WTI $65.49 -78c, Brent $68.71 -75c, Diff -$3.22 +3c, NG $3.01 -10c, UKNG 60.0p -5.02p
Oil reversed its early rise yesterday, when I wrote, Brent was over $70 the first time for a while but a couple of things changed all that. Firstly the Russian Ambassador to the UN said that ‘significant progress’ was being made on talks with Iran on the agreement. Interesting that with its Opec+ hat on Russia now has different priorities…
Later Bloomberg ran a story that suggested that 4m b/d is on the way, obviously given how much contraband oil Iran has been selling the net figure maybe somewhat lower, tongue in cheek I promise…
Finally the API stats showed a build of some 600,000 barrels, a fair bit less than the scribblers had expected although the product markets are all over the place following the Colonial Pipeline closure. Gasoline drew 2.8m and distillates 2.6m on the week.
Diversified Energy Company
Diversified Energy Company has confirmed that further to the announcement made by the Company on 30 April 2021, it has completed the purchase of certain Cotton Valley upstream assets and related infrastructure from Indigo Minerals LLC. The deal establishes an entry into Diversified’s newly identified Central Regional Focus Area for a gross consideration paid of $135 million (before customary purchase price adjustments).
It will give the company annualised 4Q20 Adjusted EBITDA of approximately $40MM and PDP reserves of ~50 MMBoe (305 Bcfe) with pre-tax PV10 of ~$175MM based on 16 April 2021 NYMEX strip. It comes with current production of ~16 MBoepd (~95 MMcfepd) includes ~780 net operated wells.
Importantly retention of key field personnel to streamline integration and Smarter Asset Management initiatives is planned and initial hedge positions cover approximately 80% and 50% of remaining CY2021 and full-year CY2022 production, respectively, from the Acquisition assets.
Rusty Hutson, Jr., CEO of the Company commented:
“We are excited to solidify our entry into the strategically-aligned Central focus area, a prolific natural gas producing region that affords us a tremendous opportunity to build significant scale and cash flow. I’m pleased to welcome the former Indigo employees to the Diversified family who are eager to integrate these assets as they embrace our Smarter Asset Management philosophy designed to maximize the value of every well. This acquisition provides us a foundation to acquire additional accretive, long-life producing assets that will contribute to strong shareholder returns, add stability to our hedge-protected dividend and drive additional debt reductions over time.”
I think that this is a game-changing deal for DEC even if it didn’t appear to need one. I never thought that it would run out of potential assets in Appalachia although never ruling out such an acquisition and it hasn’t run out at But that the top quality management at the company now has increased geographical scope that knows no bounds to use their highly efficient and profitable model, I think that the sky is the limit especially as the company has ‘a keen focus on opportunities that align with the parameters of its participation agreement with Oaktree, including a purchase price threshold of greater than $250MM’. WOW!
Final results from RKH this morning which are of very limited help but the following has happened in the period.
The Ombrina Mare arbitration Tribunal confirms “deliberations and the drafting process have both advanced very considerably” which sounds like even by the tardy standards of tribunals something may be imminent. also the disposal of Rockhopper Egypt Pty Limited to United Oil & Gas plc completed in February 2020 and the subsequent sale of the Group’s entire shareholding in United Oil & Gas plc in August 2020 raised proceeds of US$4.0 million.
Initiatives implemented to further materially reduce corporate costs and a US$222.6 million one-off non-cash impairment, based on a decision, in line with the Sea Lion operator, to write off the historic exploration costs associated with the resources which will not be developed as part of the Sea Lion Phase 1 project. The company has cash resources of US$11.7 million as at 31 December 2020.
With regard to Sea Lion detailed transaction terms agreed with Navitas Petroleum LP to farm-in for a 30% interest in the project and the recently completed merger of Premier Oil plc with Chrysaor to create Harbour Energy plc, results in a materially larger and financially stronger operator of the Sea Lion project. Finally, extension of the Company’s North Falkland Basin Petroleum Licences, including the Sea Lion Discovery Area, to 1 November 2022.
Keith Lough, Chairman of Rockhopper, commented:
“The Company will continue to work closely with all stakeholders to maximise the chance of securing the Navitas farm out and project sanction of Sea Lion. The Board believes that the opportunity to invest in a world-scale fully appraised and engineered project with material additional upside at this point in the cycle presents a compelling opportunity, and one which would lead us towards unlocking the value within the project long-awaited by all stakeholders.”
Rockhopper has been in what might be described as hibernation as the Tribunal sits, the farm-out is secured and of course what happens to Harbour Energy is determined. Right now patient shareholders can be rightfully excited that things are potentially about to happen on many fronts. Whilst I have no idea about what Harbour’s thoughts are it would surprise me that Sea Lion was not in their thoughts, after all at $70 it must have cracking economics and lead to a big summer for the company.
