WTI (Dec) $78.26 +$1.09, Brent (Jan) $82.52 +$1.09, Diff -$4.26 n/c.
USNG (Dec) $3.20 +17c, UKNG (Dec) 117.60p  +0.6p, TTF (Dec) €47.445 -€2.69

Oil price

It’s US CPI day today and the advantage of running late is that the figures are out and have come in below the market whisper the markets have gone up and rates are apparently on hold. 

Oil is up around a dollar, Opec produced a report that both saw a bigger call on its own members in Q4 but also increased demand for next year. 

On the negative front, the Iraqi oil minister was seen at the pipeline ahead of apparent switching on the crude to Turkey and Nigerian oil workers called off their industrial action.

Genel Energy

Genel has issued the following trading and operations update in respect of the third quarter and first nine months of 2023.

Paul Weir, Chief Executive of Genel, said:
“Despite encouraging comments from senior politicians, the Iraq-Türkiye pipeline remains shut. Good progress has been made in achieving consistency of domestic sales volumes, although pricing continues to be weak. We remain confident that the pipeline exports will resume, and provide access again to international pricing.

We are on track to deliver the cost reductions that we forecast at our half-year results. Tawke is now cash generative from local sales, and monthly spend across the business is set to reduce further once we have exited the Sarta licence and completed Somaliland civil works. This year we have reduced debt by almost 10% at opportunistic prices while retaining our significant cash balance, providing us with the financial strength to deliver on our objectives and diversify through the addition of resilient income streams.

We will continue to reshape our portfolio and effectively balance minimising our spend and progressing our strategy, and we continue to progress towards the Miran and Bina Bawi arbitration hearing currently scheduled for February next year.”

Whilst the pipeline remains shut there is very little Genel can add to the most basic of statements, and whilst sentiment remains positive and I allude to that again today in my oil price comments nothing can be done. Meantime factory gate sales to local refiners continue to develop and indeed are increasing, $5m per month is normal and twice that could be achievable but old fashioned bottlenecking is happening as tankers back up. 

Interestingly the M&A situation is clearly getting a bit more traction, for the first time I got the impression that this, after the pipe, was the most important item on the agenda right now, indeed buying something is now ahead of dividend payments in order to create a regular, repeatable payout from the pool of cash.

Meanwhile all the usual things are happening, cost cutting continues, the debt is being actively managed and the company remains strong and focused on long term delivery to its shareholders. Relations with the KRG continue in good shape and obviously the important policy stance from Baghdad is very important, after all Erbil need to have control over the moulah and pay IOC’s and of course its own civil servants.

It does look like news on the pipe is imminent and that will be good news, Genel is still very strong and clearly has options after that but I wouldn’t expect any spending like sailors when the taps are turned on, this will be responsible and clearly based on Genel being a more diverse company for the long term. I am looking forward to seeing that, the company is ready to deliver for shareholders again. 

Q3 2023

• Zero lost time incidents in 2023, with it being over two years and four million hours worked since the last incident
• $11 million of cash proceeds received from local sales from the Tawke PSC in Q3
  • Costs have been materially reduced at Tawke, with the asset profitable in the quarter
• Capital expenditure of $12 million in Q3

• Cash of $391 million at 30 September 2023 ($425 million at 30 June 2023)
• Net cash under IFRS of $132 million at 30 September 2023 ($158 million at 30 June 2023)
  • Total debt of $264 million at 30 September 2023 ($273 million at 30 June 2023)
  • Following completion of the bond buy-back tender earlier this month, and earlier purchases in the market, Genel’s total debt has been reduced by $25 million in H2 2023, and now stands at $248 million

• $110 million overdue from the Kurdistan Regional Government (‘KRG’) for past oil sales at the end of Q3

2023 OUTLOOK

• Domestic sales from Tawke expected to increase in Q4
• Genel expects capital expenditure to be c.$70 million (compared to March 2023 guidance of $100 to $125 million), with $60 million spent up to the end of Q3 2023
• Activity in Q4 includes limited work ahead of exit of the Sarta PSC, civil work completion on the Toosan-1 prospect in Somaliland, and continuing preparation for the Miran and Bina Bawi oil and gas arbitration hearing, scheduled for February 2024
• Genel will continue to review allocating capital towards the reduction of debt at opportunistic prices, while not materially impacting the availability of capital for the addition of new cash-generative assets

