San Leon Energy

San Leon notes the recent speculation in the Nigerian press about the operation of the Oil Mining License (OML) 18.

The Company has been made aware of an article published in Nigeria on 25 February 2023 that alleges that the Nigerian National Petroleum Company Limited has taken over the operatorship of the OML 18.  The article also alleges various improper actions by Eroton Exploration & Production Company Limited (“Eroton”), the operator of OML 18.

In response to these allegations, Eroton published a press release on 25 February 2023 confirming:

1. Eroton considers the Nigerian reports to be malicious and false.
2. Eroton remains the operator of OML 18.  Specifically the operatorship of OML 18 is a contractual agreement and is governed by the Joint Operating Agreement, any change to which can only be made through a clearly defined process which has not been followed. Therefore, any purported change by any other party is without any effect whatsoever.  This is despite the attempts of forced displacement of some Eroton staff from its Alakiri Gas Plant on 24 February 2023 by armed and unknown men who claimed to be representatives of one the other JV partners, OML 18 Energy Resource Limited, (“Sahara”). These purported actions were outside of the due process of law and in breach of the terms and conditions as stipulated in the Joint Operating Agreement.
3. Any lack of production from OML 18 alluded to in the press has been primarily due to the unavailability of Nembe Creek Trunk Line in the last two years and not to any production issues suffered by Eroton. It also notes that this is an industrywide problem due to widespread and well known crude oil theft and sabotage of pipelines in the Niger Delta.
4. Eroton categorically denies any fraudulent acts as stated in the press and confirms that it is committed to transparency, integrity and that it continues to operate in compliance with all applicable laws and regulations.

San Leon currently holds an initial 10.58% indirect economic interest in OML 18. Further announcements will be made as and when appropriate.

The company appear to have been forced into putting this out, clearly there are problems in-country and risks are high but SLE are keen to deny such anarchy…

Touchstone Exploration

Touchstone  reports that on February 24, 2023, the Company was notified by The National Gas Company of Trinidad and Tobago Limited that they expect to be ready to receive first gas from the Cascadura natural gas and associated liquids facility on or about June 30, 2023.

Touchstone remains on track to complete the Cascadura facility prior to this date to ensure production can commence as soon as NGC is in a position to receive first gas. The approximate construction status of the Cascadura facility is as follows:

• the civil and concrete foundation work for the main process facility equipment is complete;
• the flare stack is procured, with the associated foundation work commencing imminently;
• the communication tower is approximately 80 percent complete;
• the pipe racks are approximately 90 percent assembled with hydrotesting initiated, and the units are expected to arrive at the facility within the next three weeks;
• on-site condensate tanks are approximately 65 percent complete;
• the compressors, separators, and vapour recovery units have been safely transported to the facility; and
• all process equipment for the facility has been acquired.

Paul Baay, President and Chief Executive Officer, commented:
“We are encouraged to have received an expected first gas date from NGC. Although this is later than we were anticipating, we can now plan the final phase of our various work streams to minimize costs and optimize services.

First gas from Cascadura will be a transformative achievement for Touchstone, and we thank shareholders for their continued support and patience as we work towards this significant milestone.  

We expect that the funds raised late last year and our current base production will allow us to complete drilling the Royston-1X well and prepare our next development locations at Cascadura while we finalize construction of the Cascadura facility.“

I too am delighted that TXP has now received this news that the National Gas Company will be ready to take Cascadura gas in June and so will the company be, forget the slight delay this is a truly red letter day for the company and should be seen as just that.

i3 Energy

i3 Energy has announced the following Q4 2022 operational and financial update.

