WTI (Oct) $71.19 +$1.10, Brent (Nov) $73.70 +95c, Diff -$2.51 -14c
USNG (Oct) $2.33 -5c, UKNG (Oct) 84.42p, TTF (Oct) €35.515 +€1.06

Oil price

Oil stayed in positive territory this week despite the API stats which were mixed at best but probably because of the exploding pagers in the Lebanon which has continued today.

But still the financial world’s eyes are on the Fed, at 7pm tonight we will know whether it is 25 or 50 bp’s but more important the explanatory guff….

Pharos Energy

Pharos has announced its interim results for the six months ended 30 June 2024. A conference call for analysts will take place at 09.00 BST today.

Katherine Roe, Chief Executive Officer, commented:
“Since joining as CEO in July, I have found a solid operational business with quality assets delivering stable production and robust cash flows, an impressive team, and a strong financial base. Alongside this, the improving macro environment in Egypt has seen our receivables position improve significantly with over $20m received year to date. This financial strength allows us to announce today the intention to pay an interim dividend of 0.363 pence per share for the current financial year, a continuation of the existing share buyback programme and, importantly, the repayment of all our outstanding debt. We are proud of our Company moving to a net cash position of $17.5m at 30 June and, subsequent to that, is now debt-free.

“We have a solid foundation from which to build on and move forward to grow value in both Vietnam and Egypt. We benefit from having assets with catalysts. In Vietnam, actively progressing the license extensions will unlock appraisal potential. In Egypt, our consolidation proposal will provide enhanced fiscal terms to encourage appropriate re-investment. This will all be considered within the framework of a strict and transparent capital allocation policy that is balanced appropriately and with the priority on evaluating opportunities that can deliver the highest return to shareholders.

“I want to thank shareholders for their continued support and look forward to updating the market on our upcoming activity.”

Katherine Roe joined Pharos after these interims so she picks up the baton with the company in a strong position, two exciting operating areas and with a mix of production, a little short/medium term growth and some high beta exploration. In addition, in Egypt the stronger economic situation has meant that having started repaying its receivables owed Pharos has seen a transformation in the balance sheet. 

As a result of this she has been able to present a debt free company with $17.5m of net cash and is able to make a strong statement with regard to shareholder compensation, a 10% hike in this payment and promised to be no less than 10% of operating cash flow in the future. With the buy-back continuing then transparency in the yield is guaranteed. 

These numbers certainly beat the whisper, helped by the extra $20m from Egypt and the production in line and some better numbers in the short term from both Egypt and Vietnam whilst the latter continuing to offer very exciting longer term exploration upside. Assets with catalysts they call them…

The strap lines are clear, strong operational delivery, financial strength and with deleveraging providing optionality for capital spend going forward and a transparent and disciplined capital allocation. The company likes the fact that it has additional growth options but they are not immediately obvious.

So, I was going to ask the question about growth but was beaten to it in the Q&A, the answer is that with the current portfolio it’s not really needed, well not too soon that is but I’m sure that to go to the next stage it may be that some tinkering with the portfolio might be needed.

1H Operational Highlights

• Group working interest 1H production was 5,851 boepd net (1H 2023: 6,915 boepd net), in line with full year guidance:
• Vietnam 1H production 4,456 boepd (1H 2023: 5,566 boepd)
• Egypt 1H production 1,395 bopd (1H 2023: 1,349 bopd)

In Vietnam:

• Surface and subsurface optimisation to ensure stable TGT and CNV 1H production
• Approval of the TGT Revised Field Development Plan (RFDP) by the Ministry of Industry and Trade (MOIT)
• Agreement between Partners and PetroVietnam (PVN) on the terms and work programme commitments for the extension period of the TGT and CNV five-year licence extension applications; which now await formal approval
• Progressing the opportunity in Block 125 with long lead items ordered in August 2024

In Egypt:

• Focus on workovers, recompletions, and water injection to bring low-cost barrels to production and build reservoir energy for future drilling
• Preparation for exploration and development drilling programmes
• Processing and interpretation of the recently acquired 3D Seismic in NBS 

