Oil price, San Leon, Union Jack/Egdon/Europa, Jadestone, UOG. And finally…
WTI $52.20 -14c, Brent $55.04 -6c, Diff -$2.84 -35c, NG $2.56 -10c, UKNG 51p -5.25p
A relatively quiet time for oil after the Robin Hood events that have grabbed the headlines in the last few days but with todays news that silver is in the firing line why not contemplate the next target being oil?
The Baker Hughes rig count on Friday showed a rise of 6 units to 384 and in oil up by 6 also to 295 units. With big storms in the North East of the US and heading towards the Big Apple business may be tricky up there for a few days.
Finally it has been confirmed that after the oil price fall last spring that Exxon and Chevron held merger talks which have since ceased…
San Leon Energy
Further to its previous announcements, San Leon has provided an update on the funding arrangements by Decklar Petroleum Limited to develop the Oza Oil Field in Nigeria. When fully disbursed, the funding is expected to be sufficient to re-establish oil production and provide development funding for the Oza Oil Field. There has been some delay to the process due to the current pandemic.
The due diligence required to finalise the term debt to Millenium Oil and Gas Company Limited, Decklar’s local partner, arranged with a Nigerian bank and the trading subsidiary of a large multinational oil company active in Nigeria has progressed and the final report by the independent technical consultant that they contracted, which is based on a review of reserve and production data and financial projections, has been issued. The definitive loan documents are now being finalised and are anticipated to be issued by the end of the first week of February 2021.
Details of the funding were announced in September 2020 with additional options at San Leon’s discretion.
Oisin Fanning, Chief Executive officer, commented:
“As we have previously announced, the global restrictions imposed in response to the Covid-19 pandemic frustrated our attempts to complete our investment in the Oza Oil Field on our original timeframe. I am however pleased to report that, through the combined efforts of all of the partners, we are now close to concluding the funding arrangements. In the meantime, significant preparatory work has been completed on site and we now anticipate being able to start the project promptly.
“The Oza Oil Field is an existing field with historical production expected to deliver near-term cash flow. Furthermore, we have structured the transaction to minimise our own risk through a repayable loan at an attractive interest rate with an additional significant equity upside. The option to scale up our investment following receipt of the well test results provides us with valuable informed optionality.”
San Leon have a history of successfully using its model to fund companies in Nigeria who are bringing on production and hence capable of repaying the debt sometimes with decent equity stake to boot thus enhancing the return on the investment. I see no reason why SLE holders should not in due course receive significant dividends as they have in the past as the company keeps its promise to pay at least 50% of free cash flow to them.
Egdon as operator has today announced free flowing oil at the Wressle Hydrocarbon Development Project, Egdon 30%, Union Jack 40%, Europa 30%. The development is located within North Lincolnshire licences PEDL180 and PEDL182 where operations to recomplete the well and reperforate the Ashover Grit reservoir interval have been completed successfully, safely and on schedule.
Following the re-perforation and its successful communication with the Ashover Grit reservoir interval, free-flow of oil has commenced and the well has been placed on continuous 24 hour test production. The well is now in the normal clean-up phase as the well is carefully brought on-stream.
The well has not flowed for six years and the fact that free flowing oil has been achieved is in itself a significant result. This being the first stage in the process we should expect production to ramp up slowly but for all three companies the very fact that Wressle is now on production is exceptionally good news.
In a trading and business update Jadestone announces that it achieved its revised 2020 production guidance target, with full year production averaging 11,438 bbls/d. The Company realised an average oil price of $44.75/bbl in 2020, excluding hedging, and generated net revenue of $217.9 million. Unaudited cash operating expenses for the full year were around $23.24/bbl, after the customary adjustment for workover activities and for abnormal costs associated with damage from Cyclone Damien in Q1.
Cashflow savings relating to Project Clover amounted to a $33.8 million reduction from plan, and over 25% of the realised savings reflect structural changes in the Company’s operations and hence will be reflected in the Company’s outlook targets for 2021. Unaudited capital spending for the full year was approximately $26 million.
As a result of the cost cutting and operational flexibility Jadestone actually more than doubled its net cash balance in 2020. As of December 31, 2020, the Company had a net cash balance of $82.0 million, comprising cash and bank balances of $89.4 million, and gross debt outstanding of $7.4 million. Jadestone’s remaining gross debt comprises the final repayment of the Company’s reserves-based loan, drawn to part fund the Montara acquisition in September 2018. ‘The final RBL redetermination exercise was undertaken in December 2020 and was assessed at a level above the remaining drawn portion. Indeed, the Company’s drawn portion under the RBL facility has remained comfortably below each half yearly redetermination throughout the life of the loan, despite the 71 day shutdown in Q4 2018, the heavy offshore spending programme in 2019, and the oil price collapse in 2020. The final scheduled repayment will be made at the end of Q1 2021’.
