WTI (Oct) $71.95 +$1.04, Brent (Nov) $74.88 +$1.23, Diff -$2.93 +19c
USNG (Oct) $2.35 +6c, UKNG (Oct) 82.62p -2.88p, TTF (Oct) €34.24 -€1.29

Oil price

Oil is off a touch today but will still register a decent rise on the week that included the machinations of the Fed, Pagers wars and activity on the Lebanese border, remind me, what happened to that imminent cease-fire from a couple of weeks ago?

Arrow Exploration

Yesterday I was delighted to interview Marshall Abbott, CEO of Arrow Exploration and a leading share in the Bucket List after a very strong drilling programme in the Llanos Basin in Colombia this spring and summer. 

The interview is below and is a must watch, in it Marshall details the three horizontal wells already reported and all of which has beaten pre-drill estimates and are all making substantial contributions to both production, revenues and the company’s cash position. 

With another well testing, results due next week, and two more to be drilled in the programme there is every chance that all forecasts will be beaten this summer and with the Baquiano prospect to be drilled after that optimism is unsurprisingly high. Should this prospect turn into another one with lateral potential the sky is the limit.

The company has built its cash position, now around $15m from the previously announced $12.3m and the short and long term production targets are looking safe enough. As the board is to discuss the 2025 drilling programme in November there is plenty to look at and in particular the Osso Pardo where recent corporate activity between Conoco and Canacol has left opportunities in the shallow formations and which Arrow must feel that they can get involved in. 

At 28.6p the shares are significantly undervalued, on fundamentals they are very strong as they build production, revenues and cash holdings but the board must be looking over its shoulder as they are a target, as Abbott often reminds me, me they would rather be the diner than the dinner…

My Target Price is 75p which I raised in June, it is in no way extravagant and I would have no compunction  in raising it again if this significant success with the drill bit continued. Accordingly Arrow remain remarkably cheap and with substantial upside.

Core Finance CEO Interview: Marshall Abbott of Arrow Exploration

Petro Matad

Petro Matad has provided the following operational update on the Heron-1 oil discovery well and anticipated oil production start-up.

• Petro Matad has proposed that Heron-1 will be put onstream through temporary facilities so that production is not further delayed by slow moving bureaucracy.
• Mineral Resources and Petroleum Authority of Mongolia (MRPAM) has formally agreed to this proposal, with production start-up on Heron-1 now anticipated during October.

Heron-1 well pad – surface facilities

As previously reported, the application for the construction permit to install the long-term production facilities at Heron-1, which could only be initiated after land access had been approved in late May, had reached the final stage and the permit is with the provincial Governor for the final signature required. The Governor is new in-post, having been formally appointed in early September, and has told the Company that he needs time to review the application. In light of this, and with no indication of how long this review will take, Petro Matad has proposed, and industry regulator MRPAM has formally agreed, that Heron-1 will be put onstream through temporary facilities so that production is not further delayed by slow moving bureaucracy. The temporary facilities will be positioned on the well site to allow construction of the long-term facilities to go ahead in parallel with production operations once the construction permit has been obtained. The Company has given notice to its chosen contractor to install the temporary facilities and the work is anticipated to be completed within two to three weeks.

Oil sales

Following the high level meeting held at the Block XIX facilities some 20km north of the Heron-1 well, agreement in principle has been reached between Petro Matad and the Block XIX operator for the collection, metering, processing, storage, export and sale of Block XX production. The details are now being incorporated into a cooperation agreement which will then be presented to MRPAM for its approval. The parties have committed to try to have the agreement in place in time for production start-up on Heron-1 which is now anticipated to be during October.

Mike Buck, CEO of Petro Matad, said:
“The further hold up of the construction permit at the final step of an unnecessarily complex process is unwelcome, but we are very pleased that we have the support of MRPAM to use temporary facilities to expedite production. We do not anticipate any significant facility cost increase as a result of this solution and we will closely manage the construction activities when they start, to allow construction and production operations to continue simultaneously.

The meeting in Block XIX was very productive and the operator’s willingness to cooperate with the Company is much appreciated. We look forward to completing the drafting of the cooperation agreement and to securing MRPAM’s approval within the next few weeks.

Meanwhile, Heron 2 drilling operations are proceeding smoothly. With Gobi Bear-1 soon to spud, these are busy and exciting times for the Petro Matad team.”

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

Quite when Mike Buck is going to be able to report some news without a caveat that it hasn’t been approved is hard to see, I have to give him full marks for continuing to deliver at least something in such desperate local conditions. The good news that the authorities are facilitating the temporary production is a big plus and I wish him well. The shares have understandably underperformed this year but actually it might have been worse and with a following wind things might be looking up. But don’t expect that wind to be very strong, around here things are very slow or stop.

Prospex Energy

Prospex Energy Plc, the AIM quoted investment company, is pleased to announce its unaudited Interim Results for the six months ended 30 June 2024.

Corporate and Operational Overview:

• The Company’s investment portfolio projects continued to operate on a fully self-funded basis.
• No serious Health and Safety incidents or environmental issues across both its operations in Italy and Spain.
• Annulment of Italy’s Plan of Areas, which had previously limited the extent of hydrocarbon prospecting, exploration and production in Italy, signals a commitment to promote and enable more domestic gas production.
• Actively advancing the permitting of 5 new wells on the El Romeral concessions in order to bring the utilised electricity production capacity of the gas-to-power plant to 100% (currently at 33%).

