WTI $61.35 -$1.32, Brent $65.32 -$1.25, Diff -$3.97 +7c, NG $2.69 -4c, UKNG 53.25p +0.43p

Oil price

Oil was down yesterday as virus numbers again escalated in India and Japan added themselves to the danger list. The EIA inventory stats were pretty mixed, a small rise could have been better but with no change in refinery runs the gasoline number was a tiny rise although as I have been saying lately the gasoline supply numbers are increasing. The EIA also flagged a rise in air travel a leading barometer for jet fuel demand. Distillates drew another 1.1m barrels which is more than I would expect at this time of the year.

PetroTal Corp

2020 results for PTAL this morning but as is always the case it is historic news, no more so than for the company who has put a lot behind it recently with important announcements. These include restructuring the contingent derivative liability with Petroperu which was paid for from the $100m bond and allowed the company to put in place hedges to protect its balance sheet in more difficult times. The bond also gives PTAL scope to finance potential acquisitions and development of the Bretana oilfield.

Also in Q1 another shipment of 225,000 barrels of oil was sent through Brazil for export into the Atlantic region, this gives the company flexibility in geographical destinations as well as timing and price of its cargoes.

Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented
“2020 was an extremely challenging year for the global economy and PetroTal emerged from the downturn in a position of strength, a testament to our team’s dedication and resolve.  Although our 2020 results were impacted by many one-time events, the Company’s announcements over the last six months have been overwhelmingly positive and will underpin our growth through 2021 and beyond.  I am excited to continue to deliver on our 2021 capital program, which we anticipate will generate value for our equity, debt, and ESG stakeholders.

I would like to thank PetroTal’s shareholders, directors, employees, and contractors for their continued support and I look forward to keeping all our stakeholders updated on the Company’s progress throughout the remainder of 2021.”   

With such a positive outlook in terms of production, investment in facilities, hedging and flexibility in sales destinations PetroTal is in a strong position, indeed now fully financed by the $100m bond it has a balance sheet to be proud of. My 50p target price remains firmly intact and gives plenty of upside which I am convinced can be achieved.

Jadestone Energy

Again 2020 was not a year to want to revisit, Jadestone produced 11,438 b/d down 15% and in addition hit by lower oil prices but in line with ‘revised guidance’ which just about excuses it. The company went into full lockdown mode deferring $160m of capex which has now been mostly reinstated. Unsurprisingly opex fell to $23.10/b and this years estimate is between $25.50-29.50 which is wide enough.

This has all led to a very strong financial position, the company has $82.1m of cash which has doubled in the year and is debt free which is a good achievement under the circumstances. It has also meant that the dividend has been able to have been paid, added to the original $2.5m today they announced another $5m making a pay-out of $1.08 per share.

Production guidance for this year is 11,500-13,500 and with the company remaining so cash generative, even at low $40’s Brent it remains profitable. This guidance depends on the successful drilling of the H6 well at Montara two Skua well workovers and the completion of the Group’s acquisition of a 69% operated interest in Maari at the end of H1 2021. Maari’s contribution to the full year production guidance range is assumed to be 1,500 bbls/d on an annualised basis (i.e. 3,000 bbls/d average production in H2 2021), and with the completion of Maari’s MR6 well workover in early May, there is scope for additional production upside.

Paul Blakeley, President and CEO commented:
“In 2020, the Jadestone business delivered strong operating cash flow, declared its maiden dividend, acquired a near-term gas development asset in Indonesia, and exited the year with double the net cash it had at the beginning of January.

“This was accomplished against an external environment that tested the resilience of our business model, and indeed for some of our peers in the industry, challenged their very existence.  Through a mix of well-timed hedging gains, rapid adjustments to our spending plans and a hard interrogation of our cost base, we successfully protected our balance sheet while rephasing production growth to coincide with a higher price environment.  At the same time, we maintained our steadfast commitment to our principles of environmental stewardship, social responsibility, and high governance standards, and have recorded no major incidents on any of these fronts.

“Our balance sheet has grown stronger still in 2021. We are generating higher unit cash flows as benchmark oil prices have recovered and pricing premiums remain strong.  Also, as planned, we have now fully repaid our reserves based loan, being completely debt free as of the end of Q1 2021.  We are continuing in our pursuit of constant improvement across the business, and continue to find opportunities for greater efficiency in addition to having locked in 25% of the cash flow savings we implemented in 2020 through Project Clover. 

