WTI (Sep) $77.16 -$1.12, Brent (Sep) $81.13 -$1.24, Diff -$3.97 -12c
USNG (Aug) $2.01 -4c, UKNG (Aug) 74.71p -0.04p, TTF (Sep)* €33.65 +€1.27
*Indicates August contract expiry

Oil price

Oil fell last week on poor Chinese data, this week there is plenty more, the FOMC on Wednesday, the Bank of England on Thursday and Non farm Payroll on Friday. Also results from BP, Shell, Chevron and Exxon.

Zephyr Energy

Malcy is joined by Colin Harrington, CEO of Zephyr Energy. It’s been a busy few weeks for the company – a year on from the first drilling of State 36-2R well at its Paradox Basin project in Utah, Colin is here to talk us through all the updates.

Watch the video

Eco (Atlantic) Oil & Gas

Eco has announced it has signed an Assignment and Share Cancellation Agreement with Azinam Limited, Eco’s wholly owned subsidiary, Africa Oil Corp. and Africa Oil SA Corp (“AOSAC”), pursuant to which Azinam has agreed to sell and assign a 1% Participating Interest in Block 3B/4B offshore the Republic of South Africa, including the associated Exploration Right and Joint Operating Agreement rights to AOSAC in exchange for the cancellation of all common shares in the Company and warrants over Common Shares held by Africa Oil.  No additional rights in the rest of Eco’s portfolio assets in Guyana, Namibia and South Africa are part of the Agreement. 

Africa Oil currently holds, in aggregate, 54,941,744 Common Shares and 4,864,865 Warrants (collectively, the “Eco Securities”), which, assuming conversion of the Warrants, would equal 16.16% on a diluted basis (c.15% non-diluted) of the total outstanding common shares of Eco worth approximately C$11m. 

Upon completion of the conditions precedent to the Exchange Transaction, including requisite regulatory approvals from the South African Government, TSX Venture Exchange (“TSXV”), applicable Canadian Securities Commissions, and the relevant approvals from the Block 3B/4B Joint Venture Partners, Azinam will assign the Assigned Interest to AOSAC and in return Africa Oil will transfer the Eco Securities for immediate cancellation (“Completion”). Upon Completion, Eco will hold a fully carried 5.25% interest in Block 3B/4B Offshore South Africa, reducing from the current 6.25%. As a result of the Exchange Transaction, Africa Oil will, following Completion, no longer be a shareholder in the Company and will no longer have the right to appoint a director to Eco’s Board of Directors.

As part of the transaction, Africa Oil has entered into a lock-up agreement, according to which it is restricted from trading, transferring, mortgaging or dealing in any of the Eco Securities until Completion.

The Assignment Agreement serves Eco’s shareholders as a value creation initiative through a significant 16.16% (on a diluted basis) reduction in the Company’s total common shares count.  The Company currently has 370,173,680 Common Shares issued and outstanding. Upon and subject to Completion, Eco’s issued and outstanding common share capital will, ceteris paribus, be reduced to 315,231,936 Common Shares. A further update will be provided on Completion to confirm the timing for the cancellation of the Eco Shares. 

Guyana and Namibia

In Guyana, an active farmout process continues for the offshore Orinduik Block. This process is now fully controlled by Eco as Operator, enabling us to present our own technical insights and drive the process forward. Eco was encouraged to note the recent news from neighbouring Stabroek block, where the Operator ExxonMobil is planning for a seventh development at Hammerhead.

In Namibia, a multi-block farmout process is underway for all or part of Eco’s four offshore Petroleum Exploration Licences (“PEL”): 97, 98, 99, and 100.  Eco holds Operatorship and an 85% Working Interest in each PEL representing a combined area of 28,593 km2 in the Walvis Basin.  In June 2024, Eco added ~1,383km 2D data licensed on PEL100 (Tamar block) to its database, which is being technically evaluated and interpreted by the team to define additional seismic acquisition areas within the Block, along with new leads and prospects.

Gil Holzman, Co-founder and Chief Executive Officer of Eco Atlantic, commented: 
“We are very pleased to announce this transaction with Africa Oil, which follows our proposal to cancel their entire share and warrant position in the company worth C$11M in exchange for a 1% Participating Interest in Block 3B/4B, offshore South Africa. This deal equates to a c.15% reduction in Eco’s overall share count, affording our shareholders a less dilutive exposure to our highly strategic exploration portfolio in Namibia, South Africa and Guyana.

“We thank Africa Oil for their support since 2017 as it enabled Eco to enter new and exciting hydrocarbon territories and conduct exploration campaigns. We look forward to continuing our working relationship as JV Partners on Block 3B/4B.   I’m grateful to my team for reaching this excellent deal, which substantially reduces our share count to the benefit of our investors, whilst retaining exposure to all of our existing assets.

“We continue our focus on conducting exploration campaigns in global hydrocarbon hotspots, such as the Orange basin in South Africa, the Walvis basin in Namibia, and in Guyana, the team is extremely busy working with new licensed data in Namibia, defining additional seismic acquisition areas and leads, and on active farmout processes in both Guyana and Namibia.  We look forward to providing further updates to our shareholders over the rest of 2024.”

Dr Roger Tucker, President and CEO of Africa Oil, commented:
“This is a mutually beneficial transaction for Africa Oil and Eco Atlantic that meets our respective strategic objectives. We thank Eco Atlantic’s management for their collaborative approach in working with us since 2017. We are pleased to continue working with them to close this transaction and to drill the first exploration well on Block 3B/4B, targeting substantial prospectivity in the Orange Basin, offshore South Africa.”