UPDATE ON IRAQ-TÜRKIYE PIPELINE

• The Iraq-Türkiye pipeline (‘ITP’) shut on 25 March 2023
• While there continues to be positive language from the Federal Government of Iraq and Türkiye regarding opening, Genel has received no guidance from the KRG regarding the status or timing of the pipeline reopening
• The Association of the Petroleum Industry of Kurdistan (‘APIKUR’), of which Genel is a member, met with the Federal Government of Iraq’s (‘FGI’) Ministry of Oil last week
  • The members of APIKUR have committed to continuing to work with the FGI and the KRG to resume full production and export through the ITP for the benefit of all stakeholders

Touchstone Exploration

Touchstone has provided an operational update and reports its operating and financial results for the three and nine months ended September 30, 2023.

Paul Baay, President and Chief Executive Officer, commented:
“The positive impact that initial output from our Cascadura field has had on both our production profile, and more importantly, our operating cash flows is clear. The results from the first few weeks of production at Cascadura demonstrate that we can look forward to materially enhanced operational and financial results.

While we are encouraged with our initial output levels, we are focused on optimizing production across our portfolio including Cascadura, Coho and our legacy oil properties. These operations are anticipated to be completed by the end of the year and will provide Touchstone with a strong platform upon which to continue our growth in 2024.

Along with our significant production gains, we continue to work to expand our land footprint and look forward to commencing our development drilling program on both the Ortoire block and our legacy acreage.“

I am going to comment briefly on Touchstone today but will add more either when I have spoken to the company or after the presentation tomorrow. Either way this has been a game changing quarter for the company with Cascadura getting underway and the financials show it.

Tomorrow’s presentation should put some skin on the flesh of today’s numbers and give us a proper idea of the valuation for the company now that it has moved into the Premier League. I have said that TXP could be a stock of the year, despite delays earlier in the year that view is not changed just slightly delayed, there is much to see in Touchstone. 

Third Quarter 2023 and Recent Operational Highlights

• Achieved first production from the Cascadura-1ST1 well on September 6, 2023 and initial production from the Cascadura Deep-1 well on September 14, 2023.
• Produced record quarterly average volumes of 3,391 boe/d in the third quarter of 2023, representing a 167 percent increase relative to the 1,272 boe/d produced in the third quarter of 2022.
• Achieved average net sales volumes of 8,917 boe/d in October 2023, with the Cascadura field contributing 7,234 boe/d in the month.
• Cascadura wells are currently restricted by surface chokes while final facility commissioning progresses, with a production volume increase expected when the recycle compressor is operational.
• Coho-1 well workover is currently scheduled for late November 2023 to isolate water production from the lowest set of perforations.
• Preparations are underway at our Cascadura and CO-1 fields for future development drilling.

Third Quarter 2023 Financial Results Highlights

• Realized petroleum and natural gas sales of $11,682,000 compared to $9,933,000 in the 2022 comparative quarter, as $3,855,000 of incremental natural gas and NGL sales were partially offset by a $2,106,000 decrease in crude oil sales, reflecting a 15 percent decline in realized crude oil pricing and a 7 percent reduction in crude oil production.
• Cascadura field production volumes in the quarter contributed $1,871,000 of natural gas sales at an average realized price of $2.40/Mcf and $1,264,000 of NGL sales at an average realized price of $78.12/bbl.
• Natural gas production from the Coho-1 well averaged net volumes of 3.7 MMcf/d (618 boe/d) in the quarter and contributed $720,000 of net natural gas sales at an average realized price of $2.11/Mcf.
• Generated an operating netback of $6,011,000, representing a 37 percent increase from the 2022 third quarter primarily reflecting incremental Cascadura natural gas and NGL production volumes.
• Reported funds flow from operations of $2,432,000 in the third quarter of 2023 compared to $6,000 in the preceding quarter and $256,000 in the prior year equivalent quarter.
• Recognized net earnings of $988,000 and comprehensive income of $809,000 in the quarter compared to a net loss of $778,000 and a comprehensive loss of $1,228,000 reported in the third quarter of 2022.
• $3,609,000 in quarterly capital investments primarily focused on expenditures related to the construction and commissioning of the Cascadura natural gas and liquids facility and three Royston-1X well production tests.
• Exited the quarter with a cash balance of $3,794,000, a bank debt principal balance of $29,500,000 and a net debt position of $29,919,000.
• October 31, 2023 estimated cash balance of approximately $5.4 million.

