WTI $122.11 +$2.70, Brent $123.58 +$3.01, Diff -$1.47 +31c., USNG $8.70 -59c, UKNG 156.5p +25.46p, TTF €89.420 +€9.42

Oil price

A big rise in the crude price yesterday, Chinese economic data, specifically export numbers was better than expected as the economy picks up. Much more importantly was that the EIA inventory stats delivered information but not from where most were expecting it. With a rise in crude similar to the API at first sight it was maybe showing a tired oil market.

Actually it is mainly still down to product markets, and to see an 800/- draw in gasoline stocks at a time when refinery runs were up 1.6% to 94.2%, an incredibly high number even at this stage of the driving season and should lead to some serious food for thought. Product demand is very high and -you have been warned- there will be diesel shortages, fewer exports to Europe, itself already taking less from Russia will become apparent very soon. I am never one to start rumours and I never fill my 28 year old diesel Disco until its nearly empty but all that has changed, diesel may soon be a rarer commodity than you think…

Finally as the oil price is telling you there is a long term cyclical shortage in crude and product markets, even given the horrors of volatility, the years of under investment by so-called professional investors mean that much more money will be made by companies from Chevron and Exxon downwards. There are so many opportunities in the UK oil sector at the independent level it makes me cry that my own rules prevent me from filling my boots. What is it that people don’t understand about high oil prices and inventory shortages? If the blog all of a sudden stops don’t panic I will be out there buying the Bucket List PA and starting with these little beauties below…

Kistos

Kistos has provided the following operational and trading update ahead of the Company’s Annual General Meeting which is being held today at 11.00 a.m. as a virtual meeting. The information contained herein has not been audited and may be subject to further review and amendment.

Highlights

• Pro forma net production for the five months to end of May 2022 was 12.0 kboe/d, unhedged as of 1 April 2022
• Cash balances on 31 May 2022 were €128.6 million
• Acquired €27.7 million (nominal) of Kistos NL2 bonds in February 2022
• Net cash on 31 May 2022 of €6.3 million
• Acquisition of 20% interest in the Greater Laggan Area (GLA) West of Shetland from TotalEnergies progressing towards completion. The transaction has an effective economic date of 1 January 2022
• Development studies are ongoing for the Q11-B gas discovery and the Orion oil discovery
• The Q10-Gamma exploration prospect and infill drilling opportunities at the producing Q10-A gas field are also being evaluated
• In line with its strategy, the Group continues to evaluate several potential growth opportunities that meet its investment criteria

Andrew Austin, Kistos’ Chairman, commented:
“Kistos has started the year strongly, delivering a solid operational performance and benefiting from high gas prices.

“With almost €130 million of cash at our disposal, we have the financial strength, capital discipline and track record to grow the business and deliver shareholder value.

We remain guided by our founding principle to play a role in the energy transition and are evaluating several attractive opportunities in the North Sea. We continue to benefit from high gas prices in the Netherlands, and we are assessing opportunities in the UK that would enable us to take full advantage of the investment allowances implicit in the recently introduced UK Energy Profits Levy.”

This is another very positive announcement from Kistos, production was in line with guidance and that has led to net cash of €6.3m at the end of May. Strongly cash flow positive on unhedged, strong gas prices have meant that €27.7m of bonds have been paid off. 

The Looney tax was clearly unwanted but with more than 50% of production in premium Dutch gas and of course expenditure at Glendronach and Benriach will benefit from the 80% allowance. As usual I expect Kistos to have an eye for a deal to mitigate that levy and give another boost to the value of the the company and the shares are extraordinarily cheap on that basis. 

Chariot 

Chariot today announces the result of its Open Offer pursuant to the Fundraising announced on 18 May 2022.

The Company is pleased to announce that it has received valid acceptances from Qualifying Shareholders in respect of 61,098,316 Open Offer Shares, representing a take-up of over 347 per cent. of the 17,597,272 available Open Offer Shares.

All Qualifying Shareholders who have validly applied for Open Offer Shares will receive their full Basic Entitlement. Applications for Open Offer Shares under the Excess Application Facility will be scaled back as outlined in the Circular on a pro-rata basis, with the same scaling methodology to be applied to each shareholder who applied for Excess Entitlements. Accordingly, the Open Offer has conditionally raised total gross proceeds of approximately US$4.0 million (£3.2 million).

The issuance of the New Ordinary Shares is subject to and conditional on the passing of the Fundraise Resolutions at the General Meeting to be held on 10 June 2022.