This looks like a really excellent deal to me as Africa Oil, who have been waiting for opportunities to tidy up its portfolio, have canceled their holding in Eco Atlantic (about 15% plus warrants) in exchange for a 1% interest in Block 3B/4B in South Africa. With this non-dilutive deal, the value in my book of the South Africa blocks way exceeds the value on the sell side as it were and management should be warmly congratulated, especially given their low market valuation.

Add to that the fact that Eco are fully carried for two wells on this, one of the hottest blocks in world oil and gas, and also have stage payments to receive on  the way you have a massive valuation on this block alone. Indeed I have some numbers that make the value there to be higher than the market cap on its own.

And of course in this RNS Eco have updated on progress in both Guyana and Namibia where they are hoping to farm-out both the Orinduik block and the blocks in Namibia which is also a very popular postcode at the moment. I think that Eco has the makings of a good old fashioned ten bagger, even then there is monumental upside and the shares should be tucked away under lock and key.

Jadestone Energy

Jadestone has provided a trading update for the half-year ended 30 June 2024. The financial information in this update has not been audited and may be subject to further review and change.

Key updates

• Akatara mechanical completion and gas-in achieved in June 2024. The export pipeline from the field has been successfully filled with on spec sales gas, with exports into the regional trunkline expected to commence imminently.
• Record H1 2024 Group production averaged 16,867 boe/d, higher than any prior six-month period and representing 37% growth on H1 2023.
• H1 2024 oil liftings more than doubled year-on-year, driving a 131% increase in proceeds from liftings to US$200.5 million. After reflecting hedging losses of US$15.4 million, revenues for H1 2024 totalled US$185.1 million.
• H1 2024 total production costs were flat compared to H1 2023, despite production increasing 37%, with increased CWLH opex as a result of the CWLH 2 acquisition offset by lower spend year-on-year at the non-producing SFA Cluster assets, Montara and Stag.
• Net debt of c.US$72.7 million and available liquidity of c.US$151.0 million at 30 June 2024 (net debt of US$3.6 million at 31 December 2023).
• Closed the CWLH 2 acquisition in February 2024, increasing the Company’s interest to 33.33% in an outperforming asset. The final CWLH 2 Abandonment Trust Fund payment has reduced from US$37 million to c.US$19 million, to be paid on or before 31 December 2024.
• Award of the SFA Cluster PSC offshore Peninsular Malaysia in July 2024, adding another potentially significant growth opportunity to the Company’s portfolio.

Guidance

l While Jadestone continues to see Group production for 2024 at c.20,000 boe/d, the annual production guidance range is adjusted to 18.5-21,000 boe/d, from 20-22,000 boe/d, reflecting year-to-date production after significant Q1 2024 weather impacts, and the revised timing of the start of Akatara commercial sales. The lower end of the range also incorporates a conservative assumption on Akatara production in the early stages of the processing facility’s operating life, and a range of potential downside scenarios across the portfolio.

l Operating expenditure guidance for 2024 is narrowed to US$240-280 million (excluding forecast royalties and carbon taxes of c.US$30.0 million), from US$240-290 million, reflecting year-to-date performance.

l Capital expenditure guidance is unchanged at US$80-110 million and other cash expenditure for the year is revised down from c.US$77 million to US$62 million, primarily reflecting the finalisation of the CWLH Abandonment Trust Fund payments referenced above.

Paul Blakeley, President and CEO commented:
“We are starting to see solid growth feeding into the business and anticipate that the significant increases in production and revenue, coupled with flat production costs, will result in improving financial performance for the first half of 2024. We also expect that the second half will be even stronger, with Akatara capex behind us and production from this new, low cost, onshore asset ramping up in the coming weeks. 

The start of commercial sales at Akatara, which is imminent, will be a major milestone for Jadestone, delivering a complex development on a fast-track schedule just over two years since the original investment decision was made, and will help to underpin our confidence in the significant increase in production we will see this year.

It is a year of major investment in the growth and the diversification of our production base, with not just the completion of the Akatara development project, but also the addition of a second tranche of the outperforming CWLH asset, including the payment of its future decommissioning cost. We will see significant benefits in 2025 and beyond from the cash flows that these activities will deliver, while the diversification of the business is further bolstered with the addition of the recently announced SFA Cluster PSC offshore Malaysia, adding to our pipeline of near-term growth opportunities at lower cost and higher returns.”

Jadestone are on the verge of getting back to a growth situation and it is a shame that this update has come before commercial production starts at Akatara and is still imminent. Add to that and the bad weather and Jadestone has had to downgrade guidance which is a real shame. 

There are lots of pluses that will produce the steps forward after this one backwards, costs are low and the balance sheet is strong. Management is amongst the best in the business with imaginative deals coming through regularly and in the CWLH deal the payments are down. Add to that the recent Malaysia deal which has serious long term upside and potentially another step forward and JSE just about gets the benefit of the doubt. 

Petrofac

Petrofac today announces that it has reached an alternative agreement with a key customer with respect to the performance guarantee requirements under that contract.

The agreement cures the default notice received from that customer, which required a performance guarantee to be posted by 16 June 2024, as outlined in the company’s 2023 accounts.

The Company continues to require performance guarantees for certain of its other recently awarded contracts. Further announcements will be made as appropriate.

Forbearance agreement with noteholders

The Group has extended its existing forbearance agreement in respect of the non-payment of the interest coupon on its senior secured notes from 25 July to 23 August 2024.

The forbearance agreement is entered into by an ad hoc group of noteholders representing approximately 47% of the outstanding senior secured notes and certain other acceding noteholders. It provides assurance that these noteholders will not take any action in respect of the non-payment of the coupon until at least 23 August 2024, providing additional time for the Group’s financial restructuring to be progressed.

Noted.

KeyFacts Energy Industry Directory: Malcy's Blog