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Oil price

Oil remains under pressure, a strong dollar, weak API stats after the close where crude built against expectations of a draw. 

Also some nervousness as President Putin is visiting the UAE followed by going to Saudi Arabia. 

Wentworth Resources

Wentworth has provided an update on the offer from Etablissements Maurel & Prom S.A. (“M&P”).

Background
On 5 December 2022, the boards of Wentworth and M&P announced that they had reached agreement on the terms of a recommended all cash offer by M&P for the entire issued, and to be issued, share capital of Wentworth. The Acquisition is to be implemented by means of a scheme of arrangement pursuant to Article 125 of the Jersey Companies Law. The circular in relation to the Scheme was published or made available to Wentworth Shareholders on 25 January 2023.

The Acquisition was approved by Wentworth Shareholders at the Court Meeting and the General Meeting which were held on 23 February 2023, but remains subject to the satisfaction or (where capable of being waived) waiver of the other Conditions to the Acquisition as set out in Part III (Conditions to and certain further terms of the Acquisition and the Scheme) of the Scheme Document.

These Conditions include, inter alia, (i) consent from the Minister responsible for petroleum affairs in Tanzania under the Petroleum Act 2015 and any other applicable laws (“MoE Consent”); (ii) the waiver of any right of first refusal or pre-emption right to which by the Tanzania Petroleum Development Corporation (“TPDC”) is entitled in respect of the Mnazi Bay asset (the “TPDC Waiver”); and (iii) approval from the Tanzanian Fair Competition Commission (“FCC”) (together the “Governmental Approval Conditions”), in each case on terms satisfactory to M&P, acting reasonably.

Scheme Court Hearing
Commercial discussions have been ongoing between M&P and relevant Tanzanian stakeholders regarding the satisfaction of the above-mentioned Governmental Approval Conditions.  Over the course of the last two weeks, representatives of the Company and M&P attended a number of meetings with TPDC.

As a result of progress made in these commercial discussions, the Board has made arrangements for the Jersey Court to consider, and if thought fit, sanction the Scheme at a Scheme Court Hearing to be held on 19 December 2023 and all parties are working to satisfy the Governmental Approval Conditions prior to this date.

The Scheme remains subject to certain other conditions, including sanction by the Court at the Court Sanction Hearing and the delivery of a copy of the Court Order to the Registrar of Companies.  Subject to the satisfaction of the Governmental Approval Conditions, the Scheme receiving the sanction of the Court, the delivery of a copy of the Court Order to the Registrar of Companies and the satisfaction (or, where applicable, the waiver) of the other Conditions set out in Part III of the Scheme Document, the Scheme is expected to become effective on 21 December 2023.  The expected timetable of principal events for the implementation of the Scheme is set out below.  If any change to the key dates and/or times set out in the timetable are made, whether by reason of any delay in the Governmental Approval Conditions being satisfied or otherwise, Wentworth will give notice of this change by issuing an announcement through a Regulatory Information Service and such announcement will be made available on Wentworth’s website at www.wentplc.com/investors/offer-for-wentworth/

Expected timetable of principal events

(1)   References to times are to London, United Kingdom time unless otherwise stated. 
(2)  The time for the Court Sanction Hearing, the number of the Court and the name of the judge will be available at least 1 business day before the Court Sanction Hearing.
(3)  A copy of the Court Order sanctioning the Scheme is expected to be delivered to the Registrar of Companies one Business Day after the date of the Court Sanction Hearing, such that the Effective Date is then expected to be 20 December 2023.  The events which are stated as occurring on subsequent dates are conditional on the Effective Date and operate by reference to this time. 
(4)  This is the latest date by which the Scheme may become Effective.  However, the Long Stop Date may be extended to such later date as may be agreed by Wentworth and M&P (with the Panel’s consent and as the Court may approve (if such consent and/or approval is required)) or if the Panel requires an extension to the Long Stop Date pending final determination of an issue under section 3(g) of Appendix 7 of the Code.

Scheme Shareholders are entitled to attend and be heard at the Scheme Court Hearing to support or oppose the sanction of the Scheme, should they wish to do so. Such Scheme Shareholders may appear in person or be represented by Jersey counsel. Scheme Shareholders may also write to the Company’s Jersey counsel, Carey Olsen Jersey LLP, 47 Esplanade, St Helier, Jersey JE1 0BD (for the attention of Guy Coltman) or email guy.coltman@careyolsen.com at least 72 hours before the date of the Scheme Court Hearing setting out their objections to the Scheme.

