WTI (Apr) $78.26 -28c, Brent (May)* $81.91 -28c, Diff -$3.65 -$1.49*
USNG (Apr) $1.86 -3c, UKNG (Apr) 63.24p +2.09p, TTF (Apr) €25.32 -€0.08
*Denotes April Brent contract expiry

Oil price

Oil is firm again today, Opec are ready to maintain quotas and yesterdays US inflation data has pushed rate cuts forward to maybe June…Also India jet fuel demand is rocketing…

Touchstone Exploration

Touchstone’s independent reserves evaluation was prepared by GLJ Ltd.  with an effective date of December 31, 2023 (the “Reserves Report“). Highlights of our total proved developed producing (“PDP”), total proved (“1P”), total proved plus probable (“2P”) and total proved plus probable plus possible (“3P”) reserves from the Reserves Report are provided below. Unless otherwise stated, all financial amounts referenced herein are stated in United States dollars. Financial information contained herein is based on the Company’s unaudited results for the year ended December 31, 2023 and is subject to change. Readers are further cautioned to read the applicable advisories contained herein.

I have published the reserves report in full below as it contains plenty of exciting information now that Touchstone is making such good progress at Cascadura. The key takeaways are that the figures reflect ‘the initial transition of the Cascadura production base into the PDP reserves category as the company brought onstream the first two Cascadura wells, Cascadura-1ST1 and Cascadura Deep-1′ which confirm the numbers as being very good indeed. 

Relative to year-end 2022 and after 2023 production, TXP increased gross PDP reserves by 180 percent to 13,547 Mboe, decreased gross 1P reserves by 12 percent to 33,696 Mboe, decreased gross 2P reserves by 10 percent to 67,379 Mboe and decreased gross 3P reserves by 10 percent to 108,859 Mboe in 2023.

These reductions in reserves were primarily as the company removed 8 PUD locations on what they call ‘non-core’ legacy blocks and at Royston, plus some liquids revisions and of course recent production. However it is important to note that PDP reserves replaced 2023 annual production by 699 percent, reflecting Cascadura-1ST1 and Cascadura Deep-1 natural gas and associated liquids volumes that were brought online in 2023.

Touchstone is growing fast as the reserves numbers show and what is more now has the flexibility to decide its own fate by picking out the best possible projects in its exciting portfolio of exploration and development opportunities. This is no way reflected in the share price where my Target Price is still 200p. 

Touchstone’s 2023 year-end reserves reflect the initial transition of our Cascadura production base into the PDP reserves category as we brought onstream the first two Cascadura wells, Cascadura-1ST1 and Cascadura Deep-1. In addition to successfully constructing and commissioning the Cascadura natural gas and liquids facility in 2023, we also prepared for our Cascadura C delineation and development program.

In 2023 we achieved initial production from our Cascadura field which produced net volumes of 37.4 MMcf/d of natural gas and 622 bbls/d of natural gas liquids in the fourth quarter of 2023, contributing to corporate average quarterly net production volumes of 8,504 boe/d and average 2023 annual net production volumes of 3,981 boe/d.

2023 Year-end Reserves Report Highlights

• Relative to year-end 2022 and after 2023 production, we increased gross PDP reserves by 180 percent to 13,547 Mboe, decreased gross 1P reserves by 12 percent to 33,696 Mboe, decreased gross 2P reserves by 10 percent to 67,379 Mboe and decreased gross 3P reserves by 10 percent to 108,859 Mboe in 2023.
• PDP reserves replaced 2023 annual production by 699 percent, reflecting Cascadura-1ST1 and Cascadura Deep-1 natural gas and associated liquids volumes that were brought online in 2023.
• With the addition of Cascadura property reserves, PDP reserves represent 40 percent of 1P reserves, reflecting an attractive ratio of base production to low risk proved undeveloped (“PUD”) drilling targets.
• Reductions in our 1P, 2P, and 3P year-end reserves balances from 2022 reflected the removal of eight PUD locations on our non-core legacy crude oil blocks and Royston, technical revisions to the natural gas liquids yields at Cascadura, increased annual production volumes in 2023 and a limited 2023 development capital program.
• Our net present value of future net revenues discounted at 10 percent (“NPV10”) on a before tax PDP basis increased by 142 percent to $151.4 million, decreased by 30 percent to $372.5 million on a 1P basis, decreased by 27 percent to $730.1 million on a 2P basis, and decreased by 29 percent to $1.05 billion on a 3P basis from the prior year.
• Realized after tax PDP NPV10 of $99.8 million representing an increase of 93 percent from the prior year, after tax 1P NPV10 decreased by 25 percent from year-end 2022 to $191.4 million, after tax 2P NPV10 decreased by 24 percent from the prior year to $342.5 million and after tax 3P NPV10 decreased by 26 percent from 2022 to $482.6 million.
• We continue to maintain a long producing reserve life index of 7.9 years 1P and 14.4 years 2P, reflecting the low decline nature of our asset base.
• The Cascadura-2 well was drilled subsequent to the effective date of the Reserves Report and will be reflected in our future reserve evaluations. 