Reabold Resources

Reabold provides the following update to shareholders with regards to the purported requisition notice from Pershing Nominees Limited, which owns, in aggregate, approximately 7.84% of the Company’s issued share capital on behalf of 13 beneficial shareholders, requesting the Board to convene a general meeting under section 303 of the Companies Act 2006, as amended, as announced on 8 November 2023.

Whilst the Company does not wish to deny any member the right to convene a general meeting under the Act, this has to be balanced against due and proper process, recognising the convening of a General Meeting to vote on a number of the specific invalid resolutions proposed by the Requisitioning Shareholders would raise complex legal challenges for your company. Having taken legal advice, the Board has ascertained that the documentation as received contains several material deficiencies and is therefore not a valid requisition notice under section 303 of the Act.

Material deficiencies in the Requisition Notice include but are not limited to the following:

• The Requisition Notice proposes to have Sachin Oza removed as Co-Chief Executive of the Company. The power of shareholders to remove directors under section 168 of the Act applies in respect to the office of director, as opposed to a director’s position as an executive. Under statute and the Company’s articles of association, Shareholders do not have the authority to appoint or remove individual directors to or from particular management roles.  This is a general management power reserved for use by the Board.  Accordingly, this resolution is not a valid binding resolution.
• The Requisition Notice proposes to have Sachin Oza, current Co-CEO of the Company, appointed as a director. There has been no prior discussion or consultation with Mr Oza on whether or not he would be willing to be appointed as a director of the Company on the terms set out in the applicable resolution.
• The Requisition Notice proposes to have Chris Connolly, the current CFO of the Company, appointed as a director. There has been no prior discussion or consultation with Mr Connolly on whether or not he would be willing to be appointed as a director of the Company.
• A valid requisition notice of this nature must, under the Articles, enclose a notice of willingness to act from each proposed director. No such notices were enclosed.  In the absence of any such notices, any resolution proposing to appoint a new director is not a valid binding resolution.
• As at the date of this announcement, the Company has only received an electronic copy of the Requisition Notice. The Articles require the Requisitioning Shareholders to deliver a hard copy of the Requisition Notice to the Company’s registered office for it to be valid. 

Accordingly, the Company has informed Pershing as to the actions it needs to take to validly call a general meeting and has invited Pershing to procure that a valid request under section 303 of the Act is submitted. If and when the Company receives a valid requisition notice from Pershing, the Board will respond to it in accordance with the Act and will share its views on the proposals with shareholders.

Further announcements will be made as appropriate. In the meantime, shareholders are advised to take no action at this stage.

I don’t plan to comment on this further attempt on Reabold, at least until a valid requisition is received otherwise it might be a wild goose chase.

Jadestone Energy

Jadestone has announced that it has executed a sale and purchase agreement with Japan Australia LNG (MIMI) Pty Ltd, to acquire the Seller’s non-operated 16.67% working interest in the Cossack, Wanaea, Lambert, and Hermes oil fields development, offshore Western Australia, for a total initial cash consideration of US$9 million, and certain subsequent Abandonment Trust Payments. The Acquisition will increase the Company’s non-operated working interest in the CWLH fields from 16.67% currently to 33.33% on completion.

