WTI (Dec) $85.05 +54c, Brent (Dec) $93.50 +$1.12, Diff -$8.45 +58c, USNG (Nov) $4.95 -41c, UKNG (Nov) 192.0p -32p, TTF (Nov) €101.69 -€22.16

Oil price

Oil rallied as Chinese Covid numbers got better and the dollar eased. The Baker Hughes rig count showed a rise of 2 units to 771 and oil was also up 2 to 612 rigs.

In Brazil with one week to go President Bolsonaro is closing the gap to Lula every day, having been a lot closer than expected at the first vote he closed to 5 points it is now less….

Union Jack Oil

Union Jack has declared a Maiden Special Dividend, announce a Share Buyback Programme and confirm details of the Company’s Capital Allocation and Distribution Policy.

The financial performance of Union Jack during 2022 has been dynamic and following a thorough review of the capital requirements of the Company’s business operations, organic growth options and other considerations, the Board has decided it is timely to make a cash distribution by means of declaring a Maiden Special Dividend to shareholders and to implement a share buyback programme. This has been made possible following the grant of a Capital Reduction by the High Court of Justice as announced on 30 August 2022, the share buyback authority approved by shareholders at the Annual General Meeting of the Company in June 2022, and after applying the criteria associated with the Company’s Capital Allocation and Distribution Policy.

Maiden Special Dividend Declared
The Board declares a gross Maiden Special Dividend of 0.8 pence per Ordinary Share (total payment £902,927) with a London Stock Exchange Ex-Dividend date of Thursday 17 November 2022, a Record Date of Friday 18 November 2022 and Payment Date of Friday 16 December 2022.

Share Buy-back Programme
The Company will now implement a share buyback programme, funded from the Company’s existing cash resources, and within the limitations of the authority granted by shareholders at the recent AGM. This will involve the purchase of Ordinary Shares in the open market, the timing of which will be dependent on market conditions, share price, trading volumes and subject to the Company’s Capital Allocation and Distribution Policy criteria.

All share purchases by the Company will be announced by RNS as soon as practicable following the dealing.

The Company intends to place the repurchased Ordinary Shares into Treasury. Ordinary Shares held in Treasury are not entitled to voting rights and dividend payments, or included in the Earnings Per Share calculation.

Executive Chairman of Union Jack, David Bramhill commented:
“Union Jack’s financial position has been transformed during 2022 and it now has a robust balance sheet, a fully funded and active work programme for the next 18 months on its principal projects and has no borrowings. Our Capital Allocation and Distribution Policy and current excess cash position allows us to declare a Maiden Special Dividend and to implement a share buyback programme going forward, while importantly not impeding the Company’s organic growth potential.

“These distributions are an important means of returning value to shareholders and signal the significant progress that Union Jack has achieved during the past year.”

Capital Allocation and Distribution Policy
The Board applies a consistent and disciplined approach to the Company’s Capital Allocation and Distribution Policy that takes into consideration the following criteria:

• Maintaining a strong Balance Sheet which is debt free throughout the oil price cycle;
• Managing the Company’s overall funding requirements after consideration of maintaining and developing operations at Union Jack’s principal projects in order to confirm that the Company has excess cash that can then be distributed;
• Continuing to invest in the Company’s growth projects which include Wressle, West Newton, Keddington and Biscathorpe, all of which the Board believes will deliver significant future returns for shareholders;
• Managing future distributions in line with commodity price movements and the Company’s excess cash position;
• Expect that a share buyback would result in an increase in earnings per share, acknowledge that the buyback share price does not reflect the intrinsic value of the business while also considering the benefits to share trading liquidity; and
• Consistent with Union Jack’s progression into a meaningful producing company, only then make appropriate decisions on any distributions, however not at the cost of impeding the Company’s growth potential.

Future dividends and share buybacks will be reviewed and determined in line with the Company’s Capital Allocation and Distribution Policy criteria to ensure the resulting distribution is in the interests of shareholders.

Shareholders in Union Jack have been rewarded this morning as the company has come good with its prediction of a substantial return, a maiden special dividend and a share buy-back which even the most negative analysts could object to. 

The market has been hearing on a monthly basis how much the company’s finances have been ‘transformed’ by the revenues from Wressle which has enabled this payout. The board reminds us that the work programme for the next 18 months is fully funded and with no debt, the organic growth potential from West Newton, Keddington and Biscathorpe assets ‘will deliver significant growth for shareholders’. 

Union Jack has made a massive step forward today as it moves onto the dividend lists, always something associated with operational success leading to substantial revenues and a strong balance sheet. Union Jack and its loyal shareholders can genuinely celebrate backing this exceptional management who have, sometimes against all odds, delivered the company at this landmark stage in its history.

