WTI (Aug) $82.85 +$2.09, Brent (Sep) $85.08 +$1.35, Diff -$2.23 -74c
USNG (Aug) $2.04 -15c, UKNG (Aug) 73.65p -2.7p, TTF (Aug) €31.895 -€0.8

Oil price

A decent bounce for crude oil after a good but mixed set of EIA inventory stats. Crude oil drew by 4.870m barrels but gasoline built by 3.328m and distillates built by 3.454m b’s showing the weakness that I have been talking about in the product market and low margins.

Inflation watchers are having a field day as rates are moving, albeit slowly downwards and with the services part of the equation not helping, rate falls are now looking like September-ish. Hence the fall in the greenback which added to the rise in crude oil yesterday.

Union Jack Oil

Union Jack has announced a positive drilling update in respect of the Andrews 2-17 well, located in Seminole County, Oklahoma, United States in which Union Jack holds a 45% working interest.

Further to the spud announcement of 10 July 2024, the Andrews 2-17 well was drilled to a Total Depth of 4,850 feet.

The main objective for this well, the Hunton Limestone, is confirmed to be present and was penetrated at approximately 4,180 feet (Measured Depth), showing elevated gas readings, good oil and gas shows, stain and fluorescence from top to bottom of the interval and is hydrocarbon bearing as interpreted from the wireline logs.

Completion and production testing of the Andrews 2-17 well is scheduled to commence within the next 14 days.

The Hunton Limestone is one of the main hydrocarbon reservoirs in Oklahoma and is unconformably overlain by the main oil-prone source rock, the prolific Woodford Shale.

Drilling and completion costs have already been paid for from the Company’s cash resources.

Further announcements will be made when more information becomes available.

David Bramhill, Executive Chairman of Union Jack, commented:
“As we learn more about the technical and production attributes of the Andrews 2-17 well over the coming weeks, I am certain that our United States drilling activities will be accelerated and another positive phase of growth will be added to the Company’s already successful ventures on both sides of the Atlantic.

“Work continues on the gas export pipeline at the site of the commercial Andrews 1-17 well (Union Jack 45%) and as previously reported we expect to update the market on progress on this well in early August 2024.”

Another positive drilling result from over the pond as the update from the Andrews 2-17 well at Seminole County Oklahoma where UJO has a 45% WI. The target was the Hunton limestone and it was found to be present and showed elevated gas readings, good oil & gas shows and is hydrocarbon bearing as interpreted from the wireline logs. 

Chairman David Bramhill says that as the company learn more he is ‘certain’ that US activity will be accelerated and can provide another positive phase of growth for the company and as they continue to work on the gas export pipeline at Andrews 1-17 so production and thus additional revenue can’t be far away.

The strategy of going to the US seems to me to be very smart indeed, it’s different yes but given how long you can wait for approvals for pretty much anything in the UK it must be something of a pleasure to have a well be profitable within months. Accordingly we should expect more from the US investments and shareholders should rejoice, that is good news albeit a shocking verdict on the UK industry regulators.

Pharos Energy

Pharos has issued the following Trading and Operations Update in advance of the Company’s Interim Results on 18 September 2024. The information contained herein is not audited and may be subject to further review and amendment.

Katherine Roe, Chief Executive Officer, commented:
“We are delighted to report a solid first half, both operationally and financially. Production remains within previously set guidance underpinning our strong net cash position and our commitment to sustainable shareholder returns through the Company’s dividend policy and share buyback programme.

“The positive macro environment in Egypt has seen a significant improvement in our receivables position with c. $19 million received to date, substantially reducing our receivables balance. Further discussions continue regarding outstanding payments. The recent ratification of five petroleum agreements for onshore and offshore acreage further demonstrates the new Government’s commitment to our sector.

“In parallel, we remain focused on near-term drilling and finalisation of the licence extensions for TGT and CNV in Vietnam to enable us to prioritise future investment to deliver additional volumes. We also continue to progress rig and farm-out discussions for Blocks 125 and 126, our significant exploration prospects.”   