Paul Blakeley, President and CEO commented:
“Since acquiring our initial CWLH interest in November 2022, the subsurface performance has exceeded expectations, validating our work and de-risking the significant upside potential we see across the fields.  As such, we are pleased to be increasing our interest in a very high-quality, long-life asset with low decline rates at an attractive 2P acquisition cost of US$1.7/bbl, or less than US$1/bbl on a 2P + 2C basis.  This acquisition also provides us with greater influence over investment decisions on an asset which is expected to be an important part of the Jadestone investment case for years to come.

We intend to fund the acquisition and associated abandonment trust payments through available liquidity, including our reserves-based lending facility, which was structured to accommodate Jadestone’s growth by supporting the acquisition of producing reserves with significant upside potential.  Our RBL banks are supportive of this acquisition and recognise the benefits that it will bring to our business, further diversifying our production base and adding barrels which are accretive on all measures.  Flaring from the CWLH fields is minimised due to the export of associated gas to the neighbouring North West Shelf Gas facilities, reducing emissions intensity and further evidencing how our strategy of maximising recovery from existing upstream assets is consistent with our sustainability principles.”

The question I have been asking of Jadestone in recent months has been simple, how does its undoubtedly high quality management move in the next few months in the wake of the Montara debacle and start to climb the hill to get back to the heights of an appropriately higher rating. 

I say this because the share price is in a bad place and having had to raise equity funds at these low levels, whatever the company does on the inorganic growth front, it will have to be done without any recourse to equity markets. So, today they have announced what looks like a fantastic deal that ticks almost all my boxes.

The initial cash spend is very low ✔️ and buying into an asset the company knows well for $9m plus paying into the decommissioning fund next year is also very good and also extremely accretive ✔️. Knowing the asset is important and neither of the other parties will pre-empt which is good and has two ramifications, firstly it means that JSE can and probably will return for another stake before long and secondly the company now has a big enough stake to act as a block should the need arise ✔️.

The 2P acquisition cost of $1.70/ bbl is very cheap and the 2p and 2C number is less than $1/bbl, a price that could not find in any comparable basin anywhere in the world ✔️. Indeed buying this asset has so strengthened Jadestone that CEO Paul Blakeley said to me this morning that the company is in a better place than it was back at 90p and I can understand that.

So, finally I would like to assess that call, firstly Montara is back up and running and making a meaningful contribution and perhaps more importantly Akatara which will come onstream next year and Blakeley is confident that it will ‘surprise on the upside’. He also says that the opportunity set is getting better and so ticking the final box, that which says that as a result of being in a number of data rooms and with imaginative  funding, I believe that that Jadestone is back on the growth trail and that certainly✔️ my last box.

Acquisition Highlights

• The Acquisition includes the Seller’s entire 16.67% working interest in the CWLH fields, subsea infrastructure, Okha FPSO, and full abandonment liabilities. Jadestone will make payments of up to US$111 million in connection with the Acquisition, comprising a consideration of US$9 million and up to US$102 million into the CWLH Abandonment Trust Fund in three instalments in 2024.
• Jadestone is acquiring 11.8 mmbbls net, comprising 0.2 mmbbls of production since the effective date, 5.1 mmbbls of 2P Reserves and a further 6.5 mmbbls of 2C Resources (both as at 31 December 2022).
• Based on a consideration of US$9 million, this represents a 2P acquisition cost of ~ US$1.7/bbl and ~US$0.8/bbl on a 2P + 2C basis.
• It is anticipated that, due to an effective date of 1 July 2022, any completion adjustments will result in a payment to Jadestone in the range of US$3-6 million on closing of the Acquisition, which is currently expected in Q1 2024.  Any payment to Jadestone due to the completion adjustments will be paid by the Seller into the CWLH Abandonment Trust Fund, offsetting the first US$42 million instalment by the same amount (see immediately below).
• Jadestone will pay US$42 million into the Abandonment Trust Fund for the CWLH fields on completion of the Acquisition. Jadestone will also make two further payments into the Abandonment Trust Fund:

o  A payment of US$23 million, payable on NOPTA approval and registration of transaction documents exchanged at completion (currently projected for March 2024); and

o  Up to US$37 million at 31 December 2024.