Zephyr Energy

Zephyr has provided an update on operations and related investor webinar on its project in the Paradox Basin, Utah, U.S. and announces the signing of a Cooperation Agreement with Kirkwood Oil and Gas LLC related to data sharing and planned joint drilling in the Paradox Basin.

Drilling programme update
The Company has completed all preparations needed to commence drilling the fully-funded State 36-2 LNW-CC well, pending receipt of the final Federal drilling permit. While Federal drilling permit approvals have slowed markedly across the entire U.S. domestic oil and gas industry, the Company remains confident it will be able to commence drilling in the near-term.

In anticipation of the receipt of the final permit, and in order to be in position to spud the well shortly thereafter, the Company recently completed construction of the shared pad on which the State 36-2 LNW-CC and the State 36-3 LN-C9 wells will be located. The State 36-2 LNW-CC well will be the initial well drilled and will target the Cane Creek reservoir. The State 36-3 LN-C9 exploration well (targeting the shallower C9 reservoir) is being permitted in parallel. The pad for the wells is located in an area with good quality road access and adjacent to the recently acquired 6-inch gas gathering pipeline, providing efficient access to gas export infrastructure.

With the exception of the final Federal permit, all regulatory approvals required to drill the State 36-2 LNW-CC well have been secured. The Company is in advanced discussions to execute a rig contract shortly after the final permit is approved, details of which will be announced in due course.

The two wells mentioned above are both located within Zephyr’s White Sands Unit (the “WSU”), the same Federal unit in which the previously drilled State 16-2LN-CC well is located. A third well is expected to be drilled outside of the WSU, and will be drilled in partnership with, and operated by, Kirkwood Oil and Gas LLC, the Paradox Basin’s largest operator, details of which can be found below.

State 16-2LN-CC well production test update
The State 16-2 LN-CC well was successfully drilled, completed and tested in late 2021, although rates were constrained throughout the production test due to surface equipment limitations. Since then, Zephyr’s operations team, working with a team of external consultants, has spent significant time designing surface facilities to re-equip the well pad in order to:

a) test plans for improved flow assurance;
b) prepare for eventual gas export and continual production operations; and,
c) obtain further production data for overall well and field management.

The Company, which previously announced plans to conduct an additional production test on the well, is pleased to announce that all permits needed for that production test have been approved and operations to construct further surface facilities on the well pad are in progress.

Multiple service providers are currently active on site, and the wellbore has been re-entered to prepare for the commencement of the additional well test, currently envisioned to begin mid to late November 2022.

Cooperation Agreement with Kirkwood Oil and Gas LLC

The Company is pleased to announce it has entered into an agreement with Kirkwood Oil and Gas LLC and its affiliate, Wesco Operating, Inc, in which Zephyr and Kirkwood agree to co-operate and collaborate on the extension and further development of the Cane Creek play in Grand County, Utah – including the drilling of a new, Kirkwood operated well.

Kirkwood, based in Wyoming, operates over 500 wells across 39 oil fields in the Rocky Mountain region and is currently the operator of the Cane Creek oil field located 12 miles to the south of Zephyr’s White Sands Unit in the Paradox Basin. Kirkwood, via its operating subsidiary Wesco, is the most active regional operator in the northern Paradox Basin.

The Agreement allows for the sharing of certain proprietary data in order to assist both companies with the development of their individual acreage positions. In addition, the Agreement also allows for the planning and drilling of a 2-mile horizontal well targeting both Zephyr and Wesco held acreage.

The planned well will be located in Grand County, Utah immediately to the south of the Wesco operated Cane Creek Field. Cooperation on the planned well would involve sharing design and lessons learned from the Zephyr-operated State 16-2LN-CC well and utilising Wesco’s considerable experience as operator of the Cane Creek oil field. Wesco will act as the operator of the planned well, and each party will hold a 50% working interest with all expenses shared pro-rata.

The objective of the planned well is to test the potential of modern hydraulic stimulation and completion (as recently performed at the State 16-2LN-CC well) on the Cane Creek reservoir within the black oil fairway of the play. The well will be drilled from an existing pad with existing infrastructure, thereby reducing environmental impact and the need for further gathering line infrastructure. The planned well location is immediately offset by a 2014 vintage horizontal well (with a 4,900-foot lateral) which targeted the productive, highly over pressured, naturally-fractured Cane Creek reservoir. That well was subsequently recompleted with a small volume diesel stimulation and has produced over 188,000 barrels of oil to date, at very low water cut, and is still in production today.

