WTI (Nov) $77.14 +2.76, Brent (Dec) $80.93 +$2.88, Diff -$3.79 +12c
USNG (Nov) $2.75 -10c, UKNG (Nov) 100.50 -1.3p, TTF (Nov) €39.75 -€0.735

Oil price

Oil has boiled over today as there has been little in the Middle East to indicate that Israel is going to make a move on Iranian oil installations but it may not be far away, they have seemingly promised action of some sort. So probably not best to rule anything out would be somewhat premature.

Hurricane Milton is moving North but looks like it is going towards Florida rather than the Gulf of Mexico. I’m sure that is all that Floridans need right now after recent devastation.

PetroTal Corp

PetroTal has provided the following operational and financial update. All amounts are in US dollars unless stated otherwise.

Key Highlights

• Q3 production averages 15,160 barrels of oil per day (bopd), a 39% increase on Q3 2023
• 2024 annual production on track to meet top end of guidance range
• Total cash of $133 million as of September 30, 2024, an 18% increase on Q3 2023
• Well 20H achieves initial production rates over 5,300 bopd
• President of Peru grants Supreme Decree for transfer of Block 131 to PetroTal

Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:
“I am pleased to report that PetroTal’s production exceeded expectations in Q3 2024. Our operations and logistics teams have done an outstanding job of managing record low river levels, which have impacted our ability to export crude through the Brazil route in recent weeks. We are nearing the end of dry season in the coming weeks and remain optimistic that production should return to capacity by the middle of November.

With $133 million of cash in reserve, PetroTal’s liquidity remains healthy, despite a reduction in oil prices over the month of September. We are committed to a capital returns policy that includes a stable dividend, balanced with the advancement of our key development initiatives. With that in mind, the budgeting process for our 2025 capital program is well advanced, and we look forward to updating the market on our future development program at the appropriate time.”

This is another almost perfect update from PetroTal in a quarter in which the seasonal lower river levels presented the usual problems of exporting crude through the Brazil route but this season the PetroTal team has mitigated a great deal of the problem. 

This means that Q3 production exceeded expectations, at 15,160 b/d it beat guidance of 13,000 which was 39% up on 3Q last years total of 10,909 b/d and on track to ‘meet the top end of guidance’, at 17,800 b/d year to date to September 30th neatly beats the top end of the range. 

The well 20H achieved initial production rates of over 5,300 bopd and whilst it completed on September 23rd, due to low river levels the company has not been producing flat out since then production has averaged some 3,120 bopd in the last six days. For PetroTal managing the production from the new wells is crucial to the way they respond to the lower river levels now and then upping their game by maximising the field output when it rains. 

As a result of this, PetroTal have total cash of $133m at the end of September 2024 which is up 18% on the same time last year and it enables the company to be generous with its shareholder capital returns which include generous dividend payments and share buybacks that carefully balance the capital programme in order to keep building the business.

These numbers are excellent and show that PetroTal is in very good shape, it is bit by bit beating the river problem whilst building the company as well as making major distributions. In addition it has received approval from the president getting them closer to taking on the Block 131 a deal already announced. Finally I would expect some dealing in the M&A market which would make the final act of showing just how undervalued PetroTal is.     

Block 131 (Cepsa) Acquisition Update

On October 2, 2024, the President of Peru signed a Supreme Decree allowing for the amendment of the hydrocarbon exploration and production license for Block 131 in Peru. As previously announced on May 7, 2024, PetroTal reached a definitive agreement to acquire a 100% working interest in Block 131 through the acquisition of CEPSA Peruana, S.A.C. The Supreme Decree represents the last major regulatory hurdle in the transfer of this asset to PetroTal. The Parties now await the renewal of an investment certificate from the Peruvian tax authority, expected within the next 30 business days, at which point the transaction is expected to close.

Q3 2024 Production

PetroTal produced 15,160 bopd in Q3 2024, above previous guidance of 13,000 bopd. As is to be expected during the local dry season, production declined 17% relative to the prior quarter (Q2 2024: 18,290 bopd); however, production increased substantially (39%) compared to the same period last year (Q3 2023: 10,909 bopd). Drought conditions have contributed to record low river levels in Peru’s Loreto region in 2024, but PetroTal has consistently worked to improve its logistics capabilities and was able to maximize barge fleet capacity during the quarter. Year to date, through September 30, 2024, the Company has produced approximately 17,800 bopd, slightly above the full year production guidance range (FY 2024: 16,500 to 17,500 bopd). Production has averaged approximately 10,700 bopd during the first week of October.

