most emissions from this year onwards.

So we can see that operationally Wentworth is in great nick and production came in above even upwardly revised guidance and this year’s expectations are clearly ‘comfortable’, with margins as they are and continued price rises expected the business model is most impressive. More tomorrow as appropriate…

Chariot

Further to the Company’s announcement on 27 September 2021, relating to the green hydrogen project in Mauritania, Chariot, the Africa focused transitional energy company, is pleased to announce that it has signed a Memorandum of Understanding with the Port of Rotterdam International, a global energy hub and Europe’s largest seaport which handles a significant portion of Europe’s total energy demand.

The MoU represents a first step towards establishing supply chains to import green hydrogen and ammonia to meet expected demand in the Netherlands and other countries in Northwest Europe. The two parties will work together to connect with off-takers and secure contracts for specific volumes.

René van der Plas, Director of Port of Rotterdam International, stated:

“We are excited to be teaming up with Chariot, to help with the distribution element of their green hydrogen project in Mauritania. The project could turn Mauritania into a leading supplier of green hydrogen to Europe, making it one of the largest energy projects of its kind in the world.”

Benoit Garrivier, Chariot Transitional Power CEO, commented:

“This MoU is a considerable step forward for us on our green hydrogen project and we are delighted to be working with the Port of Rotterdam, as they look to continue to cement their position as one of the leading energy hubs in Europe. Our green hydrogen project in Mauritania has the potential to establish the country as one of the cheapest producers of green hydrogen. Our ambition is to help the nation become one of the world’s main producers and exporters of green hydrogen. We look forward to announcing further developments with this project in due course.”

Nothing more to add here save that Chariot are motoring ahead with their green hydrogen projects and I expect much more of the same to come. Even at 21.55p as this morning the upside is really substantial.

IGas Energy

Full year results for the year ended 31 December 2021

Results Summary

Year ended

31 Dec 2021

£m

Year ended

31 Dec 2020

£m

Revenues

37.9

21.6

Adjusted EBITDA1

5.9

4.0

Loss after tax

(6.0)

(42.1)

Operating cash flow before working capital adjustments

7.4

3.3

Net debt1

12.2

12.2

Cash and cash equivalents

3.3

2.4

Notes

1 Adjusted EBITDA and Net Debt (borrowings less cash and cash equivalents excluding capitalised fess) are used by the Group, alongside IFRS measures for both internal performance analysis and to help shareholders, lenders and other users of the annual report to better understand the Group’s performance in the period in comparison to previous periods and to industry peers

Corporate and Financial Summary

·    Successful redetermination under the Group’s Reserve Based Lending facility (RBL) concluded in December 2021 confirming £19.3 (US$26.2) million of debt capacity and headroom of £7.1 million as at 31 December 2021.

·    231,000 bbls are currently hedged for 2022 using swaps at an average price of $74/bbl and 129,000 bbls using puts with an average guaranteed minimum price, net of premiums, of $46/bbl. 15,000 bbls hedged for Q1 23 using swaps at $95/bbl.

·    Excluding hedging costs of £6.6 million, net cash generated from continuing operating activities for the year was £13.9 million (2020: £(1.0) million).

·    Cash balances as at 31 December 2021 were £3.3 million with net debt unchanged from 2020 year-end at £12.2 million.

·    The Group invested £4.8 million across its asset base during the year (2020: £8.4 million).

·    In 2022, we are forecasting a total £7.4 million of capital expenditure including site improvements, near term incremental projects to generate c.70-100 boepd, as well as longer term development projects. In addition, we have £1.8 million of cash outflow in 2022 for projects executed towards the end of 2021.

·    Ring fence tax losses at 31 December 2021 were £268 million.

Operational Summary

·    Net production, in line with guidance, averaged 1,962 boepd for the year, with operations, maintenance and project activities all being directly and indirectly impacted by COVID-19. Excluding COVID impacts, production would have been c.2,100 boepd.