By applying the latest completion techniques, it is expected that initial oil rate and expected ultimate recovery from the planned well will be increased both by drilling a longer well and improving the overall reservoir drainage. Success at this location would open new play opportunities for both companies on their existing acreage positions. Drilling operations remain subject to regulatory authority approvals.

Investor Webinar
On 28 September 2022, the Company announced that it would be presenting a live investor webinar on Tuesday 25 October 2022. At the webinar, the Company intended to present detailed development plans and schedules related to the forthcoming drilling programme. Given that the Company is still awaiting the final Federal permits for the two wells located in the WSU, it has elected to delay the webinar until the State 36-2 LNW-CC Federal permit is granted and the rig contract awarded, so that the webinar can be as detailed, accurate and informative as possible.

Colin Harrington, Zephyr’s Chief Executive, said:
“It’s exciting to see activity building across the Paradox project as we prepare for the commencement of our fully-funded drilling programme. With the construction of the State 36-2 LNW-CC drilling pad now complete, our team is prepared to commence drilling operations as soon as possible after the final Federal permit has been granted.

“Based on discussions with the relevant Federal authorities our team is confident that drilling approval has the potential to be granted in the near-term in spite of an industry wide slowdown of Federal drilling permit approvals. In the meantime, we’ve worked extremely hard to navigate the challenging rig, labour and supply chain market environment so that we’re positioned to spud the well as soon as possible.

“In addition to preparations for drilling, our facilities team has been working on the re-equip and augmentation of the surface facilities at the State 16-2 LN-CC, and we look forward to the seeing the results of the production test over the coming weeks.

“I am further delighted to announce the signing of the Agreement with Kirkwood. As the most active operator in the northern Paradox Basin, Kirkwood’s team has a strong history and service relationships which are second to none in the basin. Paired with Zephyr’s technical understanding and expertise gained from successfully drilling the northern Paradox Basin’s first horizontal well using a modern completion, our joint cooperation on the funding and drilling of a new well – at a location where our respective acreage positions are contiguous – has the potential to be highly beneficial for both parties, and with a minimum of surface disruption. We look forward to the collaboration and are eager to see the application of hydraulic stimulation applied to a long lateral horizontal well in the black oil fairway of the Cane Creek Field.

“Finally, while I’m frustrated with the delay related to our Paradox-focused investor webinar, we look forward to rescheduling as soon as the Federal permit is granted and the drilling contract is finalised – at which point it will be possible to more accurately share details regarding drill timing, service partners and expected completion and testing schedules.

“We expect the next period to be an exciting time in our development of the Paradox project and we look forward to providing further updates when activity on the ground permits.”

Zephyr are clearly close to completion of all the necessary preparations and with imminent final permitting the process of drilling the first two wells should soon get under way after signing the drilling contract. 

Production will not be far away and the deal with Kirkwood will add a joint well as well as de-risking the Cane Creek and of course other opportunities will add to the huge value within Zephyr. 

Predator Oil & Gas

Predator has announced that it has executed a rig contract with Star Valley Drilling Ltd. to use its Rig 101, which successfully drilled and completed for rigless testing the MOU-1 gas discovery well, to drill the upcoming MOU-2 well in the Guercif Licence onshore northern Morocco.

Rig 101 has been mobilised to a rack site (holding location) en route to Guercif for rig preparations whilst the access tracks and roads to the MOU-2 location have been upgraded and the well pad construction has been completed following a recent site visit by the management team to the drilling location.

MOU-2 is a high impact/high reward well  to test the range of Best Estimate and High Estimate net contingent gas resources to the Company of between 295 BCF to 708 BCF respectively, as defined in the independent SLR Consulting Ireland Ltd. (“SLR”) Competent Persons Report (“CPR”), (February 2020 and January 2022 “MOU-4” updated).

It is intended that MOU-2 will be completed for rigless testing followed by rigless testing of MOU-1.

Results from rigless testing will allow a decision on the initiation of a Compressed Natural Gas development to be made.

A location for the MOU-NE well (now designated MOU-3) was finalised during the recent site visit.

MOU-3 will be the next well in the drilling sequence and will test a 35km² area within a larger Jurassic oil prospect.

A Competent Persons Report is being commissioned to define the range of potential prospective oil resources for the MOU-3 trap.

Board changes
Thomas Evans is stepping down from the Board as a Non-executive Director with immediate effect to spend more time on his other existing commitments. The Board thanks Tom for his helpful and constructive input during his time with the Company.

