WTI (Aug) $71.79 +$2.00, Brent (Sep) $76.65 +40c, Diff -$4.86 -$1.54
USNG (Aug) $2.65 -15c, UKNG (Aug) 83.4p -5.6p, TTF (Aug) €33.865 -€0.18

Oil price

After an interrupted week oil has weakened today, bullish speeches yesterday at the Opec International Seminar in Vienna have been followed by the usual economic concerns.

After the close the API reported a better than expected draw of 4.4m barrels of crude but gasoline built by 1.6m and distillates built 600/- b’s.

Touchstone Exploration

It is going to be a crucial week in Touchstone’s history and last night CEO Paul Baay was appearing in the Shares Investor Webinar to point out just how important will be. The strong production imminently starting from Cascadura will give the company ‘5 year visibility’ and more and make it a full cycle E&P company. 

With it the company can start to convert reserves into production using the significant technology advances available, the support from the Energy Minister will see production get into top gear very soon and be producing over 9,000 boe/d and making it more of a natural gas company. 

So, over the next few days TXP shareholders can expect the plugs to be removed from the two wells at Cascadura and the flow to the newly built gas facilities will begin. And this is only the beginning, CEO Paul Baay was at pains to point out that there are a number of further wells to be drilled, probably at least five with the rig off to drill the next one very soon. 

There is much more elsewhere at Coho and Royston but this is the time for Cascadura to shine, the Ortoire block that I was shown a while ago on charts is really coming into its own, the Herrera fairway is indeed that, and over the next few years there are plenty of opportunities to fill up the spare capacity at the gas facility. 

There will be plenty of news from TXP in coming days, this will prove that it is going to be a very substantial company with huge reserves and decent production but more importantly masses and masses of upside, yes it could be a stock for 2023.

PetroTal Corp

PetroTal has announced the following operational and corporate updates, including the appointment of Mr. Felipe Arbelaez Hoyos to PetroTal’s Board as an independent non-executive director.

Record Q2 2023 Production
PetroTal achieved a record production of 19,031 barrels of oil per day in Q2 2023.  This was underpinned by robust production from the Company’s newly drilled 15H well and by delivering maximum sales volume through the Brazilian route for most of the quarter.  During its first 25 days of production, the 15H well has averaged approximately 7,300 bopd, with its most recent rate reported at 6,040 bopd after accumulating 182,500 barrels of crude oil.  Early in Q2 2023, the Company also brought online well 14H with its most recent rate reported at approximately 2,300 bopd.

During the second quarter, PetroTal constrained approximately 25% of its production capacity due to the ongoing Northern Peruvian Pipeline (“ONP”) closure and six days of planned maintenance, which coincided with a brief period of social disruption.   

2023 Production Guidance
The Company is now moving its contracted drilling rig to service two of the initial Bretana oil wells.  As initially forecast, the next location (well 16H) will commence drilling in late Q3 2023, once the new L2 West drilling platform has been fully tied in.  PetroTal continues to monitor the Amazon River levels on the Brazilian side as the peak dry season settles in, and by next month the Company should be able to either reaffirm or upgrade its current 2023 guidance.

PetroTal will continue to drill new wells while oil prices allow for quick capital recovery, ensuring the Company builds a steady base of oil producing wells that will extend Bretana’s free cash flow proposition for the long term. 

Cash and Liquidity Update
PetroTal exited Q2 2023 with approximately $75 million of unrestricted cash and $17 million of restricted cash for a total of $92 million.  Restricted cash includes amounts reserved for the social trust funds to be deposited at a later date.  The robust cash position supports future return of capital efforts to shareholders in the form of regular dividends, special dividends and share buybacks.  During Q2 2023, the Company purchased 582,708 shares at an average price of US$0.56/share pursuant to the share buyback program.  Accounts receivable of approximately $100 million are contractually current, with accounts payable of approximately $59 million, primarily due within the next 50 days. 

What a quarter from PTAL as they record 19,0321 b/d with the 15H well having a first contribution and even better via Brazil as the 2nd quarter showed the ONP closure and six days of planned maintenance. This followed the bringing on of the 14H well earlier in the quarter.

PetroTal is a superb investment at the moment, growing production, superb exploration upside and of course the capital distribution programme makes the return via yield and capital growth hard to beat, oil sector or indeed anywhere else. 

Angus Energy

As communicated on 3rd July, following a planned maintenance shutdown of the Saltfleetby Field facilities from 19th to 21st June, problems were identified with the performance of the second compressor engine and the field has subsequently been operating with a single compressor at an average daily rate of 6mmscfd. The remedial work on the compressor engine was successfully completed in the afternoon of 5th July and the field has returned to dual compressor operation with all three wells on stream.

Good news here that Saltfleetby is back in business with all three wells on stream. 

Hunting

Hunting today issued a trading update, ahead of its Half Year Results to be released on Thursday 24 August 2023.