1H Financial and Corporate Highlights

• Net cash as at 30 June 2024 of $17.5m1,2 (30 June 2023: net debt of $16.4m)1,2
• Group revenue $65.0m3 (1H 2023: $86.2m)3
• Net profit $15.3m (1H 2023: $14.3m net loss), including $12.6m of restructuring expenses, re-measurements and impairments    (1H 2023: $(15.2m))
• Cash generated from operations $44.3m3 (1H 2023: $43.4m)3
• Egypt receivables reduced with $14.8m received from EGPC in 1H 2024 and an additional $4m received on 1 July 2024
• Operating cash flow $27.9m4 (1H 2023: $21.3m)4
• Cash operating costs $17.09/bbl1 (1H 2023: $14.14/bbl)1 
• Cash balances as at 30 June 2024 of $30.7m (30 June 2023: $35.9m)
• Forecast cash capex for the full year is $31m ($26m after Egyptian carry by IPR), of which $6.8m had been incurred by 30 June 2024
• Katherine Roe appointed CEO and Mohamed Sayed promoted to COO effective 1 July 2024
• Commitment to shareholder returns continues with an interim dividend of 0.363 pence per share in respect of the year ended 31 December 2024 and continuation of the current phase of the share buyback programme, with $1.1m of the $3m incurred by the end of June 2024

1 Non-IFRS measures
2 Includes RBL and National Bank of Egypt working capital drawdown
3 Stated after realised hedge losses of $0.1m in the period (1H 2023: no realised hedge gains or losses)
4 Operating cash flow = Net cash from operating activities, as set out in the Cash Flow Statement

Outlook

2024 production guidance of 5,200 – 6,500 boepd net remains unchanged:

• Vietnam 2024 production guidance 3,900 – 5,000 boepd net; Egypt 2024 production guidance 1,300 – 1,500 bopd net

Vietnam

• Two-well TGT infill drilling programme commenced on 26 August 2024
• Awaiting CNV RFDP approval, expected in Q4 2024, enabling further development drilling on CNV to commence in 2025
• TGT and CNV five-year licence extensions well advanced; once signed, this will enable commitment to further investment in both fields
• Discussions ongoing with potential farm-in partners and rig contractors required to progress Block 125

Egypt

• Expected completion of the exploration commitment well on El Fayum in 4Q 
• Processing of c.130km2 of 3D seismic data on NBS underway and expected to complete in 4Q
• Discussions ongoing on the consolidation proposal following the initial feedback from EGPC

Star Energy

Star Energy announces its unaudited interim results for the six months to 30 June 2024.

Commenting today Ross Glover, Chief Executive Officer, said:
“We have strengthened our balance sheet with the new facility arranged with Kommunalkredit Austria AG,  and this gives us the opportunity to reinvest some of our operating cashflows into our oil and gas business to further drive its profitability and sustainability. We continue to successfully deploy capital into quick returning optimisation projects, generally investing small amounts to optimise specific wells. We continue to position the Company to take advantage of the exciting opportunities we see as the energy transition continues, both by reinforcing a very robust foundation of cashflow generating assets and also looking at how best to progress our geothermal portfolio.

Our UK oil and gas business, for now, remains the driver of revenue and we plan to maximise our economic recovery as we seek to capitalise on the shovel-ready projects we have developed at Corringham, Glentworth and Bletchingley. However the recent and proposed changes to the Energy Profits Levy (“EPL”) have made this and our transition a more difficult exercise.

We were pleased to welcome the launch of GB Energy and the National Wealth Fund. Both schemes recognise the importance of establishing Britain as a clean energy superpower and the increasing need to build energy independence in today’s febrile geopolitical climate. GB Energy plans to invest in leading technologies and projects deploying local energy production to communities across the country. Its focus will be the production of ‘clean low carbon energy’. 

Whilst we have a very large growth opportunity in UK geothermal, to date, geothermal has received sporadic support from various government schemes. We welcome the new government taking a longer term, more strategic view of the support required to start industries, just as Feed-in Tariffs, the Renewable Obligation and now the Contracts for Difference Scheme have for wind and solar.

Following the satisfaction of the Ernestinovo licence commitment, our technical teams are making good progress with their assessment of the technical data and updating development plans so that we can prioritise development within this business unit.

