WTI (June) $83.36 +$1.46, Brent (June) $88.42 +$1.42, Diff -$5.06 -4c
USNG (May) $1.81 +2c, UKNG (May) 72.49p -0.27p, TTF (May) €29.22 -€0.1

Oil price

In the quiet market that exists at the moment oil rose sharply yesterday but today is a little weaker, despite promising API stats.

PetroTal

PetroTal has announced leadership team updates.

Chief Financial Officer Appointment

Effective April 24, 2024, Mr. Camilo McAllister joins PetroTal as Executive Vice President and Chief Financial Officer. Camilo McAllister brings over 25 years of experience in the international energy sector to his role as a strategic executive of the Company. His leadership has spanned roles across North America, Latin America, and the UK, across various companies, including BP, Ecopetrol S.A., Frontera Energy, and Constellation. He most recently served as Group Chief Financial Officer at Constellation, a privately owned offshore and onshore oil and gas drilling company. He holds an MBA from The Fuqua School of Business at Duke University.

Mr. McAllister has a strong track record across finance, strategy, and operations. He has developed collaborative, high-performing teams and has shown a commitment to the highest standards of governance and compliance for stakeholders. Mr. McAllister’s ability to forge strategic relationships has secured critical funding and collaboration across diverse business cultures.

Mr. McAllister will be based in Houston and will also spend time in Lima, in line with our policy of ensuring senior management work closely with our operational and finance teams in-country.

Concurrent with the appointment, Mr. Douglas Urch is retiring as PetroTal’s Executive Vice President and Chief Financial Officer, positions he held since November 2019.  Mr. Urch will continue to work with the Company to ensure a smooth transition period. As one of the original investors in PetroTal, Mr. Urch initially served on the Board from 2017 until 2019 and then as Chief Financial Officer. Having over 35 years of experience leading the financial, compliance and regulatory aspects for a variety of international energy companies, Mr. Urch has been instrumental in the growth and success of PetroTal.

Vice President, Business Development Appointment

Effective April 1, 2024, Mr. Emilio T. Acin Daneri joined PetroTal as Vice President, Business Development.  Emilio Acin Daneri brings over 30 years of experience in several global oil companies, working in a variety of business development, commercial and financial executive roles. He has been instrumental in multiple merger, acquisition and divestiture transactions, primarily in Latin America.

Prior to PetroTal, Mr. Acin Daneri served as a Senior Commercial Advisor at CNOOC International, having key roles in developing transactions and alliances across Latin America.  Prior to CNOOC, Mr. Acin Daneri was a Director at Repsol where he held several positions of increasing responsibility, including Director of Business Development for Europe, Asia and Africa and later Latin America, and Deputy CFO for the JV with Sinopec in Brazil.  Prior to Repsol, he held commercial and finance positions at Madagascar Oil, Pioneer Natural Resources, El Paso Corporation and Santa Fe Energy Resources.

Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:
“On behalf of the management team and board, we want to extend a warm welcome to Messrs. McAllister and Acin Daneri.  Both have very impressive backgrounds and complement our existing leadership team extremely well, along with enhancing our corporate growth strategy.

I would like to thank Mr. Urch for his outstanding leadership and dedication to PetroTal over the past seven years and extend our best wishes in his retirement and other endeavors.”

Nothing significant to add here, a change in CFO is not sinister and the adding of the Business Development role is to be expected at such a time for PetroTal.

Serica Energy

Serica has announced its audited financial results for the year ended 31 December 2023. The results are included below and copies are available at www.serica-energy.com and www.sedar.com.

Commenting on the results, David Latin, Serica’s Chairman and incoming Interim CEO, stated: 
“I am very pleased that Serica has delivered a strong set of results for 2023 despite significantly lower sales prices compared to 2022 and a full year of the UK marginal tax rate being at 75%. Any ‘windfall’ due to high commodity prices has long gone and the high tax situation is ill-suited to a mature oil and gas basin such as the UK North Sea. Its continuation will not benefit people in the UK either financially or environmentally.      

The resilience of Serica’s financial position allows the Company to maintain the final dividend at 14p per share meaning an increase in the total dividend for 2023 to 23p per share compared to 22p per share in respect of 2022. Furthermore, the £15 million share buyback initiated today is a demonstration of the Board’s confidence in 2024 cash flows and the longer-term value of the Company’s assets.

By virtue of its financial strength and in-house skills, Serica is able to combine cash returns to shareholders with growth through investment in its assets and an ambitious, while disciplined, M&A effort. This situation is a testament to the achievements of everyone in Serica.