With production in line with guidance, cash continues to build and is now ‘strong’, giving the company the ability to continue its commitment to shareholder returns via dividend or buybacks. The changes in senior management have now taken place with the excellent Katherine Roe now CEO but the rest of the international team remains in place with Mohamed Sayed promoted to Chief Operating Officer.

In Egypt, following news that we heard at the time of the last presentation, there has been a significant improvement in the receivables position with c.19m having been received ‘substantially reducing the receivables balance, with more discussions in the mix. As one of the historic concerns from some investors this should be another reason to have much more confidence in Pharos and its geographical exposure. 

In Vietnam, work continues to finalise the licence extensions for both TGT and CNV as well as the obvious requirements of blocks 125 and 126 where there are deemed to be ‘significant exploration prospects’ and to be frank, what the market has been talking about for some time. 

Pharos shares are up some 40% since March when the debt repayment was announced and Pharos are set very fair looking to the future in both its key geographies. I look forward to interviewing Katherine Roe but imagine that she might want a little more time to get accustomed to the new post before that happens! I remain very happy with Pharos which has good near term visibility and a great deal of appeal longer term excitement so it will remain a Bucket List stock sans doubt as they say.

Operational Highlights

• Group working interest 1H production was 5,851 boepd net. Group working interest 2024 production guidance of 5,200 – 6,500 boepd net remains unchanged:
• Vietnam 1H production 4,456 boepd. Vietnam 2024 production guidance 3,900 – 5,000 boepd net
• Egypt 1H production 1,395 bopd. Egypt 2024 production guidance 1,300 – 1,500 bopd net

Vietnam:

• TGT Revised Field Development Plan (RFDP) was approved by the Ministry of Industry and Trade (MOIT) on 9 January, enabling the two-well drilling programme to commence in 3Q
• CNV RFDP agreed by all Partners and awaiting formal approval
• Positive progress towards obtaining TGT and CNV licence extensions  
• Discussions continue with several interested parties in preparation for the drilling programme on Block 125

Egypt:

• Preparation underway to drill an exploration commitment well on El Fayum in 3Q
• Processing and interpretation of c.130km2 of 3D seismic data on NBS underway and expected to complete in 4Q
• Multi-well development drilling programme in the NBS SW field planned to commence during 2H
• Discussions on Egypt consolidation proposal held between Pharos, our partner IPR, and EGPC

Financial Highlights

• Group 1H revenue of $65m
• Cash balances at 30 June of c.$31m (31 Dec 2023: $32.6m)
• Debt as at 30 June of c.$13m (31 Dec 2023: $39.2m)
• Net cash position as at 30 June of c.$18m (31 Dec 2023: net debt $6.6m)
• Egypt receivable position at 30 June of $31.3m (31 Dec 2023: $37.4m), having received $14.8m in 1H 2024 with an additional $4m received from EGPC on 1 July
• Forecast cash capex for the Group for full year remains unchanged at $32m ($27m after Egyptian carry by IPR), with costs in Egypt mainly settled in EGP

Corporate Highlights

Recent changes to the Board and senior management:

• Appointment of Katherine Roe as the new Chief Executive Officer, effective 1 July 2024, and as member of the Board and the ESG Committee
• Appointment of Mohamed Sayed as the new Chief Operating Officer, effective 1 July 2024

Continuation of current phase of share buyback programme

• Approval by shareholders at the 2024 AGM of a final dividend in respect of the year ended 31 December 2023 of 0.77 pence per share, amounting to $4.1m and to be paid on 19 July 2024. Including the payment of the interim dividend of 0.33 pence per share on 24 January 2024, the full year 2023 dividend was 1.10 pence per share, amounting to $5.9m in total
• Appointment of Ernst & Young LLP to succeed Deloitte LLP as external auditor to the Company with effect from the financial year commencing 1 January 2024, following approval by shareholders at the 2024 AGM

 KeyFacts Energy Industry Directory: Malcy's Blog