However, a fundamental aspect of this transition to renewable sources of energy is for the industry to leverage the cashflows and skills of the workforce in the oil and gas industry into this effort. The recent and proposed changes to the Energy Profits Levy regime will curtail our profits, limiting investment into the transition and  drive us to look for business opportunities in other jurisdictions reducing the investment we make into the UK. These changes are counter-productive, leaving the UK less able to transition, more dependent on energy from other countries and, in the short to medium term, more exposed to international energy price volatility.“

So, the oil and gas business remains the driver for the business, quelle surprise and I have met Ross Glover and he is a smart guy but has his work cut out after what has been a thoroughly wasted time under previous management. To get it back to its knitting is going to be hard going but with a knife being taken to the portfolio it would be great to see it rise like Lazarus in the sector.

There are still a few projects in the geothermal portfolio that might be worth something, one day if it comes off it could bring home the bacon but again the scattergun approach is something not normally seen in your typical business school manual…Like with me the new CEO is being given the benefit of the doubt but he is having to take a knife to an already pared cost base, no one said it would be easy…

SDX Energy

• Completion of a large data reprocessing project that enables high grading of leads to prospects to target productive resources more accurately. This data reprocessing has increased SDX’s confidence in the earlier-presented 47 Bcf gas play, of potentially significant value to the Company.
• SDX plans to drill a stratigraphic well in Q4 2024 which, if successful, will help to develop a drilling campaign for the 47 Bcf play in early 2025.
• The Company has identified its next two well targets, with total unrisked gas in place of over 3 Bcf with a view to commence drilling these in Q4 2024.
• SDX is in discussions with its partner, the Moroccan state, to tie-in a stranded gas well in the near-term, generating additional revenue for SDX. Existence of other stranded gas wells in the Rharb basin may give rise to a broader project to connect multiple wells, subject to agreement.
• SDX is preparing the tender process for the acquisition of a further 150 km2 of 3D seismic data – significantly increasing opportunities for more gas discoveries in the north west of the Company’s Rharb basin licence.
• SDX has received two draft term sheets for structured financing, backed by future gas revenues, to fund the planned drilling campaign in Q4 2024.
• The Company is also in advanced negotiations with two multi-billion dollar international companies for a deeper partnership in accelerating SDX’s gas exploration and production activities in Morocco.

Completion of 3D Seismic Merge and Reprocessing

SDX is pleased to announce the successful completion of the merging and reprocessing of more than 650 square kilometres of 3D seismic data. In February 2024, SDX awarded the project to Absolute Imaging, based in Calgary, Alberta, Canada. Their task was to merge five contiguous legacy 3D seismic surveys into a single unified survey, with consistent processing parameters. The objectives of this intensive process were to enhance consistency across the surveys, improve structural resolution, identify new drilling opportunities, and de-risk previously identified prospects.

Initial reviews of the final data have confirmed that all the objectives have been achieved, providing greater confidence and resolution across all the surveys. The next phase will involve amplitude-versus-offset (“AVO”) inversion analysis to increase the reliability of using direct hydrocarbon indicators (“DHIs”) for identifying and de-risking leads and prospects within the merged seismic area. SDX expects to complete this process by the end of Q4 2024.

47 Bcf Clustered Amplitude Play Update

Recent reinterpretation of subsurface data, prior to merging and reprocessing of the data, identified multiple clusters of densely packed amplitude DHIs. Preliminary management estimates suggest that the largest cluster could contain mean recoverable unrisked resources of 47 Bcf. Pending successful evaluation, SDX plans to develop this new play type using multi-lateral drilling techniques, commonly employed in the North American market and which SDX’s operational team has experience with.

At today’s gas prices in Morocco, 47 Bcf of gas, once developed, would represent a significantly valuable asset to the Company and a significant multiple of current reserves. SDX sees large demand for gas from current and future industrial offtakers in country and is encouraged by the discussions that have been held with potential funding partners to develop these opportunities.

With the newly merged and reprocessed seismic data, SDX has increased its confidence in this play and has identified an exploratory drilling location. This stratigraphic well will target multiple stacked anomalies to confirm the presence of both reservoir and gas. It will also test deeper stratigraphic leads, which, if successful, could unlock a new play type in the basin. SDX is preparing to initiate the mandatory Environmental Impact Assessment (“EIA”) process, which is expected to be complete in early Q1 2025. Concurrently, the conclusion of the AVO analysis will allow the company to rapidly proceed towards full-field development of the clustered anomaly play in the first half of 2025.

