WTI (Apr) $74.80 -$1.88, Brent (Apr) $80.77 -$2.01, Diff -$5.97 -13c
USNG (Apr) $2.60 +17c, UKNG (Apr) 125.08 -5.92p, TTF (Apr) €47.43 -€1.02

Oil price

The Bank madness that has gone on in the last few days has hit markets hard, risk off is the name of the game and the CPI numbers are due later in the US*. But it has changed perceptions for the Fed next week, many experts are now saying rates having been +50bp’s then +25bp’s are now 0 or even a reduction…

*The CPI figure came out at +0.5% for February, the highest in five months which has complicated matters even more for the Fed but complicating the Fed never was much of a challenge…

San Leon Energy 

San Leon notes the press release published in Nigeria by Eroton Exploration & Production Company Limited on 13 March 2023 about its ongoing operation of the Oil Mining License 18.  This press release in in response to press speculation in Nigeria last week.  San Leon’s economic interest in OML 18 is not impacted by a possible change of operatorship of OML 18.

In its press release, Eroton has emphasised that it remains the operator of OML 18 in line with the provisions of the Joint Operating Agreement governing OML 18 and has made the following points:

1.    The purported attempt by the non-operators of OML-18; NNPC Limited and Sahara Field Production Limited (now known as OML 18 Energy Resource Limited) to appoint NNPC Eighteen Operating Limited as operator of OML 18 is a breach of the JOA as any dispute whatsoever between the parties must be addressed by the dispute resolution provisions of the JOA. There can be no removal of an operator without following these procedures and the process is designed in such a way that notice requirements cannot be waived, and the removal of an operatorship can therefore not be carried out, without following the process provided in the JOA.

2.    Eroton has issued a notice of arbitration to NNPC and Sahara in accordance with the terms contained in the JOA to defend its legal rights. Furthermore, Eroton has received a legal opinion that it continues to remain as operator pending such resolution and that this will be upheld by the courts of Nigeria. Eroton further notes that the action taken by NNPC and Sahara sets a damaging precedent in the oil & gas industry in Nigeria because due process has not been followed.

3.    Eroton took over operatorship of OML 18 in 2015 with a production of 6,000 bbls/d and increased production to over 50,000 bbls/d of dry crude (75,000 bbls/d of gross liquids) in less than 24 months.  Eroton was also recognized by NNPC as being one of the two operators with the lowest technical cost per barrel in the industry over that time period. This performance continued until the wider industry became severely impacted firstly by COVID-19, and then by the unprecedented level of crude theft and sabotage plaguing the Niger Delta area since 2020.

4.    Since Q4, 2021, the Government of Nigeria has received virtually zero crude oil from any company utilising the Nembe Creek Trunk Line (“NCTL”), a pipeline that is partially owned by NNPC, owing to the force majeure declared by the NCTL operator and the widespread vandalism and crude oil theft recorded in the region. These criminal activities in the Niger Delta are well known and continue to adversely affect the entire region. For example, Eroton’s crude oil receipts dropped steadily in 2021, culminating in zero receipt in November 2021 at Bonny Terminal. This was despite efficient wellhead production data showing produced volumes of over 500,000 barrels of oil for the same month. Consequently, and in agreement with its partners in OML 18, Eroton shut in the wells.

5.    Eroton subsequently undertook an alternative means of evacuating its crude oil from OML 18 using barges, a project funded entirely by Eroton and with no financial support from its partners.

6.    Eroton further states that the allegations of improper actions by it are baseless and unfounded and categorically denies any fraudulent acts as stated in the in certain press reports.

Probably best left for the courts, this seemingly odd challenge by the non-operators does not technically affect SLE who own the stake indirectly and for whom therefore the operator is not specifically pertinent. 

Canadian Overseas Petroleum Limited

Canadian Overseas Petroleum Limited has announced that its operating affiliate, COPL America, has received continued support from its senior lender as it restores production levels and makes up oil sales at its Wyoming Assets, following winter closures in January and February 2023.

Covenant Waiver

The Company’s affiliate COPL America has executed a covenant waiver, with the support of its Lender, pursuant to which the measurement date of its 28 February 2023 liquidity covenant has been extended to 22 March 2023. The Lender granted this Waiver in response to the good progress in securing funding with the main bondholder for the July 2022 Bonds offering. 

Annual Financial Statements & Operations Update
The Company has restored normal operating conditions at Barron Flats (Shannon) miscible flood, following recent storms. A full operating update will be published at the end of March along with the publication of the Company’s Annual Financial Statements and Management Discussion and Analysis and Annual Information Form. 

Arthur Millholland, President & CEO commented:
“We thank our Lender for their continued support as we work to get the full field back on line as the conditions clear up. Our principal stakeholders are working together with the Company to exit this period stronger than it entered with a further update expected in the days ahead.”

As I mentioned before I’m only just starting coverage of COPL and these last few announcements have caught me inexperienced and I need to fix a meeting with the company. More to follow…