Well 20H Drilling & Completion Update

The 20H well at Bretaña, which was spud on July 26, was completed on September 23. As previously announced on September 3, PetroTal decided to jointly complete this well in both the Upper (VS1) and Main (VS2) Vivian sand units. In response to low river levels, which have constrained the Company’s ability to store and export crude, PetroTal has not been producing the well continuously; oil production from the 20H well achieved a peak daily date of 5,357 bopd on October 3, while production has averaged 3,120 bopd over the six days it has been onstream. PetroTal will continue to manage production from new wells in response to river levels, with a view to maximizing total field output throughout the coming rainy season. The 20H well was drilled and completed on time and budget, at a cost of approximately $15.5 million.

PetroTal commenced drilling well 21H at Bretaña on September 25, 2024. This well is expected to be completed by mid-November, at a total cost of $14 million. Following this well, PetroTal plans to drill and complete wells 22H and 23H, before releasing the rig in Q1 2025.

Cash and Liquidity Update

PetroTal maintained a strong liquidity position throughout Q3 2024, exiting the quarter with a total cash position of approximately $133 million, of which of $121 million was unrestricted. This compares to total cash of $96 million at the end of Q2 2024, and $113 million at the same time last year. PetroTal ended the quarter with accounts payable and receivable of $81 million and $55 million, respectively.

During the quarter, PetroTal entered into a hedge agreement for an average of 172,000 barrels per month through August 2025. The costless collars have a floor price of $65.00/bbl and a ceiling of $84.25/bbl, with a cap of $104.25/bbl.

Pursuant to its ongoing share buyback program, PetroTal repurchased 1.0 million shares in Q3 2024, at an average price of US$0.51/share. The Company also paid a dividend of $13.7 million (US$0.015/share) on September 13, 2024, related to Q2 2024 operations.

Block 131 (Cepsa) Acquisition Update

On October 2, 2024, the President of Peru signed a Supreme Decree allowing for the amendment of the hydrocarbon exploration and production license for Block 131 in Peru. As previously announced on May 7, 2024, PetroTal reached a definitive agreement to acquire a 100% working interest in Block 131 through the acquisition of CEPSA Peruana, S.A.C. The Supreme Decree represents the last major regulatory hurdle in the transfer of this asset to PetroTal. The Parties now await the renewal of an investment certificate from the Peruvian tax authority, expected within the next 30 business days, at which point the transaction is expected to close.

Ecuador Export Pilot

As disclosed previously, PetroTal initiated a pilot shipment of Bretaña crude to Ecuador’s OCP pipeline in mid-July 2024. While one barge was ultimately successful in delivering its cargo to Puerto Providencia, near the head of the OCP pipeline, five barges were turned back as the convoy encountered unseasonably low river levels. PetroTal remains committed to developing safe, cost-effective options for its crude oil exports, and will continue to evaluate the commercial viability of the OCP route against other available options. The Company anticipates final sale of the Ecuador pilot crude will occur in October.

Social Update

As of September 2024, PetroTal’s total contributions to the Social Trust Fund amounted to nearly $20 million. Distributions from the Fund will be used to finance projects that benefit the citizens of Puinahua District, where the Bretaña Norte field is located. For example, a bidding process is currently underway to select a contractor for the establishment of internet connectivity across the entire Puinahua District. This project was prioritized by the fund’s Board of Directors and its advisory committee. PetroTal was also recently recognized as a “Company that Transforms / Empresas que Transforman” by IPAE Accion Empresarial – a private, non-profit business association in Peru. The distinction is a response to PetroTal’s ongoing efforts to promote socially responsible business practices, in the category for medium and large companies. 

Gulf Keystone Petroleum

Gulf Keystone, a leading independent operator and producer in the Kurdistan Region of Iraq, is pleased to provide an update on its approach to shareholder distributions in the current local sales environment.

Jon Harris, Gulf Keystone’s Chief Executive Officer, said:
“We have long recognised the importance of distributions to Gulf Keystone shareholders and we were pleased to be able to restart returns of excess cash earlier in the year with free cash flow generation from local sales. As our liquidity continues to improve, we are today setting out an updated approach to shareholder distributions in the current local sales environment, which includes plans to review the Company’s capacity to declare an interim dividend on a semi-annual basis around our Full Year and Half Year Results. In line with this approach, we have decided to declare a $20 million interim dividend and initiate a share buyback programme of up to $10 million.”

GKP has always been keen to distribute so now that they appear to be getting more ‘robust’ sales from the Shaikan field, c. high 40’s bopd it seems that they have accumulated $110m of cash and like they have in the past they are going to pass it on to shareholders. 

