WTI (Apr) 79.97 +$1.71, Brent (May) $83.55 +$1.64, Diff -$3.58 -7c
USNG (Apr) $1.84 -2c, UKNG (Apr) 63.9p, TTF (Apr) €24.95 -€0.37.

Oil price

Oil was firm last week, the big rise on Friday was due to confirmation that Opec secured agreement to continue with the 2.2m b/d of quota cuts and the Russian cut of 471/- b/d. 

Touchstone Exploration

Touchstone has provided updates on its bank debt and drilling operations. 

Bank Debt

Touchstone’s wholly owned Trinidadian subsidiary, Touchstone Exploration (Trinidad) Ltd., has entered into a binding term sheet with our existing Trinidad-based lender providing for an increase in borrowing capacity of $13 million (the “Amended Bank Loan”). The parties are currently documenting an amended and restated bank loan agreement and related security registrations, following which the additional credit capacity will become effective.

The principal changes included in the Amended Bank Loan are as follows:

• a new $10 million five-year non-revolving term loan facility, with no principal repayment in the first year and sixteen equal and consecutive quarterly payments thereafter; and
• an increase in our current revolving loan facility borrowing capacity from $7 million to $10 million, which will mature two years from the execution date and may be renewed at the option of the parties thereafter.

Following execution of the Amended Bank Loan, Touchstone’s facilities will consist of its unchanged existing seven-year term loan facility, the new five-year $10 million term loan facility, and the increased $10 million revolving loan facility.

The existing seven-year non-revolving term loan facility has a current principal balance of $21 million, with fourteen equal and consecutive quarterly principal payments of $1.5 million outstanding through to the June 15, 2027 maturity date. We have $7 million drawn on our revolving loan facility, resulting in an aggregate $28 million in bank debt principal currently outstanding.

We intend to use the additional Amended Bank Loan facility borrowing capacity to finance our 2024 capital program as presented in our December 19, 2023 news release entitled “Touchstone Announces 2024 Capital Budget, Preliminary 2024 Guidance and an Operational Update”.

Drilling Operations

Touchstone has commenced drilling the Cascadura-3 development well and the CO-374 development well. Cascadura-3 was spud on March 1, 2024 from our Cascadura C surface location on the Ortoire block in which we have an 80 percent working interest. The well is targeting gas-charged sands in the Herrera formation northeast of the recently drilled Cascadura-2 well and is expected to be drilled to an anticipated total depth of 7,000 feet using Star Valley Rig #205. CO-374 was spud on February 28, 2024 on our CO-1 block, in which we have a 100 percent working interest. The well is targeting crude oil-charged sands in the Cruse and Forest formations and is expected to be drilled to a total depth of 6,600 feet using PCSL Rig #8.

The Cascadura-2 well has been successfully cased after we encountered wellbore instability issues due to high gas pressures which resulted in the need to sidetrack a portion of the well. Operations are proceeding on the road and pipeline right-of-way which will tie-in the Cascadura development wells to our Cascadura natural gas facility. This project includes the preparation of the Cascadura B surface location, which has been approved for the drilling of up to four additional development wells.

This is another good announcement from TXP, the additional and Amended Bank loan facility has been put in place to finance the 2024 capital programme as they presented in the budget guidance offered last December. 

As regards the drilling programme much is on the go, the Cascadura-3 development well and the cO-374 well both having spudded are drilling ahead and are expected to execute the drill to fill strategy, Right now that means that Touchstone is fully funded and has all the infrastructure in place to progress on all fronts. 

Petro Matad

Petro Matad provided the following operational update on Friday

Key Company Updates

• The Company has had its application for land access for 2024 operations approved by the Matad District Committee. A land use agreement is now being prepared which, once signed, will allow 2024 operations to go ahead commencing with completion operations on the Heron 1 well.
• The Company continues to push the Government to complete the regulatory formalities to confirm Block XX as State Special Purpose Land and understands and shares the frustration felt by shareholders. The continued refusal of the Provincial Governor to sign off on a Tripartite Agreement which has already been approved by the Ministry of Mining and Heavy Industry (MMHI) and the Central Land Agency has been raised by the Company with all relevant agencies and also at the highest levels in the Mongolian Government.
• Petro Matad is pleased to be the chosen contractor for the two areas for which it submitted applications in the 2022/23 Exploration Tender Round. The award of new acreage is now expected to be made after the 2024 Mongolian Parliamentary elections in the middle of this year.

Operational Update

Block XX local level land use approval: In light of the ongoing delays in the completion of the process by which the Company’s Exploitation Area is being confirmed as State Special Purpose Land, the Company has engaged with the District authorities to secure local level approval of land usage. At a meeting of the Matad Citizens’ Representatives Committee at the end of February the Company’s application for land use in 2024 was approved. This approval covers all the areas in which the Company wishes to operate during the year. The approval means that the land use agreement can now be prepared and signed by the District authorities and by the Company and it will allow our planned operational activities to go ahead whilst the Special Purpose Certification process is completed. We are hopeful that the Provincial authorities, who are holding up the Special Purpose Certification of the Exploitation Area, will not disrupt in any way the District’s approval process, but we remain vigilant.

The Company is now stepping up the planning for operations to complete the Heron 1 well for production once the contractors re-mobilise after the winter hiatus and as soon as they can make available their crews and equipment. Discussions with PetroChina for transport, processing, storage, export and sale of the Company’s early production are also ongoing.

