WTI (Nov) $87.69 +$4.78, Brent (Dec) $90.89 +4.89, Diff -$3.20 +11c
USNG (Nov) $3.24 -10c, UKNG (Nov) 130.22p +1.47p, TTF (N0v) €51.02 -€2.43

Oil price

The oil price rose some $4.90 for WTI and $6.31 for Brent as the Middle East dominated the news. Clearly Iran remains the key but US Secretary of State Blinken has been calming nerves in the area. The US rig count showed a rise overall of 3 units to 622 and oil were up 4 to 501.

Genel Energy

Genel has noted that DNO ASA, as operator of the Tawke PSC (Genel 25% working interest), has today issued an update on licence activity.

Gross production from the Tawke licence in Q3 2023 totalled 25,984 bopd.

Production was shutdown following the closure of the Iraq-Türkiye pipeline on 25 March 2023. The Tawke field was reopened on 18 July and production has since ramped up, with the contractor share of crude oil from the field during the quarter sold to local buyers with payments received directly in advance. No crude oil was delivered to the Kurdistan Regional Government for export by pipeline through Türkiye.

Nothing really of note here, until the pipeline is back up and running and the partners are being paid in full meantime, the operator, DNO is selling the crude locally which pays the bills at least. 

PetroTal Corp

PetroTal has announced the following operational and corporate updates.

Q3 2023 Production
PetroTal achieved production of 10,909 barrels of oil per day (“bopd”) in Q3 2023 and is currently producing around 12,500 bopd.  Production was lower than our guided 13,500 bopd as it was negatively impacted by lower than expected river levels that reduced barge capacity for the Brazil route exports.  On a year to date basis ending September 30, 2023, the Company has produced approximately 14,040 bopd, which is inside full year production guidance range.

Alternative Sales Route Update
The Company is pleased to announce the commencement of its pilot oil sales shipment through the OCP Ecuador pipeline (“OCP”) in early November with the support of the Ecuadorian government.  PetroTal plans to sell 100,000 barrels of crude into the OCP for eventual arrival at Esmeralda’s port.  The route involves approximately 1,000 km of river travel and approximately 115 km of trucking to the OCP terminal and will eventually generate similar netbacks to the Company’s Brazil and Iquitos routes.  The Company has also completed the contracting of service companies that will carry out the pilot shipment and trucking to the OCP terminal.  PetroTal estimates completion of the shipment prior to the end of 2023, subject to the outcome of logistical activities that are being tested.  In parallel with the OCP pilot, the Company is investigating other possible options for material sales route expansion.

Q4 and Full Year 2023 Production Guidance
River levels are lower compared to the 2022 dry season and will continue to impact October and November 2023 guided production levels.  This will delay the Company’s estimated production ramp up and as a result, the Company is now guiding Q4 2023 production between 14,000 and 14,500 bopd and full year 2023 guidance now near the lower range of 14,000 to 15,000 bopd assuming the river levels recover in December 2023.

Operational Update 
The installation of the L2 West Platform is underway and expected to be completed near the end of October 2023.  PetroTal expects to commence drilling well 16H in early November 2023 with first production estimated early in 2024. 

PetroTal’s other main sales route, the Northern Peruvian Pipeline (“ONP”), continues to be shut down.  The Company expects that once the Talara refinery is fully commissioned and running as planned, there could be progress towards reactivation of the ONP.  Additionally, PetroTal notes that Peru’s Public Ministry has taken action and captured members of the criminal group named Los Crudos, that had been involved in pipe cuts that sabotaged ONP operations for the past couple of years.

Cash and Liquidity Update
PetroTal exited Q3 2023 in a strong position with approximately $94 million of unrestricted cash and $19 million of restricted cash for a total of $113 million.  Restricted cash includes amounts reserved for the social trust funds to be deposited at a later date.  The robust cash position supports future returns of capital to shareholders in the form of regular dividends, special dividends and share buybacks.  During Q3 2023, the Company purchased 5.6 million shares at an average price of US$0.55/share pursuant to the share buyback program, and paid dividends of US$23 million (US$0.025/share) on September 15, 2023 related to Q2 2023 operations.  Accounts receivable of approximately $67 million are contractually current, with accounts payable of approximately $55 million, primarily due within the next 50 days. 

Q3 2023 Webcast Link for November 13, 2023
Please join the Company for its Q3 2023 webcast on November 13, 2023 at 9am CT (Houston).

https://stream.brrmedia.co.uk/broadcast/650d4b6b39ad9f961be9caad

Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:
“The Company is pushing extremely hard to meet guidance in 2023 despite a more severe dry season seen compared to last year on the Peruvian side.  When river levels permit, the field is capable of producing in excess of 22,000 bopd, shipping monthly volumes to Brazil of 600,000 barrels (~20,000 bopd) and well over 60,000 barrels per month (~2,000 bopd) to Iquitos until we get our other sales initiatives commercialised.  In addition, we will begin the pilot to the Ecuadorian OCP shortly, which will activate another 2,000 to 4,000 bopd of regular offtake when normalised and optimized.  Subsequently, by mid 2024, we expect to activate the Yurimaguas route which could add up to 5,000 bopd of additional sales capacity.