Carl Kindinger has been appointed Non-executive Director with immediate effect. Carl is a former Non-executive Chairman of the Company who stepped down in 2020 to focus on family matters. Carl’s biography can be accessed on the Company’s website at www.predatoroilandgas.com . Carl importantly has many years of experience in the Moroccan oil and gas sector which will enable him to provide critical oversight of the Company’s business objectives as it enters a critical phase in implementing its development strategy.

Paul Griffiths, Executive Chairman of Predator Oil & Gas Holdings Plc commented:
“No-one can deny that these are extremely challenging times, both from the political, financial, economic and supply chain perspectives, created by a set of circumstances that no-one could have foreseen.

However we are pleased to be taking the positive steps forward announced today needed to unlock the value of the gas potential of the Guercif Basin. The sequence of drilling and testing operations has been designed to establish the case for an early decision on a Compressed Natural Gas development.

We are looking ahead too to the exciting additional potential offered by the MOU-NE oil prospect. Guercif is possibly the only area of Morocco where this particular oil play can be tested in an optimal geological setting.

Management remains highly focussed and committed to delivering its carefully constructed strategic plan for developing the potential oil and gas resources of this large licence area and unlocking shareholder value.

Strong management with firm credible objectives is what is needed to navigate through these challenging times and I am delighted to welcome Carl Kindinger back to the Board.”

Predator is one step closer to drilling in Morocco with the signing of a rig contract for drilling of the upcoming MOU-2 well  in the Guercif Licence onshore northern Morocco. MOU-2 is a high impact/high reward well where high estimates are an impressive 708 BCF so any success would be highly transformational. 

Trinity Exploration & Production

Trinity has announced that it intends to conduct on-market purchases under a second share buyback programme pursuant to the shareholder authorities obtained at the Company’s last annual general meeting held on 29 June 2022 “AGM”) to return up to US$ one million to shareholders of the Company.  Under the Programme the maximum aggregate number of ordinary shares of US$ 0.01 each that can be purchased is 3,215,943 Ordinary Shares (which represents approximately 10 per cent of the Company’s issued share capital at the time of the AGM less 672,000 Ordinary Shares repurchased by the Company under the buyback programme announced on 20 September 2022).

Following the success of the buyback programme announced on 20 September 2022 and completed on 17 October 2022, the Board of Trinity still considers the Company’s current market capitalisation does not reflect an appropriate valuation for the Company.  In addition to its commitment to operational delivery, as announced in the Interim Results announced on 20 September 2022, it is the Company’s intention to implement a new Capital Allocation Policy which is likely to include the payment of a regular dividend and a share buy-back programme.  These initial share buyback programmes confirm that intent to further deliver value to the Company’s shareholders.

The Programme, which will be funded from the Company’s existing cash resources,  will take place within the limitations of the authority granted by shareholders to the Board of Trinity at the AGM.  The Programme will commence with immediate effect and will, unless terminated at an earlier date, expire at the conclusion of the 2023 AGM, or 30 June 2023, whichever is earlier (the “Expiry Date”).

The minimum price (exclusive of expenses) which may be paid for each ordinary share is US$ 0.01; the maximum price (exclusive of expenses) which may be paid for any Ordinary Share shall not exceed the higher of: i. 5 per cent above the average middle market price of the Ordinary Shares on AIM, a market operated by the London Stock Exchange plc (“AIM”) for the 5 business days immediately preceding the date on which the Company agrees to buy the shares concerned; and ii. the price of the last independent trade of any Ordinary Share and the highest independent current bid for an Ordinary Share on AIM at the time the purchase is carried out.  In exercising this authority, the Company may purchase shares using any currency, including British pounds sterling (“GBP” or “£”), United States Dollars (“US$”) and Euros (“€”).

Share purchases will take place in open market transactions and may be made from time to time depending on market conditions, share price, trading volume and other factors.  The Company has appointed Cenkos Securities Plc to manage the Programme and make market purchases of Ordinary Shares on its behalf, independently of the Company.

Trinity intends to put the repurchased Ordinary Shares into treasury.

The Company has determined that in conducting the Programme it will not rely on the safe harbour conditions for trading set out in Article 3(2) and Article 3(3) of the Commission Delegated Regulation (EU) 2016/1052 (which forms part of domestic UK law pursuant to the European Union (Withdrawal) Act 2018) given the limited liquidity in the Ordinary Shares and limitations that the conditions would impose on the number of Ordinary Shares that can be purchased and, as such, the Company may purchase on any trading day materially in excess of 25 per cent of the average daily volume in the 20 trading days preceding the date on which the purchase is carried out.

Purchases may continue during any closed period to which the Company is subject to from the date of this announcement to the Expiry Date.

There is no guarantee that the Programme will be implemented in full or that any purchases will be made. 