Should any Scheme Shareholder wish to support or oppose the Scheme at the Scheme Court Hearing, they are advised to seek appropriate legal advice before doing so.

Terms used but not defined herein shall have the meaning given to them in the Scheme Document.

In accordance with Rule 26 of the Code, a copy of this announcement will be available on the Company’s website at www.wentplc.com/investors/offer-for-wentworth/, where a copy of the Scheme Document can also be found. The content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.

This looks to be very good news for Wentworth shareholders as at long last it seems that progress is being made as all parties are heading towards towards CP’s being received ahead of the Court sanction date on 19th December. 

It looks to me that after a long summer in which the parties discussed the best outcome for all involved, the best possible resolution has been reached that works for everyone and that the situation will be resolved by the end of the year.

Pharos Energy

In the Company’s Interim Results announcement on 13 September 2023, the Company indicated an additional distribution to shareholders would be considered within the parameters of the sustainable regular dividend policy announced in September 2022. Under the policy, Pharos intends to return to shareholders by way of dividend no less than 10% of Operating Cash Flow (OCF) each year in two tranches:

• An interim dividend of around 33% of the previous year’s final dividend, payable in January of the following year; and
• Subject to shareholder approval, a final dividend payable in July of the following year.

Consistent with the policy, the Board today announces that it has resolved to declare and pay an interim dividend in relation to the financial year ending 31 December 2023 of 0.33 pence per ordinary share, amounting to approximately $1.8m.  The estimated total cost of the interim dividend assumes that the trustee of the Pharos Employee Benefit Trust (EBT) will waive its right to receive the dividend in relation to the ordinary shares held in the EBT. 

The key dates for this interim dividend are as follows:

• Ex-dividend date: Thursday 21 December 2023
• Record date *: Friday 22 December 2023
• Payment date: Wednesday 24 January 2024

* Only shareholders on the Pharos Energy plc register of members as at close of business on the record date will receive the interim dividend.

Continuation of share buyback programme
Following the initiation of a share buyback programme to purchase $3m (excluding stamp duty and expenses) of the Company’s ordinary shares in July 2022, and the commitment of a further $3m (excluding stamp duty and expenses) to an extension of the programme (the First Programme Extension) in January 2023, we are pleased to announce that we expect to complete the First Programme Extension around the end of the year. As at close of business on 5 December 2023, a total of 19.8 million shares have been repurchased by the Company during the initial phase of the programme and the First Programme Extension, at a daily average price of 23.7 pence. 

The Board believes that the Company’s shares are still trading at a material discount to their underlying net asset value, and remains of the view that on-market share repurchases is an appropriate means of returning value to shareholders while this remains the case. Therefore, the Company intends to continue with the share buyback programme in 2024 by committing a further $3m (excluding stamp duty and expenses). This further extension of the programme (the Second Programme Extension), is expected to commence following completion of the First Programme Extension.

As with the initial share buyback programme announced in July 2022 and the First Programme Extension announced in January 2023:

• the Second Programme Extension will be conducted in compliance with European Union (EU) Regulation No 596/2014 (MAR) and the MAR buyback technical standards (Commission Delegated Regulation (EU) 2016/1052) (the Technical Standards), both of which form part of Retained EU Law as defined in the European Union (Withdrawal) Act 2018;
• the Company will not seek to rely on the safe harbour conditions for trading set out in Article 3(2) and Article 3(3) of the Technical Standards, given the limited liquidity in its ordinary shares and the limitations that the conditions would impose on the number of shares that can be purchased;
• ordinary shares purchased under the Second Programme Extension will be cancelled; and
• Peel Hunt LLP, the joint broker to Pharos, will manage the Second Programme Extension and carry out on-market purchases as principal, with the authority to enact purchases and make trading decisions concerning the timing of the purchases independently of the Company. Details of any and all purchases made under the Second Programme Extension will be provided via RNS announcements and published in the regulatory news section of the Company’s website.

Jann Brown, Chief Executive Officer commented:
“We are delighted to announce the interim payment for 2023 under our dividend policy, which underpins our commitment to regular shareholder returns. In addition, the Board believes that the Company’s shares continue to trade at a material discount to their underlying net asset value and has committed a further $3m to the share buyback programme.