Highlights

• H1 2023 trading has been ahead of management’s expectations driven by strength across most international markets, with both revenue and operating profit ahead of the targets set at the start of the year. Performance in the period has also been materially ahead of the comparable period in 2022.
• EBITDA for the first half of 2023 is likely to be in the range of $48m-$50m.
• Sales order books continue to be robust across all product lines, with the Group position at 30 June 2023 being c.$530m-$550m compared to $473m as at 31 December 2022.
• North America segment reports a performance materially ahead of expectations, primarily due to international orders for South America, which are driving the performance of the US Manufacturing business.
• Hunting Titan’s international revenue is building as US completion techniques and technology are adopted globally. The segment reports stable operating profits during the period.
• Subsea Technologies segment reports growth in revenue and profits as major orders for titanium stress joints are completed.
• EMEA segment reports a broadly break-even performance as international activity supports higher revenue.
• Asia Pacific segment reports a material step up in revenue and a return to profitability as the CNOOC order continues to be delivered.
• Balance sheet remains robust with net debt expected to be $51m-$52m at 30 June 2023.
• The Company’s Capital Markets Day is confirmed for Wednesday 13 September 2023, where the Hunting 2030 Strategy will be presented by management.

Outlook

• Group performance for H2 2023 is likely to be similar to H1, therefore management is increasing EBITDA guidance for the 2023 full-year to $96m-$100m.
• Management anticipates total cash and bank at 31 December 2023 to be between $nil and $25m as larger projects are completed in H2 2023.
• The outlook for 2024 is improving as sales order books increase. Management now anticipates EBITDA to be in the range of $125m-$135m for the year ended 31 December 2024.

Jim Johnson, Chief Executive of Hunting, commented:
“Hunting has delivered a strong performance in H1 2023 as business units across the Group benefit from increased client activity. Management remains focused on delivering on market guidance, which is supported by robust international market momentum including South America, the Middle East and Asia Pacific.

“The North America drilling market is shifting activity to more oil focused targets, which continues to provide opportunities to the Group. Hunting Titan is shortly to launch the H-4 Perforating System™, which will also provide revenue growth to the segment in H2 2023, in addition to its good progress within international markets.

“Hunting’s Advanced Manufacturing businesses are also seeing good growth in both energy and non-oil and gas markets.

“The Group has made good progress in its strategy to position itself in the supply chain for energy transition markets. The strategic alliance with Jiuli, announced in June, enables Hunting to deliver key technologies and products to clients in the geothermal and carbon capture sectors, which management believes will lead to strong sales in the short to medium term.

“The outlook for 2023 continues to be strongly positive, with 2024 revenue visibility also improving due to the orders secured during the period.”

This is a fantastic statement, but should have been expected, Hunting have been warming up the market for many months but the shares haven’t, until today, reacted positively enough. Even the management were impressed with the revenue and operating profit numbers which were ‘materially ahead’ of expectations.

Sales were robust across all areas but North and South America dazzled as did Subsea Technology. AsiaPac was always going to be good what with the CNOOC order which materially stepped up the rate and boosted profits.

I remain an unrepentant bull……

Trading Statement
The monthly revenue run rate in H1 2023 is expected to be $76m-$80m, which compares to $56m in H1 2022 and $65m in H2 2022.

EBITDA in H1 2023 is expected to be in the range of $48m-$50m.

During H1 2023, the Group’s working capital balances have peaked in May, with net debt at 30 June 2023 expected to be $51m-$52m, which reflects the investment in inventory as previously guided, due to the new orders secured across the Group. Cash generation has accelerated towards the end of the period and will increase further during the second half of the year as current orders are worked off, with management still anticipating a year-end total cash and bank position of between $nil and $25m, dependent on the timing of receivables.

The North America operating segment has reported very strong results in the period, as demand for premium and semi-premium connections has continued to build. As noted above, the segment’s US Manufacturing business has reported a performance ahead of expectations as well as a material increase in completion orders for South America. The Advanced Manufacturing businesses have reported improving results, as both the Dearborn and Electronics businesses secure both energy and non-oil and gas orders, in addition to the further easing of supply chain issues. New equipment has been commissioned at Dearborn, which will lead to higher facility utilisation and order completion in the second half of the year.

Trading within Hunting Titan has been stable, despite volatility within the North America onshore drilling market. The segment is seeing good growth in its international sales profile as US technologies are adopted in key drilling basins in South America, the Middle East and China. Management note that drilling in North America is shifting to oil rather than gas targets given the decline in the natural gas price, which will also support activity in the balance of the year. The segment has continued to commercialise its H-3 Perforating System™ in the period, which has seen good customer acceptance. The segment will shortly launch the self-orientating H-4 Perforating System™, which will contribute to Titan’s revenue mix in the second half of the year.

The Subsea Technologies operating segment has reported good revenue growth in the period as sales of hydraulic valves and couplings and continued progress on the orders for titanium stress joints have led to a strengthening financial performance. Further sales opportunities in South America and West Africa are being pursued as international market activity strengthens.

