WTI (Jan) $70.29 +$1.70, Brent (Feb) $73.52 +$1.33, Diff -$3.23 -37c
USNG (Jan) $3.38 +21c, UKNG (Jan) 110.3p -1.5p, TTF (Jan) €44.385 -€1.04

Oil price

Oil rose sharply yesterday as the news from China appeared better and the EU started sanctions against Russia and the shadow fleet of tankers supplying their hooky oil.

Serica Energy

Serica announces that it has signed an agreement to acquire 100% of the shares in Parkmead (E&P) Limited (‘PUK’) from Parkmead Group Plc, which includes a 50% working interest in licence P2400 (Skerryvore) and a 50% working interest in licence P2634 (Fynn Beauly), for an initial consideration of £5 million ($6.4 million).

An additional deferred consideration of £9 million ($11.5 million1) will be paid in stages over the next three years, as well as contingent payments linked to certain development milestones – payable on receipt by Serica of approval by the North Sea Transition Authority (‘NSTA’) for a field development plan (‘FDP’) relating to Skerryvore or Fynn Beauly. These payments are calculated based on £0.8/bbl of net 2P reserves contained within the respective FDP, subject to a cap of £30 million and £90 million respectively.

The transaction provides optionality regarding future projects, simplifies decision making, and provides strategic flexibility relating to the existing position in Skerryvore through consolidating the interests in the P2400 licence, in which Serica Energy (UK) Limited, a wholly owned subsidiary of Serica, already holds a 20% interest. Following completion of the transaction, Serica will hold 70% and become the operator.

The P2634 licence was awarded in the 33rd Licencing Round in July 2024 to PUK, as operator, and Orcadian Energy, and includes the Fynn Beauly heavy oil discovery. The current licence commitment is limited to technical studies to assess the feasibility of reducing Fynn Beauly oil viscosity using enhanced oil recovery techniques.

PUK has carried forward tax loss balances which as at the transaction economic date of 30 June 2024 amounted to £197 million of ring-fence corporation tax losses, £181 million of supplementary charge tax losses, £1 million of Energy Profits Levy losses and £12 million of activated investment allowances. PUK has no employees.

The transaction is expected to close in the first half of 2025, subject to customary completion adjustments and the carve-out of PUK’s Dutch assets to a Parkmead affiliate and NSTA change of control consent.

Whilst this is not a huge deal it looks like a cracker to me, on the face of it it ups Serica’s interest in Skerryvore to 70% and gives an interest in Fynn Beauly which is a heavy oil development not even certain of going ahead under current economics but that is not the primary reason for the deal.

No, the real reason for this bit of imaginative M&A is that it brings with it a huge pool of tax losses of varying type which amount to ‘£197 million of ring-fence corporation tax losses, £181 million of supplementary charge tax losses, £1 million of Energy Profits Levy losses and £12 million of activated investment allowances’. 

It is actually amazing to write up a deal involving Parkmead after years of inactivity, Tom Cross gets to keep the Dutch assets, in themselves of little value to Serica who have nothing in the country and would only be an administrative nuisance. 

For me, while I am expecting bigger deals than this it should not be written off as just a tax efficient stroke of genius, it is entirely logical, value accretive and unusually a win-win situation for both parties. What is more, should either of the fields go ahead then they will fall into a feather bed of tax losses thus making the development highly profitable. Having said that I am still expecting more, bigger deals from Serica but this is a smart, efficient and fiscally astute gift for shareholders.

Reabold Resources

Reabold has announced that it is has agreed to acquire 20.4% of the shares in Rathlin from Connaught Oil & Gas Limited for a total cash consideration of £700,000, subject to approval from Connaught shareholders. This will take Reabold’s total shareholding in Rathlin to approximately 79.8%.