“We look forward to continuing to deliver such returns in 2024 and beyond, supported by our prudent approach to financial management and capital allocation for the benefit of all stakeholders.“

Positive news for Pharos shareholders today as they have been rewarded with an interim dividend of 0.33p per share which will be paid on 24/1/2024. In addition, the existing buy-back programme which is almost complete and likely to finish around the end of the year will continue in 2024 as the company are committing a further $3m (excluding stamp duty and expenses).

Pharos has today also announced that it has taken the next step in its net zero journey by today publishing a detailed net zero roadmap following its formal commitment in September 2022 to achieve net zero greenhouse gas (GHG) emissions by 2050.

Pharos has always been amongst the leaders in the energy sector in terms of the transition to net zero and today’s document takes that leadership one stage further as the sector defines its role in that journey. 

The combination of all these announcements means that Pharos management is taking all steps to ensure that the company is firstly an uber compliant company in the energy sector and that it also is continuing to maintain a competitive policy of returning money to shareholders.

Pharos is in a very strong position, these are non-operational issues but in Egypt and Vietnam the portfolio is looking in very good shape with medium and longer term excitement so the shares, backed by a fine record of rewarding shareholders also have potentially very substantial upside.

The net zero roadmap, which was researched and developed by the Company in close consultation with specialist advisors and consultants, models emission reduction pathways to achieve net zero Scope 1 (direct) and Scope 2 (indirect) GHG emissions from all existing and proposed future assets by 2050 or before. Based on this modelling, the roadmap contains interim targets set against the Company’s 2021 baseline year, which have been approved by the Board. 

The Group has non-controlling equity stakes in its producing assets and is predominantly non-operating. As a result, it has no direct control over the majority of its emissions inventory but it can exercise influence through the joint operating companies (JOCs) in Vietnam and Egypt in conjunction with the other JOC partners. The Company will use the net zero roadmap to continue to engage with the JOCs, partners and governments on reducing emissions where possible through the options identified. To the extent within its control, the Company will continue reducing its own emissions and remain committed to transparency in reporting and to keeping stakeholders updated on progress.

In addition, the Company established an Emissions Management Fund in September 2022. From every barrel net to the Group sold at an oil price above $75 per barrel, a contribution of $0.25 is made to the Fund. The current value of the Emissions Management Fund is now c.$400,000. In line with the net zero roadmap, this Fund is available to provide financial support for emissions management projects undertaken directly by the Group or through the JOCs.

Jann Brown, Chief Executive Officer, commented:
“The oil and gas industry is in a period of transition as the drive to reduce emissions globally is combined with each country’s efforts to secure the energy needed for its socio-economic development. We recognise that the journey to net zero will not be straightforward and this roadmap is a testimony to how Pharos is aiming to manage oil and gas assets in a responsible and transparent manner in line with our purpose to create sustainable prosperity and value for all our stakeholders.”

The detailed roadmap is available to download from our official website using the following link: https://www.pharos.energy/investors/results-reports-and-presentations/.

Scirocco Energy

Scirocco notes the announcement yesterday by Reabold Resources plc that it has been informed that the next tranche of the payment from Shell U.K. Limited for the sale of the entire issued share capital of Corallian Energy Limited, as announced on 1 November 2022 by Reabold, will be distributed to former Corallian shareholders from today.

https://www.londonstockexchange.com/news-article/RBD/ps5-2-million-received-for-the-sale-of-corallian/16237541

In line with its investment policy in 2018, Scirocco undertook a minor investment in Corallian through the subscription for 83,333 shares at a price of £1.50 per share.  Scirocco has previously received an initial payment of c. £67,000 corresponding to £0.80 per Corallian share. Based on the Reabold announcement, Scirocco expects to receive a payment of £108,333 corresponding to £1.30 per Corallian share. The final contingent payment of £1.10 per Corallian share, bringing the total potential consideration up to £3.20 per Corallian share,  is payable following the receipt by Shell of Development and Production Consent for the Victory development from the North Sea Transition Authority.

Commenting on the update, CEO Tom Reynolds said:
“We’re pleased to provide this update which adds cash to Scirocco’s balance sheet. The sale of legacy assets such as Ruvuma and Corallian creates optionality for the Company’s ongoing assessment of pathways to deliver value to investors.”

Good news today from Scirocco who are also adding to the balance sheet via the Corallian proceeds and as CEO Tom Reynolds says, will be used for acquisitions and expansion of Scirocco. 

