WTI (Feb) $72.24 +$1.47, Brent (Feb) $77.59 +$1.47, Diff -$5.35 u/c
USNG (Feb) $3.19 +21c, UKNG (Feb) 79.0p +1.9p, TTF (Feb) €30.59 -€0.275

Oil price

With 21 drones or missiles shot down by the American led forces in the Red Sea yesterday so much for the deal with the shipping deal allegedly done earlier in the week. And it provoked a spike in the oil price which hasn’t carried through today where prices are unchanged.

PetroTal Corp

PetroTal has announced the following operational, financial and corporate updates.  All amounts are in US dollars unless stated otherwise.

Q4 2023 Production

PetroTal achieved average production of 14,865 barrels of oil per day in Q4 2023 and 14,248 bopd for the year 2023.  During the month of December, due to improved river levels from the return of the rainy season, production averaged 20,090 bopd, helping meet Q4 2023 and the 2023 production guidance range of 14,000 to 15,000 bopd.

Operational Update 

With the installation of the L2 West Platform completed, the Company has successfully drilled its first horizontal well (16H) on the new platform.  Well 16H is currently being completed and expected to start production by mid-January 2024.  The 16H well should allow the Company to maintain production above 20,000 bopd for the foreseeable future now that the Company, through its trading partner, has enhanced the oil export barge fleet capacity to more than 1.6 million barrels.  This, together with reducing the time for discharge operations at the Brazilian offloading site, will mitigate production bottlenecks as experienced during the first quarter of 2023.

Alternative Sales Route Update

The Company is in the process of obtaining the relevant authorization for use of the most suitable port in Ecuador for the export of oil produced from Bretana via the OCP pipeline.  With support from the OCP, (Ecuador’s primary transportation company), PetroTal has been working closely with the various Ecuadorian government energy entities that are involved in the authorization processes.  Based on the positive support received to date from the OCP and Petroecuador, the Company is confident in its ability to obtain eventual authorization for future recurring sales to the OCP in mid to late 2024.

Cash and Liquidity Update

PetroTal exited Q4 2023 in a strong position with approximately $90 million of unrestricted cash and $21 million of restricted cash for a total of $111 million as at December 31, 2023.  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, as approved by the Board.  During Q4 2023, the Company purchased 5.1 million shares at an average price of US$0.58/share pursuant to the share buyback program, and paid dividends of $18.4 million (US$0.02/share) on December 15, 2023 related to Q3 2023 operations.  Accounts receivable of approximately $70 million are contractually current, with accounts payable of approximately $68 million, primarily due within the next 50 days. 

VP Exploration and Development Retirement

Mr. Dewi Jones, VP Exploration and Development will retire from PetroTal on January 18, 2024, having served in this capacity since March 1, 2021.  PetroTal appreciates Mr. Jones efforts and guidance over the last three years. 

The duties of his position are being reallocated internally, so a replacement is not being considered at this time.  Mr. Jose Contreras, Senior Vice President Operations will assume all responsibilities for Bretana’s development.  PetroTal is pleased to advise that it has re-engaged Mr. Estuardo Alvarez-Calderon in a consulting capacity to coordinate the exploration aspects.  Mr. Alvarez-Calderon was a founding partner of PetroTal and served as PetroTal’s VP Exploration and Development from 2017 until retiring in 2021.

2024 Budget announcement with webcast link for January 22, 2024 at 9am CT

The Company will be announcing its 2024 budget and guidance on January 22, 2024.  That same day, PetroTal will also host a webcast to discuss its 2024 budget at 9:00am Central Time (3:00pm GMT).  Please see the link below to register.

https://stream.brrmedia.co.uk/broadcast/65967ac7b012a6d30b474779

Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:
“The Company expects to have a strong oil sales profile while river levels are high.  With well 16H commencing production in January 2024, the Company hopes to produce over 20,000 bopd for the foreseeable future as we have expanded our export barging fleet to over 1.6 million barrels, and we continue to expand into other sales markets.  We are excited to be starting 2024 at this production level and will be announcing our 2024 plans very shortly. 

PetroTal remains in a strong financial position with no long-term debt.  With $90 million unrestricted cash and $21 million of restricted cash, we will continue with our plans to return capital to investors via dividends and share buybacks for the foreseeable future. 

I wish to thank Dewi Jones for his contribution to PetroTal’s successful growth and wish him well in his retirement, and welcome back Estuardo Alvarez-Calderon who will be leading our exploration efforts.”

