WTI (Apr) $86.18 +35c, Brent (May) $80.46 +78c, Diff -$6.50 +35c
USNG (Apr) $2.57 -43.7c, UKNG (Apr) 108.0p -4.0p, TTF (Apr) €41.705 -€1.69

Oil price

Since I have been away oil has been pretty steady, a couple of dollars better with China leading the positive stance with the boss saying at the party conference that c. 5.1% GDP was where they want to be at.

Today sees the start of two days of Jerome Powell testimony on the hill, I’m sure that there will be some snippets of whether he is planning 25 bp’s or 50 bp’s.

It’s my favourite week of the year, CERA Week in Houston and I remember with fond feelings those best ever sessions, a  bit like school I didn’t appreciate it as much as I should have and now I can’t afford to go!! I’ve heard a great speech from Pioneer and of course Chevron never fail to deliver, top man Dave. Exxon up next on CNBC…

Retail gasoline is climbing again, inventory stats ok and interestingly in the US used car prices keep rising, its due to a lack of 3 year old cars on the market.

San Leon Energy

San Leon, the independent oil and gas production, development and exploration company focused on Nigeria, notes the statement published in Nigeria on 6 March 2023 about the operation of the Oil Mining License (OML) 18.

The Company has been made aware of a statement on the Nigerian Petroleum Development Company Ltd (“NNPC”) website that indicates that the non-operating partners of OML 18, NNPC and OML 18 Energy Limited have removed Eroton Exploration & Production Company Limited (“Eroton”) as operator of OML 18 on the basis of, amongst other things, zero production from the field at present.

San Leon has contacted Eroton who has advised the Company that this purported takeover of operatorship was done without any legal or contractual basis and, furthermore, that Eroton considers that the action is without any legal effect, through both a lack of due process and a breach of the rule of law.  Eroton is currently taking advice on its legal rights to address the matter expeditiously and considers that it remains the operator of OML 18.

Furthermore, as previously announced, the 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 production issues suffered by Eroton.  This is an industrywide problem due to widespread and well known crude oil theft and sabotage of pipelines in the Niger Delta.

San Leon currently holds an initial 10.58% indirect economic interest in OML 18 which is unaffected by the identity of the operator. Further announcements will be made as and when appropriate.

Not really worth the share price move, as it makes it clear that SLE is not directly affected by the goings on at OML 18 but concerns about the production will be something to watch out for.

Afentra

Afentra has provided the following update regarding the previously announced Angolan acquisitions.

INA Acquisition Completion Update
On 12 January 2023, the Company announced receipt of approval from the Ministry of Mineral Resources, Oil and Gas for the acquisition of a 4% interest in Block 3/05 and a 4% interest1 in Block 3/05A offshore Angola from INA-Indstrija Nafte d.d. (‘INA’) (the ‘INA Acquisition’). We continue to work with INA to finalise formal completion of this acquisition, however due to documentation delays this process has taken longer than anticipated. Completion is still expected to occur ahead of the INA Acquisition SPA long stop date of 17 April 2023.

Sonangol Acquisition Update – Block 3/05 PSA Licence Extension and Block 23 Update
As per the SPA signed on 28 April 2022 between the Company’s wholly-owned subsidiary, Afentra (Angola) Ltd and Sonangol Pesquisa e Producao S.A. (‘Sonangol’) regarding the purchase of non-operating interests in Block 3/05 (20%) and Block 23 (40%), offshore Angola (the ‘Sonangol Acquisition’), an important condition precedent (‘CP’) is the approval of the extension of the Block 3/05 Production Sharing Agreement (‘PSA’) until at least 31 December 2040 (the ‘License Extension’). The Block 3/05 JV partners have been negotiating the terms of the License Extension addendum and are now in final discussions with ANPG; we anticipate an agreement with improved fiscal terms.

It is now anticipated that satisfaction of the remaining CPs will occur after the current long stop date of 31 March 2023. We are therefore working, together with Sonangol, to extend the long stop date for the Sonangol Acquisition from 31 March 2023 to 30 June 2023 in order to facilitate completion.