Accordingly they are to pay a $20m interim dividend which is worth 9.216 cents a share plus a share buy back of £10m out of a cash pile of $110m yesterday.

I’m sure that they will regularly assess their liquidity requirements but this seems to be a good, modest start to going back to where they were.

Update on shareholder distributions

Gulf Keystone is today setting out an updated approach to shareholder distributions in the current local sales environment to enable investors to better evaluate the prospect of future returns ahead of the restart of Kurdistan exports. While local sales remain difficult to predict beyond the near term (given market demand dynamics or the upcoming PF-1 shutdown planned for safety-critical upgrades and maintenance in November), demand for Shaikan Field crude has continued to be robust. Gross average production was c.48,500 bopd in September and c.45,900 bopd in October to date – with realised prices stable at c.$27-28/bbl – bringing 2024 year-to-date average production to c.42,300 bopd as at 6 October 2024 and enabling free cash flow generation. The Company’s cash balance was $110 million as at 7 October 2024.

The Company is committed to returning excess cash to shareholders. Looking ahead, the Board plans to review the Company’s capacity to declare an interim dividend on a semi-annual basis around the time of the Full Year Results and Half Year Results. Furthermore, share buybacks will be considered opportunistically throughout the year.

In determining the level of shareholder distributions, the Board will assess the Company’s liquidity needs to:

• fund essential investment in the Shaikan Field focused on safety, reliability and maintaining and optimising production levels, with a year of capital expenditures and costs evaluated as the primary reference point
• ensure the Company is able to transition successfully from local sales to the restart of Kurdistan exports and normalisation of Kurdistan Regional Government (“KRG”) payments

The Board will also assess the Company’s operating environment, in particular the outlook for local sales volumes and prices.

Following the reopening of the export pipeline and normalisation of payments by the KRG, the Board plans to provide an update on the Company’s approach to distributions.

$20 million interim dividend

Following the recent publication of the Company’s Half Year Results, Gulf Keystone today announces the declaration of a $20 million interim dividend. The dividend is equivalent to 9.216 US cents per Common Share based on the Company’s total issued share capital as at 7 October 2024 and will be paid on 31 October 2024, based on a record date of 18 October 2024 and ex-dividend date of 17 October 2024. Shareholders will have the option of being paid the dividend in either GBP or USD, with the default currency GBP.

Launch of up to $10 million share buyback

In line with the Company’s updated approach to shareholder distributions, the Company has decided to initiate a share buyback programme of the Company’s Common Shares of $1.00 each for up to a maximum aggregate consideration of $10 million (the “Maximum Amount”).

The Buyback Programme will be executed in accordance with the Company’s authority to make on-market purchases of Shares which was approved by shareholders at the Company’s AGM on 21 June 2024.

The Company has entered into an agreement with its brokers, Canaccord Genuity Limited (“Canaccord Genuity”) and Peel Hunt LLP (“Peel Hunt”) (together the “Brokers”), to carry out on-market purchases of Shares up to the Maximum Amount within agreed parameters on an irrevocable and non-discretionary basis. Purchases of Shares will be made on the Company’s behalf in accordance with the agreement with the Brokers and may continue independently of and uninfluenced by the Company during any closed period to which the Company is subject and/or if the Company comes into possession of inside information. The Company has agreed the Buyback Programme will commence immediately and will run to the earlier of its completion or 31 December 2024 .

So long as the Company is not in a closed period to which it is subject nor in possession of inside information (an “Open Period”) the Company may elect to terminate the non-discretionary nature of the mandate. The Company may subsequently choose to reinstate the non-discretionary mandate of the Buyback Programme provided that the Company is in an Open Period at that time.

The Buyback Programme will be carried out on the London Stock Exchange and will be implemented within certain agreed parameters, including the price parameters under the relevant shareholder authority and, except as disclosed in this announcement, the safe harbour provisions set out in the Market Abuse Regulation (EU) 596/2014 (as it forms part of UK law pursuant to the European Union (Withdrawal) Act 2018) (the “Regulations”) and the applicable laws and regulations of the London Stock Exchange.

A buyback of Shares on any trading day may represent a significant portion of the daily trading volumes in the Shares and may exceed 25% of the average daily trading volume specified in the safe harbour provisions of the Regulations dealing with buyback programmes and accordingly the Company may not benefit from the exemption in Article 5(1) of that regulation.

The sole purpose of the Buyback Programme is to reduce the capital of the Company. As such, all Shares purchased under the Buyback Programme will be cancelled.

The Company will make announcements and publish on its website details of any Share repurchases.

KeyFacts Energy Industry Directory: Malcy's Blog