Christmas 2021 / New Year 2022 Blog
20 companies covered: ADV, COPL XOP, CHAR OIGLF, EME, GENL GEGYF, HE1 HLOGF, IOG, I3E ITE, LOGP, LBE, PANR PTHRF, MATD PRTDF, PTAL TAL, PRD, PPC PPCGF, PVR, RKH RCKHF, TLOU TOU, ZPHR ZPHRF & 88E EEENF
2021 ends with a strong energy pricing environment and a positive outlook for those companies with viable projects. I’ll focus today on the interesting ones which have issued news over the last month or so and which offer the potential for significant price action in 2022.
Advance Energy (ADV) (3.975p) holds a 50% interest in the Buffalo PSC and the upcoming Buffalo-10 well is designed to test the presence of an attic oil accumulation remaining after the original development, converting the 2C resources of 34.3 million stock tank barrels to 2P reserves following re-certification. Chance of success is stated as an 85% probability of confirming a sanctionable development project based on the minimum economic field size. There is some professional scepticism regarding this, but ADV claims that in the success case, there is potential to deliver a gross production rate of around 40,000 barrels per day by the end of 2023, which in the current pricing environment would deliver exceptionally strong cash flow and significant rates of return. Spud is this week. Those in ADV from 2p up once it came into play most likely have de-risked and will be riding the drill result for free. It’s been covered in the private blog all the way. Market capitalisation is £41 million.
Canadian Overseas Petroleum (COPL XOP) (17.1p) this month raised $8 million at 20p to finance a bid for Cuda Energy, a non-operating partner in COPL's Wyoming assets. Increased oil production has been announced at Barron Flats due to the commissioning of facilities to reduce the surface working pressures on the most capable producing well in the field, a horizontal previously producing at a restricted rate of 150 barrels a day, which has exhibited what the company says is an exceptional response to the miscible flood scheme. The jury is still out as the actual economics of all this, but the company retains an extensive investor following, which perhaps is its most valuable asset. Market capitalisation is £28 million.
Chariot (CHAR OIGLF) (7.25p) has commenced drilling operations. Work to drill the Anchois-2 gas appraisal and exploration well and re-enter the previously drilled Anchois-1 gas discovery well is expected to take up to approximately 40 days. The target is a total remaining recoverable gas resource in excess of 1 trillion cubic feet. Those in this from 5p after it came into play most likely have de-risked (it’s been as high as 9p) and will be riding the drill result for free. It’s been covered in the private blog all the way and significant promise still remains. The company has signed a memorandum of understanding with what it describes as a leading international energy group, relating to the key terms of gas off-take and partnering between the parties in respect of the Anchois gas development and the future gas sales agreement will be for around 40 million cubic feet per day for up to 20 years on a take or pay principle to underpin the venture. Major projects in the sustainable/renewable energy space also are about to commence. Market capitalisation is £54 million.
Empyrean Energy (EME) (6.15p) has raised £7.623 million to fund drilling of the Jade prospect in China. £3.326 million was raised via a placing at 6p and a further £4 million was raised through the issue of a convertible loan note. The company lost $1.98 million to a “cyber fraud,” but says it still has sufficient funding on a dry hole basis for the drill. Testing, in a success case, has been quoted at an additional $7.4 million. The well remains scheduled to be drilled immediately, following a well site survey which requires 5 days of suitable, low swell, sea conditions. Jade has an independently assessed geological chance of success of 32% (although the company believes it could be as high as 41%) and an audited mean in place potential of 225 million barrels with a P10 in place upside of 395 million barrels. Market capitalisation is £39 million. However, having left the fundraising so late, is there still time for a worthwhile pre-spud run?
Genel Energy (GENL GEGYF) (127.2p) in its last trading and operations update disclosed net production averaged 32,005 barrels of oil per day in the first nine months of 2021. Drilling operations at Peshkabir, Sarta, and Qara Dagh remain ongoing. Market capitalisation is £354 million, but following last week’s announcement of the Somaliland farm-out to CPC Corporation, the state-owned energy company of Taiwan, there is now a big drilling event coming up in 2023, targeting multiple stacked prospects with over 5 billion barrels of prospective resources. The well cost will be around $40 million, however, the technical case for drilling is compelling. One prospect alone could target over half a billion barrels.
