WTI (Apr) $76.66 -92c, Brent (May) $82.66 -63c, Diff -$6.00 +29c
USNG (Apr) $2.55 -13c, UKNG (Apr) 103.79p -8.65p, TTF (Apr)  €40.82 -€2.58

Oil price

Slightly more drift in oil as a follow up to Jay P’s fit of the vapours but the inventory stats were better than expected, an actual draw in crude of 1.694 barrels when the spotty kids were expecting a build.

Oil is about a dollar better today after comments from the Opec Secretary General about growth in demand from China.

PetroTal Corp

PetroTal has announced various corporate updates, alongside news that it has been recognized by the TSXV as a top 50 performing issuer, ranking 4th in the energy industry sector.  All amounts are quoted in US dollars.

Oil Production Update
After re-establishing barging fleet schedules, PetroTal has been producing an average of 20,000 barrels of oil per day since the last week of February 2023.  Prior to that, production was constrained resulting in January and February 2023 average production of approximately 7,600 bopd and 8,000 bopd, respectively.  At current oil production rates, the Company expects to average between 11,000 bopd and 12,000 bopd during Q1 20023, below the guided 13,500 bopd for the first quarter. 

With barging travel now normalized, and the contracted barging fleet now expanded to over 1.5 million barrels of capacity (from 1.2 million barrels in 2022), PetroTal expects to make up the Q1 2023 production shortfall in Q2 2023, thus maintaining its 2023 full year production guidance of between 14,000 bopd and 15,000 bopd.

Drilling Update
The Company completed drilling (and coring) its third water disposal well (“4WD”) on January 29, 2023.  The core sample taken from the well is currently being analysed.  The water disposal well was completed ahead of schedule and on budget.

PetroTal subsequently commenced drilling development well 14H on February 8, 2023, its 15th oil well at Bretana. The well is estimated to cost $15.3 million and will be drilled to a total measured depth of almost 5,100 meters with a 1,125 meter horizontal section, making it the longest reaching horizontal well ever drilled on land in Peru. The well is expected to be completed by mid April 2023, with associated production capacity available shortly after initial testing. This will allow the field to continue producing at approximately 20,000 bopd during Q2 2023. 

Cash and Bond Repayment Update
PetroTal has received $26.5 million in regular monthly scheduled payments from Petroperu as at March 1, 2023, totalling approximately 40% of the $64 million true up revenue due to the Company from 2022.  PetroTal has also received $4.5 million from the exercise of warrants in 2023, further enhancing its cash position. 

The Company reiterates its Q1 2023 cash flow guidance, which will allow for the remaining $55 million of bonds to be repaid by the end of March 2023, in addition to the $25 million paid in mid February 2023.  The full bond repayment will allow for a capital return program to commence shortly thereafter, with further updates on this program to be made in due course.

To support working capital fluctuations, PetroTal is pleased to advise that it has finalized an unsecured revolving $20 million credit facility with a Peruvian bank.   

Social Trust Modification in License Contract Formally Approved
The Company is pleased to announce the publication of the Supreme Decree signed by Peru’s President authorizing Perupetro to execute the amendment incorporating the 2.5% Social Trust Fund to the Block 95 License Contract.  The social trust still requires its bylaws to be approved by the working table participants, which is estimated to occur in April 2023.  Since January 2022, the Company has segregated contributions for the fund based on the underlying rules and objectives of the social trust, which will fund important social projects in the Puinahua district.  PetroTal’s social trust vision has received overwhelming support from government officials, industry sector leaders, and local communities for its potential to change the operating landscape in Peru, including its important mining sector.

TSX Venture Exchange Recognition
The 2023 TSX Venture 50 is an annual program of the TSX Venture Exchange that recognizes the top performing TSXV-listed companies from five industry sectors.  The 2023 winners are selected based on 2022 annual performance for market capitalization and growth, share price appreciation and trading volume.  In addition to ranking 4th in the energy industry sector, PetroTal was also the 4th ranked Company based on market capitalization amongst the TSX Venture 50 companies, showcasing the natural progression of PetroTal’s recent graduation to the TSX.

This is PetroTal’s second consecutive year as a recognized top 50 issuer and a video featuring PetroTal can be found at the link below along with additional information from the full 2023 Venture 50 ranking:

https://money.tmx.com/en/venture50

Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:
“We are pleased that barge loadings and deliveries have been restored and normalized to allow steady and continuing sales flow.  The team is confident the Company will be able to catch up with guidance in Q2 2023, should current export conditions continue, creating the platform not only to meet, but also surpass, current 2023 guidance. 

The field is now producing over 20,000 bopd, which recently propelled the Company to reach over 12 million barrels of cumulative oil production and represents only 11% of the field’s estimated ultimate 2P recovery.  We are also extremely happy that we will fulfil our promise to investors to repay the remaining bonds and prepare for a much anticipated return of capital program.”

