WTI (Sep) $77.59 +63c, Brent (Sep) $81.71 +70c, Diff -$4.12 +7c
USNG (Aug) $2.12 -7c, UKNG (Aug) 75.4p +2.3p, TTF (Aug) €32.275 +€0.72

Oil prices

Yesterday was a bad day for markets and even Nasdaq fell sharply as all of the Magnificent 7 fell along with traditional stocks like Ford and indiscriminate across the board. And today we see advance US GDP numbers  which need to be OK and all sorts of emergency moves in China with rate cuts in the short/medium term confidence is at a low across the board.

Actually oil therefore outperformed, a very decent set of inventory stats helped with crude drawing by 3.741m b’s and gasoline by 5.572m was probably partly Beryl and partly the fall in refinery runs by 2.1% to 91.6%.

Trinity Exploration & Production

On 1 May 2024, the boards of directors of Trinity and Touchstone announced that they had reached agreement on the terms of a recommended all share acquisition of the entire issued and to be issued share capital of Trinity by Touchstone to be effected by means of a Court-sanctioned scheme of arrangement under Part 26 of the Companies Act 2006. Under the terms of the Acquisition, upon the Scheme becoming effective Trinity Shareholders will be entitled to receive 1.5 new Touchstone Shares for each Trinity Share held.

Trinity published a shareholder circular relating to the Scheme on 24 May 2024 (the “Scheme Document”). Capitalised terms used but not defined in this announcement have the meanings given to them in the Scheme Document, unless the context requires otherwise.

On 24 June 2024, Trinity announced that the requisite voting majorities to approve and give effect to the Scheme had been received at the Court Meeting and the General Meeting, each held that day.

On 28 June 2024, Trinity announced that all Regulatory and Antitrust Conditions, as set out in Part A of Part Three of the Scheme Document, had been satisfied.

The Acquisition remains subject, inter alia, to the Court’s sanction of the Scheme at the Court Hearing.

Possible offer by Lease Operators

The board of directors of Trinity  announces that on 17 July 2024 it received an unsolicited, conditional, non-binding, indicative proposal from Lease Operators, a company incorporated in Trinidad and Tobago, regarding a possible cash offer for the entire issued and to be issued share capital of Trinity at a price of 68.05 pence per Trinity Share (the “Lease Operators Proposal”).

The Board notes that should a firm intention to make an offer pursuant to Rule 2.7 of the Code (a “Rule 2.7 Announcement”) be announced on such terms, the Lease Operators Proposal would value the entire issued share capital of Trinity (excluding Trinity Shares held in Treasury) at approximately £26.5m and represent a premium of:

• 41.8 per cent. to the Closing Price of a Trinity Share of 48 pence on 24 July 2024 (being the date of this announcement);
• 89.0 per cent. to the unaffected price of a Trinity Share of 36 pence (being the Closing Price on 30 April 2024, the last Business Day prior to the announcement of the Acquisition);
• 71.0 per cent. to the volume-weighted average price of a Trinity Share of 39.8 pence for the 3-month period ending 30 April 2024 (being the last Business Day prior to the announcement of the Acquisition); and
• 39.6 per cent. to the implied value of a Trinity Share pursuant to the Acquisition based on the Closing Price of a Touchstone Share of 32.5 pence on 24 July 2024 (being date of this announcement).                                                                                   

The Lease Operators Proposal states that the making of a Rule 2.7 Announcement is conditional upon, amongst other things, the completion of satisfactory confirmatory due diligence on Trinity by Lease Operators and a unanimous recommendation from the Board (the “Pre-Conditions”). Lease Operators has informed the Board that the Pre-Condition relating to its recommendation is not waivable but the Pre-Condition relating to due diligence is waivable.

This announcement does not constitute a firm intention by Lease Operators to make an offer for Trinity. The Board emphasises that there can be no certainty that any firm offer for Trinity from Lease Operators will be forthcoming (even if the Pre-Conditions are satisfied or waived).

Rescheduled Court Hearing relating to the Scheme and consideration of the Lease Operators Proposal

In light of the indicative terms of the Lease Operators Proposal and recognising that the Court Hearing to sanction the Scheme is imminent and scheduled for 31 July 2024, the Board has decided to reschedule the Court Hearing to the next available date, being 23 August 2024 (the “Re-scheduled Court Hearing”), in order to provide additional time for the Lease Operators Proposal to be advanced and evaluated.

The Board highlights that Touchstone will have the ability to invoke Condition 2.3 (ii) of Part A of Part Three of the Scheme Document on the day prior to the Rescheduled Court Hearing if it so chooses.

Code Notices

Any offer for Trinity is governed by the Code. In accordance with Paragraph 4(c) of Appendix 7 of the Code, the Panel Executive will announce the deadline by which Lease Operators must clarify its intentions in relation to Trinity.

