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Oil price

Oil prices fell yesterday as Moodys took a bearish stance on a recovery in the Chinese economy. They claimed that the property sector and infrastructure investment is ‘subdued’ and that consumption and investment had ‘stalled’. They also said that global demand would ‘dampen export growth’. Ron Moody more like…

United Oil & Gas

United Oil & Gas has issued the following trading and operations update summarising recent operational activities, providing trading guidance in respect of the half year to 30 June 2023. This is in advance of the Company’s half year results which will be released in September. The information contained herein has not been audited and may be subject to further review and amendment.

Egypt, Abu Sennan (22% non-operated working interest, operated by Kuwait Energy Egypt)

H1 2023 Production
Oil production from the Abu Sennan Licence in H1 2023 averaged 1,051 bopd (net to United’s 22% working interest) with an additional 93 boepd net gas. The exit rate from the quarter was 1,011 bopd net, plus 111 boepd net gas.

2023 Work Programme
Two development wells, ASH-8 and ASD-3, were drilled in the first half of the year. Both of these wells were successful and came onstream in March and May respectively. 

In parallel to the development drilling, a number of workovers have also been completed, and have enhanced production from existing wells through low-cost interventions. Further workovers are planned as we continue through the second half of 2023.

After producing for a number of months at rates in excess of 2,800 bopd (616 bopd net), production from the ASH-8 well is now declining. This is in line with expectations and the performance of the other production wells in the ASH Field. Based on our previous experience of the field, the impact of the decline is expected to be partially mitigated by the installation of artificial lift in the well during H2, and by continued production-enhancing workover activity across the Abu Sennan Licence.

Additional drilling in H2 2023 has now been agreed by the JV partners and is expected to commence in September. An exciting exploration prospect, ASM, lying to the south of the prolific ASD Field has been approved for exploration drilling, and following on from the success of ASH-8, an additional target within the ASH Field has been identified for further appraisal. Further details on the timing and order of the H2 drilling programme will be announced in due course.

UK Central North Sea, Maria Discovery, Licence P2519 (100% working interest)
On 18 May United announced it had agreed to grant a further extension of the long stop date of the Asset Purchase Agreement (the “APA”) with Quattro for the sale of the Company’s interest in the Maria licence to 31 July to provide sufficient time for Quattro to meet the funding requirement under the APA. The parties have agreed that a further extension may be required for all conditions precedent to be met to allow completion of the sale, namely regulatory approvals to enable the transfer of funds to United, and the licence assignment to Quattro. The Company understands that Quattro have appointed a Canadian broker, Research Capital Corporation, and plan to conduct a marketing and accelerated book build process in July, primarily targeting Canadian based investors. Although there is no guarantee that the sale will complete, United continues to believe that the sale to Quattro on the current agreed terms remains the best option for United to realise value for its shareholders.

UK Onshore, Licence PL090 (26.25% non-operated working interest, operated by Egdon Resources UK Ltd)
Licence PL090 contains the shut-in Waddock Cross Field, situated in the onshore Wessex Basin, UK. Work continues on securing planning and permitting consents, finalising the site facilities and well designs, ahead of a potential 2024 drilling campaign. Although Waddock Cross remains non-core to United, there is clearly value within this asset, and United will continue to evaluate all the options for realising this potential, including the option of participating in a well in 2024.

Jamaica, Walton Morant Licence (100% working interest)
The farm-out campaign remains a key focus for United, as we seek to take this potentially transformational project forward into the next phase of the Licence. In order to do so, a commitment to drill a well will need to be made by end January 2024.

We have continued to engage with potential partners to participate alongside us in drilling this exploration well, and earlier in the year, a deadline for indicative offers had been set for the end of H1. We are encouraged by the number and quality of companies that are in the process of completing their evaluations, and as they have requested additional time, we have agreed to extend the deadline. Additional updates will be provided in due course.

