WTI $59.24 -$1.28, Brent $62.91 -$1.02, Diff -$3.67 +26c, NG $3.07 -1c, UKNG 41.32p -3.17p
After all that hullabaloo the oil price was almost static last week, in the end WTI lost just 23 cents and Brent gained 48 cents. In the same boat the US rig count showed overall rigs unchanged at 397 with oil down 1 at 305.
But the Covid numbers are falling and the UK has today announced a slow step back from lockdown, international markets are still however in the red.
Chariot Oil & Gas
Chariot has signed a Collaboration Agreement with Subsea Integration Alliance to work together to enable the front-end design, engineering, procurement, construction, installation and operation of the Anchois Gas Development project in Morocco. Subsea Integration Alliance is a nonincorporated strategic global alliance between Subsea 7 and OneSubsea®, the subsea technologies, production, and processing systems division of Schlumberger.
Chariot and Subsea Integration Alliance will adopt a “One-team”, integrated and collaborative approach to safely fast-track first gas to maximise the return on investment. The team will also handle the operations and maintenance of the facilities and maintain Chariot’s commitment to ESG and the importance of contributing to social development through the creation of direct and indirect jobs in Morocco.
Stuart Fitzgerald, CEO, Subsea Integration Alliance commented:
“We are pleased to be starting a journey with Chariot on the exciting Anchois gas development in Morocco. We believe the Subsea Integration Alliance “One-team” collaboration with Chariot will help unlock the planning and execution of the development and uncover the true value of the project for all stakeholders.”
Adonis Pouroulis, Acting CEO, Chariot Oil & Gas Limited commented:
“This Collaboration Agreement with Subsea Integration Alliance further endorses our view that the Anchois development is a high value project. With the recent announcement on potential project finance, Chariot is clearly showing that it is delivering on what it said it would do, namely, advancing the commerciality of the Lixus asset and generating value to shareholders in the process.
We believe that 2021 will be an exciting year for the business, as we look to commence with our operational plans at Anchois and further enhance our portfolio to include other commercial opportunities along the theme of energy transition. We look forward to keeping our investors updated on progress with these initiatives over the coming months.”
I read this to be excellent news from Chariot who are powering on at the Anchois gas project in Morocco, this time for the FEED, EPC installation and operation of it as well as pre-commissioning and commissioning work. The fact that they have gone with SIA is also a positive sign in terms of partner quality and efficiency and clearly for ultimate delivery.
The economics of the project are looking very positive with an NPV 10 of $500m on revenue of $1.5bn and repaying capex within two years. With 361 BCF of 2C resources in the initial phase, there are up to 3 TCF of total remaining recoverable resources which could mean 7 additional core developments.
This agreement covers all parts of the development except the drilling and completing of the wells. It is anticipated that the appraisal well will drill the A+B discovery sands as well as further previously undrilled but low risk sands. If you assume that the well will be suspended as a producer the the value for money is very good as the well will be an appraisal, production and exploration play and rig availability is good and at reasonable rates.
There has been much going on at Chariot under the new management regime and as I understand it there is still much to come. Obviously more work at Anchois and Lixus, indeed the whole of the wider Rissana licence but also on other ‘ventures’ which are currently being worked on. Accordingly it is going to be an interesting time as a shareholder in Chariot over the coming months and at what looks like a very modest risk for the potentially high return on capital invested.
Angus Energy PLC has announced, further to the RNS of 19 January 2021 that the Company has received a “best efforts” expression of commitment in the form of a conditional Mandate Letter, for between £8 and £9 million toward the proposed £12 million Saltfleetby Equipment Finance and Field Development Loan Facility from a major multi-national institution. The Mandate commitment is conditional also on the participation of other institutions and investors for the balance of £3 to £4 million.
The Company has also been informed of indications and soft commitments for the same Loan Facility of approximately £11 million from an identified group of investors led by Aleph Energy (“Aleph”). In each instance the terms of the Loan Facility are substantially unchanged from those disclosed in the RNS of 19 January 2021.
Additionally, the group of investors has expressed a strong interest in funding Angus’s planned geothermal and solar projects, in continued support of the Company’s Energy Transition plans and revenue diversification.
The Mandate includes a 45-day exclusivity period for this joint financing effort until 5 April although it is the stated intent of all parties to conclude legal documentation, perfect security and satisfy conditions precedent, including, inter alia, regulatory approval of the Field Development Plan by the OGA, consequential amendments to the Farm-out Agreement, the Joint Operating Agreement and the existing Knowe Properties Loan Note, with a view to making disbursements during the month of March.
A further condition of the Mandate is that the debt provider will also provide hedging services on market terms for a proportion (no greater than 70%) of a low case production estimate during the four year life of the Loan Facility.