Highlights:

• Average Q4 2022 production of approximately 22,757 barrels of oil equivalent per day (“boepd”), an 11% increase from the previous quarter, with current production of approximately 23,440 boepd
• Record corporate production exceeding 24,000 boepd achieved in December
• 2022 drilling programme completed, delivering 31 gross (18.4 net) wells, which met or exceeded management’s expectations and completed approximately 5% underbudget in a high inflationary environment
• In Q4, 10 gross wells (5.7 net) brought onto production and 8 gross wells (4.3 net) drilled in its core Central Alberta, Wapiti and Clearwater assets
• Completed the 13/23c-12 appraisal well on the UK North Sea Serenity field, with a single well field development plan now being progressed
• Dividends of £5.098 million declared and £3.399 million paid in the quarter, with total dividends of £15.351 million paid in 2022
• Operations commenced on the 2023, USD 64.05 million capital programme ahead of schedule targeting 23 gross wells, with 6 gross (4.3 net) wells drilled

Majid Shafiq, CEO of i3 Energy plc, commented:
“Q4 2022 was very busy as we completed our 2022 drilling programme which met management expectations, was executed under budget and achieved peak production rates in excess of 24,000 boepd. We have successfully completed the first phase of our 2023 drilling programme, with multiple wells now on clean-up flow and several Clearwater intervals tested, and we are now on course to deliver positive YE2022 financials and reserves data by the end of March.”

i3 is relatively new on the coverage list and these numbers reinforce my positive stance taken after a recent meeting with CEO Majid Shafiq. Production is still very good and will, despite gas price falls still deliver a big dividend for shareholders. We only disagree on Serenity…

Kosmos

Kosmos announced today its financial and operating results for the fourth quarter of 2022. For the quarter, the Company generated a net loss of $114 million, or $0.24 per diluted share. When adjusted for certain items that impact the comparability of results, the Company generated an adjusted net income(1) of $111 million, or $0.23 per diluted share for the fourth quarter of 2022.

FOURTH QUARTER 2022 HIGHLIGHTS

• Net Production: ~58,700 barrels of oil equivalent per day (boepd), with sales of ~67,800 boepd resulting in an overlift position at the end of the quarter. Full year net production of ~63,600 boepd, representing 17% growth over 2021
• Revenues: $510 million, or $81.70 per boe (excluding the impact of derivative cash settlements)
• Production expense: $126 million, or $20.15 per boe
• Capital expenditures: $228 million
• Generated free cash flow(1) of approximately $23 million (~$343 million for the full year)
• Continued debt repayment with net leverage falling to <1.5x (>$400 million repaid in 2022)
• Phase One of the Greater Tortue Ahmeyim LNG project around 90% complete at year end
• Full payback of the Ghana assets acquired from Occidental Petroleum achieved in ~14 months
• Ended the quarter with 2P reserves of approximately 550mmboe, representing over 20 years of reserve life

Chairman and Chief Executive Officer Andrew G. Inglis said:
“During 2022, Kosmos continued to make strong operational and financial progress in support of our differentiated strategy.  We advanced our three major development projects and further strengthened the balance sheet.

“Kosmos expects to reach an important inflection point in the second half of 2023 with production forecast to grow as major development projects start to come online and capital expenditures expected to fall. With higher production and lower capital, free cash flow is expected to rise into 2024 providing multiple pathways for the company to deliver value for our shareholders.

“Kosmos offers investors access to a high quality reserve base, with unique exposure to world-scale LNG projects, alongside a portfolio of low cost, lower carbon oil ILX opportunities. These opportunities underpin sustainable and value-accretive growth. We look forward to further delivering on the strategy, creating value for our shareholders and bringing affordable, secure, and cleaner energy to the world.”

Investors know that I am a big fan of Kosmos which has a great portfolio of grown up assets which are now being delivered to shareholders. Unlike most UK stocks KOS has been a good performer having almost exactly doubled y/y but hang on in there.

Eco (Atlantic) Oil & Gas

Eco has announced its results for the three and nine months ended 31 December 2022, and to provide a corporate and operational update. 