Rathlin is operator of the PEDL183 Licence on the West Newton gas development, located onshore UK in East Yorkshire. Upon completion of the Transaction, Reabold will hold a ca. 69.9% economic interest in West Newton and PEDL 183 via its ca. 79.8% shareholding in Rathlin, which, in turn, has a 66.67% interest in PEDL 183. In addition, Reabold has a 16.665% direct licence interest in PEDL 183. In the 12 months ended 31 December 2023, Rathlin reported a net loss of £851,286.

West Newton is the largest undeveloped onshore gas field in the UK, located near to infrastructure and a gas hungry industrial base. As announced on 13 June 2024, the pre-tax NPV(10) of the West Newton project was calculated to be US$179 million net to Reabold under the full field development plan.

West Newton phased development programme

The North Sea Transition Authority (“NSTA”) has approved a revised work programme for PEDL 183 to:

• Re-enter and recomplete or sidetrack one of the currently suspended wells on or before 30 June 2026;
• Re-enter and recomplete or sidetrack one of the remaining suspended wells or drill and complete a new deviated or horizontal well on or before 30 June 2027; and
• Submit a field development plan on or before 30 June 2027.

Rathlin, as the operator, has applied to carry out a reservoir stimulation on the existing West Newton West Newton A-2 well.

• Reabold believes this to be a key step in fully de-risking the subsurface characteristics of the project at limited cost. 

A Gas Export Feasibility study, completed by CNG Services Limited, concluded that, as a precursor to the intended West Newton full field development, an initial single well development and gas export plan can accelerate production and cash flow whilst requiring limited capital expenditure, giving the joint venture (“JV”) partnership the ability to drill future wells out of cash flow. 

• The single well development plan benefits from early cash generation with the ability to drill future wells out of cash flow. Following drilling and testing of this horizontal well, first gas is expected after 18 months with an associated development capex estimated to be ca. £12 million.
• New initial phase, based upon a single well development, materially reduces the financial hurdle to reach production and retains the potential for full development.

Sachin Oza, Co-CEO of Reabold, commented: 
“We are thrilled to be further increasing our interest in Rathlin as it delivers the upcoming work programme, which would de-risk the West Newton development plans. Furthermore, Reabold will also be increasing its exposure to the broader PEDL 183 licence area which, we believe, has significant running room beyond West Newton, and on highly attractive terms. 

“The UK budget has provided much needed fiscal clarity and against this more stable backdrop, we are confident in our ability to progress the West Newton work programme and bring this important UK gas asset to the next stage of development and monetisation. As the energy transition in the UK moves forward, the economic, fiscal, energy security and environmental case for using indigenous gas has never been stronger.”

For those of us who have been long term bulls of West Newton this makes for very good news, Reabold has increased its involvement in the project to 69.9% and more importantly bought a material resource at what can only be described as a bargain price. 

This is also a great piece of timing given that the partners had already agreed on the recompletion of one of the wells early next year and will I’m sure make good news for Reabold who will now be in a really strong and influential position now that they have bought out the original owners who now leave the process. 

With this commitment Reabold shares should start to outperform as we move into 2025 and with it action at West Newton very much long awaited and where I see significant underlying value, way ahead of the current Reabold market cap.

United Oil & Gas

United Oil & Gas announced on 11 December 2024  details of a placing through the issue of new ordinary shares of £0.00001 each in the capital of the Company at a price of £0.001 each (the “Issue Price”) to be completed by way of an accelerated bookbuild process (the “Bookbuild”) which was managed by Tennyson and Shard, acting as joint book-runners (“Tennyson” and “Shard” or the “Book-runners”).

The Company is pleased to confirm that the Bookbuild has been completed and the Company has, conditionally, raised gross proceeds of £0.7 million through an oversubscribed placing of 690,000,000 New Ordinary Shares with new and existing shareholders via the Bookbuild and 10,000,000 New Ordinary Shares by way of subscriptions directly with the Company (“Subscription”). Accordingly, a total of 700,000,000 New Ordinary Shares will be issued pursuant to the fundraising, representing 60.54 per cent of the Company’s issued ordinary share capital.