The Company continues to benefit from accrued asset cash flow from the respective effective dates of each transaction, which will be offset against the initial consideration as set out in the respective sale and purchase agreements. In addition, we expect to accrue a significant crude inventory stock from the INA transaction due to the infrequent liftings for this interest. We have updated our estimated completion settlement estimate for the INA Acquisition in our latest corporate presentation, including the impact of accrued crude inventory. The presentation is available on our website (https://afentraplc.com/investors/)

Meanwhile, an Executive Decree dated 27 February 2023 has extended the Block 23 exploration block, located in the deepwater Kwanza Basin, through to 2 December 2026. This provides time for the new contractor group to discuss and agree a forward work programme.

Block 3/05 Operational Update
FY 2022 gross production from Block 3/05 averaged 18,660 bbl/d compared to 19,160 bbl/d for the first nine months of the calendar year. Production in Q4 2022 was impacted by planned restoration works to the power generation and distribution network, which were carried out to improve power supply efficiency across all facilities and, in turn, water injection uptime. This work has resulted in a significant increase in average water injection rates in the first months of 2023. This type of ongoing maintenance and infrastructure upgrade process is expected to continue into 2023 and will enhance future production and performance of the asset.

Board Appointment Update
The candidate identified for the planned Board position as independent Non-Executive Director and Audit Committee Chair is now unable to accept the appointment. As a result, the Board will relaunch its search process and expects to finalise this appointment later in the year.

The Company looks forward to providing shareholders with further updates in due course.

Commenting on the update, CEO Paul McDade said:
“While disappointing to experience delays, we remain very positive on the potential of these producing assets and our ability to grow our business in Angola. The update to the completion settlement estimate for the INA Acquisition, including the accrued crude inventory, speaks to the competitiveness with which we have been able to structure these deals. We have also used this time to better understand the assets and get to know the JV partnership, and the asset team responsible for the delivery of this asset. We are now close to agreeing terms on the licence extension award, a key CP towards completing the Sonangol Acquisition and a major step towards completion.”

Whilst this is a slight disappointment, delays in closing deals of this size and complexity are by no means unusual but somewhat frustrating. However the JV partners are confident that all the administrative paperwork between the JV partners will be be finalised prior to the existing long stop date but it is worth noting that the company continues to benefit from the accrued significant cash flows and cause no negative value. 

As for Block 3/05 final negotiations are underway which may actually result in improving fiscal terms and an uplift in project economics which is reflected in the work being done to extend the long stop to June 2023 in order to facilitate completion of the transaction.

With a significantly lower estimated aggregate completion payment for both INA and Sonangol transactions  (depending on the closing date of Sonangol and netting off inventory value outlined in the corporate presentation) – this update indicates a much lower cash outflow (33-50% lower) than Afentra’s earlier estimate which should trump any negative sentiment associated with the delay. 

Overall I remain totally confident that not only will this deal complete before long but that it will be a transformational one for the company as envisaged and in my view lead to other equally value enhancing deals in due course.

Europa Oil & Gas

Europa Oil & Gas has published on the Company’s website a third-party report that details the results of a study which calculated the emissions associated with the development of a future 1 TCF indigenous gas discovery on its Irish offshore Licence FEL 4/19 (the “Licence”). The Report was independently researched and compiled by sustain:able (https://www.esgable.com/), an ISO certified emissions advisory company that specialises in forecasting greenhouse gas emissions associated with the upstream oil and gas industry.

The key findings of the study listed in the Report are as follows:

• the average emissions intensity for Irish offshore Corrib gas is 5 kgCO2e/boe;
• the average emissions intensity for indigenous gas on the Licence is forecast to be 2.8 kgCO2e/boe;
• the average emissions intensity of imported gas from UK is 36 kgCO2e/boe (over 12 times more CO2 than indigenous gas from the Licence); and,
• LNG from the USA would have an emissions intensity of 145 kgCO2e/boe (over 50 times more CO2 than Irish indigenous gas).

The very low emissions associated with the development of a gas discovery on the Licence detailed in the Report are primarily due to the following factors:

• the close proximity of the Licence to the existing Corrib field (Corrib is only c.11km from the Licence);
• gas would be produced through the existing subsea pipeline and facilities located at the Bellanaboy Gas Terminal;
• the quality of the gas and the low levels of impurities associated with the gas;
• the quality of the reservoir anticipated and the forecast initial production rates from wells on the Licence;
• the anticipated size of the gas resource; and,
• the forecast production profiles associated with a gas discovery on the Licence.