2023 Year-end Reserves Report Summary

Touchstone’s year-end light and medium crude oil, heavy crude oil, conventional natural gas and natural gas liquid reserves in Trinidad were evaluated by independent reserves evaluator, GLJ, in accordance with definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook (“COGE Handbook”) and National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”). Additional reserves information as required under NI 51-101 will be included in the Company’s Annual Information Form, which will be filed on SEDAR+ (www.sedarplus.ca) on or before March 30, 2024.

The reserve estimates set forth below are based upon GLJ’s Reserves Report dated February 29, 2024 with an effective date of December 31, 2023. The Reserves Report uses the average price forecasts of the three leading Canadian oil and gas evaluation consultants (GLJ, McDaniel & Associates Consultants Ltd. and Sproule Associates Ltd. (collectively, the “Consultants”)). All values in this announcement are based on the three Consultants’ average forecast pricing and GLJ’s estimates of future operating and capital costs as of December 31, 2023. Please refer to “Advisories: Reserves Disclosure” for further information. In certain tables set forth below, the columns may not add due to rounding.

2023 Reserves Summary by Category

Notes:

(1) Gross reserves are the Company’s working interest share before deduction of royalties.
(2) Reserve additions (reductions) exclude 2023 annual production. See “Advisories: Oil and Gas Metrics”.
(3) Based on the Consultants’ average December 31, 2023 forecast prices and costs. 

Year-Over-Year Reserves Data

Notes:

(1) Prior year reserve estimates per GLJ’s independent reserves evaluation dated March 3, 2023 with an effective date of December 31, 2022.
(2) Gross reserves are the Company’s working interest share before deduction of royalties.
(3) Based on the three Consultants’ average December 31, 2023 forecast prices and costs.

Summary of Crude Oil and Natural Gas Reserves by Product Type 

Notes:

(1) Gross reserves are the Company’s working interest share before deduction of royalties.
(2) NGLs are comprised of 100% condensate.
(3) Net reserves are the Company’s working interest share after the deduction of royalty obligations

Summary of Net Present Values of Future Net Revenues

Note:

(1) Based on the three Consultants’ average December 31, 2023 forecast prices and costs. 

Notes:

(1) Based on the three Consultants’ average December 31, 2023 forecast prices and costs.
(2) The after-tax net present values prepared by GLJ in the evaluation of the Company’s petroleum and natural gas assets presented herein are calculated by considering current Trinidad tax regulations and are based on the Company’s estimated tax pools and non-capital losses as of December 31, 2023. The values reflect the expected income tax burden on the assets on a consolidated basis. Values do not represent an estimate of the value at the business entity level or consider tax planning, which may be significantly different.

Reconciliation of Gross Reserves by Product Type

The following table sets forth a reconciliation of the Company’s total gross proved, gross probable and gross proved plus probable reserves as of December 31, 2023 by product type against such reserves as at December 31, 2022 based on forecast prices and cost assumptions.

Notes:

(1) NGLs are comprised of 100 percent condensate.
(2) Prior year reserve estimates per GLJ’s independent reserves evaluation dated March 3, 2023 with an effective date of December 31, 2022.
(3) Reserve amounts for Infill Drilling, Extensions and Improved Recovery are combined and reported as “Extensions and Improved Recovery”.
(4) Technical revisions factor includes all changes in reserves due to well performance and previously booked wells which were drilled in the year.
(5) Economic factors are the change in reserves exclusively due to changes in pricing.