·    Underlying operating costs for the year were c.$37/boe (at an average 2021 exchange rate of £1:$1.38).

 ·    In 2022, we anticipate net production of c.2,000 boepd and operating costs of c.$38/boe (assuming an exchange rate of £1:$1.35), albeit subject to the ongoing challenges that COVID-19 still presents.

·    Plan to progress two development opportunities in the East Midlands in 2022:

o  One infill project with the potential to add c. 100 bbls/d and 0.35 mmstb 2P reserves in 2023 with an anticipated NPV10 of £3 million;

o  A two-phased project to extend an existing field adding c.200 bbls/d and development of c. 1.0 mmstb 2P reserves with the subsequent phase having the potential to add an additional 500bbls/d and the addition of c.2mmstb 2P reserves.

·    Shale:

o  Whilst the effective moratorium remains in place, the Government has commissioned the British Geological Survey to advise on the latest scientific evidence around shale gas extraction.

o  Domestic shale development can reduce higher carbon tax imports, reduce gas prices, improve our balance of payments and the country’s tax revenues, and provide jobs.

o  The Group holds a significant portfolio of shale licences, totalling 292,100 net acres with estimated Mean volumes of undiscovered GIIP of 93 TCF (net to IGas, independently assessed by D&M in 2016).

o  Potential to deliver 5 production well pads, with each pad having up to 16 wells, which would supply 3 million homes with initial production within 12-18 months with the right Government support to rapidly accelerate the development of this strategic national resource.

 ·    Deep geothermal:

o  Made excellent progress with support from the UK Government – specific provision has been made for deep geothermal in the recently launched Green Heat Network Fund (GHNF);

o  The GHNF Transition Scheme is a three year £288 million capital grant fund supporting the commercialisation and construction of new low and zero carbon heat networks including the drilling of deep geothermal wells and associated works;

o  GHNF opened to applications in March 2022 and confirmed it will fund up to 50 percent of a project’s total combined commercialisation and construction costs;

o  Stoke-on-Trent will be the first project to apply to the fund and we are working with SSE to agree the Thermal Purchase Agreement by Q3 2022;

o  Currently in discussions with six off takers, across six separate sites which equates to c.60-70 megawatts of installed heat generation; and

o  Expect to announce the acquisition of our first site in the Manchester area in H1 2022.

·    Collaborations announced with Cornish Lithium and CeraPhi Energy extending the geothermal portfolio

Reserves

·    Reserves and resources updated in DeGolyer & MacNaughton (D&M) CPR of 31 December 2021

o  1P NPV10 of $139 million: 2P NPV10 of $190 million

o  Reserves have, as anticipated, declined this year driven primarily by our 2021 production and higher operating cost assumptions.

IGas Group Net Reserves & Contingent Resources as at 31 December 2021 (MMboe)*

1P

2P

2C

Reserves & Resources as at 31 December 2020

11.74

17.12

20.34

Production during the period

(0.71)

(0.71)

Additions & revisions during the period

(0.46)

(0.62)

Reserves & Resources as at 31 December 2021

10.57

15.79

20.34

*Oil price assumption of c. $67/bbl for 2022-2024 then escalated at an average rate of 2.5% thereafter

Commenting today Stephen Bowler, Chief Executive Officer, said:

“I am very pleased with the way the business responded to the ongoing challenges of COVID-19 in 2021. Our production remains robust and we expect strong operating cash flow generation, in line with improved commodity prices.

We have made excellent progress on large scale geothermal, with specific provision now being made for drilling of geothermal wells in the Government’s recently launched Green Heat Network Fund (GHNF). This now gives us a clearer line of sight to development as we firm up a number of rapidly emerging opportunities.

Our decision to follow an energy diversification strategy was the right one.  However, what is clear, is that fossil fuels and gas in particular, will remain a significant part of the energy mix as we move towards and beyond net zero.