Finally, I would like to take this opportunity to reiterate the Board’s appreciation for Mitch Flegg’s very significant contribution to the Company over many years, most recently as CEO since 2018.”

Results from Serica are as expected and historic so little to add. The key thing is the change in management which always creates a short term higher beta depending on who the board decides to hire but I have to say that David Latin and team are excellent, fully backed by Mitch Flegg who I repeat it is going to be difficult to replace.

Mitch Flegg, Serica’s outgoing CEO, stated:
“The completion of the Tailwind acquisition in March 2023 represented a step change in the scale and diversity of Serica’s portfolio. The merits of seeking diversity and organic growth opportunities through the transaction have been borne out by the sharp decline in gas prices relative to oil prices during 2023 and Serica maintaining its track record of more than replacing production through reserves additions in both the Bruce and Triton production hubs. Moreover, there are further growth opportunities within the Company’s existing producing fields and other assets in Serica’s portfolio, such as the potential Buchan Horst project.

My term as CEO ends with these results. More than the metrics of the last six years, it is the quality of the team we have built at Serica that gives me the most satisfaction and pride. Clearly, the BKR and Tailwind transactions represented the most significant organisational changes. Creating the culture and expertise of an organisation like Serica, however, is an everyday process that involves everyone in the Company. I am grateful to far too many people to mention here.

The result of the last several years is that Serica combines distinctive financial and operational strengths with a high-quality team, providing a platform for further returns to shareholders through investment and M&A.“

2023 Summary

·      Acquisition of Tailwind Energy Investment Ltd completed 23 March 2023.

·      Proforma production from the combined Serica and Tailwind portfolios averaged 40,121 boe per day during 2023 as a whole. Equity production for the year as reported (excluding Tailwind volumes between 1 January and 23 March 2023) averaged 35,167 boe per day (Serica net production in 2022: 26,200 boe per day).

·    Serica 2P reserves increased to 140.3 million boe at 31 December 2023 (31 December 2022: 76.9 million boe) with net upwards reserves revisions of 23.5 million boe and a proforma reserves replacement ratio of 179% for the combined Serica and Tailwind portfolio.

·    EBITDAX of £381.4 million (2022: £616.5 million) reflecting an average realised sales price after hedging of $63 per boe compared to $104 per boe in 2022.  

·      Final 2023 dividend of 14p per share recommended (2022: 14p per share), bringing 2023 full year total to 23p per share compared to 22p per share for 2022, an increase of 4.5%. 

Financial

·      Average 2023 realised sales price, after hedging, of approximately US$63 per boe (2022: US$104 per boe) comprising average realised prices for gas of 93 pence per therm, oil of US$71 per barrel and NGLs of £363 per tonne.

·      Revenue of £632.6 million (2022: £812.4 million), largely reflecting lower natural gas prices partially offset by nine months of production contribution from the Tailwind assets.

·      EBITDAX of £381.4 million (2022: £616.5 million) reflecting the lower commodity prices whilst operating costs increased largely in line with higher production, albeit with some inflationary impact.

·      Profit before tax of £305.6 million (2022: £488.2 million).

·      Profit after tax of £103.0 million (2022: £177.8 million) reflecting current tax charges of £183.3 million (2022: £277.7 million) deriving an effective tax rate of 48% (2022: 45%), notwithstanding an increase in the marginal overall rate of tax on UK oil and gas production to 75% during 2023 and with the benefit for only nine rather than twelve months of Tailwind’s brought forward tax losses.

·      Cash flow from operations, after deduction of 2023 current tax, of £195 million[1] (2022: £427 million). Serica considers this measure to be representative of the cash generation of the business prior to discretionary decisions regarding capital allocation.

·      Capital expenditure (including exploration and abandonment) of £79.2 million largely comprising Bruce well work and long lead items for the Triton area drilling campaign commencing in 2024 (2022: £98.3 million).

·      Cash dividends paid of £88.8 million (2022: £46.3 million) for 2022 Final and 2023 Interim dividends.

·      Gross cash and cash equivalents, including £28 million of cash security temporarily lodged with a third party in respect of decommissioning obligations, of £291.0 million at 31 December 2023 (2022: £432.5 million) after capital expenditure (£79.2 million), dividends (£88.8 million) and tax paid (£279.5 million).

·      Amount drawn at 31 December 2023 under the RBL facility assumed with the Tailwind acquisition of US$271.2 million (£213.0 million).