Tower has announced an update regarding planned operations on the Thali license in Cameroon, and the NJOM-3 well. The Company has now received formal confirmation from the Minister of Mines, Industry and Technological Development of the details of the formal extension of the First Exploration Period of the PSC.
As previously announced the Company declared Force Majeure in March 2020 in respect of the First Exploration Period of the PSC, in light of the restrictions required to combat the Covid-19 pandemic, and on 31 March 2021 the Company announced that the President of the Republic had also approved a formal extension of the First Exploration Period.
The formal “arrête” from MINMIDT extends the First Exploration Period to 11 May 2022. This formal extension allows the Company to proceed with finalising a schedule for drilling and testing the NJOM-3 well.
Jeremy Asher, Chairman and Chief Executive Officer, commented:
“We are once again grateful to the Republic of Cameroon and to the Minister of Mines, Industry and Technological Development and his staff for their continued support of the Thali project, and also to the President of the Republic, the Secretary General of the Office of the Presidency, and the Prime Minister for taking a direct interest in our activity, as well as all the staff at the Societé Nationale de Hydrocarbures who have supported us during this First Exploration Period. We are looking forward to seeing the NJOM-3 well drilled as soon as possible, and we will have more news for investors about the schedule in due course.”
Another company where shareholders have been monumentally patient, it looks like things are still slowly admittedly, moving on up, as they say. I am told by his people that Jeremy is happy to be interviewed on my CEO slot on Core Finance so expect that to happen, he is a man of his word. That interview should answer many questions.
Hurricane Energy/Crystal Amber
So, what does one say about this news? Given what CA has said in recent months it should come as no surprise and it is a last chance saloon for equity holders before the board annihilates their holding. Other holders may sympathise, even agree…For this announcement I am copying news directly.
Hurricane has announced that it has received a requisition notice from Crystal Amber Fund Limited pursuant to section 303 of the Companies Act 2006, requiring that Hurricane’s board convenes a general meeting of shareholders for the purposes of considering the following ordinary resolutions:
1. That Steven McTiernan be removed from office as a director of the Company with immediate effect.
2. That Dr David Jenkins be removed from office as a director of the Company with immediate effect.
3. That John van der Welle be removed from office as a director of the Company with immediate effect.
4. That Sandy Shaw be removed from office as a director of the Company with immediate effect.
5. That Beverley Smith be removed from office as a director of the Company with immediate effect.
6. That John Wright be appointed as an additional director of the Company with immediate effect.
7. That David Craik be appointed as an additional director of the Company with immediate effect.
The Board is considering the content of the Requisition Notice, which it intends to respond to in accordance with the requirements of the Act. A further announcement will be made in due course.
Crystal Amber Fund, the activist investment fund, announces that it has sent to the board of Hurricane a requisition notice requiring Hurricane to convene a general meeting at which resolutions will be proposed to remove Steven McTiernan, Dr David Jenkins, John van der Welle, Sandy Shaw and Beverley Smith as directors and to appoint John Wright and David Cruik to the board as non-executive directors. Details relating to John Wright and David Cruik are set out below in Appendix 3.
Since 2013, the Fund has been a shareholder in Hurricane. To enable Hurricane to commence and continue its workstreams, the Fund was, on three separate occasions, asked to provide capital to Hurricane. Each time, the Fund responding favourably, investing a total of more than £25 million. The board of Hurricane had previously presented the company as a strategic asset of national importance. However, it has failed to reconcile its earlier estimates of the value of Hurricane’s West of Shetland portfolio with its latest, downbeat assessment.
The Hurricane board has also demonstrably failed to protect shareholders’ interests. Its actions (more fully set out below) provide ample evidence of its evasive and obstructive engagement with its shareholders. The Fund believes there may well have been a failure by the incumbent Board to act in accordance with section 172 (1) of the Companies Act 2006, which states that a director must act in a way most likely to promote the success of a company.
There is much more but this is the crux of it, watch this space.
Frontier European E&P Summit
Tomorrow I am speaking at the above event, many speakers much more qualified than I and on the agenda below. I am pleased to be able to offer to blog readers a chance to watch the virtual conference, the first 10 who message me will get free executive tickets after that it is 50% off the £100 +VAT price.
The Premiership is coming to an end and with so many catch-up games before the season end on Sunday, odd results happen. Last night the Cottagers got a point at the Theatre of Dreams, the Saints lost 0-2 at home to Leeds, the Seagulls beat the Noisy Neighbours 3-2 and in the Cup Final repeat Chelski got their revenge beating the Foxes 2-1. Tonight the Toffees host the Wolves, the Blades go to the Magpies, Spurs host the Villa, the Gooners go to the Eagles, Burnley host Liverpool and the Baggies entertain the Hammers.