After a slight hiccup in recent weeks with barging difficulties the turnaround has been swift and after missing recent production targets full year guidance is unchanged at 14-15/- b/d.

The 14H development well has spudded and will cost $15.3m and will be drilled to a total measured depth of almost 5,100 meters with a 1,125 meter horizontal section, making it the longest reaching horizontal well ever drilled on land in Peru. When on production it will get Bretana back up to 20/- b/d enabling confidence on guidance. 

Finance wise this means that PTAL are very well placed, with the Petroperu payments and warrant conversion totalling some $40m the company will repay the final $55m of bonds by the end of this month in line with cash flow guidance.

After that the door is opened to the promised capital return programme to commence which will be very good news for shareholders and confirms confidence in my long held TP of 150p so masses of upside on offer in what is a cracking investment. 

Eco (Atlantic) Oil & Gas

Eco has noted Africa Oil Corp.’s publication of an independent, NI 51-101 compliant report of qualified reserves and resources evaluator for Block 3B/4B Offshore South Africa. The CPR was commissioned by Africa Oil Corp. and issued by RISC Advisory (UK) Limited, an independent oil and gas advisory firm.

Highlights

• RISC’s analysis of the licence identifies total Unrisked Gross P50 Prospective Resources of approximately 4 billion barrels of oil equivalent (“BOE”).
• Net (26.25%) to Eco Atlantic, the Net Unrisked Prospective resources are approximately 1.0 BOE.
• Exploration risk (Pg) for the identified prospects and leads were assessed by RISC to range from 15% to 39%.

Eco Net Unrisked Prospective Resources: Oil – Million stock tank barrels of oil (“MMstb”):

• Minimum (P90): 452 MMstb
• Most likely (P50): 802 MMstb
• Maximum (P10): 1,427 MMstb         

Eco Net Unrisked Prospective Resources: Gas – Billion cubic feet (“Bcf”):

• Minimum (P90): 798 Bcf
• Most likely (P50): 1,446 Bcf
• Maximum (P10): 2,628 Bcf

Notes:
Net values are ECO’s 26.25% working interest share of Gross Prospective Resources attributable to Exploration Right and are not equivalent to an entitlement right.

Colin Kinley, Co-Founder and COO of Eco Atlantic commented:
“After completing an extensive reprocessing of the 3D on 3B/4B, this CPR by RISC confirms 3B/4B’s potential and generates exciting prospectivity on this unique Orange Basin block. The region offshore Namibia and South Africa continues to be an exploration hotspot and yielding dramatic discoveries. The estimated one Billion BOE of P50 prospective resources net to Eco are all in prospects of similar geologic age and structure to that of the recent discoveries announced by TotalEnergies and Shell in the same horizons of the Orange Basin.

“We are working closely with our JV partners on a potential farm out of up to a 55% gross working interest in the block, which will help accelerate the commencement of a two well drilling program on the licence. We believe that this is a highly prospective block with multiple exciting exploration prospects. We look forward to updating the market on further developments of Block 3B/4B as exploration activity continues to accelerate in this basin.”

It is always pleasing when a partner, especially one as good as Africa Oil validates your own investment decisions and in my own mind Eco are in as good a position as possible to make out in the Orange Basin. If they can’t get a farm-out of record proportions something has gone terribly wrong, so the risk reward on owning Eco are firmly with investors.

Gulf Keystone Petroleum

Gulf Keystone confirms that a gross payment of $34.3 million ($26.9 million net to GKP) has been received from the Kurdistan Regional Government (“KRG”) for Shaikan crude oil sales during September 2022.

The payment reflects a new pricing mechanism proposed by the Ministry of Natural Resources for Shaikan crude oil sales, effective 1 September 2022. Under this mechanism, the realised price for September reflects the average price for the Kurdistan Blend (“KBT”) sold by the KRG at Ceyhan in Turkey, adjusted for a quality discount and transportation costs for use of export pipelines.

For Shaikan crude oil sales in September 2022, the new pricing mechanism results in an approximately $11/bbl reduction in the realised price versus the previous pricing mechanism leading to a discount to Dated Brent of approximately $34/bbl. The impact on net payment is $5.3 million.

The following table summarises pricing information for KBT published by the KRG for the months from September 2022 to January 2023, including the impact on Shaikan realised prices versus the previous pricing mechanism:

If the new pricing mechanism had been in place throughout 2022, the reduction in monthly Shaikan realised prices would have ranged from $4/bbl to $13/bbl versus the previous pricing mechanism, assuming KBT crude specs during Q3 2022 were representative of those during H1 2022. Given fluctuations between Dated Brent and KBT, and the widening differential in 2022 driven in part by competition with heavily discounted Russian crude, the future KBT discount to Dated Brent, and associated impact on Shaikan realised prices, is uncertain.