·      Net cash of £78.0 million (2022: £432.5 million).

·      Executed a refinancing into new six-year US$525 Reserve Base Lending (“RBL”) facility with a syndicate of international banks (facility completed and borrowings assumed with the Tailwind acquisition were repaid in January 2024).

Operational

·      Updated independent audit of field reserves reported Serica’s share of estimated remaining 2P reserves as 140.3 million boe at 31 December 2023 increased from 76.9 million boe at 31 December 2022. Movements in the year include:

o  Acquisitions of 52.2 million boe relating to the completion of the acquisition of Tailwind Energy Investments Ltd on 23 March 2023.

o  Net upward revisions of 23.5 million boe reflecting better than expected production performance in the Rhum and Gannet E fields, the movement of Belinda from contingent resources to 2P reserves and the maturing of projects to enhance production from the Bruce and Rhum fields.

·      A series of surveillance and interventions carried out on several Bruce wells by means of platform based and Light Well Intervention Vessel (“LWIV”) activities. These interventions delivered incremental near-term production and identified additional intervention opportunities for future well campaigns.

·      The GE-04 well on the Gannet E field came onstream in February 2023 and achieved initial rates higher than pre-drill estimates. This contributed to the Triton hub reaching gross production levels in excess of 30,000 boe per day for the first time in ten years.

·      A ‘walk to work’ campaign was conducted on the Triton FPSO, continuing the maintenance and upgrades that have been pivotal in improving the performance of the facilities and hydrocarbon throughput. A key item of work currently is the replacement of the Triton control system, which is planned to be completed during a further ‘walk to work’ campaign planned in 2024. 

·      Work was carried out to remove power supply vulnerabilities to the Rhum field including the installation of a new power umbilical on one of the three Rhum production wells.

·      Planned shutdowns in 2023 of both the Bruce and Triton hubs to carry out essential maintenance and life extension work were extended unexpectedly. On Bruce, it was decided to make permanent rather than temporary repairs to issues identified on the flare tower during an inspection, which, in combination with bad weather, caused an approximate one-month overrun. The Triton shutdown was extended due to a combination of equipment and control system issues, which are now resolved.

·      Serica elected to relinquish the P.2501 North Eigg licence following the evaluation of the results of the exploration well on the prospect in 2022. The relinquishment will be completed during 2024.

ESG

·      Achieved lowest Scope 1 Carbon Intensity (16.36kg CO2/boe) since taking operatorship of Bruce.

·      Received Supply Chain Principles Gold Award for companies demonstrating outstanding commitment to business relationships.

·      33% reduction in methane emissions compared to 2022. 

·      Awarded Gold Standard Pathway for methane reduction and monitoring plans from the Oil and Gas Methane Partnership (OGMP) 2.0.

Outlook

·      The Triton area drilling campaign started earlier this month with the first well in the programme being the B1z sidetrack on the Bittern field. The programme using the COSLInnovator rig now comprises five wells with the addition of the 100% owned Belinda development well. Serica has taken a final investment decision on Belinda and is waiting for NSTA approval of the field development plan.

·      An extensive programme of well interventions is being carried out on the Bruce and Keith fields during 2024. It is hoped to bring the Keith field back into regular production during this year. 

·      Capital expenditure in 2024 (cash spent) is estimated at around £170 million, based on sanctioned projects previously disclosed, plus up to £25 million on the newly sanctioned Belinda development.

·      The production guidance range for 2024 is updated to 41,000 – 46,000 boe/d. The narrowing of the range from 41,000 – 48,000 boe/d factors in the unplanned shut-in of Erskine (production recently restarted and expected to ramp up), production to date in 2024 from the rest of the portfolio and the later than expected start of the Triton area drilling programme. Notwithstanding the shut-in of Erskine, production in 2024 year-to-date[2] has averaged about 45,400 boe per day. Production in the second half of 2024 will be impacted by the planned 40-day shutdown of the Triton area for maintenance work.

·      Targeting operating costs at around US$20 per boe produced during 2024 despite significant inflationary pressures.

·      Production for 2025 is anticipated to be in the same range (41,000 – 46,000 boe/d) as 2024 reflecting the updated view coming out of 2024 and slippage in some of the planned work in the Bruce and Triton hubs. 