“Our commitment to ongoing shareholder returns remains intact too, and I am pleased to announce the final portion of our 2020 dividend today, as well as re-affirming our dividend policy for 2021 and beyond.  We are constantly focussed on delivering value for shareholders and see both organic, and inorganic growth, as well as direct shareholder returns as key components.

“I would also like to take the opportunity to offer my thanks to the entire Jadestone team, and to their families for remaining strong and resilient through what has been a very challenging year.  The performance we delivered in 2020 is a testament to the high calibre of our workforce, and with their unwavering support for the business, we are well positioned to continue delivering value for shareholders in 2021 and beyond.”

Jadestone’s share price has meandered around during the year including two very strong rallies and it looks like a text book chart which it should break out on the upside at around 76p. If all the planned projects scheduled for this year kick in I see no reason why it shouldn’t  do much better than that, after all it was the poster boy of the sector before the price, the quality play of the sector can rise again.

Providence Resources

If I had a pound only for every time I had seen the headline ‘Barryroe terminated’ I would have retired by now, but yet again PVR shareholders are being put through the mill. The farm-out with SpotOn Energy has been terminated and the company is progressing arrangements for an alternative funding package to finance 100% of the costs of the early development scheme for the Barryroe licence.

The Barryroe partners are pursuing a similar development approach, including payment deferrals by individual service providers on equivalent or better terms and a Nordic bond issue. This revised approach will enable Providence to participate in a much greater share of the value of the Barryroe asset than was proposed under the SpotOn structure. Speaking with Alan Linn the best that can be taken from this is that they have inherited the farm-out process and effectively in charge of the process, some win eh?

It won’t come as a great surprise to know that Providence is not awash with cash, so that in order to maintain development pace and demonstrate their continuing and material support for the project, Pageant Holdings, a substantial shareholder, has made an offer to underwrite a capital raise for US$2.5m at 3p per share. The offer includes a one for one warrant which would potentially raise a similar amount. There is also an old outstanding warrant at 3p that may come in handy.

Now in my view there is, as is often the case, a good news bad news story. The good news is that according to legend the Barryroe EDS has the potential to deliver exceptional value for Providence. Internal modelling forecasts a project NPV (10) valuation of $560m to Providence at US$60 per barrel based upon recovering 48m barrels of oil, equivalent to c. 16% of the estimated recoverable resource within the SEL 1/11 Barryroe license area.

Now the bad news, firstly funding, whilst today’s raise is by no means an emergency one, current cash and warrants will keep the lights on until the end of the year and keep the working capital secure. On the plus side the service providers, their partners, should help with the bills and of course the Nordic bond would come in handy.

There’s more bad news, it’s all about timing and there is quite a long lead until that NPV of $560m can be accessed. Assuming the site survey can be done in 3Q 2021 that puts the rig timetable for late 2022/23 and production for late 2023, all of these of course subject to funding.

Providence CEO Alan Linn commented:
“Having actively supported SpotOn over the past year it is disappointing that it’s become necessary to terminate the farm-out process with them. However, we are looking forward and actively building a revised development partnership with key service providers and a financing package designed to meet the needs of the project. We have been encouraged by the support we are receiving from service providers and banks and the commitments being offered to work with us in progressing the project. We are currently working with key service providers to structure direct long-term partnerships on a risk/ reward basis and we are also in discussions with brokers to raise a Nordic bond. The interim funding offer from Pageant Holdings is very welcome and a confirmation of their continuing support for the value potential of the development.

The Barryroe early development scheme is an attractive investment which offers excellent returns, even in a low oil price environment. We look forward to completing the funding process and appreciate the support and patience of shareholders. The early development scheme will be of considerable benefit to the local economy and contribute to Ireland’s energy security as we move towards a low carbon economy.”

I think that the positive way that CEO Alan is handling this is a credit and he is quite rightly saying that it is right that the partners are taking control of the project. I have listed above both the concerns and potential bonuses that could occur over the next 3 years for Providence and their shareholders, although it may take its time it would be a shame if this important asset wasn’t eventually brought to market. Also what would we all do if every year Barryroe wasn’t ‘terminated’.