In accordance with Rule 2.5 of the Code and to the extent that Trinity declares, makes or pays any dividend or distribution or other payment or return of capital to Trinity Shareholders following the time of this announcement, Lease Operators reserves the right to make an equivalent reduction to the terms of the consideration payable under the Lease Operators Proposal. In such circumstances Trinity Shareholders would be entitled to receive and retain any such dividend and/or other distribution and/or return of capital or value to which they are entitled.

This announcement has been made with the consent of Lease Operators.

The Board will issue a further statement when appropriate. Trinity Shareholders are advised to take no action at this time.

This certainly came out of the blue to me, the existing bid on the table was deemed by me and most commentators I know to have been generous in the extreme and given the most recent results and updates Trinity is hardly knocking the lights out operationally. The rationale that it would help reduce costs and create a bigger company to go forward was the only, and sensible raison d’etre to me. 

To say that I was flabbergasted when I read the RNS last night was an understatement and if it was for the howls of laughter I thought it might not be serious. I look forward to hearing from other, more sensible, rational heads in the sector to come out with something. 

Afentra

Afentra advises that, further to the announcement on 10 July confirming the award by Presidential Decree of the onshore Angola license KON 19, the formal award of KON 19 was signed yesterday with the Agência Nacional de Petróleo, Gás e Biocombustíveis (ANPG).

Afentra has been assigned a 45% non-operated interest in KON 19 alongside two local Angolan companies ACREP and Enagol. The equity participation in the license is:

Block KON 19 Ownership Interests 

Contract discussions on Block KON 15 are ongoing and continue to make progress.

The onshore Kwanza basin, covering 25,000 Sqkm, is an under-exploited and overlooked proven hydrocarbon basin with numerous oil fields and discoveries dating back to 1955. Both KON15 and KON19 blocks are high-graded by Afentra as they have good signs of a working petroleum system. The blocks are adjacent to both legacy oil fields that are currently being appraised for potential re-development and existing infrastructure allowing rapid commercialisation.

Commenting on the update, CEO Paul McDade said:
“We are very pleased to have been formally awarded this new license, which further enhances our strategic position in Angola. The license expands Afentra’s footprint in this attractive market and further diversifies our portfolio with a low-cost onshore block with significant potential. We look forward to bringing our technical expertise in support of our local Angolan Operator as we collaborate to define the full potential of this license. We will update the market fully on our onshore strategy and work program upon completion of the onshore award process.”

This seems to be a no-brainer for Afentra and is a good add to the asset base that the company have accumulated offshore in recent years. Although it doesn’t have the size as the offshore basins as CEO Paul McDade says above there is a low-cost block with ‘significant potential’. 

I look forward to a company presentation on this as a number of companies have been tinkering onshore Angola and not all with significant obvious success. But where Afentra have landed appears to have very decent upside potential and they do have experience of their own as well as with in-country partners as well still being in discussions for other growth blocks.

Prospex Energy

Prospex announce that the Spanish regulatory authority has granted a ten-year extension, to July 2034, to the natural gas production concessions owned by Tarba Energía S.L. known as El Romeral 1, 2 & 3 from which Tarba generates electricity from its own natural gas production.

The Royal Decree was signed on 24 July 2024 allowing the Ministry for Ecological Transition and the Demographic Challenge (MITECO) to grant the extension of the natural gas exploitation concessions “El Romeral 1, 2 and 3” for ten years, the maximum allowable term, thus guaranteeing electricity supply to the grid until at least July 2034, when the concessions may be extended for a further ten-year period, reaching 2044.

Tarba’s electricity production plant in Carmona near Seville was declared a Public Utility by the Andalusian Regional Government at the beginning of 2023 and is the only facility in Spain that converts electricity from natural gas at the same location as the gas is extracted from the subsurface.

Applications to permit the five well drilling campaign on the concessions is already with MITECO for permitting approval.

The El Romeral power plant is operated by Tarba, which is based near Carmona east of Seville in the province of Andalucía, Spain.  The El Romeral asset is co-owned through Tarba by Prospex which has a 49.9% working interest and Warrego Energy Limited which has a 50.1% working interest.  Warrego Energy is now wholly owned by Hancock Energy (PB) Pty Ltd in Perth Western Australia.

Tarba is pioneering a new hybridisation model that combines natural gas and solar energy as sources for electricity generation in the ecological transition process by developing a project to produce 5MW electricity using photovoltaic solar energy (“Project Helios”).

In 2023, Tarba supplied enough energy to cover the electricity consumption of approximately 6,700 homes in the area, even when operating the facility at one third of its capacity.  With future wells to be drilled on the concessions, the plant is expected to reach its maximum nameplate production capacity to sell 8.1MW of power into the grid.  The combination of further natural gas extracted from the concessions and the new photovoltaic generation is expected to cover the energy supply of 20,100 homes.

Mark Routh, Prospex’s CEO, commented:
“The official extension of the El Romeral production concessions for the maximum allowable term of ten years, is a very welcome step by the Spanish regulatory authorities. It is also an important official acknowledgement by the Spanish state of the crucial role natural gas will continue to play in the nation’s energy security and the ecological transition process.