1H 2023 Financial Summary
Revenues for the first half of the year are expected to be $6.4m (2022 H1 $9.8m), with the average realised oil price per barrel from Egypt achieved of approximately $78 (2022 H1 $105). Our cash balance as at 30 June was approximately $0.55m (2022: $3.8m) and whilst cash collections in the period remained strong at $7m (2022 H1 $8.7m), the continued impact of the macro-economic challenges affecting the Egyptian economy has resulted in increasing difficulty and foreign exchange cost to repatriate funds from our Egyptian operations. Although we have received USD payments in H1 and successfully repatriated funds directly, we have also incurred significant additional foreign exchange costs when translating EGP to USD for working capital needs. Notwithstanding these short-term challenges due to reduced USD liquidity in Egypt, we continue to manage our working capital position across the group.

United Chief Executive Officer, Brian Larkin commented:
“We have had a strong start to the first half of the year from our Egyptian drilling programme with two successful development wells coming onstream and positive results from our low cost workover programme. We are cognisant of the short term challenges in Egypt and with this in mind are delighted to continue drilling in the second half, initially targeting one exploration and one appraisal well In this highly prospective licence. We look forward to announcing further details in due course. 

“In parallel, we remain focused on securing a partner in Jamaica for this potentially transformational licence and we are delighted to have multiple quality potential partners advancing their evaluation of the project. We look forward to the remainder of the year and updating our shareholders on our progress.”

UOG is in a strong position and with two absolutely crucial assets in a work in progress mode Egypt is doing well to carry the company so well. In Egypt the two successful wells have been highly successful with more to come later in the year. 

Elsewhere the Marie deal is still subject to Quattro raising the money but they have hired a new broker to get that over the line and we should know about that soon. Finally the exciting acreage in Jamaica has seen a great deal of interest from some well known names in the industry so things are looking bright for UOG. 

Gulfsands Petroleum

Gulfsands has stepped up its Project Hope campaign, this is the video they have issued to make their point.

Angus Energy

• Angus has updated on Bridge Financing, Hedge Management and Board Change
• £6m debt facility agreed in principle and waivers obtained
• Potential £20m Global Refinancing
• Discussion under way for future refinance of the senior and junior debt
• Forward hedges to be partially unwound to allow exposure to higher gas prices
• Board Change
• Progress on commercialisation of the gas storage at Saltfleetby

£6.0 million Bridge Facility
Further to the announcements of 30 June and 10 July 2023, Angus is pleased to confirm that it has now agreed the detailed terms for the proposed GBP 6 million junior debt facility (the “£6m Bridge Facility”) and has received approval from the lenders under the Company’s senior secured loan facility to proceed.  The Company has now to execute the final documentation after which it will proceed to completion and drawdown.

As identified in the Company’s Interim Results announced on 30 June 2023, the Company is required to make a payment due under the derivative instrument of approximately £3.5million by 20 July 2023 for financial hedges not settled in July and August 2022 due to late start-up of gas production at the Saltfleetby Field. This £6m Bridge Facility will meet this obligation as well as providing funds for existing and proposed capital, general working capital and operating expenditures around the temporary and permanent flowlines at Saltfleetby. 

The £6m Bridge Facility has been arranged by Aleph Commodities Limited (“Aleph”) and the ultimate providers are a range of private family office investors introduced by Aleph, many of whom were providers to the Company’s 2021 Senior Loan Facility.  The terms are in line with the previous £3m Bridge Facility arranged in March 2023, which has been rolled until September 2023, and will be announced on completion and drawdown planned for next week. Given Aleph are a Substantial Shareholder in the Company the £6m Bridge Facility and any associated fees payable to them will be treated as a Related Party transaction under AIM Rule 13 and considered as such once documentation is to be executed and announced. 

Potential £20m Global Refinancing
Last month, the Company entered into a further non-binding, conditional Term Sheet with Aleph Commodities Limited for a loan facility of up to US$25 million for an 18 month term with an all-in coupon of 15% per annum fixed (“Global Refinance Facility”).  The proposed Global Refinance Facility is extendable at the Company’s option for an additional period of 18 months, for a total tenor of 36 months.  This facility, if it proceeds, would be intended to refinance the c. £7.35 million outstanding under the Senior Facility as well as the £3 million and £6millon Bridge Facilities. 