Highlights:

Financials (as at 31 December 2022)

• The Company had cash and cash equivalents of US$14.5 million and no debt as at 31 December 2022.
• The Company had total assets of US$68.0 million, total liabilities of US$17.8 million and total equity of US$50.1 million as at 31 December 2022.

Operations:

South Africa - Block  2 B

• In November 2022, the JV Partners submitted a Production Right Application to the Petroleum Agency of South Africa (“PASA”), based on the existing oil discovery of AJ-1 and potential future operations. 
• Following the drilling of the Gazania-1 well in November 2022, further analysis of the well data is being undertaken to determine next steps on the Block.  
• Eco and its JV partners continue to believe that Block 2B contains considerable hydrocarbon resources and further updates will be made in due course on how the JV partners will look to deliver value from the licence for the benefit of all stakeholders.

South Africa - Block 3B/4B

• In December 2022, Eco received regulatory approval from the Department of Mineral Resources and Energy (“DMRE”) of South Africa and Petroleum Agency South Africa (“PASA”) in respect of its acquisition of an additional 6.25% participating interest in the Block (the “Acquisition”), giving Eco an overall interest of 26.25%.
• As the final instalment of the share consideration due in respect of the Acquisition, Eco is issuing an additional 1,666,666 common shares to the Lunn Family Trust, the Vendor (the “Final Consideration Shares”).
• The Company and its JV partners are progressing plans to conduct a two-well campaign on Block 3B/4B and in addition continue to progress the collaborative farm-out process, up to 55% gross working interest in the Block, with various potential parties.
• The JV Partners have selected a leading South African environmental consulting firm to conduct a comprehensive Environmental and Social Impact Assessment (ESIA) process commencing in March 2023 in preparation for permitting and drilling activity on the Block.
• Africa Oil Corp. the Operator of the Block is preparing a new 51-101 Competent Person’s Report following the completion of the 3D data reprocessing and targets and leads identification.

Namibia

• Namibia witnessed some of the largest oil exploration discoveries in the world in 2022 and with significant exploration activity set to continue this year, the Company believes that its highly strategic acreage in-country will remain of considerable interest to operators looking to enter the region.
• Eco continues to explore possible farm out opportunities with its four licences in the region and will update investors on developments accordingly.

Guyana

• Eco and its JV partners on the Orinduik Block, offshore Guyana, continue to work towards identifying the optimal drilling target and Eco plans to drill at least one well into a light oil Cretaceous target in the next 12-18 months.
• With an excess of 11 billion barrels of oil discovered in Guyana to date, the region has become one of the most prolific hydrocarbon basins in the world. Eco continues to work towards unlocking the potential of the Orinduik Block as fast as practically possible.

Gil Holzman, President and Chief Executive Officer of Eco Atlantic, commented: 
“We have had a busy start to the year, and I am pleased to report substantial progress across a number of fronts in our exciting exploration portfolio.

Following our drilling campaign on Block 2B, offshore South Africa, in Q4 2022, we continue to analyse the well data obtained from the Gazania-1 well. We remain of the view that considerable untapped potential remains in the asset and we are working with our partners on the Block to plan our next steps, in order to deliver value for all stakeholders.

Significant progress continues to be made on Block 3B/4B, offshore South Africa, with a number of workstreams progressing well. As we have said previously, we are conducting a farm out process on the licence and we are looking ahead to commencing a two well drilling program once ESIA is completed and permits obtained.

Both Guyana and Namibia continue to yield sizeable discoveries, and we are seeing unprecedented levels of interest for exploration assets in these regions. As such, we continue to progress our highly strategic acreage positions in both Guyana and Namibia and we look forward to updating the market on our farm out program in Namibia and our plans for a drilling campaign in Guyana as soon as practically possible.

We remain excited about the potential for 2023 and we look forward to keeping all stakeholders updated throughout the course of the year.”

Nothing I can add to this detailed review, plenty of very high potential upside projects to drill which will dwarf the current share price.

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