December 31, 2023 gross proved plus probable reserves were 67,379 Mboe, representing a 7,695 Mboe or 10 percent decrease from the 75,074 Mboe reported in the prior year. Relative to December 31, 2022, light and medium crude oil reserves decreased by 2,006 Mbbl. The annual decline predominately reflected a combination of annual production, the removal of two proved undeveloped drilling locations at Royston and six proved undeveloped drilling locations at our CO-2 field, partially offset by two new proved undeveloped drilling locations at our CO-1 property and improved recovery from well recompletions at our WD-4 field. Proved plus probable heavy crude oil reserves decreased by 592 Mbbl from the prior year, reflecting the removal of all future recompletion activity at our Fyzabad property and 2023 production. Proved plus probable conventional natural gas reserves decreased by 5,604 MMcf relative to December 31, 2022, mainly attributed to annual Cascadura and Coho field production. Proved plus probable natural gas liquids reserves decreased by 4,102 Mbbl in comparison to December 31, 2022, reflecting a reduction in forecasted Cascadura natural gas liquids yields and 2023 annual production.

Future Development Costs

The following table provides information regarding the development costs deducted in the estimation of the Company’s future net revenue using forecast prices and costs as included in the Reserves Report.

The following table sets forth the changes in undiscounted future development costs (“FDC”) included in the Reserves Report against such costs in our December 31, 2022 reserves report prepared by GLJ dated March 3, 2023.

Forecast Pricing and Costs

Forecast pricing and costs are prices and costs that are generally acceptable, in the opinion of GLJ, as being a reasonable outlook of the future as of the evaluation effective date. The forecast cost assumptions consider inflation with respect to future operating and capital costs. The following table sets forth the benchmark reference commodity prices and inflation rates reflected in the Reserves Data as of December 31, 2023. These price assumptions were provided to the Company by GLJ and represented the average price forecast of the three Consultants as of the date of the Reserves Report.

Note:

(1) This summary table identifies benchmark reference pricing schedules that might apply to a reporting issuer. Product sales prices will reflect these reference prices with further adjustments for specific marketing arrangements, quality differentials and transportation to point of sale.

Capital Program Efficiency

Notes:

(1) Financial information is based on the Company’s preliminary 2023 unaudited financial statements and is therefore subject to change. 
(2) Non-GAAP financial measure.
(3) See “Advisories: Reserves Disclosure” and “Advisories: Oil and Gas Metrics”.
(4) Based on gross reserves, which are the Company’s working interest share before deduction of royalties.

January 2024 Sales Volumes and Realized Prices

In January 2024, we achieved average net sales volumes of 7,436 boe/d as follows:

Cascadura contributed net sales volumes of 5,799 boe/d consisting of:

– net natural gas sales volumes of 32.8 MMcf/d or 5,460 boe/d with a realized price of $2.47 per Mcf; and

– net natural gas liquids volumes of 339 bbls/d with an average realized price of $68.15 per barrel;

• Coho field net average natural gas sales volumes were 2.8 MMcf/d or 467 boe/d at a realized price of $2.28 per Mcf (excluding third party processing fees); and
• average net daily crude oil sales volumes were 1,170 bbls/d per day with an average realized price of $68.15 per barrel.

January 2024 production decreased by approximately 11 percent from December 2023, attributed to natural declines and the Cascadura Deep-1 well being shut in for four days in the month.

Eco (Atlantic) Oil & Gas

Eco has announce its results for the three and nine months ended 31 December 2023.

Highlights:

Financials (as at 31 December 2023)

·    The Company had cash and cash equivalents of US$2.2 million and no debt as at 31 December 2023.

·    The Company had total assets of US$49.9 million, total liabilities of US$1.6 million and total equity of US$48.3 million as at 31 December 2023.

Operations:

South Africa

Block 2B

• Eco has applied for a Production Right Application to the Petroleum Agency of South Africa, for Block 2B, and continues to assess opportunities available to deliver value from this licence for the benefit of stakeholders.

Block 3B/4B

• The JV partners continue to actively progress a farm out in conjunction with preparations for a two well drilling campaign on the Block. Further updates will be made as appropriate.

Post-period end

• On January 22, 2024, Eco's wholly owned subsidiary, Azinam Limited, received final government approval for the farm out of its 6.25% Participating Interest in Block 3B/4B to Africa Oil Corp. announced on 11 July 2023. As per the teams of the Assignment and Transfer Agreement, Eco received further payment of $2.5m from Africa Oil.