• Jadestone intends that the Abandonment Trust Fund payments, which are projected to broadly coincide with receipts from liftings attributable to the Seller’s interest, are paid for through available liquidity including corporate cash balances and, pending lender consent, available liquidity in its reserves-based lending (“RBL”) facility.
• The CWLH fields produced c. 2,200 bbls/d during Q3 2023 and have averaged c.1,800 bbls/d year-to-date 2023 (both figures net to the Seller’s 16.67% interest).  Production has regularly exceeded 2,300 bbls/d net to Jadestone in recent months. Year-to-date production was impacted by facilities downtime earlier in 2023, with remediation plans to prevent similar occurrences already being implemented. 
• Oil production from the CWLH fields is low-sulphur and low-density.  The next lifting allocated to the Seller’s interest is estimated at c.650,000 bbls and is expected to occur in Q1 2024.
• Unit operating costs for the Seller’s interest are estimated at <US$25/bbl and will be accretive to the Company’s overall current unit operating cost.  There will be no incremental overhead to Jadestone for managing this interest.
• Jadestone continues to believe that there is potential to add incremental reserves through infill drilling, targeting unswept oil across all four of the CWLH fields; and extending the asset life beyond 2031 (the initial design life of the Okha FPSO).

United Oil & Gas

United has announced that Peter Dunne has notified the Board of his intention to step down as an Executive Director and Chief Financial Officer of United and to take up the role of Chief Financial Officer with daa plc. It is currently anticipated that Peter will leave United during the first quarter of 2024 at a date to be confirmed.  

The company will commence a search process to identify a new CFO with immediate effect and an Interim CFO will be appointed. An announcement on this will be made in due course.

Over the coming months Peter will remain available to support a smooth transition and the continued execution of the Company’s strategy.

Brian Larkin, Chief Executive Officer commented:
“Peter has made an outstanding contribution to United since he joined the company. Whilst we are sorry to see Peter leave, we wish him all the best and success in his new role as CFO with daa plc. On behalf of the Board and Peter’s colleagues, I would like to thank Peter for his hard work and commitment, and he leaves with our best wishes.”

Peter Dunne, Chief Financial Officer commented:
“I have thoroughly enjoyed my time at United working alongside such a strong team that is dedicated to executing United’s strategy and delivering value to shareholders. I would like to take this opportunity to wish Brian and the whole team continued success and I look forward to seeing continued progress being made in Jamaica and Egypt.”

UOG had better not lose anyone else otherwise there will be nobody left to open up in the morning….

Echo Energy

Echo has announced the following Board changes.

Stephen Birrell has been appointed as Chief Executive Officer of the Company with immediate effect. Stephen is highly experienced geoscientist who has worked in the upstream oil and gas and mining industry for over 35 years with a particular focus on gas developments across multiple jurisdictions with Britoil, BP and Elf and Sterling Resources, where he discovered and initiated the development of the Black Sea gas field complex, Ana/Doina in Romania. Stephen has a BSc Honours in Applied Geology and is a member of the Association of International Energy Negotiators and the Society of Petroleum Engineers.

Christian Yates, current non-executive director, will assume the position of non-executive chairman. 

Martin Hull, the Company’s existing CEO, and James Parsons, the Company existing Non Executive Chairman, are both transitioning into the role of non-executive director and both individuals have been asked to provide additional support to the new chairman and CEO for an interim period.

These changes will take place with immediate effect. 

Christian Yates, Non-Executive Chairman of the Company, said:
“I am delighted to confirm Stephen’s appointment as Chief Executive Officer. Stephen brings a wealth of technical and commercial experience, holding executive positions across a range of oil and gas businesses and we look forward to leveraging his experience as we look to deliver our strategy. I would also like to thank James and Martin personally and on behalf of the Board for their leadership and commitment to the Company over the last few turbulent years and I look forward to their continued support as non-executive directors.“

Echo has moved the deckchairs but will still find it necessary to have a bit of a rethink about its portfolio. In the highly capable hands of Stephen Birrell it will be interesting to see what happens, similar to President I imagine…

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