WTI (Aug) $75.42 -$1.75, Brent (Sep) $79.87 -$1.49, Diff -4.45 -2c
USNG (Aug) $2.53 -2c, UKNG (Aug) 58.5p -6.5p, TTF (Aug) €24.62 -€2.59

Oil price

After the excitement of the reporting agencies last week the oil price turned on Friday. Firstly Libya is back on and the 250/- b/d from the two fields is returning. This morning economic data from China was mixed with GDP q/q ok but y/y not so smart. Trading closed due to a typhoon but will resume tomorrow.

The rig count was down 5 overall to 675 units and in oil down 3 to 537.

Diversified Energy Company

Diversified Energy Company has announced the sale of certain undeveloped acreage within Diversified’s Central Region for net consideration of ~$16 million to an undisclosed buyer.

The Assets include approximately ~22,000 net acres in Oklahoma, representing a small portion of the Company’s undeveloped Central Region acreage. The Transaction  demonstrates Diversified’s ability to realize upside within its broader portfolio by monetizing undeveloped and non-core acreage, adds ~$16 million to the Company’s liquidity, and is well-aligned with Diversified’s strategic focus on operated PDP properties. Consistent with prior acquisitions, the Company ascribed no value to the leasehold in its purchase price allocation. Accordingly, 100% of the proceeds from this sale represent additional value to shareholders.

Commenting on the Transaction, CEO Rusty Hutson, Jr. said: 
“Once again, our teams delivered in their commitment to enhance the value from recent Central Region acquisitions, significantly reducing our net purchase price by successfully monetizing another portion of undeveloped leasehold. This Transaction exemplifies our strategy of efficiently managing our producing assets while extracting upside from other portions of our asset portfolio. The sale proceeds enhance our liquidity as we evaluate other value-accretive opportunities to generate additional free cash flow. We remain focused on delivering operational and administrative synergies, stewarding our assets, and executing our Smarter Asset Management programmes.”

Another smart deal from DEC who continue to tidy up the portfolio with accretive deals such as this which sells non-core acreage whilst bringing in cash thus increasing liquidity. Combine these deals with the larger more strategic deals, which by the way set up these smaller divestments, and you have a strong business case. 

It should be remembered as you look at the phenomenal embedded value within DEC with their huge yield and potential for buy-backs which add to the massive total return. Also if they stopped doing deals now they would be able to pay an unchanged dividend for many years without affecting the ability to pay out these significant amounts. Ive never seen protection like it.

Beacon Energy

Beacon has announced an update on the Schwarzbach-2 drilling operations which spudded 19 June 2023.

Rhein Petroleum has performed a successful recovery or ‘fishing’ operation in the SCHB-2 well to free a directional drilling assembly stuck in the 12¼” hole section and has returned it safely back to surface.

The stuck pipe incident occurred after the well had made good progress, reaching a drilled depth 100m above the first target which remains untested. The operations team will now clean out the 12¼” hole section before continuing with drilling to the target reservoirs.

The Company expects to provide a further update on the progress of drilling operations during the course of next week.

Beacon Energy Chief Executive Officer, Larry Bottomley commented:
“Clearly this is an unfortunate development that has caused a delay in delivering the SCHB-2 development well, however we see a minor impact to the overall costs of the well relative to its upside potential in the success case. These unavoidable challenges are common when drilling and it has been our focus to ensure it was resolved in a safe, rapid and cost-efficient manner. 

“We are very pleased with the exemplary performance of the operating team in Rhein Petroleum, who have moved swiftly to resolve the situation so we can continue to focus on delivering the objectives of this well.

“We had made good progress with the drill up to this point, with the situation occurring just above the first target zone, with all shallower horizons being on prognosis and the well encountering the expected increase in background hydrocarbon gas as the drill bit got closer to that target.  The operations team are fully focused on drilling to TD and we will update the market on the results of these efforts.”

This should not affect the timing very much and any cost will be well within the contingency. This is indeed a not unusual occurence on a drill like this and it looks like there will be little or no effect on the timing and hope the results which are still due soon are good.

Petrofac

Petrofac has been awarded a facilities management contract by CNR International (CNRI) offshore the Ivory Coast, West Africa.

The initial three-year, multi-million pound, contract will see Petrofac’s Asset Solutions business providing integrated services for the Espoir Ivoirien Floating Production Storage and Offloading (FPSO) vessel. Around 110 personnel currently supporting the FPSO, including those onshore and on the vessel, will transition to Petrofac from BW Offshore following the recent sale of the vessel to CNRI. The transition of people and operatorship is expected to complete before the end of July.

The contract builds upon Petrofac’s existing strong relationship with CNRI in the UKCS, which has centred around the provision of operations and maintenance services. The contract will be managed from Petrofac’s technical hub in Aberdeen, using decades of experience in the mature and highly regulated UKCS market.

Nick Shorten, Chief Operating Officer for Petrofac’s Asset Solutions business, said:
“I’m delighted that we are continuing to grow our presence in Africa with this latest contract from CNRI. We bring our considerable global FPSO experience to the Ivory Coast, adding to our portfolio of service contracts in Africa. Petrofac is expanding across the continent, providing local jobs, developing local skills and collaborating with local partners.

“We look forward to deploying our expertise and working collaboratively with CNRI and our new employees to effect a safe and seamless transition through to operation of the asset.”

This latest award builds on contract successes achieved throughout 2022, including decommissioning in Mauritania for Tullow Oil, operations and maintenance for Tullow Oil in Ghana and the provision of offshore operations services for bp’s Greater Tortue Ahmeyim (GTA) Project, including an FPSO, in Mauritania and Senegal.

Whilst not in the league of the recent huge contracts this proves that the asset solutions business is ticking over nicely with another good contract in Africa. 

Longboat Energy

Longboat has confirmed that its transaction with Japan Petroleum Exploration Co., Ltd  to establish a joint venture in Norway has now been completed with the initial investment of US$16 million received by the renamed entity Longboat JAPEX Norge AS. As part of the transaction, Longboat JAPEX will use part of the JAPEX investment to repay an intercompany loan of NOK 45.5 million to Longboat Energy.

The contingent consideration of US$4 million, payable by JAPEX into the JV, associated with the recently announced production acquisition, will be paid on completion of that transaction which is anticipated toward the end of the year.

The third tranche of up to US$30 million is contingent on a successful discovery on the Velocette well, which is expected to spud in September. The amount payable under the Velocette Tranche is based on a sliding scale applied to the gross resources approved for development by the Norwegian Ministry of Petroleum and Energy.

Having completed the transaction, the US$100 million Acquisition Financing Facility to finance acquisitions and associated development costs has been established and is available for drawing by the JV.

Longboat JAPEX is owned 50.1% by Longboat and 49.9% by JAPEX.

Helge Hammer, Chief Executive of Longboat, commented:
“We are pleased that the creation of the Longboat JAPEX joint venture has completed as scheduled and now look forward to pursuing further acquisitions and opportunities on the Norwegian Continental Shelf to follow on from the first joint transaction announced at the beginning of this month. 

“In the near term, we are looking forward to the drilling of the high impact Velocette exploration well (JV 20%) which is expected to spud in September.”

Now completed this deal looks a good one for Longboat and about time too. Now we look forward to drilling the Velocette exploration well.

KeyFacts Energy Industry Directory: Malcy's Blog