PetroTal are in great shape, Q4 production of 14,865 bopd making 14,248 bopd for the year, aided by river levels December came in at 20,090 so the guidance of 14/- to 15/- was made relatively comfortably. Add to that that through its trading partner, PTAL has enhanced the oil export barge fleet capacity to more than 1.6 million barrels and you get to stay at over 20/- b/d for the ‘foreseeable future’.

Indeed, that barge capacity, together with reducing time for discharge operations at the Brazilian offloading site will ‘mitigate’  production bottlenecks as experienced during the first quarter of 2023. With the plans for a suitable port in Ecuador ongoing for the Bretana oil via the OCP pipeline and receiving favourable support, the likelihood of approval and ultimate sales to the OCP could occur later this year.

With its ‘robust cash position’ I expect shareholders to continue to receive the red carpet treatment, substantial dividends giving a yield of some 14%+ and a buy-back that adds at last two points of return to that. My 150p Target Price and a guaranteed berth in the Bucket list are assured for this superbly managed company.

Hunting

Hunting has today issued a year-end trading update ahead of announcing its 2023 Final Results on Thursday 29 February 2024.

All financial data noted below remains subject to audit.

Highlights

• 2023 trading and financial outturn in-line with previous guidance and market expectations, with EBITDA in the range of $96-$100m. Group revenue is expected to be in the range of $925-$930m.
• EBITDA margin of c.10.5% has been delivered during the year, up from 7% in 2022, and on-track to meet the 2025 target of c.14-16% as guided at the Capital Markets Day in September 2023.
• Hunting’s sales order book continues to improve following further material order wins within the Subsea and OCTG (Accessories) product groups. The Group’s total sales order book now stands at c.$575m, up 12% from the end of Q3 2023 and up 21% from the 2022 year-end.
• Strong cash generation delivered in Q4 2023, with total cash and bank / (borrowings)1 at year-end expected to be $nil, in line with the guidance provided in October 2023.
• Disposal of residual oil and gas production assets completed in Q4 2023, to further streamline the Group’s operating activities.
• Launch of the Hunting 2030 Strategy in September 2023.
• 2024 EBITDA expectations unchanged at c.$125-$135m, driven by the strong order book noted above.

Jim Johnson, Chief Executive of Hunting, commented:
“I am really proud of the performance of the team during 2023, as they have delivered another year of strong revenue growth for the Group, with EBITDA nearly doubling compared to 2022 as industry activity accelerated during the year.

“The Group’s diverse product lines, including energy-related and non-oil and gas have enabled Hunting to deliver solid top line growth in the year, with sales into South America being strong as drilling in Guyana and Brazil increased, while activity across Asia Pacific accelerated as drilling momentum in India and the Middle East improved.

“2024 will see another year of EBITDA growth underpinned by our strong sales order book, which is now up 21% compared to a year ago.”

Hunting are sitting pretty in a fast growing, high margin market place with profits on the up and a large and growing order book and that bulking up means that next year and the year after should be materially better.

The cautious nature of the company means that guidance is not raised today but I suspect it will be in January, historically the company has a quiet spell between Thanksgiving and the new year, waiting to add up the numbers is very sensible. 

Hunting shares are 50% off the bottom but are still not reflecting this high quality company in such an industry or should I say industries as it diversifies geographically and across industries.

Trading Statement

Trading in Q4 2023 has remained in line with management’s expectations with EBITDA anticipated to be in the range of $96-$100m for the full year.

The Group’s sales order book has continued to strengthen through the quarter and now approaches a record level of c.$575m, following a further large order win for titanium stress joints and OCTG Accessories for clients operating in the Black Sea and South America respectively.

The Group’s balance sheet remains strong, with total cash and bank / (borrowings)1 of c.$nil at year-end, reflecting the expected strong collections in the final quarter of 2023.

Product Lines

Sales within the Group’s OCTG product lines, including Premium Connections and Accessories, are likely to be up c.53% compared to the $259m reported in 2022. This has been led by strong activity in Asia Pacific and South America, supported by good progress within North America. 

Perforating Systems reports a c.3-4% decrease in revenue compared to 2022 in part due to the c.20% decline in the North American rig count reported in the year. The segment has delivered record international sales in the year as North American well completion techniques are adopted globally. This international growth supports the Company’s belief in its ability to deliver its strategic ambitions laid out at the Capital Markets Day in September 2023.

