WTI (Aug) $97.57 +$1.81, Brent (Sept) $101.16 +$2.06, Diff -$3.57 +25c, USNG $7.02 +41c, UKNG (Aug) 200.29 -34.76p, TTF (Aug)  €167.70 -€3.69

Oil price

Another down week for oil yet today Brent is back up to $104, last week it was down $5.86 with WTI off $7.20. China is still very Covid prone, both Tianjin and Macao are extending lockdowns and clearly the vaccination isn’t working although even over here numbers are up.

In Libya the Government has apparently cut a deal with the protesters and a short million b/d has been cleared for export whilst Sleepy Joe came back from the Middle East without any promises of help which is what one expected. He hadn’t any great backing from US production either as the Baker Hughes rig count was up 4 units overall at 756 but in oil only up 2 at 599.

Perhaps more important is to see what the volumes are like through Nordsteam 1 on Friday…

SDX Energy

UPDATE ON EQUITY OWNERSHIP OF THE COMPANY AND INTENTION OF SHAREHOLDERS OWNING 25.65% OF THE COMPANY TO VOTE AGAINST RECOMMENDED ALL-SHARE COMBINATION WITH CASH ALTERNATIVE WITH TENAZ ENERGY CORPORATION (“TENAZ”).

SDX has been advised in a letter from Aleph Commodities Limited dated 16 July 2022, that Aleph on behalf of itself and other parties, hold 25.65% of the issued share capital of the Company. 

The letter also states that;

• “Aleph Commodities is a global trading and investment company.”
• “The group of shareholders led by Aleph intends to vote against the recommended all-share combination with cash alternative between Tenaz and SDX which is being effected by means of a Scheme of Arrangement under Part 26 of the Companies Act 2006.  The Court and shareholder meetings relating to the Scheme of Arrangement are due to be held on 29 July 2022.”
• “Aleph welcomes the opportunity to engage with management and the Board of Directors to explore opportunities to provide financial, commercial and technical support to SDX to ensure the growth of the Company and its production base, with minimal dilution.”

The Board of SDX is considering the contents of this letter and the Company will issue a further announcement in connection with the above in due course.

This is interesting, obviously it puts a stop on the Tenez bid should Aleph and its partners go ahead and vote against the deal. I’m probably being stupid but I hadn’t seen Aleph on the SDX shareholder list in the past and so it must have been sweeping up stock in the market recently. 

It may be an attempt to try and get a bit more out of Tenez or even the precursor to a higher bid, I would expect market movements, and would love to look at the up to date shareholder list, when it started this was a slam dunk, something is not quite right in the State of Denmark. 

Trinity Exploration & Production

Trinity has provided an update on operations for the three-month period ended 30 June 2022.

The Company maintained robust production and benefitted from a stronger realised oil price in Q2, when compared to Q1, leading to a 25% increase in operating cash flow pre-tax and pre-hedging. In addition to continuing the programme of recompletions and workovers which kept production stable, during June drilling operations commenced on the first well of the planned six well campaign.

Q2 2022 Operational Highlights

Safely commenced the fully funded six well drilling campaign within the WD-5/6 onshore block:

• Currently drilling the first of four low angle wells, which will be followed by one horizontal and one deep appraisal well.
• This drilling campaign is expected to lead to a meaningful increase in production by the end of Q1 2023, when all six wells are expected to be onstream.

Stable production:

• Q2 2022 production volumes averaged 3,093 bopd (Q1 2022: 3,013 bopd; Q2 2021: 3,047 bopd).
• Q2 2022 production sold averaged 3,019 bopd (Q1 2022: 2,929 bopd; Q2 2021: 3,013 bopd).

9 recompletions (“RCPs”) (Q1 2022: 5) and 31 workovers (Q1 2022: 24) were completed during the period, with swabbing continuing across the Onshore and West Coast assets.

Ongoing benefits from onshore automation: 

• Improved ability to reduce production volatility.
• Reduced response times to well issues.

Net average production guidance for 2022 remains 2,900-3,100 bopd (before the impact of the drilling programme and/or acquisitions) (2021: 3,006 bopd).

Q2 2022 Financial Highlights

• Q2 2022 average realisation of US$96.8/bbl (Q2 2021: US$59.4/bbl). 
• Operating cash flow pre-tax and pre-hedging of US$6.9m (unaudited), an increase of 25% compared to the previous quarter (Q1 2022: US$5.5m).
• Cash balance of US$15.0m (unaudited) as at 30 June 2022, reflecting the combination of strong operating cash generation, the impact of which has been reduced due to hedging related payments and increased capex, including the purchase of long lead items to support the drilling campaign.
• Average operating break-even for Q2 2022 was US$31.3/bbl (unaudited) (Q2 2021: US$27.8/bbl (unaudited).

Outlook

Having commenced drilling on the first of the six planned onshore wells, the near-term focus is on completing the 2022 drilling programme safely, on time and on budget, and bringing these wells onto production in short order. It is expected that the 4 low angle wells will be producing before this year ends, with each contributing to a meaningful increase in the daily production rate by the end of 2022. Production is anticipated to continue to increase into Q1 2023 subject to successful outcomes for the horizontal well and deeper well, the combination of which is projected to underpin a material increase in operating cash flow for 2023, for which no hedging instruments are in place. 

Jeremy Bridglalsingh, Chief Executive Officer commented: 
“The hallmark of last quarter’s performance was continued production stability and stronger operational cash flows due to higher realised oil prices, although the impact of these factors was reduced by hedging costs.  We have a clearly defined strategy in place, focused on increasing our cash generation to enable us to fund future growth initiatives and deliver cash returns to shareholders. To this end, the current drilling campaign includes a diversity of targets, with a mix of different risks and potential returns.   The initial well is progressing well and we expect to commence drilling on the second well during August.

“During a recent meeting with the Minister of Energy, we highlighted the merits of Trinity’s stable base production and our plans to grow via the drill bit. This message was well received. In addition, the Ministry of Energy and Energy Industries has recently launched the 2022 Onshore and Nearshore Competitive Bid Round, which Trinity plans to evaluate and may participate if we identify attractive opportunities.”

Oil prices helped a 25% increase in operating cash flow and pre-hedging, this was the same as usual, recompletions and workovers kept production at a familiar rate of 3,093 b/d unchanged on the last three quarters and indeed this time last year. Unsurprisingly, guidance for this year is…2,900-3,000 b/d. 

But Trinity has started a fully funded 6 well programme to add a ‘meaningful’ increase in production by the end of 2023 when these wells are onstream. The shares have halved since the one year ago high of 175p and will probably stay put until that production is imminently visible, others in the peer group are bringing on material production and much sooner. 

Gulf Keystone Petroleum

Gulf Keystone confirms that a gross payment of $48.7 million ($38.1 million net to GKP) has been received from the Kurdistan Regional Government (“KRG”) for Shaikan crude oil sales during April 2022.

Too late for Friday’s blog but this note from GKP is only the usual monthly report from the company. 

KeyFacts Energy Industry Directory: Malcy's Blog