Namibia

• Following continued drilling success in the area, Eco continues to receive significant interest in its strategic acreage position in Namibia.
• The Company continues to assess farm out opportunities with its four licences in the region and will update the market further as appropriate.

Guyana

• On November 15, 2023, the Company received approval for the transfer of 60% Working Interest and Operatorship in the Orinduik Block, offshore Guyana, from the government.
• Within the period, Eco became Operator of the Orinduik Block, holding, in aggregate, a 75% Participating Interest via Eco Orinduik (60%) and Eco (Atlantic) Guyana Inc (15%), following the closing of the acquisition of Tullow Guyana B.V.
• A formal farm-out process for the Orinduik Block is underway and the Company will provide further updates as appropriate.
• Guyana remains one of the most prolific hydrocarbon basins in the world, continuing to yield sizable discoveries and attracting high levels of interest for exploration assets.

Post-period end

On January 22, 2024, Eco Orinduik gave notice to the Minister of Natural Resources of the Cooperative Republic of Guyana to enter the Second Phase of the Second Renewable Period of the Orinduik License effective as of January 2024 and TOQAP's decision to relinquish its 25% WI. As a result, Eco currently holds 100% WI in the Block.

Gil Holzman, President and Chief Executive Officer of Eco Atlantic, commented: 
"Each asset within our exploration portfolio yields exciting opportunities and I am pleased to report continued progress across all fronts. Notably, government approval of our farm-out agreement of our 6.25% Participating Interest in Block 3B/4B to Africa Oil has strengthened our cash position as we continue preparations for a two well drilling campaign on the Block and progress farm out discussions.

"Guyana remains one of the most important hydrocarbon provinces in the world and Eco's position has been strengthened by its increased Working Interest in the Orinduik Block. We have seen a great deal of interest from a number of oil and gas players as we progress a formal farm out process.

"Eco continues to benefit from its position in Namibia, which sits close to some of the largest oil discoveries in 2023, an area that we expect will see further excitement and activity over the course of this year, which will aid our farm out process.

"The end of the period was marked by dynamic activity across our portfolio and we remain excited about the potential for the remainder of 2024."

Well there is not much in this announcement that wasn’t already in the market, historic figures are just that and as for the portfolio it is all about partnering. In South Africa, having already farmed-out 6.25% of Block 3B/4B to Africa Oil and benefited the cash flow they are looking to find another buyer as well as preparing for a two well drilling campaign. 

In Namibia the company report ‘significant interest’ in their strategic acreage position, here too Eco are looking to farm-out of its four licences in the area. I have heard so many stories about other wells drilled in the country with varying degrees of success that the proof of this particular pudding will undoubtedly be in the eating. 

Finally, one way or another Eco has its now 75% stake in the Orinduik Block in Guyana as well as operatorship to play with. The formal farm-out procedure is underway and whilst Guyana remains a very hot post code since the huge success of Exxon amongst others, there are plenty of hurdles before that long awaited drilling programme reappears.

Eco is standing on the verge of a most exciting time, I would suggest that unlike in the old days it is Africa which is hottest of properties and South Africa within that, either way any prospect of seeing the signature on a farm-out document would result in the much needed increase in the share price, at below 10p a share Eco is ludicrously good value and with news flow surely imminent?

Molecular Energies

Molecular Energies has provided an update on corporate and trading matters.

Key Points

• Tapir x-1 exploration well, Paraguay, suspended. Participants reviewing next steps
• Positive cash receipts from Argentina continue
• Strategic developments with regards to Green House Capital Group including receipt of UK government EIS advance assurance
• Sustainable Aviation Fuel studies progress

TAPIR X-1

The Paraguay exploration well Tapir x-1 has been suspended due to tough drilling conditions without reaching the target zone. The drilling rig has been retained on site pending further decision by the participants, taking into account the risk-reward ratio of the well. Further information will be provided at the relevant time subject to confidentiality and regulatory restrictions. Investors are reminded that this was frontier exploration with an estimated 17% chance of success.

ARGENTINA CONTINUES POSITIVE CASH CONTRIBUTION

Molecular is pleased to announce that President Petroleum S.A., the former subsidiary of Molecular, has continued to pay down the US$13 million of debt due to Molecular. Approximately US$1.28 million has now been paid down within the last four months and expectations are that funds will continue to flow.