Paul Blakeley, President and CEO commented:
“Early in 2020, we responded to the combined impact of a drop in benchmark oil prices and the challenges posed by the COVID-19 pandemic. Our primary focus was to preserve our balance sheet in the face of enormous uncertainty, with an oil price that fell below US$20/bbl, and not to be driven by short term targets. We were quick in rescheduling capital investments with an eye on protecting project returns by deferring spending into a stronger price environment, and we were aggressive in challenging our cost base to ensure maximum efficiency across the portfolio.
“Through our cost-saving programme, Project Clover, we have realised US$33.8 million in cashflow savings versus our original plan, and have locked in over a quarter of those savings as structural changes in the way we work going forward. At the same time, we have engaged in a modest hedging programme covering approximately 30% of our planned production volumes in the first quarter 2021, and are prepared to lock in more barrels in the short term with the sole aim of underpinning cashflow to support delivery of our capital programme this year.
“All in, our 2020 performance has met our revised guidance targets, and we have emerged from the year as a stronger company that will be debt free by the end of Q1 2021, US$89.4 million of cash on hand, and an exciting suite of investment projects ahead. Importantly, we have done so without compromising our commitment to sustainable operations, and have recorded no material deviations from our safe operating parameters.
“We are continuing to progress our growth ambitions too, with integration of the Indonesia Lemang asset now underway, the New Zealand Maari asset acquisition expected to complete in H1 of this year, and several additional opportunities in the Asia Pacific region under evaluation.
“We are also announcing today our intent to continue our pivot toward practices more typical of our UK-based peer group. Following our recent adoption and implementation of the Quoted Companies Alliance Corporate Governance Code, it is our intention to effect a corporate reorganisation whereby our British Columbia incorporated parent company will be substituted for an England and Wales incorporated entity, targeted to be complete in the first half of 2021.”
United Oil & Gas
UOG today confirm 2020 performance and also announce 2021 guidance. Group working interest production 2,195 boepd, FY 2020 Total Revenues of c. $9.0 to $9.2m with realised Oil Price c. $37.7/bbl. There was a Group Cash Balance of $2.1m along with total cash collections of c. $9.8m and Cash Capital Expenditure c. $2.5m.
As for 2021 guidance, Group working interest production in Egypt is forecast to average between 2,300 and 2,500 boepd for H1 2021. A reserves uplift is expected following the success of the El Salmiya 5 and ASH 2 wells in 2020 (subject to independent certification with publication expected during H1-21)
Group Capital Expenditure is forecast to be $5.3m, fully funded from existing operations and split c. $4.7m to be invested in Egypt with two firm wells, five workovers, and facilities upgrades and c. $0.6m to be invested in Jamaican, Italian and UK assets.
Finally, flexibility exists within the Abu Sennan joint venture and the EDC-50 rig contract to add up to two further wells in the Abu Sennan drilling campaign subject to well results and the commodity price environment.
United Chief Executive Officer, Brian Larkin commented:
“2020 was a successful year for United, delivering an excellent operational and financial performance, despite a challenging commodity price environment and the global pandemic. We successfully integrated our Egyptian assets, delivering average 2020 working interest production of 2,195 boepd, creating revenue of c. $9.0 to $9.2m (net of government take) for the ten months since completion of the acquisition.
“United begins 2021 in strong position with a balanced portfolio, low-cost growing production, high quality reserves and a healthy balance sheet. The business is well placed to benefit from rising hydrocarbon prices but also well hedged to protect against volatility. Our fully funded, multi-well drilling programme in Egypt has begun with the result of the ASH-3 well expected shortly. This low-risk well has the potential to build on the successes of 2020 by delivering increased production and reserves. A formal farm-out process will shortly commence seeking partners to join us in unlocking the potential in our high impact Walton Morant exploration licence in Jamaica, and our Italian asset remains on track for first gas in 2021.”
On Friday I did an interview with Jeremy Naylor of IGTV, he was interested in an updated view of the recently announced Bucket List. We spoke about the UK (2m 45s), SQZ, IOG, UJO, JOG. International (1) 4.45, JSE 4.50, PTAL 6.08, TXP 7.00, SAVE 0830, Int (2) 1035, PPC 10.45, PRD 11.35, Solo 12.15, CHAR 13.15, Yield 14.15, DGO 15.00, GENL 16.00, Wentworth 17.00, San Leon 19.30, Hi Beta 21.00, Kistos 21, LBE 21.30, Zephyr 22, Eco (Atlantic) 22.3.
Oil stocks ‘bucket list’
On Saturday in the Prem there were wins for Villa, the Noisy Neighbours, the Eagles and interestingly the Magpies winning at the Toffees. Sunday saw Chelski beat Burnley 2-0, the Foxes lost 1-3 to Leeds, the Hammers run was ended by Liverpool and the Seagulls turned over Spurs.