It should be emphasised that the Mandate Letter is not a firm offer of funding and completion of the Loan funding remains subject to the satisfaction of those various conditions that currently remain outstanding.
George Lucan, Angus CEO, comments: “We are very pleased to have attracted the support of a group of institutional investors and family offices some of whom have also expressed genuine interest in funding Angus’s pipeline of Energy Transition projects. We look forward to closing this Loan Facility within a realistic timeframe and thank shareholders for their continued support in developing our portfolio of assets in line with the highest ESG standards. We will be following this announcement with updates on our other assets over the coming days.”
I’m not surprised to see that George Lucas is ‘very pleased’ with regard to this news about the loan funding, it is massively oversubscribed if anything like all these interested parties stay involved and he gets a potential funder for the geothermal projects as well as someone to provide hedging services. The share price has yet to realise that this is good pretty much whatever the terms.
Angus- Take 2 – Re-evaluation of Lidsey Field (PL 241)
Angus Energy plc has announced an update and adjoining presentation on recent work done by the Company on reprocessing and reinterpreting the Lidsey seismic data. One of the conclusions of the work is that previous seismic mapping both underestimated the aerial extent of the reservoir and most importantly its shape. As a consequence of which, the presentation addresses the likelihood that both wells X1 and X2 have been addressing the flank or edge of the structure rather than its crest.
The Company therefore intends to acquire a new line of seismic data and reprocess the existing seismic lines. Angus will reinterpret and remap the field using the new data with the aim of identifying a new drilling target. Assuming the further seismic line does not result in a wholly unexpected remapping, the Company will then explore farm-out or other financing for a short side-track back to the crest of the structure, subject to Planning, EA and other regulatory permissions.
George Lucan, Angus CEO, comments: “Lidsey was one of the two oil fields which supported the launch of Angus onto the AIM at its initial public offering in 2016. Expectations were for over 250 barrels a day and the disappointment at low flow rates in late 2017 was one of two defining moments for the Company in its early years on the market.
The Company believes that the Field has more potential than previously considered and that our technical view concerning depth conversion and seismic interpretation will shortly be incontrovertibly confirmed by the addition on further short seismic line. This has already been budgeted for.”
The second announcement is also positive for the company, further, fully funded seismic work must have every chance of success from what I read into the Lidsey RNS.
A 2020 update and 2021 outlook from President today which goes along with an investor presentation.
For 2020 numbers were as pretty much already detailed, turnover of approximately $28 million, a reduction of 32% year on year driven primarily by average oil price realisations falling 33% to $37 per barrel. However, average net Group production up 12% year on year to over 2,700 boepd and December average net Group production of circa 3,300 boepd demonstrating the early impact of the new wells drilled in late Q4.
Over $10 million of free cash generation from operations (after workovers) and treasury income gave adjusted EBITDA of approximately $3 million. Well operating (excluding royalties and workovers) and administrative costs were successfully reduced by 19% year on year to circa $20 per boe and capex incurred (including capital leases) of over $11 million.
Net debt reduced by 25% year on year to approximately $16 million, including the $5 million loan secured at the end of the period to fund development of the new treatment plant in Puesto Flores. Trafigura, one of the largest commodity traders in the world, and an important offtaker of President, became a major strategic shareholder.
‘Robust’ Group net 2P reserves of over 24 MMboe as at the year end with additional 9 MMboe of 2C contingent resources convertible to reserves on licence extensions.
This year’s drilling programme is expected to kick off as scheduled at end of March with four new gas wells in the Las Bases and Estancia Vieja fields, Rio Negro Province, all due to come on stream by end May. In H2, a further three oil well drilling programme planned at the Dos Puntitas field, Puesto Guardian Concession, Salta Province, Argentina, all due to come on stream towards the end of 2021.
New 3D seismic data acquisition planned over Canada Grande, a formerly prolific but now non-producing oil field also at Puesto Guardian and a new treatment plant and infrastructure set to start first phase operations in Rio Negro by end June bringing immediate cost savings. In Paraguay, farm-in discussions are ongoing, targeting completion during H1. Initial well planning to drill the high impact Delray complex exploration well within next 12 months.
Guidance for full year average production is projected to be between 3,600 and 4,000 boepd, based on Group capex spend of circa $18 million. This is planned to be funded through cash generation complemented by additional non-equity sources as required. The full benefit of capex will only be fully felt from the start of 2022 when all Salta new wells are expected to be on stream.
Atome Limited, a new alternative energy subsidiary was formed to focus on developing a hydrogen and ammonia production business.
Peter Levine, Chairman, commented
“In an unprecedented year of so much personal tragedy and pain for the World which we must humbly acknowledge, the President family pulled together and not only survived but by the end of the year became stronger. We successfully controlled what we could and the key performance metrics bear witness to this. We are sincerely grateful to everyone within the business for their efforts. We have a lot of work to do this year but we are very much up for it and relishing the prospects.