GREEN HOUSE CAPITAL GROUP

Significant progress has been made in relation to GHC, which will be subject to a separate announcement early next week. GHC has been granted EIS advance assurance by HM Revenue & Customs  in relation to the UK government’s EIS scheme. Based on the receipt of EIS advance assurance, the directors of GHC also believe that a prospective investment in GHC should constitute a ‘qualifying holding’ for a Venture Capital Trust.

SUSTAINABLE AVIATION FUEL (“SAF”)

As previously announced, studies commenced with Aecom, the worldwide engineering consultancy, to investigate the feasibility of Molecular moving into the business of SAF. These studies continue to progress before any final decisions are made.

The skill set of Molecular, its management and its related parties as well as its knowledge of multi-lateral funders and institutions supportive in principle of SAF projects, place Molecular in a beneficial position should the results of the feasibility studies prove positive.

SAF has a captive, permanent and increasing future offtake market as airlines around the world have committed to increase the use of this product. Production is a complex process and requires a substantial investment. Further updates will be made in due course.

ATOME PLC

Molecular notes the progress of Atome and the Board remains of the view that Molecular’s investment in Atome will generate substantial shareholder value for Molecular shareholders in future.

Peter Levine, Chair, commented:
“The result of the Tapir x-1 well, whilst disappointing, is not surprising given it is the frontier exploration. Sometimes it is the better decision in tough drilling conditions to make a bold resolution to suspend rather than continuing in escalating cumulative down hole issues, especially taking into account the risk-reward ratio.

“The progress being made in Green House is promising, as is the continued cash flow coming from the previously disposed Argentine business. This bodes well for the future and complete collection of the US$13 million intercompany debt.”

The result of Tapir x-1 was the only thing that of course I wasn’t able to ask Chairman Peter Levine about in my interview earlier in the week, but the vibes have not been wonderful and it is no surprise to see the well suspended after ‘tough drilling conditions’ and now anything could happen. With everything else going on in Molecular Energies and the reminder that this was a high risk well with a 17% COS if the rig isn’t already being put on the back of a lorry. 

For all the rest on the company I have loaded the link to the interview below, Mr Levine goes into a great deal of detail about prospects across Molecular Industries. 

Core Finance Chairman Interview: Peter Levine of Molecular Energies

Coro

Coro yesterday announced an update on the ongoing legal proceedings by the Company against an Italian contractor in relation to damages following the historical cessation of production at the Bezzecca field in Italy.

The Company announced on 14 February 2023 that it was initiating legal proceedings against an Italian contractor in relation to damages following the historical cessation of production at the Bezzecca field in Italy. The Company alleges that the original construction at Bezzecca lacked an effective cathodic protection system which was required to avoid corrosion, which ultimately led to the shut-in of gas production at the Bezzecca field in March 2020 for safety and environmental reasons. Production at Bezzecca was re-established in November 2022. The Company is claiming damages of approximately Euro 300,000 for the capital and related costs of the replacement equipment and necessary cathodic protection and a further Euro 7M for consequential losses, including both lost revenue and incurred fixed costs, during the shut in period.

On 22 September 2023, the Company served a writ of summons on the contractor.  The contractor filed its response statement to the court on 23 November 2023, which included the identification of three potentially liable third parties (a supplier, a sub-contractor and the sub contractor’s insurance company). The judge has set the first hearing for 5 June 2024, before which various supplementary memorandums are required to be filed by both sides. Further updates will be provided as necessary.

The Company sold its Italian natural gas portfolio as previously announced by the Company first on 27 March 2023, and then in subsequent updates on 10 August 2023, 8 November 2023 and 19 February 2024, respectively. Under the terms of this disposal any costs and proceeds from the Bezzecca legal claim accrue to the Company.

This came out yesterday and given that it was really only an update in a lawsuit I felt that I couldn’t add much. But I got a bit of inbound and from people asking how important it might be so I thought I should chat to James Parsons about Coro. 

He actually confirmed that this suit continues and would be meaningful if they won the summons. But he was keen to point out that the team at Coro are working hard on the renewables front in Vietnam and in the Philippines and of course recent news from the Duyung PSC has been entirely helpful across the board. 

KeyFacts Energy Industry Directory: Malcy's Blog