·      New commodity price hedges being added to supplement the existing fixed price hedges coming to an end during 1H 2024. Initially, these are weighted towards oil in view of current market levels, run through to Q1 2026 and are mainly ‘collars’ affording downside protection while retaining upside exposure. Currently[3], hedges are approaching a quarter of Serica’s projected production volumes (c.10 kboe/d for 2024, tapering to around 6 kboe/d by Q1 2026).

·      A draft FDP has been submitted for the Buchan Horst field. As with all major capital projects, a final investment decision, which is not expected before the latter part of 2024, depends in part on the impact on project economics of expectations for the future tax regime which will apply through the life of the project.

·      Subject to shareholder approval at the AGM, a final 2023 dividend of 14p per share will be payable on 24 July 2024 to shareholders registered on 28 June 2024 with an ex-dividend date of 27 June 2024.

·      Additionally, a £15 million share buyback is being initiated today under the authority granted at the AGM in 2023. This reflects the confidence of the Board in the Company’s current financial position, the cash generating capacity of the portfolio during 2024 and the long-term value of the assets. Serica will look to provide further detail on its future policy of cash returns to shareholders in due course. This policy will be framed by reference to Serica’s post-tax operating cash flow, its organic and inorganic investment opportunities, and the maintenance of a prudent balance sheet.

·      After six years on the Serica Board, Malcolm Webb has informed the Board of his wish not to stand for re-election at the forthcoming AGM. As chair of the Nominations Committee, Malcolm will continue to lead the CEO recruitment process. It is anticipated that an announcement on the conclusion of this process will be made by the time of the AGM in June. The Board is very grateful for Malcolm’s considerable contribution to the transformation of the Company over the last several years. 

Sound Energy

Sound has announced its audited final results for the year ended 31 December 2023.

Highlights

Substantial 2023 Project execution undertaken - positioned for significant operational and financial progress through development of pivotal Moroccan Tendrara Production Concession, with rig activities from June 2024 and plant commissioning planned by year end

Phase 1 Micro LNG (''mLNG'') project (''Phase 1''):

• Completed mLNG tank foundations and manufacturing of the main components of the outer and inner LNG storage tank in 2023
• Advanced construction of the access road, which is scheduled for completion summer 2024
• Design, planning and procurement of equipment for workover of wells TE-6 and TE-7. Initial well works setting packers in each well successfully completed in Q4 2023 with rig activities scheduled for June 2024
• Processed gas expected at plant by end 2024 with LNG sales thereafter

Phase 2 Gas (pipeline) development (''Phase 2'') - financing to be concluded in 2024

• Receipt of binding conditioned term sheet in June 2023, for project financing from exclusive lead arranger, Attijariwafa Bank, Morocco's largest bank

Corporate - strengthening of financial position

• In June 2023 the Company entered into a non-binding term sheet with Calvalley Petroleum (Cyprus) Limited for a partial divestment of a net 40% working interest in the Tendrara Production Concession and the Grand Tendrara exploration permit
• In May 2023 the Company entered into a full and final settlement of its tax disputes with the Moroccan tax authorities and received court papers in June 2023 confirming the withdrawal of the cases between the Company and Moroccan tax authority
• In June 2023 the Company made a drawdown of £2.5 million of up to £4.0 million senior unsecured convertible bond instrument.
• In December 2023, restructured the Eurobond such that it will now not be fully redeemed until December 2027 rather than partially from December 2023
• Phase 2 financing planned to be concluded in 2024 through Project debt and conclusion of partial asset divestment

Graham Lyon, Executive Chairman said:
''Whilst substantial progress had been made in advancing mLNG and the financial foundations for Phase 2, execution and closing of documentation experienced delays. However, timely conclusion of the proposed partnering arrangement and bank debt financing in 2024 will facilitate progress on the pipeline development at Tendrara, as well as funding for further exploration on Grand Tendrara.

The micro-LNG development at Tendrara construction has suffered from supplier delays and is now expected to be ready to receive gas into the plant by the end of 2024 with LNG sales thereafter. The Company continues to uphold strong ESG values and deliver our work in a manner commensurate with our principles. We are pleased to have settled our outstanding tax matters such that we can optimise our resources on field development. We have enjoyed a supportive working relationship with ONHYM, the Ministry and our various contractors in Morocco, and, most importantly, we continue to benefit from the hard work and dedication of our own staff. We will continue to work diligently to deliver value and progress for all our stakeholders during 2024 and beyond, as we focus on delivering material developments in transition energy.''