The energy landscape has changed even faster and more dramatically than anticipated. President, as an energy company focused on long term goals, embraces this. Any action has to be considered carefully, seriously and be planned with the ultimate objective of delivery for the Group in key relevant areas. It takes time. We are pleased to announce the incorporation of Atome Limited, a first step in respect of one of those actions.”
2020 Trading review
Last year, one that no-one could have foreseen, was incredibly hard for the industry as a whole given the material decline in commodity prices and demand that ultimately resulted in significantly reduced revenue and associated financial performance.
However, notwithstanding the challenging macro environment, President’s average production for the year increased modestly and operating costs reduced by almost 20% with over $10 million of free cash generation being $6 million from operations after taking into account workovers and over $4 million from astutely managed treasury income, taking advantage of market volatility.
This demonstrates the robustness of President’s oil and gas business and sets the Group up well to benefit from the improving financial climate in 2021.
In summary, for the industry it was a year more to survive than thrive but in which the stability of President prevailed. Having gone, as stated before, some two years without drilling new wells, President was the only company to drill in H2 2020 in Rio Negro, Argentina, post the start of the pandemic. The foundations were laid for a significantly more active 2021 where an important mission is to exploit the assets of the Company, increase consistent average production and enlarge the well stock to mitigate the continued effect of production being disrupted by older wells going down or in need of constant repair.
2021 will be a very busy year for the Company with a record number of wells to be drilled and a return to growth. Seven new production wells are projected either side of the half year. The drilling will kick off with the first four gas wells scheduled at the end of March in Rio Negro. These will be followed by three vertical oil wells in the Dos Puntitas field at Puesto Guardian.
Later in H2, there is a planned 3D seismic data acquisition programme over a formerly prolific Canada Grande field within the Puesto Guardian Concession, Salta Province to find new well locations to target and drill the productive A6 sand there. An initial land survey by potential contractors is currently underway. The best wells in Canada Grande produced initially as much as 1,000 boepd from the clean A6 sands. If the data indicates commercially viable well locations, then it would be President’s objective to drill in Canada Grande following on from the H2 drilling in Salta.
The return to activity in Puesto Guardian is significant with the real beneficial impact on the Company only occurring in all material effects from the start of 2022 when it is projected all wells will be on stream. Puesto Guardian is a long term Concession to 2050 and 100% owned and operated by President. Its current production is stable and showing good reservoir properties albeit low in volume due directly to the fact that there has been no new successful drilled wells there for some 10 years.
Unproduced reserves of scale are unquestionably present and there is significant potential to grow. The hard lessons that have been learnt from unsuccessful drilling in the past has given President a determination to succeed with the Company now having the resource and a drilling and engineering design team that have proved themselves able to deliver in action. Moreover with higher oil prices mitigating the greater discount for Salta oil and all necessary infrastructure in place to cope with greater volume, there are potentially materially enhanced margin barrels to be had.
Along with drilling and workover operations, President continues with the infrastructure projects previously announced including the treatment plant set to be commissioned by end June which will result in an estimated $4/boe reduction in operating costs.
As announced on 8 February 2021, President is seeking to renew its core Puesto Flores/Estancia Vieja Concession by a further ten years before the end of the year, thereby allowing for the conversion of some 9 MMboe of contingent oil and gas resources into reserves in due course.
With regards to Paraguay, the farm-in discussions continue with the previously identified party, a substantial national energy company from a non-Paraguayan, democratic, economically stable and technologically advanced country. The Main Board and technical committee of the proposed partner have approved its participation in the project, including the main financial and commercial terms. The parties are now finalising the definitive legal agreements.
Although it was stated in the RNS dated 22nd December 2020 that President hoped to conclude matters before the end of Q1 2021, patience is required in these pandemic restricted times which affect legal due diligence and negotiating final form agreements in two languages. Nevertheless, the target for both parties is to complete the farm-in during H1 2021 and in that event, drilling is expected to commence in the first part of 2022 at the high impact Delray complex of prospects internally estimated to contain 230 MMbo of unrisked oil in place.
As to oil prices, whilst our modest Louisiana operations approximately track WTI and Louisiana Light prices, Argentina realisation prices are always subject to a discount from Brent and also depend on geographic location. In February, in Rio Negro, President’s realisation price is currently estimated at just over US$52 per barrel whilst in Salta, the realised price for this month is approximately US$46.
Gas prices reflect the current modest supply squeeze which is expected to exacerbate over the winter. Current spot prices are US$2.40 per MMBtu with President projecting higher winter prices of US$3.60 per MMBtu.