Julian Maurice-Williams, CFO of Chariot commented, 
“I am very pleased to report that, subject to shareholder approval, we will have raised a total of US$29.5 million through the Fundraising, which is an excellent result for the Company. We are very grateful to our shareholders for their continued support and we are excited about the coming months, as we anticipate the rest of the year will be a very busy period for Chariot.”

Good news for Chariot investors as proved by so many who have formed up for this Open Offer. Despite this successful fund raising the shares remain within 4p of the years high. Indeed I would contend that a market cap of around £75m is way below what it will be when the massive potential projects that Chariot are undertaking come to fruition. 

Southern Energy Corp

Southern Energy is excited to announce successful early flowback results from the first well of the three-well horizontal padsite located in the Gwinville Field.

Highlights

• Well GH 19-3 #2 is flowing at an initial level of 7.7 MMcf/d (1,280 boe/d), at a highly restricted flowing pressure, exceeding the Company’s modelled type curve
• Additional volumes from GH 19-3 #2 have increased the Company’s production approximately 60% to 3,175 boe/d, materially increasing gas sales as no test volumes are flared
• The Company remains largely unhedged, resulting in gas from GH 19-3 #2 being sold at current NYMEX gas prices
• Initial results indicate that flowback performance using the Generation 3 completion design is far superior to any previous Selma Chalk wells in the area
• Flowback results are expected from two recently completed Gwinville wells shortly

The GH 19-3 #2 well was opened to flowback following the stimulation operation.  After approximately one week of clean-up, the well is flowing at 7.7 MMcf/d (1,280 boe/d) at a highly restricted flowing pressure of 1,100 psig.  Production from the well is flowing directly to sales creating significant additional cash flow for the Company.  The well continues to produce over 2,000 bbl/d of load fluid, with approximately 24% recovered to date.  Throughout the first week of production, as more load fluid is recovered, the well’s gas rate has consistently increased day over day. 

Southern’s Generation 3 completion design increased the stage count by over 275% and the proppant concentration by over 40% as compared to the most recent Selma Chalk horizontal wells completed in Mississippi between 2013 – 2015, and initial flowback performance suggests that the increased completion intensity is having a very positive result.

With the additional volumes from the new well, Southern’s current WI sales production has increased approximately 60% to 3,175 boe/d (96% gas).  The additional natural gas production from the new well is unhedged and being sold at current NYMEX gas prices.

Stimulation operations on the GH 19-3 #3 and #4 wells have also been completed, and both wells will begin flowback/clean-up shortly. 

Ian Atkinson, President and CEO of Southern, commented:
“This is a transformational moment for our company; not only are we adding material production, reserves, and cash flow at a time when gas prices are near 14-year highs, but we are solidifying and executing our operational strategy to deliver multi-year redevelopment from our assets and highlighting the significant opportunity and optionality we have in providing equity growth for shareholders.

“We are extremely excited by these initial results from our Generation 3 completion design on these Gwinville Selma Chalk horizontal wells. The flowback results from the GH 19-3 #2 well are evidence of how our team has successfully used modern technology to revitalize these significantly under-developed conventional assets in the Gulf Coast area.

“While still premature to make accurate type curve predictions for these and future Gwinville wells, we can say at this point, that the early flowback performance is far superior to any of the previous Selma Chalk wells in the area. Our operations team has done an excellent job of safely managing the stimulations on the three-well pad, and we expect costs to come in-line with AFE estimates.”

I have been very impressed with SOUC who have already delivered significantly, indeed this GH 19-3 #2 well is flowing at an initial level of 7.7 MMcf/d (1,280 boe/d), at a highly restricted flowing pressure, well exceeding company and market expectations. The well result was actually put out earlier than expected as the flow back brought in so many bucks it had to be done. 

Indeed, the additional volumes from GH 19-3 #2 have increased the Company’s production approximately 60% to 3,175 boe/d, ‘materially increasing gas sales’ and as the company has only modest hedging in place will flow through to the bottom line. The hedging was only done on the base portion and some has been written to benefit only at $20 prices which is my sort of bet. All this gas we are talking about is unhedged and very profitable, indeed these wells achieve pay-out in 3 months. 

Clearly the Gwinville field 3 well horizontal padsite project is already a success and this bodes very well for the future, if you have not checked out Southern up until now it is very much worth a detailed look. Speaking to CEO Ian Atkinson a little while ago I was more than comforted in my confidence that Southern is the best new arrival for a long time, indeed it may even make a surprise Bucket List appearance… With this well so good and the next two ready to flow back anytime I think that there is more good news to come. 

KeyFacts Energy Industry Directory: Malcy's Blog