Two New Drilling Locations

SDX has identified two new drilling locations and is in the final stages of securing land permits for each. The newly processed seismic data has been integrated into the original interpretations, further de-risking both prospects. These locations, designated as KSR-22 and OLME-A, have unrisked mean gas in place estimates of 2.4 Bcf and 0.6 Bcf, respectively. SDX plans to commence its next drilling campaign during Q4 2024.

Near-Term Production Opportunity

The Company is waiting for the approval from Office National des Hydrocarbures et des Mines (“ONHYM”) to tie-in an existing ONHYM-owned well to the Company’s pipeline, which would bring proven gas reserves online in the near term. SDX would share the gas sales revenue with ONHYM. This would help maintain supply of gas to customers and bring additional revenue to SDX, while the Company focuses on progressing its drilling campaign, identifying new opportunities, and developing the 47 Bcf clustered amplitude anomaly play. Other currently stranded wells with gas-behind-pipe may also be tied into the Company’s pipeline, subject to further negotiations with ONHYM.

Temporary Reduction of Gas Supply to CITIC Dicastal Subsidiaries

The Company has directed CITIC Dicastal subsidiaries, including DIKA MOROCCO AFRICA (“DMA”) to temporarily reduce their gas consumption from 48,000 cubic metres per day average during August 2024 to 10,000 cubic metres per day, as part of a proactive effort to responsibly manage remaining resources and to ensure maximum recovery from the field. The Company remains committed to supplying gas at existing consumption volumes to other offtakers. Plans are in place to restore historical supply levels to DMA as soon as new gas reserves are assessed, either by connecting ONHYM’s legacy wells with identified pay zones or by drilling new wells.

Tendering for 150 km² of New 3D Seismic Data Acquisition

SDX is preparing a tender process to select a partner for the acquisition of over 150 km2 of 3D seismic data. The area selected for this new seismic acquisition campaign is to the north-west of the existing newly merged seismic surveys and has been strategically placed to allow SDX to tie-in to its existing pipeline infrastructure, merge into the newly merged data set while covering a thicker and prospective portion of the basin. SDX anticipates finalising the tender and commencing the seismic acquisition in Q1 2025. The EIA for this project commenced in July and is expected to be completed during Q4 2024.

Progress on Structured Financing Arrangements and Strategic Partnership Discussions

SDX has been in negotiations with two separate counterparties to secure financing, secured by SDX’s future gas revenues. SDX has draft term sheets from both counterparties and the Company hopes to be able to finalise a transaction in Q4 2024. This structured financing will be used to fund the upcoming drilling of the new production well KSR-22 and potentially the stratigraphic well, to significantly de-risk the 47 Bcf play.

A separate tranche of financing is being negotiated for the tie-in of the ONHYM well, referred to above and should be in place also in Q4 2024.

SDX also continues to explore strategic partnership options with two multi-billion dollar international companies to provide financing support in the short-term, enabling SDX to drill an additional well within six months and acquire the new 3D seismic data. In the longer-term, such a strategic partnership may significantly accelerate and expand SDX’s exploration and production activities in Morocco.

As the sole independent gas producer in Morocco, SDX works closely with its partner, ONHYM, in all aspects of development and production. SDX’s gas is sold to multiple offtakers in the Kenitra industrial area.

I’ve not met the new management of SDX and this looks like a series of long shots that not even the they have been prepared to comment on here, in which case I will certainly wait until they have.

Seascape Energy

Longboat Energy, a Southeast Asian focused E&P company, announces that it has changed its name to Seascape Energy Asia plc.

The Company will commence trading on AIM under the new name and the new stock symbol “SEA” effective from the start of trading today. The CUSIP and ISIN numbers remain the same. There is no consolidation of share capital. Shareholders are not required to change their existing share certificates for new certificates bearing the new company name and Company shares held electronically will be booked electronically. The name change does not affect the rights of the Company’s shareholders, and no further action is required by existing shareholders with respect to the name change.

A new beginning, as readers know I am very keen on the prospects for Seascape as we shall now call it, I expect plenty of good news in the not too distant…

KeyFacts Energy Industry Directory: Malcy's Blog