“It is important to highlight that the El Romeral power plant will reach full output capacity from production of just two of the proposed five wells.  Any extra gas from the remaining new wells or any future wells drilled on the concessions will facilitate expansion plans at the power plant as well as the ability to supply natural gas directly to the grid or to the local market in Andalucía.”

This extension is good news for Prospex albeit not particularly surprising, especially given that there is very decent upside in the prospect the possible expansion offers good upside.

With strong gas prices it is good to see some European Governments realising that growth of domestic production in low carbon, transitory gas is a wise decision not a head first dive into a pathetic zero-carbon race such as that of the UK which will inevitably lead to the UK buying filthy hydrocarbons from dictators and ne’er-do-wells all around the world. 

Petro Matad

Petro Matad has announced that completion operations on its Heron-1 oil discovery commenced on 22 July. 

The contractor, PetroChina’s well completion subsidiary DQE, has mobilised to site along with Petro Matad’s team and is preparing to re-enter the well. The work planned involves a reservoir stimulation operation to enhance near wellbore drainage and the installation of the downhole production equipment. These operations are expected to be completed by mid-August.

When the well completion operations are finished, the wellsite will be prepared for the installation of surface production equipment and this work is expected to start during August. Once the surface equipment has been connected to the Heron-1 well and commissioned, the well will be ready for production start-up.

Meetings are scheduled before the end of July with the industry regulator, the Mineral Resources and Petroleum Authority of Mongolia (MRPAM), and with PetroChina’s in-country management team to finalize details of the cooperation agreements required to allow Petro Matad to access PetroChina’s oil processing facilities, transport and oil sales infrastructure.

Further updates will be provided as the 2024 work programme progresses.

Good news from MATD after a long wait that operations at Heron-1 are back underway. By mid-August we will have more news and then hopefully a restart of production. It’s good to have Petro Matad back and hopefully for the long haul. 

Star Energy

Star has provided the following trading update for the six month period to 30 June 2024. The figures have not been audited and are subject to change:

Key highlights:

• Net production average boepd of 2,012 for six months to 30 June 2024; with production on track to achieve our full year forecast of c. 2,000 boepd
• Forensic audit of G&A is underway, with a target to achieve savings of c.£1.5 million per annum that will take effect from 2025
• Cash at 30 June 2024 of £4.2 million and net debt of £1.9 million
• Progress being made on analysis of the technical data from all three secured licences in Croatia to rank the optimal sequencing of their commercial development
• Approvals received for the acquisition of magnetotelluric data across the Sjece and Pcelic geothermal licence blocks in Croatia.  Data acquisition will commence imminently
• Seismic data acquisition and analysis for Salisbury hospital project to commence in Q3

Commenting, Ross Glover, Star Energy CEO said:
“My focus since becoming CEO has been twofold: to identify the best ways to optimise our oil and gas business in order to make it as capital efficient as possible; and, by delivering on this goal, generate cashflow that will enable us to build our geothermal business further, having refined and high-graded the opportunities it currently holds. There is much to be done to achieve these goals, but I am pleased to report that we are making progress.

Production remains robust as we focus on quick returning optimisation projects to yield incremental production and, in the longer term, reduce operational expenditure. The oil and gas business for now remains the driver of the Group cashflow and capitalising on near term production opportunities will be important for this.

We have committed to transitioning, over time, to a geothermal business, generating geothermal heat in the UK and power in Croatia. Cashflows from our oil and gas business to provide development funding are key to this transition, as are the skills of our workforce. We will, however, be rationing our capital allocation in this area until we have clarity on government support mechanisms in the UK and have force ranked our Croatian project opportunities.

The new UK Government have a clear mandate to build out clean energy and tackle climate change.  The King’s Speech set out the government’s commitment to a clean energy transition, which aligns with our energy transition strategy. We are heartened by the positive moves to drive forward renewable energy deployment through the establishment of GB Energy and streamlining planning processes. We look forward to continuing positive engagement with this Government as we continue to deliver indigenous oil and gas whilst developing low carbon, geothermal heat for a net zero future.

I look forward to updating the market further and in more detail at our interim results in September.”

I have met with Ross Glover the new CEO of Star and know that he has a huge job on his hands trying to get Star back to anywhere near where it was under the smart guidance of Steve Bowler. The tragic waste of time and money under the management that followed was a shame for a company and some of the executive decisions had to be seen to be believed. And you only have to go back over my blogs during the ‘tragic time’ from start to finish to see how obvious it was, the shares have fallen to a tenth of their value and now appear to be a might steep hill for Ross Glover to climb and bear in mind there isn’t any money to do it with. 

Normally one would look at the Non-Executive board after a massive problem like this has been exposed but two things are strikingly obvious, firstly, right now Star has what looks like a really good bunch of NED’s, I even worked with one of them! Perhaps more importantly I don’t think any of them were involved at the time of appointment, the board’s evolution has meant that right now they are very important as the new CEO will need all the help he can get. 

KeyFacts Energy Industry Directory: Malcy's Blog