WTI (Mar) $77.87 +95c, Brent (Apr) $82.77 +77c, Diff -$4.90 -18c 
USNG (Mar) $1.69 -8c, UKNG (Mar) 61.52p -1.63p, TTF (Mar) €24.89 -€1.455

Oil price

Oil is very quiet at the moment, nothing new is coming from the IEA summit in Paris and the on-off nature of the Israel talks doesn’t give a lead. The API stocks showed a bigger build in crude stocks but again products drew sharply, today’s EIA numbers will help that process. 

Zephyr Energy

Zephyr has announced that it has received state and federal Sundry Notice approvals for the amendment of the drilling permit related to the forthcoming “twinned” redrill of the State 36-2 well. These are the final regulatory approvals required for the Company to spud the State 36-2R well on its project in the Paradox Basin, Utah, U.S.

Zephyr will now move to execute a rig contract and will update the market on the expected timeline for the spud of the State 36-2R well upon award of the contract.  Bid processes for other major services are also underway.

The State 36-2R well’s main objective is to target the same Cane Creek reservoir natural fracture network which was successfully intersected by the State 36-2 well last year. The Company expects to recover substantially all State 36-2R well drilling costs under the well control insurance policy that it has in place for the State 36-2 well.

Colin Harrington, Zephyr’s Chief Executive, said: 
“We are pleased to have cleared the final regulatory hurdles for the spud of the State 36-2R well and look forward to next steps, including the execution of a rig contract and mobilisation of operations to the site.

“This is a time of significant activity for the Company with the potential to generate substantial new value for Shareholders, and we plan to provide regular updates over the coming weeks and months as operations progress.”

Good news for Zephyr who, armed with these permits can now move on, hire a rig and drill the State 36-2R well at the Paradox Basin. The final approvals are all that has been needed and with the well paid for, expect the company to kick on with the operational side of things.

PetroTal Corp

PetroTal has announced a dividend declaration of USD$0.02/share payable on March 15, 2024 based on Q4 2023 results and January 2024 liquidity test.

Q4 2023 dividend declaration.  Based on the Company’s current liquidity exceeding USD$60 million, PetroTal confirms that a cash dividend of USD$0.02 per common share will be declared and paid in Q1 2024.  This represents a 15% annualized yield based on current share price and includes the recurring USD$0.015 per common share amount plus an amount for a minimum liquidity sweep equal to US$0.005 per common share.  The total dividend of USD$0.02 per common share will be paid according to the following timetable:

• Ex dividend date: February 28, 2024
• Record date: February 29, 2024
• Payment date: March 15, 2024

The dividend is an eligible dividend for the purposes of the Income Tax Act (Canada) and investors should note that the excess liquidity sweep portion of all future dividends may be subject to fluctuations up or down in accordance with the Company’s return of capital policy.  Shareholders outside of Canada should contact their respective brokers or registrar agents for the appropriate tax election forms regarding this dividend.

The PetroTal dividend has appeared, regular as clockwork and so the equity yields some 15% which is very appealing especially as the recent reserves report shows that both 1P and 2P reserves continue to increase and make the shares trade at a significant discount to assets. 

With one of the best managements in the sector and potential for both income and capital growth over a long period of time this is the ultimate share to cornerstone any portfolio. 

Europa Oil & Gas

Europa Oil & Gas has announced an extension to licence PEDL 343 located in the East Midlands of the UK, which contains the Cloughton gas discovery. Europa is operator of the licence with a 40% interest.

The North Sea Transition Authority (“NSTA”) notified Europa that it has agreed to a two-year extension of the Initial Term to 20 July 2026 and a two-year extension of the Second Term to 20 July 2028 for PEDL 343. The extension will enable the Company to continue its ongoing work on the licence, where Europa estimates Cloughton to have Pmean gross gas initially in place (GIIP) volumes of 192 BCF. The discovery well at PEDL 343 (Cloughton) flowed good quality sweet gas at rates of up to 40,000 scf/day on natural flow, and the Company believes that a well could flow at 6 mmscf/day using the correct completion techniques.

