Wentworth Resources, Challenger Energy, Zephyr.

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A flash blog today as I’m away for a couple of days.


Wentworth Resources


A record set of interims from WEN this morning due to growing demand and ‘increasingly stronger fundamentals in 2021’. An interim dividend of $1.32 million has been declared, an increase of 10% from H1 2020 ($1.2 million), bringing the total dividend distribution declared in the last 12 months to $5.12 million, in line with the Company’s stated progressive capital return policy.


Revenues grew 40% to $11.7 million (H1 2020: $8.3 million), due to record levels of production at Mnazi Bay, adjusted earnings before interest, taxes, depreciation, amortization, and exploration (EBITDAX) rose 75% to $7.0 million (H1 2020: $4.0 million).


Wentworth retains a very strong financial position with $21.0 million cash in hand at 2 September 2021 (2 September 2020: $16.7 million) with zero debt. Tanzania Petroleum Development Corporation (“TPDC”) continues to remain fully current with all invoices for gas sales and a payment plan to settle outstanding arrears from Tanzania Electric Supply Company (“TANESCO”) established with over half the outstanding balance received in August.


It gets better, as the company reiterate increased production guidance range for the year of 70 – 80 MMscf/day (gross) compared to previous guidance of 65 – 75 MMscf/day after production at Mnazi Bay averaged 80 MMscf/day (H1 2020: 58 MMscf/day), the highest H1 production performance achieved to date. Production capacity of existing wells and production facilities increased to 100 MMscf/day whilst operational costs of production down 72% year-on-year to $0.48/Mscf (H1 2020: $1.72/ Mscf), due to continued focus on cost efficiencies.


Wentworth’s share of Gross 2P Reserves as at 31 December 2020 estimated by RPS to be 90.8 Bcf with a post-tax NPV10 of $116.6 million


There has been plenty of corporate activity at Wentworth which show that at board level there is ongoing change, amongst these were included the appointment of Juliet Kairuki, independent Non-Executive Director, as part of the ongoing process of Board refreshment.


Bob McBean retired as Chairman of the Board but continues to support the Company as President of Wentworth Tanzania which led to Tim Bushell being appointed Non-executive Chairman as part of the planned Board succession process. The company expect to appoint another independent NED later this year and a new senior hire in the management team expected to be appointed ‘shortly’.


Growth within Tanzania continues to be a key focus to capitalise on in-country track record, improving demand dynamics and operational performance. One of the key things about WEN is the stakeholder engagement process which leads to strong relationships with the Government of Tanzania, local communities, and the above payment of receivables. I commented recently that Wentworth has been a standard bearer in the process of ESG and they published an inaugural Sustainability Report earlier this year.


A key focus for 2021 is Wentworth’s climate strategy, to ensure effective measurement and mitigation of climate-related impacts; ‘further updates will be shared in due course’ and they announced membership of the United Nations Global Compact, underlining the commitment to operate responsibly in line with the UN’s Ten Principles on human rights, labour, environment, and anti-corruption and to take strategic action to support the UN’s Sustainable Development Goals.


Wentworth has announced a dividend of GBP 0.52 pence per share (US$1.32 million), payable by the end of October 2021. A final dividend for the year ending 31 December 2021 will be determined by the Board with the full year results and is expected to be approximately $2.64 million in line with the Company’s stated policy of 1/3: 2/3 split between the interim and final dividend. Assuming a final dividend is declared, subject to shareholder approval, this would equate to a total distribution of $3.96 million which represents a full year dividend of 1.55 pence per share, a yield of approximately 6.8% at the current share price.


I suspect that there was some discussion about an even bigger dividend this time but that probably waits until the final, also keeping their cash powder dry shows that they are wanting to be flexible should the ‘right’ deal turn up.


Katherine Roe, CEO, commented:


“We are delighted to have delivered a record financial and operational performance in H1 2021 which underpins our decision to increase our interim dividend once again, to $1.32 million. Following a challenging period of global economic uncertainty, to have delivered this record performance demonstrates once again the strength of our fundamentals. Our commitment to maintaining these is unwavering.


“Whilst we have enjoyed a robust first half, we remain focused on meeting our full year potential and meeting the growing demand in Tanzania for reliable low-cost power. The strength of our team and partnerships, the reliable performance of the Mnazi Bay asset and the improving outlook in Tanzania ensures we are in a positive position for the future.”


This has indeed been a very good set of interims, a strong financial position has been maintained with receivables reduced, and a dividend increase for shareholders. Wentworth is a very stable, well managed company in a country that is continually proving to be helpful and even realising that the likes of WEN is a genuine bonus to in-country progress on all energy fronts, what is more it is differentiated from any peer group by way of the qualities displayed in this announcement today.


Challenger Energy


News today from Challenger on Saffron and funding, I will add to it when I return.


Eytan Uliel, Chief Executive Officer, commented:


“On 25 August 2021, Challenger Energy advised of initial production test results at the Saffron-2 appraisal well in Trinidad’s South West Peninsula. Testing is ongoing, but we have since received queries as to the implication of the well results so far for the project as a whole, in response to which I’d make two general comments: one, Saffron-2 has told us that a project at Saffron is likely viable, but two, it will not look the same as the project we had envisaged pre-drill. Specifically, we now know that a project based solely on shallower, cheaper wells targeting just the Middle Cruse can stand on its own, and we are working on revising technical models and development plans accordingly. We also now know that there are moveable hydrocarbons in the Lower Cruse, although more work is needed to figure out how to get sustained production from those zones, which has the potential to then expand the scope of any development over time. And finally, what we have learned from Saffron-2 will allow us to systematically revisit all available financing options, plus there is a body of work to be done in terms of updating relevant regulatory and planning requirements. The important point is that based on the results of Saffron-2 we believe Saffron is a commercial project, and so we are doing the work needed to advance to a development as soon as possible, until which time we will continue to maximise cashflow from the Saffron-2 well itself. We will keep shareholders appraised of developments.”


Zephyr Energy


Another very positive update from Zephyr this morning, again I will update upon my return.


Colin Harrington, Zephyr’s Chief Executive, said: “I’m thrilled with the continued progress from the well site. The results of the DFIT, combined with the significant amount of data previously gathered from the well, all indicate that the State 16-2LN-CC has the potential to be an excellent “proof of concept” location for an HSRP test.


“This marks tremendous progress, and the Board’s subsequent decision to move forward with an HSRP completion is a clear indication of the significant value which we believe may exist through that development route.


“The next step – a successful HSRP test – would result in a substantial reduction in development risk across our acreage, as well as allow for a wider systematic development with predictable well distribution. Production results from the first well, expected to be available in late October, will be the first test of the viability of this strategy – but given what we’ve learned to date, I feel confident that we’ll continue to hone drilling and completion techniques on this acreage well into the future.


“Indeed, we now believe that our acreage holds multiple opportunities within both the Cane Creek and the shallower clastic reservoirs to support the drilling of additional wells to delineate the acreage. This first completion will add further data to help us understand the reservoirs and our ability to optimise well length, well spacing and completion design.


“I’d like to conclude by noting that in pursuing the HSRP development route, Zephyr’s goal is to maximise resource efficiency and project economics while minimising environmental and surface disruption. Zephyr’s core mission is to be responsible stewards of our investors’ capital while also being responsible stewards of the environment, and a tangible demonstration of that commitment is our pledge to offset one hundred per cent. of our Scope 1 carbon emissions by the end of September. With any future development, we will continue to strive to mitigate the environmental impact by reducing surface footprint, minimising disturbance and offsetting our emissions.


“We look forward to keeping shareholders informed as completion operations commence and production data is received.”

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