Helium One Global (HE1 HLOGF) (6.6p) announced an operational and trading update. The company has commenced data acquisition of its 200 line kilometre Phase II 2D Seismic Campaign at Rukwa. The campaign is ongoing with the late arrival of rains to Rukwa resulting in good ground conditions for data acquisition. Following encouraging early results, the Company has decided to extend the survey with an additional 20 line kilometres of 2D Seismic to secure additional data over promising targets within the previously un-surveyed Momba area. The Company has also agreed to shoot a 15 kilometre high resolution line. Helium One says it remains well funded for current exploration activities, is confident about its Phase II exploration campaign and is in negotiation with a number of rig contractors for mobilisation of a conventional rig to target commencement of drilling in Q3 2022. After payment of all due invoices related to Phase I drilling, cash reserves available for Phase II exploration as of 31 October stood at £8.7 million with liabilities excluding disputed invoices of £0.18 million. Market capitalisation is £41 million.
IOG (IOG) (36.5p) profiles itself as a net zero UK gas and infrastructure operator focused on high return projects. Its Saturn Bank project is about to start producing. Final pre-first gas commissioning activities are underway and sales are expected to start in the early weeks of 2022, with Phase 1 looking set to capitalise on strong gas prices. IOG is targeting a gross peak production rate of 140 million cubic feet of gas per day so potential revenues are substantial. IOG has been covered in the private blog each week from as low as 9p. Market capitalisation is £191 million.
I3 Energy (I3E ITE) (13p) announced its 2022 Canadian capital programme and dividend guidance. The capital budget is $47 million and is forecasted to deliver 12.6 net wells to be drilled across the portfolio in Central Alberta, Marten Hills, Simonette and Wapiti. Estimated average 2022 production is above 20,000 barrels of oil equivalent per day, producing $184 million of combined 2022/23 net operating income. I3E says it is committing to pay a minimum of £11.827 million in dividends during the course of 2022, equating to 1.05 pence per share, an 8% yield at the current share price, with forecasted 2022 unencumbered cash of $66 million which could support additional shareholder distributions or share buybacks. It’s certainly going to be fascinating to read the eventual published accounts.
Longboat Energy (LBE) (63p) has four wells upcoming: Ginny/Hermine (9% interest), where drilling is expected to commence in the next few weeks, Kveikje (10% interest) and Cambozola (25% interest), which are to be drilled in the first quarter of next year, plus Copernicus (10% interest), where a drill is expected in the summer. Chances of success of these wells are 27%/22%, 55%, 15% and 26% respectively. The latter two, Cambozola and Copernicus, are the big ones, with mean resource estimates of 159 million barrels of oil equivalent and 254 million barrels of oil equivalent respectively. Market capitalisation is £36 million.
Pantheon Resources (PANR PTHRF) (83.2p) has raised gross proceeds of approximately $41 million through a placing, subscription and retail offer at a price of 65 pence per share, plus a further $55 million from the issue of convertible bonds. Upcoming in January is the flow testing of Talitha #A and the drilling and testing of Theta West #1. Billions of barrels of oil are touted by the company, but these are Pantheon’s own numbers and not independently assessed. Market capitalisation is £648 million. Question is whether there remains time for a meaningful pre-spud run.
Petro Matad (MATD PRTDF) (2.875p) announced an operational update. Contracting negotiations with drilling, well completion and infrastructure services providers are at an advanced stage with contract awards anticipated in good time for the start of the operational season in Q2 2022. Operations will focus on the completion of the Heron-1 discovery as a production well and the drilling of additional production wells within the current 3D seismic footprint. Block V exploration also remains a keen focus with a number of attractive, low cost, high impact prospects identified. The company is in discussion with drilling contractors to determine the potential timing and costs of drilling operations on the trend. There is no word yet on financing, though, the details of which of course will be crucial. Market capitalisation is £26 million.
PetroTal (PTAL TAL) (22.1p) has now achieved its 20,000 barrels of oil per day goal. Well 9H is delivering strong initial production, having averaged approximately 8,200 barrels of oil per day and well 10H has commenced drilling. The targeted completion date is in early February. Meanwhile, the indigenous protests have been resolved, PetroTal has taken back control of Pump Station 5 and now can recommence oil throughput in the Northern Peruvian Pipeline. Market capitalisation is £185 million. I mentioned PTAL positively just over a year ago at 7.6p.
Predator Oil & Gas (PRD) (4.9p) says an extended MOU-1 well testing programme is to commence in Morocco, for which it is fully funded and a MOU-4 competent persons report is due to be published early in 2022 prior to that testing. A placing or alternative fundraising method looks likely to be required to drill MOU-4. Predator is a company that’s been covered in the private blog each week since December 2019 and has been quite a spectacular performer. The share price is still up from 2019/2020 levels, having reached a high of 22.5p prior to the MOU-1 spud. Market capitalisation is £14 million. It’s one to look at once fully financed for the next drill.