Hunting’s Subsea product lines have reported strong year-on-year growth, with revenue up c.40% in 2023 from $69m in 2022. The Spring business has secured a number of large orders for its titanium stress joint technology in the year in Guyana as well as the Black Sea, the latter being a new market for the Group which was awarded in mid-October.

The Group’s Advanced Manufacturing businesses also report strong growth in the year, with revenue up c.45% in 2023 from $75m in 2022. The Dearborn business unit has reported good progress in the development of non-oil and gas sales, while supply chain constraints reported within the Electronics business unit have continued to ease throughout the year which has supported continued revenue growth.

Other Manufacturing, which includes the Group’s well testing and trenchless businesses, has delivered revenue growth of c.5% in the year, up from $71m in 2022.

The overall share of non-oil and gas revenue is expected to increase to c.8% of total revenue, up from 6.5% in 2022.

Operating Segments

The North America operating segment has delivered a strong year of EBITDA growth, as demand for Premium Connections and Accessories accelerated throughout the year. As noted above, sales into South America, driven particularly by the US Manufacturing business unit, have accelerated as drilling and development activity in Brazil and Guyana continued to grow strongly. The segment’s OCTG businesses have also benefited from a strong performance in Canada, as the rig count has remained steady throughout the year. Within Advanced Manufacturing, the Electronics and Dearborn businesses have delivered good revenue and EBITDA growth in the year, with Dearborn’s financial performance improving strongly from Q2 2023 onwards. As noted above, during Q4 2023, the segment completed the sale of Hunting’s residual oil and gas production assets located in the US. This disposal further streamlines the Group’s activities. 

The Hunting Titan operating segment has reported stable results in the year, despite the declining US onshore rig count throughout the year. The segment has continued to commercialise its H-3 Perforating System™ and in the second half of 2023 launched the H-4 Self Oriented Perforating System™, which is seeing good customer acceptance.

The Subsea Technologies operating segment was formed on 1 January 2023 and, during the year, has benefited from the increased investment in international offshore drilling activity. The Stafford business unit has delivered a strong performance in the year, with revenue in October and November reaching record levels. The Spring business unit has continued to secure new orders for its titanium and steel stress joints, primarily in Guyana but also in the Black Sea. Enpro Subsea’s business unit has seen an increase in momentum since H1 2023 following receipt of a number of major orders in H2, which will drive performance through 2024.

The EMEA operating segment has reported an improvement in revenue in the year supported by the Tubacex contract and reduced its operating losses in the year, compared to the prior year.

The Asia Pacific operating segment reported a strong increase in revenue and EBITDA in the year driven by the CNOOC contract, followed by the Cairn Oil and Gas (Vedanta) contract, which was commenced in the year.

2024 Trading Expectations

Given the record sales order book noted above, the Board believes that 2024 will see further growth to EBITDA with the projected outcome in line with current market expectations of $125-$135m.

View Equity Development report: Hunting PLC, 10 January 2024

Reabold Resources

Reabold Resources plc, the oil & gas investing company with a diversified portfolio of exploration, appraisal and development projects, announces that, further to its announcement on 13 December 2023, all the proposed resolutions put to shareholders at the General Meeting by the Requisitioning Shareholders, including removing the entire Board of directors and replacing it with four new directors, were not passed.

Jeremy Edelman, Non-Executive Chairman of Reabold, said:
“Today’s requisitioned General Meeting result represents the resounding support for the existing Board of Directors by its shareholders. The results represent an even greater margin of votes against the Requisitioning Shareholders’ resolutions than was the case at the last requisitioned general meeting in November 2022. The Requisitioning Shareholders, who own approximately 7.91% of the Company’s currently issued share capital, received average support for the proposed resolutions from shareholders representing approximately a further 5.77% of the Company’s issued share capital. I would like to thank our shareholders for their support of the Board.

“This process has, once again, been a serious and costly distraction for Reabold, significantly delaying the management team’s ability to execute the Company’s strategy. The Board believes the Company is well positioned with its portfolio of strategic gas assets and strong cash position. The Company’s efforts can now be entirely directed towards unlocking this value for all shareholders.”

There is little to add to the comments above save to say that the fact that the support for Reabold was even stronger than the last time just over a year ago. It proves that all shareholders are entitled to make such moves but to come back again with a weaker hand has only proved costly in terms of time and money. There should now be plenty of water to flow under the bridge before anything like this happens again…

Time to get back to work everybody. 

KeyFacts Energy Industry Directory: Malcy's Blog