SDX Energy

Further to the Company’s announcement on 19 April 2024, SDX confirms that it has received the first instalment of the West Gharib sales proceeds amounting to US$3.5 million and repaid in full the outstanding secured EBRD reserves-based lending facility amounting to US$2.7 million, resulting in the Company having more flexibility to deliver shareholder value by progressing the disposal of South Disouq, growing our Moroccan assets and executing on the energy transition strategy.

Convertible Loan Agreement

As announced on 27 July 2023, the Company entered into a syndicated unsecured convertible loan agreement (the “Original Agreement”) with Aleph Finance Ltd for up to $3.25 million (the “Convertible Loan”. Pursuant to the Original Agreement, the Company drew $2.50 million and the period to draw the remainder of the commitment amount expired.

The Company has now agreed an amendment to the Original Agreement to extend the drawdown period. The remaining commitment amount of $750,000 will be drawn by the Company and used to pay service providers in relation to ongoing Moroccan drilling activities and general corporate purposes.

All other terms of the Original Agreement are unchanged. The syndicated Convertible Loan is unsecured, convertible at any time at the option of the individual lenders and repayable 364 days after the initial drawdown of the Convertible Loan is made. The conversion price is approximately 4.5 pence per Ordinary Share (or, if lower, the lowest issue price for any Ordinary Shares issued during the life of the Convertible Loan). If conversion occurs within ten business days of maturity, the conversion price is approximately 6.6 pence per Ordinary Share.

This doesn’t exactly lead to where SDX is headed right now, much more information required with regard to the future I think….

Star Energy

Star announce full year results for the year ended 31 December 2023

Commenting today, Chris Hopkinson, Chief Executive Officer, said:
“We delivered strong production in 2023, capitalising on the improvement drive we started at the end of 2022.

We were delighted, earlier this month, to secure a new €25 million secured financing facility.  Our ability to drawdown on this facility for our geothermal activities will allow the business to be better positioned for the longer term and should enable sustained growth. It will also give us greater flexibility to continue to optimise the value of our entire asset portfolio, investing in short cycle developments which will deliver additional production and cash flow in the current higher commodity price environment.”   

As I said recently, the company remains dependent on the oil portfolio and shareholders will now wait and see how the geothermal activities will reward them…

Financial Performance

* Adjusted EBITDA, Net Debt (borrowings less cash and cash equivalents excluding capitalised fees) and Underlying Operating Profit are used by the Group, alongside IFRS measures for both internal performance analysis and to help shareholders, lenders and other users of the Annual Report to better understand the Group’s performance in the period in comparison to previous periods and to industry peers

Corporate & Financial Highlights

·    Successfully secured bespoke €25 million transition financing facility provided by Kommunalkredit Austria AG

o  Retires BMO RBL and will support transition strategy into geothermal energy and enables continued investment in the oil and gas business by utilising existing cash flows

·    Significant growth of geothermal portfolio

o  Entry to new geography with Croatian acquisition and subsequent Sječe and Pčelić licence awards

o  Croatia provides a desirable combination of favourable geology for geothermal energy as well as a supportive government and regulatory environment

·    We anticipate cash capex of £5.5 million in 2024 which includes near-term incremental projects with short cycle returns, maintenance and optimisation of existing oil and gas sites as well as maturing our development projects portfolio; and expenditure on non-core asset rationalisation will facilitate the future sale of a land holding

Operational Highlights

·    Net production, beat guidance averaging 2,100 boepd in 2023 (2022: 1,898), with uptime across the portfolio remaining strong over the year

o  Continued to optimise oil production from our existing wells through selective investment in short cycle developments which deliver quick payback

·    We anticipate net production of c.2,000 boepd and operating costs of c.$41/boe (assuming an average exchange rate of £1:$1.26) in 2024

·    DeGolyer & MacNaughton updated CPR  values 2P NPV10 at $235 million (2022: $215 million) using an oil price assumption of c.$72/bbl for 5 years, then inflated at 2-3% p.a. from 2028 to 2050

·    Development projects progressed to “shovel ready” position:

o  Planning permission granted for Glentworth Phase 1 oil project, environmental permits are expected imminently

o  Corringham site preparation complete

o  Bletchingley gas-to-wire secured grid connection

·    NHS hospital trust geothermal projects in Manchester and Salisbury progressing through feasibility stage

·    Executed well test on Ernestinovo-3 well in Croatia, satisfying exploration licence obligations. Data analysis from the well, once completed, will allow a ranking exercise for all three licences and lead to the production of  a development plan for the most prospective opportunity

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