Getech Group

Getech Group has announced it has successfully agreed software licence renewals with existing customers with a combined value of c.£375,000. The licenses expand on Getech’s strategy to apply its skills to fast-developing energy transition markets.

On top of its baseline of monthly orderbook revenue, Getech has recently successfully closed software renewals totalling c£375,000, data sales and new service projects totalling c£350,000. These software renewals extend their recurring revenue and include annual and multi-year contracts. In addition, data and service project wins span the petroleum and geothermal sectors which broadens the offering. Together, these new sales are expected to deliver c£537,000 of revenue in FY2021.

Getech’s Chief Executive Office, Jonathan Copus, commented:
“I am encouraged to see our core business activity in the oil and gas exploration and production sector regaining momentum and that our existing customers are renewing their software licences, which results in recurring revenue.

I am also excited that we are winning new business in the geothermal sector. It is Getech’s strategy to apply our extensive geoscience and geospatial skills to fast-developing energy transition markets, in particular hydrogen, CCUS, geothermal and locating rare-earth and battery metals.

We believe that the geothermal industry is poised for substantial growth as developers scale up projects to produce ‘green’ baseload power to help balance the exposure of electricity grids to intermittent renewable energy sources such as wind and solar. At Getech we have unique skills and software workflows that can help operators locate heat assets that are economic to develop and to de-risk their development and management.”

Far Limited- A FARce starring Remus…

Fasten your seatbelts as this story takes a fair bit of believing, I’m not planning to go through the history as it’s been in the blog a fair bit recently but this should be the end of Remus as a suitor for anything with its reputation in tatters.

The ‘bid’ for Far from Remus had led to a meeting last week at which shareholders had to decide the future of the company, with 20:20 hindsight the fact that Remus got so close and embarrassed Far is little short of a disgrace.

‘FAR refers to its ASX announcement dated 14 April 2021 which attached a letter from Remus Horizons PCC Limited as requested by it advising its intention to make a takeover offer for FAR shares at 2.1 cents per share.

Remus stated in that letter that Remus was proceeding to finalise its Bidder’s Statement so that it would be lodged by no later than 28 April 2021. An adjournment of the shareholder meeting until 10am on 28 April 2021 was proposed and supported by FAR shareholders in order to give Remus time to lodge its Bidder’s Statement.

Overnight, FAR has received 2 further letters from Remus:
1. In the first further letter from Remus, Remus states that it is unable to lodge its Bidder’s Statement over coming days. Remus states that this is because it has recently had its registration as a private investment fund suspended by the Guernsey Financial Services Commission.
2. In the second further letter authored by a different Remus signatory, Remus states that the intended takeover offer was not properly authorised by Remus, that Remus does not have the funding to complete the takeover offer, that the takeover offer intention letter issued by Remus contained a number of factual inaccuracies, and that the Remus Board would not approve a Bidder’s Statement.

In these circumstances, it seems clear that the proposed Remus takeover offer won’t be proceeding.

This shows that the Far management had tried to do everything that they could to put up with what was clearly a company not entirely in control of what it was saying to Far or the market.

This of course won’t come as a surprise to blog readers as we had quite a scoop published only last week in which we broke the news that the Remus fund had been de-registered by the Guernsey Financial Services Commission and therefore wasn’t able to make a bid. This would corroborate point 1. above re the GFSC and someone at Remus wrote to Far to tell them.

But then who wrote the second letter? Given that after the departure of most of the Remus staff (I’ve heard at least 15 out of 20) there aren’t many names to point to and it was someone who was prepared to own up to having insufficient funding, the takeover offer intention letter ‘contained a number of factual inaccuracies’ and would not be approved by the board. So what on earth is going on behind the scenes at Remus, maybe we should be told? Maybe the letter came from a less than gruntled former contractor who was peeved that they could be run roughshod over..?

Now I’ve been in this market for over 40 years and seen plenty of marginal bid situations in that time. I think I would have remembered if something this strange had happened and given what I understand of the 15 staff who have recently left without pay and rations we have more to hear from this tawdry episode…

Empyrean Energy

Empyrean has announced that it has received $357,702 from the US IRS in payment for a tax rebate. I know that there a number of people waiting on my comments following a virtual meeting with Tom Kelly. Whilst this has been delayed a number of times but he has emailed today and I expect that meeting to happen soon.

KeyFacts Energy Industry Directory: Malcy's Blog