The Company has existing shareholder authorities to allot and issue up to 385,000,000 shares therefore subject to the results of the Placing, it will use these authorities to allot and issue a first tranche of the Placing Shares (“First Tranche Placing Shares”) raising an initial sum of GBP £385,000. An application will be made to the London Stock Exchange for the First Tranche Placing Shares to be admitted to trading on AIM shortly after the results of the Placing Shares are announced.  It is expected that admission of the First Tranche Placing Shares to trading on AIM (“First Admission”) will occur no later than 18 December 2024.

The Company intends to convene a general meeting (“GM”) to be held on or around 8 January 2025 to seek shareholder authorities to allot and issue the balance of the Placing Shares (“Second Tranche Placing Shares”) of 315,000,000 new ordinary shares and placing warrants of one warrant for every two Placing Shares subscribed for (“Placing Warrants”) with an exercise price of £0.0015 per new ordinary share for tranche 1 and tranche 2.

Subject to the passing of the resolutions at the GM, an application will be made to the London Stock Exchange for the Second Tranche Placing Shares to be admitted to trading on AIM. Subject to the Conditions below, it is expected that admission to trading on the exchange (“Second Admission”) will become effective and that dealings in the Second Tranche Placing Shares will commence on AIM at 8.00 a.m. on 09 January 2025. 

The New Ordinary Shares will be issued and credited as fully paid and will rank in full for all dividends and other distributions declared, made or paid after the admission of those New Ordinary Shares and will otherwise rank on Admission pari passu in all respects with each other and with the existing ordinary shares in the Company.

The Chairman participated in the Subscription and the details of his anticipated shareholdings is shown below subject to the Fundraising becoming unconditional:

The Placing and the Subscription (together “Fundraising”) are conditional upon, amongst other things:

• The Placing Agreement having become unconditional (save for Admission) and not having been terminated in accordance with its terms prior to Admission; and
• The passing by shareholders of certain resolutions at a General Meeting (“GM”) of the Company  authorities to, amongst other matters, issue the Second Tranche Placing Shares of 315,000,000 new ordinary shares and all the Placing Warrants.
• The Company has existing shareholder authorities to allot and issue up to 385,000,000 shares therefore subject to the results of the Placing, it will use these authorities to allot and issue a first tranche of the Placing Shares (“First Tranche Placing Shares”) raising an initial sum of GBP £385,000. An application will be made to the London Stock Exchange for the First Tranche Placing Shares to be admitted to trading on AIM shortly after the results of the Placing Shares are announced.  It is expected that admission of the First Tranche Placing Shares to trading on AIM (“First Admission”) will occur no later than 18 December 2024.
• Admission taking place by no later than 8.00 a.m. on 9 January 2025 (or such later date as the Book-runner may agree in writing with the Company, being not later than 8.00am on the long stop date). If any of the conditions are not satisfied, the Placing Shares will not be issued, and Admission of the Second Tranche of New Ordinary Shares will not take place.

The total issued share capital of the Company, as increased by the First Tranche Placing Shares, immediately following First Admission (and excluding any issues of shares pursuant to the exercise of any employee share incentives between the date of this Announcement and Admission) will be 1,541,353,969 ordinary shares.

The Company expect to send a circular to shareholders later today to convene a General Meeting to propose the resolutions to shareholders to issue the Second Tranche Placing Shares.

Indicative Timetable

Terms used but not defined in this Announcement have the same meaning as set out in the Company’s Announcement released at 18:23 p.m. on 11 December 2024.

A rescue raise for UOG who will need to have an EGM to approve the share issue, in the meantime Jamaica is clearly beckoning as the use of the proceeds, apart from keeping the wolf from the door, so to speak. 

Original article   l   KeyFacts Energy Industry Directory: Malcy's Blog