As at the time of this announcement, the Company’s total issued share capital consists of Ordinary Shares with one voting right per share. Trinity holds 672,000 of its Ordinary Shares in treasury and has 39,884,637 Ordinary Shares in issue (including treasury shares). Therefore, the total voting rights in the Company will be 39,212,637. 

The above figure of 39,212,637 Ordinary Shares may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the FCA’s Disclosure Guidance and Transparency Rules.

It worked the last time so….

IOG

IOG has provided a financial update.

Following the scheduled monthly receipt of payments for gas sales, IOG’s cash position is today in excess of £36 million, of which £5 million is restricted. The Company’s internal modelling projects corporate cash flows in a range of risked scenarios, including lower production outturn versus forecast, longer than planned downtime and gas prices materially below the prevailing forward curve. In the current outlook based on these scenarios, no short-term incremental funding need is anticipated.

Rupert Newall, CEO of IOG, commented:
“Following yesterday’s update, and with 2022 capex guidance unchanged, it is important to reassure our shareholders that IOG has sufficient liquidity to work through current operational challenges and that the changes announced this morning do not imply any upcoming capital raising plans.

The new IOG management team is working constructively to take ownership of these challenges and rebuild shareholder value. Our near-term priorities are to restore Saturn Banks production as early as possible after the Bacton terminal shutdown, bring Southwark onstream in a safe and timely fashion, and advance our plans to optimise Blythe production. We also look forward to progressing our exciting portfolio of appraisal and development opportunities. I look forward to keeping investors updated.”

This actually came out last Thursday lunchtime when I was on my way to Guernsey but it is worth remembering that after the substantial fall the company is in a good financial position and able to cover pretty much any eventuality. 

Reabold Resources

As announced on 17 October 2022, the Board of Reabold received a letter from Pershing Nominees Limited, which owns approximately 6.93% of the Company’s issued share capital on behalf of five beneficial shareholders, requesting the Board to convene a general meeting under section 303 of the Companies Act 2006.

The Board was advised that the requisition letter contained several deficiencies, including the potential for resolutions to be voted on in such a combination that your Company could be left without a minimum of two directors to form a valid quorum in breach of the Act and that resolution 11 (below) should properly be classified as a special resolution and not an ordinary resolution.  Accordingly, the Company engaged with Pershing as to the steps it needed to take to address these deficiencies.  Unfortunately, Pershing has refused to amend its requisition letter.  Notwithstanding the Board’s concerns about the validity of the letter, the Board has decided to proceed on the basis that the requisition process is a major distraction and needs to be dealt with swiftly and that the aforementioned potential breach of the Act is considered remote due to the indications of support the Board has received following its initial engagement with the Company’s major shareholders.

Reabold believes that the requisitioning parties have a questionable motive to gain control of the Company without paying a control premium. The Board also notes that the proposed new directors include individuals with a track record of value destruction as public company Board directors or no public Board experience at all. 

The requisitioned general meeting has been called for the purposes of considering the below ordinary resolutions. A general meeting date will be published alongside a circular to shareholders shortly. In the meantime, shareholders are advised to take no action at this stage.

The Ordinary Resolutions

1. THAT Kamran Sattar be and is hereby appointed as a director of the Company (with such appointment taking immediate and simultaneous effect).
2. THAT Cathal Friel be and is hereby appointed as a director of the Company (with such appointment taking immediate and simultaneous effect).
3. THAT Francesca Yardley be and is hereby appointed as a director of the Company (with such appointment taking immediate and simultaneous effect).
4. THAT John McGoldrick be and is hereby appointed as a director of the Company (with such appointment taking immediate and simultaneous effect).
5. THAT Jeremy Samuel Edelman be and is hereby removed as a director of the Company.
6. THAT Michael Craig Felton be and is hereby removed as a director of the Company.
7. THAT Marcos Estanislao Mozetic be and is hereby removed as a director of the Company.
8. THAT Sachin Sharad Oza be and is hereby removed as a director of the Company.
9. THAT Anthony John Samaha be and is hereby removed as a director of the Company.
10. THAT Stephen Anthony Williams be and is hereby removed as a director of the Company.
11. THAT any person appointed as a director of the Company since the date of the requisition of the Requisitioned General Meeting at which this resolution is proposed, and who is not one of the persons referred to in the resolutions numbered 1 through 10 (inclusive) above, be and is hereby removed as a director of the Company.

This also came out when I was away, I do not intend to comment on it at this time, it seems that the Reabold team are quietly confident that it doesn’t have legs and will be rejected at the meeting. The ‘Pershing’ side however are also not without hope and for example Cathal Friel has significant experience in the energy sector in the past. Watch this space…

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