President Energy (PPC PPCGF) (2.3p) has completed the farm-out of a 50% interest in its Pirity concession in Paraguay to CPC Corporation, the state owned energy company of Taiwan. CPC will be paying 60% of the costs of a $10-15 million exploration well scheduled to commence in the first half of next year., plus a cash payment of $4 million. The well will be targeting a complex of prospects, estimated by President to contain an un-risked resource of 230 million barrels of oil with a 30% chance of success. In the meantime, subsidiary company, Atome Energy, is to be spun out and floated on AIM this week, with PPC’s shareholders receiving a dividend in specie of one share in Atome for every 169 shares in President held on the record date. It is to be valued at £20 million pre new money (£9 million has been raised at 80p per share) and at the initial valuation price, the Atome dividend is worth 0.47p per share to President’s shareholders. Market capitalisation is £47 million.
Providence Resources (PVR) (2.65p) has initiated a strategic review of the development potential of the Barryroe field to prepare what it claims will be a robust case for the development of the field. The review will be completed next month it says and will determine the strategic plan. Providence believes it has a compelling proposition with regards to Barryroe, which is stated to hold 346 million barrels of oil equivalent of recoverable hydrocarbons, but to date the company has been unable to raise the necessary funds. PVR owns an 80% interest in Barryroe and Lansdowne Oil & Gas (LOGP) (5p) owns 20%. Market capitalisations are £26 million and £4 million respectively. Caveat is that the granting of the lease undertaking for the Barryroe field, which is subject to Ministerial consent, is fundamental to the execution of the board's strategy. In the absence of that, and indeed without timely receipt, Providence may not be able to achieve its stated objectives, with fundamental and serious consequences for both PVR and LOGP's future viability.
Rockhopper Exploration (RKH RCKHF) (8.3p), Harbour Energy and Navitas Petroleum have signed detailed heads of terms for Harbour to exit the Falklands and for Navitas to farm-in. Rockhopper will own 35% working interests across all their Falkland Islands petroleum licences and Navitas will own 65%. Rockhopper's share of Sea Lion costs from transaction completion up to final investment decision will be funded through a loan from Navitas and in the event of a positive decision, Navitas will provide an interest free loan to Rockhopper to fund two-thirds of Rockhopper's share of development costs. Meanwhile, arbitration proceeds continue against the Republic of Italy in relation to the Ombrina Mare field, in respect of which Rockhopper believes it has strong prospects of recovering very significant monetary damages. Market capitalisation is £38 million.
Tlou Energy (TLOU TOU) (2.45p) announced terms of a convertible note agreement with the Botswana Public Officers Pension Fund: $5 million for 5 years at an interest rate of 7.75% a year and conversion to shares at a 10% discount to the 90-day VWAP. The funds are planned to be used to finance construction of transmission line infrastructure to connect the Lesedi project to the Botswana Power Corporation power grid and to fund installation of generation assets and ancillary costs to facilitate power generation and the sale of electricity. In addition to the note, TLOU and BPOPF have agreed preliminary terms for a further $5 million equity investment post 1 July 2022. Meanwhile, the company and Synergen Met are working on combining natural gas reserves with solar energy to produce green hydrogen. Production is planned for 2022 and the prototype hydrogen production unit is being transported to Lesedi in the first half of next year, when production trials will commence. The construction of transmission lines to connect Lesedi to the existing power grid is expected to be completed in 2023. Market capitalisation is £16 million.
Zephyr Energy (ZPHR ZPHRF) (7.1p) has announced a successful State 16-2LN-CC production test with a constrained rate of 716 barrels of oil equivalent per day. Initial simulation modelling suggests possible plateau rates of 2,100 barrels of oil equivalent per day are possible when the well is fully equipped and initial data suggests the State 16-2LN-CC has a single well potential estimated ultimate recovery of 2.65 million barrels of oil equivalent, significantly higher than the company's pre-drill estimates. A new CPR is expected to be finalised in February. In the meantime, completion of the acquisition of non-operated working interests in North Dakota is expected in January. Key here will be the true economics and whether earnings actually can come down to the bottom line. Market capitalisation is £92 million.
88 Energy (88E EEENF) (1.35p) has its next big well coming up. Snow road construction preparations are underway, well permitting is advanced, with the permit to drill expected to be issued around year-end, commissioning of the Arctic Fox rig is scheduled for January and spud is on track for February. Although fully funded for the well, 88E says it may also consider a farm-out to a strategic partner. Merlin-2 is targeting 652 million barrels of oil, with a geological chance of success of 56% and the independent “un-risked net entitlement mean total prospective resource” estimate for the prospect is 1.6 billion barrels of oil. 88 Energy has been covered in the private blog from the 0.40s and reached a high of 4.7p in March. Market capitalisation is £208 million.
Substantial rewards are on offer in this sector and the key to making money with these types of companies is to eliminate potential losers, focusing solely on those which from a trading perspective are as close to a certainty as possible. That’s what the private blog is all about and you can try it out free for the next 14 days: