WTI (Apr) $78.54 -33c, Brent (Apr) $83.68 +3c, Diff -$5.14 +36c
USNG (Apr) $1.89 +8c, UKNG (Apr)* 61.15p -0.85p, TTF (Apr) €25.4 +€0.33
*Denotes March contract expiry

Oil price

A very Happy Leap Day to all readers….

Mixed is the story in crude oil, the inventory stats showed bigger builds than forecast but in demand the picture is different, both gasoline and distillates are drawing and the international stage is beginning to see the effects of Russian action.

Zephyr Energy

Zephyr has provided initial fourth quarter 2023 results related to hydrocarbon production from its non-operated asset portfolio in the Williston Basin, North Dakota, U.S.

• Q4 production averaged 1,053 barrels of oil equivalent per day compared to production in the third quarter of 2023 of 983 boepd, representing an increase of 7% quarter on the quarter.
• Peak daily production rates of 1,440 boepd were achieved in late November 2023 with the commencement of the initial production from the six wells operated by Slawson Exploration Company.
• Production from the Slawson wells was temporarily curtailed in mid-December 2023 due to adverse weather conditions and infrastructure constraints.  Zephyr has been informed by the operator that production from the Slawson wells resumed in late January 2024.
• Q4 production rates from the remainder of the portfolio were as expected.
• 2023 full-year production was only marginally under forecast (1,040 boepd actual vs 1,150 boepd forecast) despite the above-mentioned factors impacting the Slawson wells. All other wells performed in line with management expectations during the year. 
• 2023 full-year revenues from the portfolio are estimated to be, subject to audit, circa US$26.3m of which it is expected more than 90% is made up of oil sales.
• Q4 revenues are estimated to be, subject to audit, circa US$6.9m compared to Q3 revenues of US$6.0m.
• At 31 December 2023, 225 wells in Zephyr’s portfolio were available for production (versus 220 wells at the end of Q3).
• Net working interests across the Zephyr portfolio now average 8% per well (equivalent to 15.1 net wells).
• During February 2024, ten wells in which Zephyr holds working interests and which are operated by Continental Resources (Harms Federal and Quale Federal) were placed in production. Early production data shows these wells performing ahead of management expectation, adding initial production rates, net to Zephyr, of circa 75 boepd.
• The Company has hedged 27,000 barrels of oil over the first quarter of 2024 at a weighted-average price of US$82.20 per barrel.  The Company will continue to evaluate its commodity price risk management strategy on a regular basis.

Colin Harrington, Chief Executive of Zephyr, said:
“Our non-operated assets continue to deliver strong and robust cash flows, allowing us to proceed with the next phase of our Paradox project in the near-term.”

“The initial indications of the performance of the Slawson wells continue to exceed our estimates and the wells have the potential to materially increase our 2024 cash flows. Very strong initial performance from the Harms Federal and Quale Federal wells is also highly encouraging.”

“We continue to make good progress ahead of the commencement of drilling on the Paradox project and will be providing a further update on this in the coming days.”

The starter on the menu for this years repast is rather pleasing, the quality of the management at Zephyr means that they did indeed mend the roof when the sun shone, here providing some basic nourishment from the Williston assets whilst the main course of the Paradox is being prepared. 

The non-operated assets are providing much needed cash flow and as above the Slawson wells ‘have the potential to materially increase our 2024 cash flows’ and the same goes for the Harms Federal and Quale Federal wells after initial strong performance. 

So now to the main course, Zephyr are making good progress on the restart at the Paradox Basin where momentum is building towards a drill which make the spring and summer an exciting time for shareholders. 

Note   

Q4 production volumes are based on a combination of state reported production volumes and field estimate production reports supplied by certain operators. Both production data sets are two phase reports (oil and well head gas) as opposed to sales volume reporting which is three phase and consists of oil, processed sales gas and NGL volumes.  While Zephyr previously reported three phase sales volumes, going forward the Company will report two phase production volumes on a quarterly basis and three phase sales volumes on an annual basis. This change has been necessitated by the timing of the receipt of sales volume data from certain operators.

Hunting

Hunting has announced its results for the year ended 31 December 2023.

Financial Highlights

Commenting on the results Jim Johnson, Chief Executive, said:
“Hunting has delivered a strong year of growth across most of its product groups, demonstrating the underlying strength of our market drivers, with security of supply and affordable energy remaining key investment themes.

“Our offshore and international businesses have delivered robust growth as we continue to build a more balanced and diversified business, underpinned by the strong technology and intellectual property that makes Hunting a market leader in precision engineered products across our markets.

“The growth and composition of our record order book demonstrates how much Hunting has evolved in terms of more diverse revenue and better visibility on earnings, and provides confidence in our near and longer-term outlook, as we deliver the Hunting 2030 Strategy.”

These figures show that Hunting is in a very good place indeed right now, today they have declared EBITDA of $103m nearly doubled year on year and above the top end of guided range, more importantly margins of 11% were up 4 points on the year. Indeed margins ended the year nearer 12% and I wouldn’t be surprised to see that number settle nearer to the 12/13% level. 

Hunting is achieving this by maintaining its strong position in oil and gas and yet has expanded extremely successfully internationally, recently this has been in India, the Middle East and South America. In India the JV with Jindal, including its smart new premium threading facility is doing extremely well and in the Middle East growth is good from a fairly low base. In South America sales are up in Brazil and in Guyana it’s gangbusters, huge growth coming from the most expensive completions with the highest value parts, notably in subsea applications.

Finally as mentioned in my last couple of notes I am even more impressed by the progress Hunting are making outwith the traditional energy plays by driving its Advanced Marketing businesses, in particular in aerospace and electronics defence through its sophisticated facility in Dearborn. The division continues to flourish and is a key part of the 2030 strategic objectives. 

Hunting increased the dividend by 11% to 10p and given the background to the medium term financial performance I would expect that to increase progressively on the back of growing eps and those top line increases in margins. Finally, that confidence is based on the order book, $565m up 19% and with ‘good visibility, not surprising given the tenders book with ‘north of $1bn in it’. 

Hunting shares are almost double the lows of last summer but nowhere near the level that they should be, at least twice this price, with highly efficient cost management and probably the best management in the business the company has significant upside potential from here. 

Strategic Highlights

Financial Summary

Financial Performance measures as defined by the Group*

Financial Performance meuasres as derived from IFRS

* Adjusted results exclude adjusting items agreed by the Audit Committee and Board.
** Non-GAAP measure. Please see the 2023 Annual Report and Accounts pages 239 to 244.
*** Payable on 10 May 2024 to shareholders on the register on 12 April 2024, subject to approval at the Company’s 2024 AGM.

Outlook Statement

The global outlook for energy in the year ahead will be driven by similar themes to those reported in 2023.

Geopolitical tensions and potential supply disruptions are a continuing threat to the oil and gas supply/demand balance, and while commodity prices trended lower in the past year, it is likely that they will remain in a range that supports sustained activity levels during 2024.

Offshore market momentum is poised to continue to increase in the coming years as major development cycles in South America and South West Africa continue to accelerate.

The North American onshore drilling market is likely to be stable during 2024, with the US more focused on oil production. Additional LNG capacity is likely to come on-stream later in the year, which will support new natural gas drilling in the second half. Projected growth in international sales should also offset shifts in US onshore market dynamics.

The Middle East will also likely show a continuation of the activity levels reported in 2023. Despite the pause in oil production expansion in Saudi Arabia being announced in recent weeks, natural gas drilling in-country will continue to grow to meet local demand, underpinning steady activity levels in the year ahead.

In India, the Group’s facility is shortly to receive its API threading licence which will enable premium threading activities to accelerate. Management sees a positive profit contribution from our joint venture in 2024, given the growth momentum in-country.

Across Asia Pacific, traditional energy demand as well as energy transition initiatives will continue to drive growth, with geothermal opportunities being captured as market activity increases, particularly in the Philippines and Indonesia.

For Hunting, the Group’s OCTG product group should deliver another year of growth, as activity in South America continues to increase, coupled with stable activity in the US and Canada. Our EMEA OCTG operations will continue to support projects in Brazil, while in Asia Pacific, larger tenders continue to be announced, which should lead to new orders being secured. Hunting’s Perforating Systems business will continue to roll-out its leading technology to clients across North America, while continuing to grow internationally where markets such as Argentina present good opportunities due to reduced import tariffs being announced.

Our Subsea Spring and Stafford businesses should also deliver a further year of strong results as orders for ExxonMobil and other major operators across South America continue to be progressed. The Enpro business should also support this growth profile given the orders secured in the second half of 2023.

Hunting will continue to drive its non-oil and gas diversification through the Advanced Manufacturing businesses. Momentum remains strong, with opportunities in aerospace and defence being pursued, supporting our 2030 strategic objectives.

In summary, the Board sees a further year of growth ahead, given our diverse, international product offering, with management remaining comfortable with current market guidance.

Operational and Corporate Highlights – Delivering on the Hunting 2030 Strategy

Beacon Energy

Result of oversubscribed Fundraise to raise €3.0 million

Beacon has announced, further to its announcement of 28 February 2024, that it has successfully completed its oversubscribed Placing with new and existing institutional investors and the PrimaryBid Offer, both of which have now closed.  The Company has raised, in aggregate, approximately €3.0 million (approximately £2.6 million) (before expenses) via the issue of 5,137,000,000 Shares at the Issue Price pursuant to the Fundraise (the “Fundraise Shares”). 

The Placing was undertaken through an accelerated bookbuilding process managed by Tennyson Securities.  

Larry Bottomley, CEO of Beacon Energy, commented: 
“We’re pleased to have completed this fundraise and thank our new and existing shareholders for their support in the process. Having attempted various low-cost remedial works to bring the SCHB-2(2.) well into production at the volumes expected from the sub-surface results of that well, it became clear that the proposed side-track would be required. 

As previously guided, based on the excellent reservoir properties and light oil recovered by the well, and the higher rates of production achieved on historic wells in the area, management maintains belief that the well can produce at materially higher levels.

The SCHB-2(2.) well demonstrated a material reserve in the Erfelden field, ranging from 4.7 – 7.2 – 10.2 million barrels in the Low, Best Estimate and High case respectively in the Company’s assessment.

We are delighted to have secured the rig for April and believe the side-track will result in a flow rate that reflects the quality of the reservoir that we have encountered.  The funds raised will ensure Beacon is fully funded for the sidetrack, which in the success case will result in a rapid payback and transform the Company’s financial profile.

We look forward to updating the market through the coming months.”

The problems associated with the drilling of this well continue but the management believe that the reservoir can produce at higher levels and that the side-track is the correct way to deliver the right results. Strong support here has meant that the well can be drilled in 1H April.

KeyFacts Energy Industry Directory: Malcy's Blog