Europa will continue to engage with its various stakeholders required to obtain the necessary permits and consents needed to drill an appraisal well in order to demonstrate the productivity of the field.

Will Holland, Chief Executive Officer of Europa, said:
“We are delighted that the NSTA has granted a two-year extension to PEDL 343 as it allows us to continue to progress the material Cloughton gas discovery towards commercialisation. We will update the market as we reach further milestones”.

There is a lot going on at EOG at the moment and this is one of the areas that exhibits that strategy perfectly. CEO Will Holland said when Cloughton reappeared on the front burner that it had all the signs of being a commercial gas discovery and this can only help. 

It is of course early days but it looks very promising and the NSTA have also helped by extending the license by this much, good news all round for once. 

Deltic Energy

I said that after two Deltic announcements recently that I would speak to Graham Swindells and revert, well I have done that and I remain convinced that Deltic remains one of the most attractive stocks in the sector.

The first point was just to clear up the issue with regard to the recent license round, Deltic got what they wanted including the Dewar prospect which they know very well. The part license awarded by the department is being assessed further as it may not be as good as the whole proposition would have been, nothing to do with Shell. 

As for the farm-out it is as good as, if not better than I had previously thought, Dana have paid full whack for their 25% non-operated interest and that means that Deltic is carried through to and effectively beyond the exploration well planned for Q3 of this year. 

Unsurprisingly Deltic are delighted with this deal, Dana has experience in this type of play via Tolmount, it validates Selene and provides another experienced partner in the JV. I couldn’t ask for a better transaction if I wrote it out beforehand myself. 

And all this as the farm-out of Pensacola continues in parallel, as outlined before, all options are possible, a buyer for both assets or different ones for each but I’m confident that a successful outcome will happen. The Pensacola well is set to run back-to-back with the Selene well which spuds in July so from then on in there will be non stop action. for Deltic shareholders. 

I have slightly rejigged the numbers for the company as a result of this deal but either way there is phenomenal upside, any success at either Selene or Pensacola would make my TP of 200p per share look ridiculous. Deltic must have a very good chance of being a ten-bagger from here as despite reasonable performance this year of a 30% rise in the shares, any similar news from Pensacola or of course the Selene well would dwarf that move. 

Jadestone Energy

Jadestone has announced the completion of the acquisition of a non-operated 16.67% working interest in the Cossack, Wanaea, Lambert, and Hermes oil fields development, offshore Western Australia, from Japan Australia LNG (MIMI) Pty Ltd. As a result, the Company’s non-operated working interest in the CWLH fields has increased to 33.33% (from 16.67%).

The headline acquisition cost to Jadestone was US$9 million, as originally announced on 14 November 2023. Agreed adjustments, reflecting the accumulated economic benefits of the CWLH assets for the period from the effective date of 1 July 2022 to completion, resulted in a net receipt to Jadestone from the Seller of US$6.3 million.

The US$6.3 million net receipt from the Seller and US$35.7 million from Jadestone have been paid into the CWLH Abandonment Trust Fund, in aggregate satisfying the initial US$42 million abandonment funding and in line with the original acquisition announcement. The second US$23 million instalment into the CWLH Abandonment Trust Fund is payable on NOPTA[1] approval of the accession documents, which is expected in April 2024. The final instalment into the CWLH Abandonment Trust Fund is payable by 31 December 2024. 

The acquired interest includes the Seller’s entire 16.67% working interest in the CWLH oil fields, subsea infrastructure, Okha FPSO, and full abandonment liabilities. The CWLH fields continue to perform ahead of the Company’s expectations, averaging c.13,700 bbls/d year to date in 2024, equivalent to c.2,300 bbls/d for the 16.67% interest being acquired or c.4,600 bbls/d to the Company’s total 33.33% interest following completion.