The Global Refinance Facility is expected to contain less onerous covenants and would make allowance for the payment of dividends in line with the Company’s goal of returning capital to shareholders. The improved financing terms, including the bullet repayment profile will strengthen the balance sheet of the Company and provide flexibility to deploy cash generated for distributions, organic and inorganic growth opportunities. While the aim is to conclude the refinancing as swiftly as possible, definitive agreement needs to be reached with the ultimate provider(s) of the funding for the Global Refinance Facility, due diligence and discussions remain ongoing and there can be no guarantee that the proposed Global Refinance Facility will be made available to the Company. In parallel, the Company is also in discussions with another financial provider to provide pre-payments for the gas and restructuring of the hedges. These facilities could either be complementary or an alternative to the Global Refinancing Facility.

Potential Gas Storage
Interest has been expressed by three major integrated gas players in long-term gas storage at Saltfleetby. The site was  previously fully permitted under the ownership of Wingas in 2010, and we are now in the process of obtaining the first stages of a fresh planning permission and detailed technical evaluation for that project. Consultations have been held with various branches of government on this subject which obviously comes at a critical time for the energy security needs of the country. The monetisation of the gas storage would provide an additional revenue stream for the Company and the Company expects to select a strategic partner by year end on this project. 

Forward Hedge Management
The Company’s hedge counterparty has agreed to allow the Company to crystallise (i.e. unwind) 50% of its forward hedge liability from Q3 2024 to the end of the hedge profile in June 2025. Settlement for each unwind is deferred until the periods in question and no interest is being charged.  The resulting hedge profile will leave the Company and its shareholders with more exposure to upward movements in gas prices going forward.  

Board Change
George Lucan has notified the Board of his intention to step down as Executive Chair with effect from 14th August 2023. The search for a new non-executive Chair has been initiated.

George Lucan, Executive Chairman, comments: 
“We are grateful to our core supporters for making this facility available at short notice and so further evidencing their commitment to the development of the Company whilst protecting fellow shareholders from unnecessary dilution.  This marks a moment, going forward from which, the Company can show itself to be a self-standing and cash generating vehicle simultaneously rewarding shareholders and pursing growth in the energy transition.  

Upon the successful completion of this financing, this will represent an opportune moment for me to step aside and allow Richard a free but firm hand on the tiller.  Accordingly, I have asked the Board to begin the search for a new non-executive Chair and several candidates have already been approached.  I have advised the Directors that I shall step down from the Board in the middle of August, but will remain available as a resource for the Company for some months after that to assist in the prospective global refinancing as well as our longer term gas storage project.

It has been a pleasure serving Angus and its stakeholders and an equal pleasure to be able to leave shareholders with both a high quality producing gas field, the additional potential of a national storage asset, and a high calibre CEO.”

Richard Herbert, CEO, comments:  
“With the Saltfleetby Field now producing at design capacity, we are now seeing the benefits of production well above our committed hedge volumes at strong summer gas prices. The new bridge facility will allow us to close out the legacy hedge payable which arose last year when production start up was delayed and we can now look forward with confidence. I wish to thank George for his help and guidance since my arrival at Angus and for all his hard work and accomplishments for the Company.”

I only noticed this announcement, which came out on Friday, yesterday and with the technical problems I had it didn’t make the cut. It gives a rundown on funding with the £6m of debt agreed in principle and a potential £20m of global refinancing under review. 

This will involve the unwinding of the forward hedges, which will please shareholders, and me, and a number of other changes are underway. One of the changes will be the departure of current Chairman George Lucan who will be leaving next month, he has done a great deal for Angus who may not be in this good position without him. I have recently met Richard Herbert and it looks like Angus is in pretty good hands. 

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