Simon Oddie, CEO of Europa, commented:
“This report demonstrates the strategic importance of developing this gas resource, which will not only contribute to Ireland’s energy security, in line with the EU’s stated goals of diversifying gas supply, but would also lead to significantly reduced emissions during the transition to renewable energy. Production from the Licence would reduce Ireland’s absolute emissions associated with imported gas from the UK by over 50%.”

This is not the first time that Ireland will have reports presented to it that for the benefit of their energy security goals that emissions would also be reduced by using domestic gas. Accordingly if EOG made say, a 1 tcf development of a gas discovery on EOG licence FEL 4/19 would have emissions of 2.8 kgCO2e/boe somewhat lower than gas from Corrib let alone imported gas…

As a result of this you could make a genuinely substantial added value case for EOG but it is too early  to suggest that either that will happen, as it hasnt been discovered yet, nor do the Irish Government have the record to create the background to ensure companies actually can drill in the country.

This is an interesting putative situation, I have recently met with the EOG senior management which encouraged me to look in some greater detail about the possible value within the portfolio and will look forward to doing so in the near future. 

SDX Energy

SDX has announced that, at the request of the Egyptian Natural Gas Holding Company, its wholly owned subsidiary, Sea Dragon Energy (Nile) B.V.,  and Energy Flow Global Limited have reconstituted the transaction announced on 1 February 2022.

There is no change to the underlying economic substance of the original transaction. Under the original transaction, EFGL acquired an effective 18.15% interest in the South Disouq concession through its acquisition of 33% in Nile B.V.. Under the Reconstitution, Nile B.V has assigned a direct 18.15% interest in the South Disouq concession to EFGL by way of a Deed of Assignment. EFGL has simultaneously returned its 33% stake in Nile B.V. to SDX for a nominal fee of $1. The parties have agreed to an effective date, as of the signature by the Egyptian Minister of Petroleum of the Deed of Assignment on 22 February, 2023.  

As EFGL is considered a related party of SDX, the Reconstitution represents a related party transaction under the AIM Rules. The directors of the Company having consulted with the Company’s nominated adviser, consider that the terms of the transaction are fair and reasonable insofar as its shareholders are concerned.

Speaks for itself.

Predator Oil & Gas

Predator has announced an update on the proposed testing of the MOU-1 well drilled and completed in 2021 in the area of the the Guercif Petroleum Agreement onshore Morocco.

In conformance with the current Moroccan regulatory procedures for rigless well testing, the Company has expressed in writing to the Office National des Hydrocarbures et des Mines the intention to test MOU-1.

The testing program has been outlined together with the intervals to be tested and the quantities of explosive required.

A letter from ONHYM has been sent to the Ministry of the Energy Transition and Sustainable Development and to the Governor of the Guercif region to inform them of the proposed testing operations.

After receipt of the ONHYM letter has been acknowledged, the Company is required to send a letter to the Regional Director of Energy and Mines to request a meeting with the committee in charge of the explosive authorisation. This is to agree in the meeting on the date when the explosives will be transported under police escort from the bunker in Casablanca to the MOU-1 well site and the date when the rigless well test will be held. This is so that the local authorities will be able to track the explosive quantities used.

Given that well perforating operations have only been carried out once before in the last 51 years in the area of the Guercif Petroleum Agreement, the Company will also hold  a meeting with the local authorities in Guercif to explain the rigless well test perforating procedures and the proposed timescale.

This is the normal practice in Morocco for the use of explosives in well operations.

Paul Griffiths, Executive Chairman of Predator Oil & Gas Holdings Plc commented:
“Once the regulatory process has been fully complied with the Company will begin MOU-1 rigless testing at the very earliest opportunity.

Options for the implementation of the next stage of drilling operations in Guercif are in the process of being finalised but are unlikely to be completed before the rigless MOU-1 well testing commences.”

Perfectly normal regulatory process here from Predator but shareholders will be pleased to see that the company is not standing still and looking forward to testing MOU-1 as soon as possible.

KeyFacts Energy Industry Directory: Malcy's Blog