Sunday Blog, 23 January 2022
CHAR 88E ADV LBE HE1 SQZ HUR PTAL
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Chariot (CHAR) announced the completion of successful gas drilling operations. Anchois-1, the original discovery well drilled in 2009, was located and the wellhead was inspected, prepared and successfully coupled with the Stena Don rig confirming its potential viability as a future producer well. The ambition now is to bring the Anchois gas development online as quickly as possible to deliver near-term cash flows to the company. CHAR undertook a placing at 5.5p in May last year, following which the shares were highlighted in the private blog and could be picked up as low as 5p for some time thereafter. The price was up to 12.75p the week before last on news of a significant gas discovery at the Anchois-2 well.
88 Energy (88E EEENF) announced a Merlin-2 operations update. The permit to drill is in the final stages of review by the Bureau of Land Management, snow road construction is underway ahead of drilling, commissioning of the Arctic Fox rig has commenced and spud remains on track for February. The Merlin-2 appraisal well is planned for a total depth of 8,000 feet and is targeting 652 million barrels of oil in the N18, N19 and N20 targets that were encountered in the Merlin-1. 88E undertook a placing at 1.49p in September last year, following which the shares were highlighted in the private blog and could be picked up as low as 1.3p for some time thereafter. The price was as high as 2.4p yesterday and looks like it has further to go.
Advance Energy (ADV) announced a well drilling update. It disappointed since the top Elang reservoir was intersected at a depth approximately 80 metres low to prognosis, outside the pre-drill range of expectations. ADV undertook a placing at 2.6p in April last year, following which the shares were highlighted in the private blog and could be picked up as low as 2p for some time thereafter. The price was up to 5.7p last week and I cautioned de-risking prior to the result on several occasions. It is important to understand that the time to buy these companies is after the placing which fully finances the drill (you can usually get in under the placing price); the time to sell is before the spud or drill result. This is what the private blog is about.
Here’s a comment received last week:
“Thank you for the private blog, spot on as usual with Advance energy. The ebook you send out with the subscription changed my view on investing and financial markets. Eye opening. And so many people on the message boards cannot see it. And to be honest I am not going to tell them either. Keep up the good work Jim.”
Longboat Energy (LBE) announced the award of a licence under the Norwegian APA licensing round. The Ministry of Petroleum and Energy has offered the company a 25% interest in production licence, PL 1049C, covering a possible extension of the Cambozola prospect towards the north. Cambozola will be drilled back-to-back following the Kveikje well, which in turn is expected to spud at the end of the first quarter. Drilling of the Ginny Hermine well is currently underway.
Helium One Global (HE1) announced the completion of a multispectral satellite spectroscopy study which has identified additional surface helium anomalies at the Rukwa, Eyasi and Balangida project areas. Data from 2D seismic, airborne gravity gradiometry, and knowledge of the helium system gained from the Phase I drilling will next be combined with the results to assist in the prioritisation of subsurface traps to be tested in the company’s 2022 drilling campaign.
Serica Energy (SQZ) announced a corporate update. As operator of Bruce, Keith and Rhum, SQZ is now responsible for over 5% of the UK's gas production. That could go higher since a rig has been contracted for the drilling of the high-impact North Eigg exploration well this summer. Gas prices closed 2021 strongly, contributing to a market average for the year of over 113p/therm (25p/therm in 2020), which allied to growing production volumes drove Serica's total cash resources to £218.4 million.
Hurricane Energy (HUR) announced a trading, operational and financial update. Production for the final three months of 2021 averaged 10,000 barrels of oil per day, revenue for 2021 was $239 million, with an average realised oil price of $67 a barrel, year-end net free cash was $50 million and year-end total debt was $78.5 million, following repurchase of $151.5 million of outstanding convertible bonds for cancellation. The company now expects to have cleared its debt by the end of July.
PetroTal (PTAL TAL) announced an operations and liquidity update. Production is now again averaging approximately 20,000 barrels of oil per day. Well 10H drilling operations continue according to plan with estimated completion in early February, oil deliveries for export via Brazil are expected to increase to approximately 240,000 barrels per month and December 31 total cash was $74.4 million. I mentioned PTAL positively just over a year ago at 7.6p. It’s now nearly four times that price at 30.2p.