Oil price

The threat by Iran to retaliate against the Damascus attack, allegedly by Israel, has seen Sleepy Joe promise to support Israel ‘unconditionally’ as the ‘Great Satan’ wakes up.

The CPI figures were worse than expected and left the market in little doubt that Fed rates cuts would be fewer and later in the year, if at all, and that inflation has yet to be defeated. Sometimes you have to decide whether you want rate cuts or economic growth and faced with that I guess the Fed say that they have to remain strict on inflation. 

PetroTal Corp

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

Q1 2024 Production

PetroTal achieved average production of 18,518 barrels of oil per day in Q1 2024, in line with guidance.  This represents an increase of approximately 23% and 54% from Q4 2023 and Q1 2023, respectively.  Production during the past 30 days has averaged approximately 20,500 bopd.   

Operations 

During Q1 2024, following favorable river levels, the Company delivered its planned sales through the Brazil and Iquitos routes.  PetroTal’s recently drilled 17H well commenced production on March 1, 2024, and has produced at a rate of approximately 4,000 bopd during its first 30 days online.  Since the electro submersible pump was activated two weeks ago, the well has delivered a rate of approximately 4,500 bopd, in line with the Company’s expectations.

Currently, PetroTal is continuing with its 2024 development program, and is drilling well 18H, which is expected to commence production in May 2024.  

Erosion Control Update

The Company is progressing its preventive erosion control program aimed at protecting the Bretana oilfield and nearby community.  PetroTal expects to commence project construction in mid to late Q3 2024; while permitting is ongoing, detailed engineering is being finalized, and long lead items are being procured.

Cash and Liquidity Update

PetroTal exited Q1 2024 in a strong position with approximately $63 million of unrestricted cash and $22 million of restricted cash for a total of $85 million at March 31, 2024.  Restricted cash includes amounts reserved for the social trust funds to be deposited at a later date.  Cash liquidity decreased from year end 2023 levels as a result of increased capital expenditures from drilling program commencement in Q1 2024, March 15, 2024 dividend distribution and revenue payments received in early April.  During Q1 2024, the Company purchased 4.7 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 March 15, 2024, related to Q4 2023 operations.  At the end of Q1 2024, accounts receivable and accounts payable of approximately $111.7 million and $73.6 million (due within 50 days) respectively, were outstanding.

Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:
“The Company achieved its strongest annual start to a year in PetroTal’s history generating quarterly average production of over 18,500 bopd.  Q1 2024 liquidity was as expected with the Company receiving an average oil price above its 2024 guidance of $77/bbl Brent, bolstering Q1 2024 financial and operational metrics. 

The two recently completed horizontal wells bring our well count to 18 oil producers, setting the stage for record first half and annual production.  This will allow us to continue returning capital to our shareholders while growing the Company.”

With continued delivery of its production targets, along with the 17H now in production PTAL is clearly doing very well indeed with Brent at $90 revenue and indeed cash flow is very strong indeed. The 18H well has spudded and is expected to add to highly profitable production from next month. 

In addition the company is ‘progressing’ the erosion control programme which is expected to get underway in the next quarter. These, along with continued work into finding alternative export routes should maximise production and hence revenues. 

The PetroTal share price should be performing a great deal better than it is given the superb operational performance and the amount of total return to shareholders via dividend and buy-back programmes which must give the company a total yield of at least 17%. My TP of 150p per share stands. 

The Company is progressing its preventive erosion control program aimed at protecting the Bretana oilfield and nearby community.  PetroTal expects to commence project construction in mid to late Q3 2024; while permitting is ongoing, detailed engineering is being finalized, and long lead items are being procured.

Jadestone Energy

Jadestone has disclosed that, further to the announcement of 13 February 2024, it has been advised by Woodside Energy Group Ltd. that Woodside is cancelling the sale of its participating interests in the Macedon and Greater Pyrenees Projects offshore Western Australia.

As a result, trading in the Company’s ordinary shares is expected to be restored to trading with effect from 10:30 a.m. today.

As previously announced, the Company will publish its full-year 2023 results on Monday 29 April 2024, prior to which the Company expects to announce the outcome of the March 2024 reserves-based loan redetermination.

Interesting stuff this, the shares have returned to the market at 27.64p after suspension and although it may settle down, it looks like investors prefer the company without the potential financial burden of the Woodside assets given the question about how that acquisition may have been funded. 

Personally I am all in favour, and fully back the excellent management in its M&A strategy but understand why shareholders might wish to do approach this in smaller bites. It’s worth taking another look at my recent interview with Paul Blakeley who updates on strategy and operational success. 

Core Finance CEO Interview: Paul Blakeley of Jadestone Energy

Longboat Energy

Longboat has announced its results for the 12 months ended 31 December 2023.