Serica Energy

Serica has provided the following updates on operations, production, licencing and organisation.    

Mitch Flegg, Chief Executive of Serica, said:
“I am pleased to report the successful conclusion of the planned summer shutdowns on Serica’s Bruce and Triton hubs and the re-establishment of strong levels of production at both. During the last month Serica has been consistently achieving production rates in excess of 50,000 boe per day. Overall production guidance for the year is unchanged reflecting delayed production restarts and slower than expected production ramp-ups after the summer shutdowns.

I am also pleased to report successful well campaigns on the Bruce and Guillemot fields during 2023. These are further proof of the benefits to be had from low cost, short cycle investments in our existing asset portfolio. The full impact on production of the well work carried out this year is expected to be felt in 2024, aided by the work on the Bruce facilities deferring the need for another major shutdown until 2025.

The LWIV vessel used on Bruce is already booked for a third campaign in 2024, which will target wells on both the Bruce and Keith fields. We are also looking forward to the start of a four well drilling campaign in the Triton area, with the first well on the Bittern field scheduled to begin around the middle of the first quarter. 2024 is anticipated to be a very busy and impactful year of investments in Serica’s North Sea portfolio. 

The levels of production achieved and the range of organic investment projects undertaken underlines the attributes of the Tailwind acquisition. The Tailwind founders will substantially cease their involvement in Serica during the early part of next year. We are grateful for their openness and support during 2023. Each has made important contributions to Serica including pivotal roles in our Greater Buchan Area acquisition and achieving important milestones in the Triton area. Their achievement in creating and building Tailwind speaks for itself and we wish them further success in their various endeavours.

I am very pleased to be announcing Mike Killeen’s promotion to Chief Operating Officer. At the end of November, we passed five years since Serica became the operator of the Bruce, Keith and Rhum fields. The manner and results of Serica’s operatorship have been crucial to establishing the Company as one of the UK’s leading independent oil and gas companies. Mike’s promotion is richly deserved. Moreover, it demonstrates the capacity within our organisation for career development, which I hope will help us attract and keep talented people.”

An operational update that is pretty much in line with expectations, some longer shutdowns and a slower ramp-up of Bruce and Triton mean that production has slightly disappointed but is now at over 50/- and for the year 40-45/- guidance remains in place. 

Bruce and Guillemot wells have been successful but will benefit 2024 more when wells will be drilled on Bruce and Keith which have the advantage of pushing back the major shutdown on Bruce until 2025. 

Serica also announce that the Tailwind founders will ‘substantially cease’ their involvement early next year and so over a period of a few months the senior executive team at the company will have changed after the CFO appointment recently announced, for 2024 it will be Serica 2.0. 

Finally the company has recently announced that it is farming-in to the GBA with JOG and NEO, this seems a very wise move for SQZ and keeps a tax efficient foothold in the UKCS and reinforces my view that the company remains one of the best plays in the sector.

Group Production
Serica’s overall production entitlement during the last four weeks has averaged just over 52,000 boe per day. Guidance for the whole year remains at 40-45,000 boe per day reflecting a slower than planned ramp up of production following the end of the planned summer shutdowns on the Bruce and Triton hubs.   

Bruce Hub
Production restarted on 11 September 2023 after the planned Bruce summer shutdown. The shutdown work scope was successfully completed including the upgrading of certain control systems and fabric maintenance. This outcome means that the next major shutdown is now not expected to be until 2025. The restart of production was later than planned, as previously reported, mainly due to a decision to carry out permanent rather than temporary repairs following inspection findings on the flare tower. The carrying out of these repairs at height was hampered by weather.

Strong levels of production have been established from both the Bruce and Rhum fields with Serica’s average production entitlement being over 24,000 boe per day during the last four weeks.   Production has been constrained by being unable to run one of the gas export compressors at full capacity. This issue is now substantially resolved. There was also a short outage to make a repair to the glycol dehydration system.

Commencing in September, Serica has been conducting its second Light Well Intervention Vessel (“LWIV”) campaign on the Bruce field. This has involved successfully re-entering three wells to identify areas of scale build-up, perform water shut offs and perforate target intervals. With work on one well still to finish, there has been an uplift in overall production from the re-entered wells of about 2,500 boe per day so far. Serica has a 98% share with gas representing about 85% of the incremental production.