We welcome the Government’s scientific review of shale gas by the British Geological Survey, expected before the end of June 2022, and the opportunity to demonstrate how shale gas can provide safe, secure and affordable energy for the UK.  We believe that expediting shale gas development will help alleviate the recent supply issues and high prices, alongside reducing emissions through to the replacement of imported gas.”

It is IGas’ time and at long last the share price is on the move as a result of the news yesterday that the UK Government announced its review of shale gas and of course the support for geo-thermal grows. All the company needs now is to have central Government take planning decisions away from local areas and things would be really motoring. 

It is worth seeing just how domestic hydrocarbons can be easily and safely produced as per charts in the presentation and just how quickly we as a country are becoming reliant on imported oil and gas. IGas really are one of the keys plays in the market if you believe that the recent Russian activity will change our energy policy for the long term.

Eco (Atlantic) Oil & Gas

Eco has announced, further to the Company’s announcement of 5 April 2022, the successful completion of an oversubscribed Equity Fundraise. A total of 64,885,496 new Common Shares in the capital of the Company have been conditionally placed with, or subscribed for by, new and existing institutional investors at a price of £0.30 per Placing Share (or, for Placees in Canada, CAN$0.50). On settlement, the Equity Fundraise will raise gross proceeds of approximately £19.5 million (approximately US$25.5 million) for the Company before expenses consisting of:

·  48,040,714 new Common Shares pursuant to the Placing, raising gross proceeds of approximately £14.4 million (approximately US$18.9 million);

·   10,178,116 new Common Shares pursuant to the Subscription, raising gross proceeds of approximately £3.1 million (approximately US$4.0 million); and

·   6,666,666 new Common Shares pursuant to the Retail Offer on the PrimaryBid platform, raising gross proceeds of approximately £2.0 million (approximately US$2.6 million).

In aggregate, the new Common Shares to be issued pursuant to the Equity Fundraise represent 28.8% of the issued share capital of the Company prior to the Equity Fundraise and 22.4% of the Company’s issued share capital as enlarged by the Equity Fundraise.

In connection with the Placing, Berenberg, SpareBank 1 Markets and Echelon acted as Joint Bookrunners and the brokered private placement element of the Placing was conducted by Echelon acting as Canadian agents.

The Equity Fundraise Shares will, when issued, be credited as fully paid and will rank pari passu in all respects with the existing Common Shares of the Company, including, without limitation, the right to receive all dividends and other distributions declared, made or paid after the date of issue.

Application has been made to the London Stock Exchange for admission of the Placing Shares, the Subscription Shares and the Retail Offer Shares to trading on AIM. The issuance of the Equity Fundraise Shares is subject to conditional approval by the TSX Venture Exchange. It is expected that AIM Admission will take place on or around 8.00 a.m. BST on 11 April 2022 and that dealings in the Placing Shares, the Subscription Shares and the Retail Offer Shares on AIM will commence at the same time.

Following AIM Admission, the enlarged issued share capital of the Company will be 289,875,431 Common Shares. The above figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company.

The Equity Fundraise is conditional upon, amongst other things, AIM Admission becoming effective and upon the Placing Agreement not being terminated in accordance with its terms.

 Gil Holzman, Co-Founder and CEO of Eco Atlantic, commented:

We are delighted with the result of this oversubscribed placing and grateful for the strong demand and support from investors, in particular our existing shareholders and our strategic alliance partners Africa Oil Corp.

“The capital raised will support the upcoming drilling of the Gazania-1 well on Block 2B, offshore South Africa, further G&G work across the entire portfolio and will also ensure that we maintain a strong balance sheet to continue executing on our consolidation strategy aimed at becoming the most exciting exploration company in the E&P Sector with multiple drilling catalysts.”

Nothing to add here, this was expected and why the shares have been waiting for today’s news. I would think that now this is behind them the company should power on with its activities in Guyana and Africa. More when I have had a chance to chat to Gil. 

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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