Liftings of crude oil from the CWLH fields are implemented on an equity basis. Jadestone’s next cargo, attributable to the 16.67% interest just acquired, is estimated at c.650,000 barrels and has been sold at a small premium to Brent with the lifting scheduled for early March 2024. Receipt of proceeds for this lifting are expected in early April 2024. Two further liftings of similar size are expected within the next 12 months – one attributable to the original 16.67% interest (estimated timing in the fourth quarter of 2024) and the other attributable to the 16.67% just acquired (estimated timing in early 2025).

Paul Blakeley, President and CEO commented:
“We are pleased to increase our interest in the CWLH fields in line with the originally announced terms. The asset continues to outperform our expectations, with the imminent early March 2024 lifting proceeds expected to substantially offset the net cost of the first two abandonment funding instalments.  

CWLH is fast becoming a key asset for Jadestone. Our increasing ownership and influence will help to realise the full potential of the fields through a life extension beyond 2031 and additional drilling.

Elsewhere, we continue to make good progress on commissioning activities at Akatara, with the project remaining on schedule for first gas in the second quarter of this year. The scheduled redetermination of our reserves-based lending facility is also progressing well. The near-term momentum and growth in our business is complemented by exciting longer-term opportunities, providing encouragement for the future as we look to generate significant value for our shareholders.

Nothing to add to the already announced CWLH fields deal, it’s good stuff and typical Jadestone work, with Akatara imminent and Woodside assets beckoning there is plenty of upside, that is when we know the details of the deal…

Borders & Southern Petroleum

Borders & Southern has provided notification of changes to the Board of Directors and management team.

Howard Obee has informed the Board that he intends to stand down as Chief Executive Officer. As one of the co-founders, he has led the Company for nearly 20 years, delivering exploration success, including the Company’s Darwin gas condensate discovery.

The Board is pleased to announce that Harry Baker will assume the role of Chief Executive Officer from 1 March 2024. Harry has nearly 24 years of capital markets experience from previous roles with Auctus Advisors, GMP First Energy, Mirabaud Securities and Canaccord Capital. Harry brings a wealth of experience in the Natural Resources sector.

Howard has agreed to stay on until 29 February 2024 to support the transition to the new leadership.

Harry Dobson, Non-Executive Chairman, said:
“I’d like to thank Howard for his role in leading the Company since its inception and wish him all the best in his future endeavours. The technical work undertaken by Howard and his team in opening up a new basin is second to none, and both I and the Board are grateful for all he has done to progress the Darwin discovery to this point. I sincerely believe that the South Falklands Basin will achieve recognition as a world class hydrocarbon system and he can be proud of what he has achieved in his time with the Company.  

“I am delighted to welcome Harry Baker to the Board and look forward to working with him in this next phase of the Company’s development.”

An interesting move for Borders & Southern as they move into investment banking territory to hire Harry Baker as their new CEO. Historically whilst my area of knowledge in the Falklands prospects has been primarily restricted to the North Basin, given the beta in the south things are now changing and its time may have come.

This must be an excellent opportunity for Mr Baker and the team going forward as there has never been any doubt about the size of the Darwin discovery just the the ability to develop it. With Navitas bringing much needed oomph to Rockhopper at Sea Lion which is now, finally, on the starting block, the southern area can be revisited.

If my memory serves me correctly there are very few prospects around the world with the size and scale that Darwin offers and the new CEO has clearly been charged with finding the key that will unlock the asset. I think that the risk profile, including the political concerns is now somewhat lowered and with 100% of this asset there is a prize to be competed for. 

I have spoken to Harry Baker today and he is understandably excited about the prospects and he has invited me in to meet the team and look at the squiggly lines, which I look forward to. The jury will have to be out for a while but it may be that this particular signing might just do the trick for the company, watch this space…

AIM Rules Disclosures

Mr Henry (“Harry”) Charles Baker, aged 48, currently holds or has held the following directorships and partnerships in the last five years:

Mr Baker holds no ordinary shares or options in the Company.

Other than those as provided above, no other disclosures in relation to Mr Baker are required under Rule 17 and Schedule 2(g) of the AIM Rules for Companies.

KeyFacts Energy Industry Directory: Malcy's Blog