Serica has now intervened on five of the subsea wells that form the Western Area Development (“WAD”) part of the Bruce complex. Since taking over operatorship, Serica has also re-entered fourteen Bruce platform wells. The results have demonstrated the benefits of low cost well interventions and a third LWIV campaign is planned during 2024 which will involve work on both Bruce and Keith wells. The inventory of platform wells on the Bruce field is also being high graded for potential future interventions.      

Serica is currently carrying out vessel-based final abandonments of four exploration and appraisal wells on the Keith field and the North Eigg exploration well. This campaign is consistent with the NSTA’s initiative to reduce the number of suspended inactive wells in the UK North Sea. The abandonments are scheduled to be completed in late December 2023. Despite owning 100% of the Keith field, Serica’s share of the costs of the well abandonments under the terms of the BKR sale and purchase agreements is 8.34%. The sellers retain the remaining 91.66% of the liabilities with Serica paying additional cash consideration equal to 30% of the sellers’ post-tax share of costs. The work does not affect the plan to bring the Keith field back into production during 2024. Serica bears all the cost of abandoning the North Eigg well.

Triton Area
The Triton summer shutdown was completed in September 2023. This was supported by the ‘walk to work’ campaign which continued into October. The activities carried out included essential fabric maintenance and inspections, a further phase of the control systems upgrade and preparation for the reinstatement of water injection on the Bittern field, which is planned to restart in early 2024.

Good production rates are being achieved from all of Serica’s fields in the Triton Area. As previously reported, this is after a slower ramp up in production than planned following the shutdown. The reasons included an essential repair on a piece of equipment identified during a pre-production inspection, a seawater lift pump failure and initial difficulties operating the upgraded FPSO control systems. These issues are now resolved.

During the middle of this year, a rig-based well intervention campaign was carried out on the Guillemot West and North West fields. These were the first such interventions on the fields in over ten years and have resulted in incremental gross daily production of about 1,500 barrels of oil from one well and 12 million cubic feet of gas from another, both of which had been shut-in for lengthy periods. Serica’s interest in these fields is 10%. As with the Bruce field, these outcomes demonstrate the low risk returns which can be earned from diligent field management.

Planning is continuing for the four well drilling campaign scheduled for 2024 and early 2025. The campaign is being carried out using the semi-submersible COSLInnovator drilling rig. All four wells are production wells. The first well in the campaign will be a sidetrack of an existing well (B1z) on the Bittern field (Serica 64.63%). The spud date is currently expected to be in mid Q1 of 2024 with completion of the well expected in about ninety days. The other wells in the campaign are the GE-05 well on Gannet E (Serica 100%), the EC well on Guillemot North West (Serica 10%), and the EV-02 well on Evelyn (Serica 100%).

Serica has also exercised an option to use the COSLInnovator to drill a fifth well in the campaign. This may be the development well on the Belinda field. The draft FDP for this project was submitted to the NSTA in September 2023.   

Licencing
The process of completing the acquisition of a 30% interest in the Greater Buchan Area from Jersey Oil & Gas, announced on 23 November 2023, is ongoing.

Licence P2448, which contains the Mansell discovery, expires in March 2024. Serica has requested an extension to the licence term in order, primarily, to determine whether there is a viable long-term export route for production.

The licence documentation for the award in the UKCS 33rd Offshore Licensing Round of a 100% interest in UK block 29/2a, containing the Kyle discovery in the Triton Area, is in the process of being finalised.

Serica has relinquished Licence P2506, blocks 3/25b, 3/30, 4/26, 9/5a, in the Northern North Sea at the end of Phase A of the Licence. This follows the fulfilment of its work programme including sub-surface studies. Serica concluded that there are no viable exploration targets.

Organisation
The integration of the Serica and Tailwind organisations and processes has been progressed since the completion of the Tailwind acquisition in March 2023. Steve Edwards, Dave Freeman and Tom Ujejski will be ending their roles with Serica by the end of March 2024. Jacques Tohme is currently working for Serica in a consultancy position, assisting with the integration of the financial systems and other financing matters. This arrangement is planned to continue into 2024.

As reported on 21 November 2023, Martin Copeland will succeed Andy Bell as CFO in early 2024.

As part of the restructuring of the organisation, Mike Killeen has moved from the position of Vice President Operations to Chief Operating Officer. This role is not currently part of the Serica Energy plc board.

KeyFacts Energy Industry Directory: Malcy's Blog