Post period

• Acquisition of 7.2365% in the Viura gas field in northern Spain (“Viura”), its third onshore producing and revenue generating well.
• Successful fundraise of approximately £4.2m via the issue of 69,955,393 new shares at 6p each. The funds raised were used to acquire 7.5% of HEYCO Energy Iberia S.L. (“HEI”) which has majority ownership in the Viura gas field in northern Spain.
• Prospex is funding 15% of the cost of the development programme to earn 7.5% of HEI.  The Company will earn a 10% coupon on its capital investment and will be repaid its capital investment from 15% of the HEI production income (after OPEX and taxes), until payback at which point Prospex’s share of net income reverts to 7.5%.
• Ten-year extension of the natural gas exploitation concessions at “El Romeral 1, 2 and 3”  to July 2034.
• 12-month extension to Selva Malvezzi’s gas supply contract with BP Gas Marketing Ltd.

Financial Overview

• All interest-bearing debt outstanding plus accrued interest has been repaid.
• Well positioned for growth, cash generative with no debt.
• The Company reports a £275,120 loss after taxation from continuing operations for the six-months ended 30 June 2024 (H1 2023 loss: £888,473).
• This includes a £nil unrealised gain/loss on revaluation of financial assets at fair value (H1 2023 unrealised loss: £489,037).
• The valuation undertaken at 30 June 2024 resulted in no change in the net book value of investments.  Forward gas prices and exchange rates at 30 June 2024 were taken into consideration as well as gas produced from the assets in reaching this conclusion.
• Loan capital repayments in the period were £168,487 and interest payments were £6,753.  All debt finance and interest accrued from the Convertible Loan Notes issued in September 2022 was settled from accumulated cash within the Company during the reporting period.  No further debt-finance has been raised subsequently.
• At 30 June 2024, the Company held cash and cash equivalents of £10,991 (30 June 2023: £395,202).  Prospex’s net share of Cash and cash equivalents held in Euros in its non-consolidated investment and joint venture companies amounted to €794,762.
• The bulk of the decrease in trade and other receivables of £505,890 comprises debt repayments to the Company by its investment vehicles on investment loans made during the exploration and development phases of its projects.
• The Company and its investment vehicles are expected to have sufficient funds to meet existing commitments.

Mark Routh, CEO of Prospex, said:
“Firstly, I am pleased to be able to report that our operations both in Italy and in Spain have been executed this year with no serious Health and Safety incidents nor any reportable environmental issues, which is a credit to the operators in country.

“It has been a transitional period for Prospex, but one in which the Company consolidated its position as an onshore gas producer in two stable European countries, Italy and Spain.  The Company now has no debts outstanding.  Post period-end, the Company announced the acquisition of an interest in Viura, a producing gas field in Northern Spain thereby adding a third onshore gas producing asset to our portfolio.  This acquisition delivers the next step of our growth strategy to increase the portfolio of onshore Europe producing gas assets.

“A development well is being drilled on Viura with two further development wells being planned next year to increase production even further.  Applications have been submitted to permit five further wells on the El Romeral concessions in Andalucía southern Spain and preparations are in place to drill four more wells on the Selva Malvezzi concession in the Po Valley in northern Italy following the acquisition of a short low-cost 3D seismic survey across the concession.  Accordingly, in the Board’s view, all three of Prospex’s producing onshore gas investments have significant upside potential within the existing production concessions and I look forward to updating shareholders as we progress with the conversion of both our contingent and prospective resources on our three production concessions into proved developed producing reserves.”

I usually say that results like these, being historic and therefore of little interest, these are even worse than usual as the results cannot determine the underlying performance of the assets and tell us nothing. Having said that the assets look to be interesting and the long term prognosis given demand for hydrocarbons in Europe make them of interest. 

SDX Energy

As announced on 4 September 2024, the Company and Aleph Finance Ltd (the “Lender”) signed a new agreement (the “New Facility Agreement”) that would refinance the Company’s syndicated unsecured convertible loan agreement with the Lender for up to US$3.25 million (the “Existing Convertible Loan”).

The Lender and the Company are now negotiating to amend the terms of the New Facility Agreement. Therefore, the General Meeting that was to be held at 11.00 a.m. on Friday 20 September 2024 at 38 Welbeck Street, London, W1G 8DP will not be held. However, the Annual General Meeting will be held at 11.30 a.m. on Friday 20 September 2024 at 38 Welbeck Street, London, W1G 8DP.

The syndicated Existing Convertible Loan is unsecured, convertible at any time at the option of the individual lenders and repayable on 24 July 2024. The Company has requested and the Lender has consented and agreed to repayment of the Existing Convertible Loan being delayed, provided that the New Facility Agreement is entered into on or before 11 October 2024. The amount payable is US$3.82 million (principal US$3.25 million and interest US$0.57 million).

By 11 October 2024, the Company plans to convene a general meeting to ask shareholders to vote on the amended terms of the New Facility Agreement.

A further announcement will be made in due course.

It looks like the New Facility Agreement has not been agreed and thus the General Meeting has not taken place. I suspect that the AGM might have been quite fun…In the meantime we know nothing….

KeyFacts Energy Industry Directory: Malcy's Blog