President is an energy centric company. As such, as a long term business it has to embrace and develop in energy outside both its present geographic core area of Argentina and also its oil and gas business whilst not neglecting the same. So whilst recently forming President Nuevo Energia SAU, a new renewables company in Argentina to consider opportunities in that country, President, after careful research has determined that it is appropriate to step out in a more concrete and definite direction.
The Company has formed Atome Limited as a UK intermediate holding company focusing on developing a hydrogen and ammonia production, marketing and sales business as distinct from an OEM (original equipment manufacturer). It will leverage on the international contacts and experience of President’s management and is being seeded out of cash flow. In due course, it will have an independent board experienced in alternative energy. President is pleased to announce that the first of such directors has now been appointed being Mary Rose de Valladares, former long standing General Manager of the IEA (International Energy Agency) Global Hydrogen Collaboration Programme. It is too premature to make further comment save that Atome which has already started detailed research work represents a serious step for President and updates on progress will be made as matters develop later in the year.
Today’s statement from PPC was much more extensive than usual and I havent covered it in full, for that it is possible to read the detailed announcement and of course listen to the trading update. The company is clearly in very good nick and still remarkably cheap compared to the sector with its oil and gas flow. As Peter Levine says, this is a serious company and to add my own tilt, is without doubt delivering the goods.
Echo Energy has announced, further to the Company’s announcement of 1 December 2020, that following positive and constructive discussions with certain holders of the Company’s Luxembourg listed EUR 20.0m 8.0% secured notes it has published its proposals in respect of a restructuring of the Notes and that a meeting of the holders of the Notes has now been convened to consider the Proposals for 10.00 a.m. (London Time) on 15 March 2021.
Pursuant to the Proposals, the Company is seeking Noteholder consent to extend the maturity of the Notes by three years to 15 May 2025; and remove all cash interest payments on the Notes prior to the Maturity Date.
If approved by the requisite majority of Noteholders any and all interest on the Notes accruing from 31 December 2019 shall be paid in cash on the Maturity Date save that Noteholders will be provided with the ability, from 30 September 2021, to elect to receive Note interest payments in respect of the immediately preceding quarter in new ordinary Shares in the Company, subject inter alia to the Company having the required share issuance authorities in place from time to time to satisfy Elections and to Noteholders holding at least 50 per cent. of the Notes having made Elections in respect of the relevant quarter. Any new ordinary shares issued as a result of Elections will be issued at an effective issue price equal to the volume weighted average price of an Echo ordinary share for the 10 Business Days before the relevant interest conversion date.
In putting the Proposals to Noteholders the Company has agreed, subject to Noteholder approval of the Proposals at the Noteholder Meeting that it will not, without the prior consent of Noteholders by way of a simple majority of those Noteholders then voting, drill an exploration well with a budgeted cost to the Company of in excess of EUR 5.0 million for so long as the Notes are outstanding and that it will not, in the last 18 months prior to the Maturity Date, make an acquisition of an interest in an oil and gas property, lease or licence if the cash consideration for such acquisition exceeds EUR 10.0 million.
Subject to the passing of the Proposals at the Noteholder Meeting, the Company will make a payment to Noteholders of an aggregate of EUR 100,000, payable to Noteholders voting in favour of the Proposals at the Noteholder Meeting pro rata to votes cast at the Noteholder Meeting, to be satisfied by the issue of new ordinary shares in the Company at an issue price equal to the average mid-market closing price per Echo ordinary share for the five days ending, and including, 18 February 2021.
Total Market Solutions
On Friday afternoon I spoke to Doc Holiday of TMS and we talked about selected oil & gas stocks. The following names came up : RKH, SEY, TLW, KIST, LBE, JOG, SQZ, UJO, SAVE, RBD, EDR, EOG, PTAL, PRD, HE1, ZPHR, SCIR, BLOE and BPC. The link is here:
Total Market Solutions interview: Malcy Talks Oil & Gas XXIV
In the Prem on Saturday the Saints held Chelski 1-1, Burnley and the Baggies drew 0-0, the Cottagers secured three valuable points against the Blades and in the Scouse derby the Toffees nicked all the points at fortress Anfield winning 0-2.
On Sunday talking of gritty derbies the Hammers held on to beat Spurs 2-1, the Foxes visited the Grealishless Villa and won 1-2, the Gooners entertained the Noisy Neighbours who beat them 0-1 and the Magpies went to the Theatre of Dreams and lost 3-1.
Tonight its another grudge game also known as the M23 derby as the Eagles head to the Seagulls.
Team Ineos failed in its attempt to win the Prada Cup and therefore no opportunity to challenge Team New Zealand in the Americas Cup sailing. The winds were too light for the UK boat that needed heavier weather.