State Special Purpose Certification process status: A number of regulatory steps were required to be completed by the Government covering the granting and management of State Special Purpose Land. As reported previously, a key part of this is a Tripartite Agreement between the Central Land Agency, MMHI and the Governor of Dornod Province. The Governor is still withholding his signature, now on the basis of a partial overlap of the Block XX Exploitation Area with a provincial Protected Area as he claims it breaches the principle of no overlaps in areas for specific land use.

The Block XX PSC was signed in 2006 and the provincial Protected Area was not declared by the province until 2014, so it is the province that is in beach of the no overlap principle. Furthermore, the Land Law allows the central Government to take such land for State Special Purpose use, so this overlap should not be an obstruction to the certification process. Heron 1 and the other locations that the Company wishes to work on in 2024 are not within the overlapped area.

The Company has raised this issue formally with government agencies and ministers including: the Mineral Resources and Petroleum Authority of Mongolia, MMHI, Ministry of Economic Development, Central Land Agency, Deputy Prime Minister, Prime Minister and the President.

The Government needs to complete this process and Petro Matad is pushing hard for this to be done.

New acreage: As previously reported, the Company was selected as the preferred contractor for the two blocks for which it submitted applications. Despite setting an aggressive timetable for completion of the negotiations and award of the Production Sharing Contracts, the government is now not expected to make the awards until after the 2024 parliamentary elections which take place in the middle of this year. This new timeframe is not critical as the Company intends to focus all of its operational activity on Block XX in 2024. 

Mike Buck, CEO of Petro Matad, said:
“We are very pleased that Matad Soum has approved our application for 2024 land access and we are following up as a matter of priority to finalise and sign the land use agreement. With that being said, we are extremely frustrated with the continued delay to the State Special Purpose Certification process and we continue to push to get this resolved.

The diligent efforts of our Government and Community Relations teams have facilitated this progress on land access and we are grateful to the Matad Citizens’ Representatives Committee for its favourable hearing of our application and for its approval.”

Further operational updates will be provided in due course.

This pantomime continues, land access for 2024 operations has been approved so that the Heron 1 well can be completed and commence production but regulatory formalities still appear to be stalled with regard to the protected area. 

And as for submitting applications in the 2022/23 Tender round they will be held after the 2024 elections…

Molecular Energies

Molecular has provided an update on Green House Capital Group PLC (Molecular 75% shareholder).

Key Points:

• Green House Capital Group, has received advance assurance from HM Revenue & Customs  for prospective investment under the Enterprise Investment Scheme 
• Further strategic progress set out in a new verified GHC Investor Presentation published on website of GHC at www.ghcplc.com 

GREEN HOUSE CAPITAL GROUP

EIS
GHC has been granted advance assurance for prospective EIS investment under the UK government initiative which encourages investment in qualifying early-stage companies by offering tax benefits to qualifying investors who subscribe for new shares in the GHC.

Subject to certain conditions being met by the company and the investor, the scheme enables a qualifying investor with a UK tax liability to claim income tax relief in the UK of up to 30% of their investment, subject to a maximum investment of £1 million per tax year. In addition, when investors sell EIS shares, any growth in value from an investment is potentially free from UK capital gains tax (to qualify for this relief, income tax relief must have already been claimed – and not withdrawn by HMRC. Investors also have to hold the shares for at least three years, and the company must remain EIS-qualifying for at least three years). Further details about EIS can be found here. Prospective EIS investors should seek their own tax and financial advice.

Based on the EIS advance assurance given by HMRC, the directors of GHC also believe that an investment in the company would constitute a ‘qualifying holding’ for a Venture Capital Trust.

This is a positive development for GHC and its future funding plans, whether through IPO or other new share issue as an independent company to enable the expansion and growth of the business.

STRATEGIC PROGRESS OF GHC

GHC is pleased to announce that material progress has been made in various businesses of that Group. A summary is set out below and more details are described in the Investor Presentation.

Hyso

• Internationally applicable biochar carbon removal projects with significant potential for carbon offsets and products for agriculture, cement, and asphalt industries. Targeted to commence production in H2 2024
• Feedstock and offtake agreements in place 

Dual Fuel

• Testing shows 31% diesel retardation (reduction of diesel displaced by hydrogen)
• Further shows 29% increase in fuel efficiency giving more energy produced per unit of fuel
• Company moving into mobile dual fuel and hydrogen mobile generators for off-grid contractors and plant hire businesses
• Offtake clients in place
• Business with international applicability anticipated to commence in latter part of 2024

Aton 6

• Advanced negotiations with significant clients for company services in a wide variety of sectors
• Business model of medium-to-long-term contracts with positive cash flow
• Benefits from inter-group and related party businesses

Peter Levine, Chair, commented:
“The MEN Board believes that significant value has already been generated throughout the Green House businesses. The grant of EIS advance assurance from HMRC is a important milestone that will assist in funding the growth and expansion Green House.

“We look forward to being able to report on further progress as soon as possible.”

It has been a busy week for MEN, a number of announcements all preceded by my interview with Chair, Peter Levine. At the risk of overkill the link to the interview is below which should add the necessary flesh on the bones of all the announcements.

Core Finance Chairman Interview: Peter Levine of Molecular Energies

KeyFacts Energy Industry Directory: Malcy's Blog