Hunting’s EMEA operating segment reports improved revenue as global activity continues to strengthen. The segment has worked on the Tubacex contract for South America, with the order now being shared with the Group’s Aberdeen facility, in addition to the Netherlands facility which remains at full capacity. The Organic Oil Recovery technology continues to see strong interest from a range of major international energy companies, with pilot and field trials either underway or being planned for the UK, Europe and the Middle East in the second half the year.

The Group’s Asia Pacific operating segment has reported a strong improvement in performance in H1 2023 compared to H1 2022 as activity in the Middle East and Asia Pacific recovers from COVID-19. Completion of the CNOOC order secured in Q3 2022 has progressed during the period, which has led to a significant increase in revenue and profitability. Ongoing deliveries of the CNOOC order will continue into Q3 2023, with cash inflows increasing during the second half. The three-year Vedanta order, secured in Q2 2023, will contribute to steady activity through to 2025. During the period, the new threading facility in India has been completed, with final commissioning expected in Q3.

Petro Matad

Petro Matad has announced that the Cabinet of the Mongolian Government has approved the certification of the Block XX Exploitation Area, including the Heron oil discovery, as special purpose land.

Having received feedback from all other ministries, the Ministry of Construction and Urban Development, which is responsible for land issues, submitted the documentation to Cabinet and the proposed certification was discussed at the Cabinet’s meeting on 5 July 2023. The Cabinet approved the certification and also instructed officials to conclude the follow up formalities required under the Land Law. The Company will now work with the central Land Agency and local authorities to complete the registration of the area and to sign the necessary contracts required by the regulations on the management of special purpose land. In parallel, we are already in discussion with service providers to determine a timeframe in which crews and equipment can be available for the completion for production of the Heron 1 well.

The certification of Block XX as special purpose land gives the Company the legal right of access to the entire area for the purpose of hydrocarbon exploration and exploitation.

Mike Buck, CEO of Petro Matad, said:
“We are very pleased that the Cabinet has approved the certification of Block XX as special purpose land. This important step has been a very long time coming but now provides a firm legal standing to the Company to execute the approved plan of development for Heron and to explore the exciting potential around it. 

I would like to thank all our shareholders and in particular those that have been with Petro Matad for some years now, for their patience during this protracted certification process and I look forward to sharing further updates as we move into the next phase.”

Thank goodness for that, I was half expecting never to see the certification on Block XX, this is good news indeed.

Prospex Energy

Prospex has announced the start of gas production from the Podere Maiar-1 (“PM-1”) gas facility at the Selva field in the Po Valley region of northern Italy.  First gas was achieved following the completion of operational and safety inspections with successful sign off from UNMIG and the Fire Department and subsequent go-ahead from the Ministry last week, solidifying its authorisation for gas production at PM-1.

Construction and grid connection of PM-1 to the SNAM grid in Italy was announced on the 16 May 2023, with all activities completed on schedule and within 3% of budget.

Po Valley Operations Pty Limited, a wholly owned subsidiary of Po Valley Energy Limited, is the Operator of the Selva Malvezzi production concession with a 63% working interest, while Prospex has the remaining 37% working interest.

Highlights

• Podere Maiar-1 commenced gas production in Italy, delivering first gas on 4 July 2023
• First gas will provide the Company with its maiden revenue from the Selva Malvezzi Production Concession in Italy
• PM-1 will provide gas directly to the domestic Italian market under an 18-month supply agreement with BP Gas Marketing announced on 14 February 2023
• Further upside potential at the Selva Malvezzi Production Concession (Figure 1), as Po Valley Energy, the Operator, intends to advance other projects within the Concession.

Mark Routh, Prospex’s CEO, commented:
“I am absolutely thrilled to be announcing the start of first gas from the Podere Maiar-1 well in the Selva Field, a pivotal milestone in our company’s development and a credit to the work of our partners at Po Valley Energy and their team on the ground, Po Valley Operations, who have made today’s announcement possible.

“I would also like to thank our shareholders, who have supported us as we transitioned to become a gas producer in Italy with guaranteed revenues from our 37% interest in the field, on the back of the 18-month supply agreement with BP Gas Marketing.  We are optimistic additional gas producing wells will be developed within this Concession which hosts several lookalike prospective wells and we look forward to updating the market on our progress in this regard.”

“This is a key step in the Company’s strategy to become a diversified energy producer with multiple producing assets principally in lower risk, onshore European markets with ready access to infrastructure”.

An important time indeed for Prospex and when we get an idea of what the production rates are set to be, a key contributor to revenues. 

As part of the gas production process, Po Valley Energy will actively monitor production parameters in order to determine the optimal flow rate and ensure sustainable production levels from the Podere Maiar-1 well.  By settling on a sustainable flow rate, it aims to maximise the production potential from the Selva Malvezzi concession.  The Company will update shareholders on the production rates in the coming months.

KeyFacts Energy Industry Directory: Malcy's Blog