WTI (Jan) $71.23 +$1.89, Brent (Feb) $75.84 +$1.79, Diff -$4.61 -10c
USNG (Jan) $2.58 -1c, UKNG (Jan) 92.5p -11.35p, TTF (Jan) €36.60 -€4.695

Oil price

Oil was up on Friday but still lost on the week, up until Friday it had been quite grim but the US jobs data was better than expected as was the unemployment rate. The White House announced more SPR buying and the rig count was small, up one unit overall and down two in oil.

Kistos

Kistos announces that on Friday 8th December 2023 its Dutch subsidiary, Kistos NL2 B.V., notified Nordic Trustee AS of the exercise of its Call Option and redemption of all its outstanding bonds. Of the original €150,000,000 of bonds issued by Kistos NL2, €73,168,000 has already been repurchased by the Company.

The Company will redeem the outstanding €76,832,000 (plus accrued and unpaid interest) under both of its Bond Issues at a redemption price equal to 102.5% of the nominal amount for each redeemed bond. The redemption date will be 22 December 2023 and the record date will be 20 December 2023.

Andrew Austin, Executive Chairman of Kistos, said:
“The redemption of the Kistos NL2 B.V. bonds from our cash resources will boost Kistos’ profitability by reducing our net interest costs. By removing certain covenants contained in the Bond Terms, it will also enhance our financial flexibility.”

This is good news for Kistos shareholders and there is little doubt that they will recognise the strategy this time being adapted by Kistos. It goes without saying that the company has chosen to move cash trapped in the Netherlands by paying down all the outstanding bonds.

This saves the 9% coupon and as mentioned above gives Kistos the flexibility to distribute cash should they choose to. As always this could be via dividends or share buy-backs but either way I would suggest shareholders will benefit from this move.

Finally I notice that last week there was a shut-in at the Shetland Gas Plant after a minor incident in which no one was injured. I understand that production should be restarted before the year-end and that it will not affect guidance issued by Kistos. 

Reabold Resources

Reabold has announced that it has exercised the Second Option to subscribe for 116 new ordinary shares in LNEnergy Limited through an aggregate further investment of £1,650,000. Reabold will fund £750,000 of this from its existing cash resources, while the remaining £900,000 will be satisfied through the issue of 486,486,487 new ordinary shares of 0.1p each in the capital of the Company at a price of 0.185 pence per share to LNEnergy Limited. This increases Reabold’s shareholding in LNEnergy to 26.1% of its enlarged share capital.

LNEnergy’s primary asset is an exclusive option over a 90% interest in the Colle Santo gas field. The Colle Santo gas field is a highly material gas resource with an estimated 65Bcf of 2P reserves[1], with two production wells already drilled and flow-tested, making the field development ready. LNEnergy believes that the field has the potential to generate an estimated €11-12m of gross post-tax free cash flow per annum.

Colle Santo update
The University of Chieti-Pescara of the Region of Abruzzo announced the formation of a Technical Scientific Committee on 17 November 2023 in support of the development of the Colle Santo Gas Field in Abruzzo, Italy.

The Committee will work in collaboration with LNEnergy’s technical and engineering advisors, Italfluid, to provide third party expert support in the evaluation of data to be collected in advance and during LNEnergy’s proposed controlled long-term test and monitoring campaign., .

The presence of Italfluid’s substantial expertise in field development, local and regional authorities and in particular representatives of the Engineering and Geology Department of the University of Chieti-Pescara (leading experts in the subsurface of the Abruzzo Region) is a material step forward in LNEnergy’s ongoing concession authorisation work. 

Sachin Oza, Co-CEO of Reabold, commented:
“Reabold is excited by the potential of the Colle Santo project and confident in its decision to invest further in LNEnergy. The formalisation of the Technical Scientific Committee at the University of Chieti-Pescara shows constructive local stakeholder  engagement in  the Colle Santo project and follows on from positive regulatory progress taking place at a government level, as Italy looks to secure domestic energy supply. We look forward to updating shareholders on our progress in Italy as we develop this important regional project.”

Reabold have made a strong point of making the LNEnergy investment a key part of its current investment programme and with the Shell money can move forward with the Second Option. The Technical Scientific Committee which will work with all the key advisors but most importantly Italfluid who will add the necessary third party support during the long term test and monitoring campaign. 

With strong Italian Government backing for the project and significant local demand leading to high domestic gas prices Reabold see Colle Santo as a potentially very profitable venture as revenues will increase in coming years.

1 RPS estimate, September 2022

Chariot

When I wrote up the Chariot/Energean deal last week I said that I would assess the market reaction, speak to the company and add more comments as pertinent. I received an interesting mix of inbound messages and accordingly decided to put those points to Julian Maurice-Williams, Chariot CFO.

I started by asking him about the deal and to deep dive into some of the details and personal thoughts gained in the months of negotiations as well as regarding costs and timings of the process?

• We are very pleased with this deal. Energean is a FTSE250 company with a strong track record of successfully developing large offshore gas projects. They are both experienced and proactive and like us, are also keen to get after it with developing Anchois.
• We have secured a great partner, that like us, believes there is significant upside potential unaccounted for with this project, and we now have a financial pathway to reaching first gas, that doesn’t see equity holders diluted further. We both have a common goal – to deliver the development of the project in a safe, cost efficient and expedited manner.
• In terms of next steps, rig negotiations are advancing, the technical teams are working collaboratively on planning, and will look to undertake an appraisal well at Anchois as soon as possible in 2024. As outlined, the appraisal well is a multi-objective well which will be a future producer. Both sides plan to optimise the development further, appraise newly discovered gas sands and drill two exploration targets, aiming to increase the resource.
• In terms of other catalysts, we will be commencing with a drilling programme on the Loukos onshore licence in the new year and our team is looking to commence this asap. In addition, we also have plans to conduct a seismic acquisition programme on Rissana.
• Possibly also worth noting the current macro environment, which for exploration remains somewhat challenging. The fact that the company received multiple offers is testament to the assets.
• All these things aside, though, we are very excited about the agreement we have struck with Energean. We are aligned in the development plans and in the view that this project could be larger than initially anticipated and we now have the financial and operational framework in place to get the project to first gas, delivering cash flows and value for all our stakeholders.

I wanted to ask Julian about the details of the carry, it seems to be different to other industry deals of late. He responded with the below points about the terms of the transaction:             

• While Chariot has taken dilution, we believe we are unlocking a potentially much larger development than initially thought, with significant further upside.
• We get cash into the business upfront, retain a material stake in the project and most importantly we potentially get a full carry to first gas.
• Also, it is a non-recourse loan repaid through 50% of net revenues from the Lixus licence which only commence once we get to first gas and start generating cash flows. So there is no cost to us until all the milestones are achieved and the loan provides us with the potential to start paying dividends to shareholders once first gas is reached – which wouldn’t necessarily be the case if we decided to use other less flexible financing solutions.
• We also see 7% above SOFR as a very competitive rate – you don’t get this elsewhere – as seen with other recently announced bonds in the sector.
• Also, Chariot shareholders get a royalty and a choice between a US$50m convertible loan or 3 million ENOG shares as part of Energean opting to take the further 10% (which would include income from ENOG’s dividend programme).

I would like to thank Julian for his time, I hope that these answers go a long way to ensuring that the questions put by investors have been adequately covered. I remain a strong supporter of Chariot and believe that the assets in the portfolio are worth significantly more that the current share price and it will undoubtedly stay in the Bucket List come January.

KeyFacts Energy Industry Directory: Malcy's Blog