The Company continues to engage with the MNR regarding the proposed pricing mechanism and amendment to the Shaikan Lifting Agreement.

The new style payments from those in the KRG might become the norm but only time will tell, in the meantime these updates will presumably keep coming although they may be of limited importance…

Harbour Energy

Harbour Energy today announces its audited full year results for the year ended 31 December 2022.

Linda Z Cook, Chief Executive Officer, commented:
“In our first full year as a publicly listed company, Harbour delivered materially higher production which – together with improved margins – enabled us to continue to deleverage and make material shareholder distributions. We further developed our Net Zero strategy, setting ourselves an interim target, and built significant momentum in our flagship Viking CCS project.  Most importantly we achieved all of this while improving our safety record.

However, the UK Energy Profits Levy, which applies irrespective of actual or realised commodity prices, has disproportionately impacted the UK-focused independent oil and gas companies that are critical for domestic energy security. For Harbour, the UK’s largest oil and gas producer, it has all but wiped out our profit for the year. This has driven us to reduce our UK investment and staffing levels.  Given the fiscal instability and outlook for investment in the country, it has also reinforced our strategic goal to grow and diversify internationally. 

Thanks to our robust balance sheet, we enter 2023 well-placed to deliver on our strategy of building a global diverse oil and gas company.  We will continue to return any excess capital to shareholders while investing in our existing portfolio and maintaining capacity for meaningful but disciplined M&A.”

2022 Operational highlights

• Production of 208 kboepd (2021: 175 kboepd), a 19 per cent increase on 2021
• Improved unit operating costs of $13.9/boe (2021: $15.2/boe)
• Total recordable injury rate reduced to 0.8 per million hours worked (2021: 1.3)
• Investment decisions taken on Talbot development and Leverett appraisal in the UK
• Material discovery at Timpan-1 (Indonesia), de-risking a multi-TCF gas play
• Zama (Mexico) development plan substantially agreed ahead of submission to the regulator
• 2P reserves and 2C resources of 865 mmboe (2021: 948 mmboe), reflecting Indonesia exploration success offset by production and UK licence relinquishments
• Net Zero by 2035: Board-approved interim target to halve our emissions by 2030
• Viking CCS CO2 storage resources of 300 mt independently verified; customer base expanded

2022 Financial highlights

• Realised, post hedging, oil and UK gas prices of $78/bbl and 86p/therm (2021: $59/bbl, 54p/therm)
• Increased EBITDAX of $4.0 billion (2021: $2.4 billion) and profit before tax of $2.5 billion (2021: $0.3 billion)
• Profit after tax of $8 million (2021: $101 million) impacted by a $1.5 billion one off non-cash deferred tax charge associated with the EPL
• Free cash flow of $2.1 billion (2021: $0.7 billion) after total capital expenditure of $0.9 billion (2021: $0.9 billion) and $551 million of tax payments (2021: $280 million)
• Approved $600 million of shareholder distributions: $553 million made in 2022; $41 million in 2023
• Net debt (excluding unamortised fees) and leverage reduced to $0.8 billion (2021: $2.3 billion) and 0.2x (2021: 0.9x), respectively
• Proposed final dividend of $100 million (12 cents per share) for 2022, in line with $200 million annual dividend policy; given our buybacks, this represents dividend per share growth of nine per cent

Outlook for 2023

• Production guidance of 185-200 kboepd reiterated; production to end February of 202 kboepd
• Opex guidance unchanged at c.$16/boe
• Total capex guidance reiterated at c.$1.1 billion, including c.$0.2 billion decommissioning, split 85 per cent UK / 15 per cent international
• UK capex targeting high return, near field and/or infrastructure-led opportunities
• International capex focused on growth opportunities with potential for material reserves replacement, including Zama (Mexico) and Andaman (Indonesia)
• Review of UK organisation to align with lower activity levels to complete in second half of 2023
• Continued efforts to reduce emissions and progress UK CCS projects to a final investment decision
• At $85/bbl, 150 pence/therm, forecast 2023 free cash flow (post-tax, pre-distributions) of c.$1.0 billion1 with the potential to be net debt free in 2024
• New $200 million share buyback announced today which, together with the $200 million annual dividend policy, brings total announced shareholder returns to $1 billion since December 2021

Harbour has gone ‘all in’ on attacking the UK Government with regard to the Looney Tax saying that the profits were ‘all but wiped out’ by the tax and that any further diversification would be overseas by necessity. I suppose this comes better in a foreign accent however true it may be. 

A strategic review may herald a significant reduction in the size of the company, the warning above means that the UK will probably bear the brunt of the cuts.

KeyFacts Energy Industry Directory: Malcy's Blog