PetroTal remains in a strong financial position.  With $94 million unrestricted cash and $19 million of restricted cash, we will continue with our plans to return capital to investors via dividends and share buybacks for the foreseeable future.”

In a particularly long dry season PetroTal are flagging that 3Q production of some 10,909 b/d (now 12,500) will be a bit below guidance of 13,500 and has reduced 4Q guidance to 14,000-14,500 b/d and full year guidance to 14,000-15,000 assuming of course the river levels recover in December.

This reduction is slightly disappointing but no more, it will come as no surprise to investors who have had detailed presentations that show seasonal ebbs and flows occasionally challenge guidance but the company are working hard to establish new routes including the current pilot to the Ecuadorian OCP soon and for next year’s season the Yurimaguas route. 

PetroTal has a very strong balance sheet with cash of some $113m and has a super generous capital payout scheme which pays quarterly dividends of $0.025 per share and thus yields around 18%, add that to the value of the share buy-back which adds another 2% and the shares remain outstanding value, my longstanding Target Price remains at 150p for what it’s worth. 

Scirocco Energy- They said it wouldn’t happen…

Scirocco has today announced an update on the Ruvuma transaction.

Scirocco is pleased to announce it has completed the transaction with ARA Petroleum Tanzania for the divestment of its 25% non-operated interest in the Ruvuma asset, Tanzania.

In accordance with the SPA, Scirocco has received the balance of completion payment consideration of $2.54 million (equivalent to $3.0 million completion payment less the $0.5 million advance received following signature as well as contractual adjustments). The cash call loan facility provided by APT and used by Scirocco to fund cash calls during the interim period has also been fully settled by completion and Scirocco has no ongoing associated liability.

Following completion Scirocco will be entitled to receive a series of contingent payments which depend on progress on the development activity of Ruvuma:

• US$3 million payable upon Final Investment Decision (FID) being by the parties to the Ruvuma Asset Production Sharing Agreement or the JOA as the case may be. Given the progress made on the development to date, with first gas being targeted for December 2023, Scirocco is confident of receiving this payment later in 2023.
• Up to US$8 million payable in the form of a 25% net revenue share from the point when Ruvuma commences delivery of gas to the gas buyer. These payments will be made following the sale of gas has commenced and based on the current development timeline are estimated to commence in Q1 2024.
• Contingent consideration of US$2 million payable on gross production reaching a level equal to or greater than 50 Bcf. This will require consistent production over a period of time from the licence and is unlikely to be payable before 2025 at the earliest.

Commenting on the update, Tom Reynolds, CEO of Scirocco, said:
“This is a transformative divestment for Scirocco and we are delighted to have reached this watershed moment for the company as we complete our transition to a business positioned to take advantage of opportunities in the growing energy transition sector which match our strategic investment mandate. 

I would also like to thank the representatives of the Tanzanian government who have supported the completion process.

With Scirocco’s exit from the significant legacy investments of what was Solo Oil, this will broaden the appeal of our investment proposition amongst a significantly wider pool of prospective investors, and we look forward to forging a new profile as a focused and ambitious company, motivated to create sustainable long-term value and contribute to net-zero targets.

The receipt of the initial consideration, and even more so upon receipt of the future contingent payments, places the Company on a solid financial footing to explore and evaluate opportunities in line with the strategic focus on the energy, circular and vector sectors.  The Company looks forward to engaging with shareholders regarding our next steps.”

This is the deal that shareholders have been waiting for from Scirocco and although it has taken longer than expected that is all behind them now. With a cash payment of $2.54m now received the company is on target to receive in total some $16m over the next year or two. 

The next payments are all contingent but the next is tied to the JV getting FID and with the development licence imminent that seems to be likely in Q4. After that the payments are linked to production and should payout mainly this tear and next.

Scirocco finds itself in a very strong position and I for one am glad that I remained confident that the deal would happen as expected, not something that I think everyone even close to the tent were so confident. This deal leaves the company with no financial liabilities and clean as a whistle with money in the bank to continue with the sustainable energy policy. 

The management promised to reengage with shareholders following the Ruvuma deal  and that is what they are planning to do, the opportunities are out there, the team have a strong idea of what is best for the future and to create long term value. And they said it wouldn’t happen…

KeyFacts Energy Industry Directory: Malcy's Blog