Corporate Activity

Transformational transaction in Norway to form joint venture with JAPEX (July 2023):

• Japan Petroleum Exploration Co., Ltd (JAPEX) acquired a 49.9% interest in the Company’s Norwegian subsidiary to create a new joint venture company Longboat JAPEX Norge AS (“Longboat JAPEX”)
• JAPEX made a total equity investment of US$20 million in two tranches, US$16 million in 2023 and US$ 4million post the period end
• In addition, JAPEX has provided a five-year, US$100 million Acquisition Finance Facility to finance acquisitions and associated development costs
• Acquired SE Asian management team and assets (September 2023):
• Longboat acquired Topaz Number One Limited, increasing its working interest in the Production Sharing Contract over Block 2A offshore Sarawak, Malaysia to 52.5% and simplifying the process to farm-down the high impact exploration block ahead of a drilling commitment  
• Topaz team of James Menzies and Pierre Eliet joined the Company bringing extensive expertise and an established network in SE Asia

Operations Summary (including post-period events)

First production acquisition of the Statfjord satellites, by Longboat JAPEX, was completed (in January 2024):

• Demonstrates the ability of the Longboat JAPEX joint venture to access and transact opportunities
• By end-March 2024, initial production of c. 300 boepd net to Longboat JAPEX had doubled to c. 600, following the completion of drilling and gas-lift installation on three of the five new Statfjord Øst wells brought on stream since the acquisition
• The remaining two  new wells require some minor work which is expected to be completed in the coming months
• While the Statfjord satellites infill drilling project was successfully executed technically, there have been delays, in both the development programme and production ramp up, and cost overruns which together have had a significant negative impact on the joint venture’s projected working capital.  After the period end, Longboat JAPEX drew down US$17 million on the Acquisition Finance Facility to fund the Statfjord satellites acquisition and provide additional working capital
• Exploration well drilled in Norway on the Velocette prospect (Longboat JAPEX 20%) discovered subcommercial quantities of gas.

Kveikje Area:

• In a prolific area North West of the Troll field, Longboat JAPEX has established a portfolio of assets including the Kveikje discovery and the Kjøttkake/Lotus licence(awarded in January 2023)
• Kveikje, contains 3.5-6 million boe (2C-3C) net to Longboat JAPEX, the operator Equinor is maturing plans for a multi-field cluster development
• Kjøttkake/Lotus has gross mean prospective resources of 27 mmboe with an upside of 44 mmboe and a chance of success is 56% (Company APA application) The well will be drilled using the semi-submersible Deepsea Yantai and is expected to spud in Q3 2024
• In December, Longboat JAPEX announced a 2:1 farm down for a full carry on the dry hole costs of Kjøttkake/Lotus, reducing its interest in the well to 15%, which completed in 2024

The Company entered Malaysia in the Malaysian Bid Round 2022 by winning operatorship of a Production Sharing Agreement for Block 2A (Longboat 36.75% (subsequently increased to 52.5% following Topaz acquisition)):

• Exploration block offshore Sarawak in deep water covering an area of more than 12,000 km2 with material exploration opportunities
• Low initial cost obligation and with up to three years until a drill decision

Financial Summary

• Cash balance of £3.7 million as at 31 December 2023 (31 December 2022: £12.1 million) with no consolidated exploration finance facility (EFF) borrowings due to the balances of Longboat JAPEX no longer forming part of the consolidated balance sheet
• The continuing operations loss after taxation for the period, excluding other comprehensive income, was £9.3 million (2022: £2.6 million), with a profit on discontinued operations being £5.1 million (2022: loss of 12.9 million) resulting in a loss for the period of £4.2 million

Cost cutting

In light of and pending the successful execution of the Company’s twin jurisdiction M&A and operational strategy, there is limited ability to make a material reduction in general and administrative expenditure in the immediate future. However, the Company is mindful of the need to reduce costs to the extent possible, and  the Company is reviewing where savings can be made

Board Rotation

Brent Cheshire and Jorunn Saetre have confirmed their intention to stand down from the board as Non-Executive Directors and will not put themselves forward for re-election at the forthcoming Annual General Meeting. Brent and Jorunn have been with the Company since its inception and have provided strong guidance and challenge at all times and will be very much missed. We thank them for all of their hard work over the period. The Company has no immediate plans to replace the Non-Executive Directors that are standing down.

Outlook

• The Company’s strategy remains unchanged, to build Longboat into a full-cycle E&P company with Norway remaining the core area, with a focus on SE Asia
• The Company is actively pursuing opportunities in Norway to deliver material production volumes, primarily on a bilateral basis but is also actively participating in sales proceeses. Longboat will make use of the Acquisition Financing Facility provided by JAPEX which puts Longboat JAPEX in a much stronger position in these processes
• The Lotus exploration well, where Longboat has a 15% retained and fully carried interest, is expected to spud in Q3. The well will be targeting analogous injectite sands to the sand encountered in Kveikje.   

Helge Hammer, Chief Executive Officer of Longboat Energy, commented:
“In 2023, Longboat made a transformational transaction with JAPEX to create a new joint venture in Norway. The JV is now in prime position to pursue opportunities and deliver on our plans to grow production and reserves in high quality assets in Norway.

Longboat also made further inroads into the Southeast Asian region, increasing our working interest in Block2A in Malaysia, and welcoming James Menzies and Pierre Eliet to the team – both of whom have extensive experience and established networks in the region.

Our strategy remains unchanged and in 2024, we seek to build cashflow generating E&P portfolios in both Norway and Southeast Asia with the full confidence that we will deliver considerable growth and create substantial shareholder value.”

Nothing new here in these historic numbers nor in Helge’s words, I remain a big fan of the company and in particular the appointment of James Menzies to deliver success in South East Asia.

KeyFacts Energy Industry Directory: Malcy's Blog