WTI $83.82 +$1.70, Brent $86.48 +42c, Diff -$2.66 +42c, NG $4.26 u/c, UKNG 190.0p -20.0p

Oil price

Oil continues to behave as expected, I can’t write the same reasons every day why I believe in the bull case, as I have done effectively ever since the industry started over investing and when Opec realised that they were in charge again. For people who have had to listen well before COP 26 I have been saying that the vibes I have been getting from my contacts close to Opec say that they are as bullish as they have been for a long time. When they start warning the traders to take them on at their own risk you know who is in the driving seat. IRMC

The latest push for the oil price was yesterday when Yemeni terrorists launched an attack on operations in the UAE which will undoubtedly receive some sort of reaction. Oil is up another dollar today accordingly.

Genel Energy

Genel has issued the following trading and operations update in advance of the Company’s full-year 2021 results, which are scheduled for release on 15 March 2022. The information contained herein has not been audited and may be subject to further review.


  • Production in 2022 is expected to be around the same level as 2021
  • Genel expects to generate free cash flow of up to $200 million in 2022, pre dividend payments, at a Brent oil price of $75/bbl
    • An increase or decrease in Brent of $10/bbl impacts annual cash by $50 million
    • Under the terms of the Receivable Settlement Agreement signed in August 2017, the last override payment will be made relating to Tawke PSC production in July 2022. Given payments are received three months in arrears from the Kurdistan Regional Government (‘KRG’), 10 override payments are expected in 2022
    • 2022 capital expenditure is expected to be between $140 million and $180 million, with key asset spending including:
      • c.$75 million expenditure forecast at the Tawke PSC, an increase of c.$25 million compared to 2021 as drilling increases at the Tawke field
      • c.$45-80 million expenditure forecast at Sarta, with higher spend the result of appraisal success
      • c.$10-20 million expenditure forecast at Taq Taq
      • Work is underway on planning a well in Somaliland, with expenditure in 2022 expected to be under $5 million
    • Operating costs expected to be c.$50 million (2021: $44 million), equating to under $5/bbl, retaining our advantageous low operating cost position
  • Following the termination of the Bina Bawi and Miran PSCs by Genel on 10 December 2021, Genel will be claiming substantial compensation from the KRG. Genel’s claims will be brought in a private London seated international arbitration
  • Genel remains committed to paying a material and progressive dividend, as we look to offer a compelling mix of value-accretive growth and shareholder returns
  • Genel continues to invest in the host communities in which we operate. 2022 represents twenty years of operations in the Kurdistan Region of Iraq, which we will commemorate through the Genel20 programme, launching significant new social activities throughout the year, aligned with UN Sustainable Development Goals


  • $281 million of cash proceeds were received from the KRG in 2021 (2020: $173 million)
  • Capital expenditure of $165 million (2020: $109 million), with c.$45 million spent at the Tawke PSC and c.$110 million at Sarta and Qara Dagh
  • Free cash flow of $86 million in 2021, pre dividend payments (2020: $5 million free cash outflow), comparison impacted by:
    • Higher oil price of $71/bbl in 2021, compared to $42/bbl in 2020
    • 10 entitlement payments received in 2021, compared to 12 in 2020, following industry-wide reversion to payments three months in arrears by the KRG
    • Receivable recovery payments of $35 million received in 2021, with the resumption of Tawke override payments contributing a further $72 million ($23 million in override payments received in 2020)
  • Dividends paid in 2021 of 16¢ per share (2020: 15¢ per share), a total distribution of c.$45 million
  • Cash of $314 million at 31 December 2021, net cash of $44 million ($10 million at 31 December 2020)

Bill Higgs, Chief Executive of Genel, said:

“In 2021 we generated significant free cash flow of $86 million, and in 2022 we are set to build on this as the strength of the oil price and our positive outlook means that free cash flow is expected to more than double. Our focus in 2022 is on growing the business and supporting our progressive dividend long-term. We aim to increase cash flow through the progression of our asset development plans and the addition of income streams. Our priority is the derisking and commercialisation of Sarta, while the successful farm-out on our Somaliland licence opens the way to drill an exploration well on this exciting opportunity.”

Things are clearly going very well at Genel as the company is generating a material amount of cash and in the absence of any physical growth it is in a strong position to progress the business and ‘support that progressive dividend long-term’. 

Without the likely upside of the Bina Bawi and Miran PSC’s and what seems like a 12 month delay at Qara Dagh, depending on collaboration from Chevron, Genel still has a number of areas of organic growth. Work on Sarta continues with a decent spend in the area and appraisal on S-5 completed and the rig moving to Sarta 6 with an imminent spud date. There are also the beginnings of talk of Somaliland work and of course potential non-organic growth options. 

So, plenty going on at Genel and importantly solid work on the key domestic operational work that continues to deliver significant progress that can only get better, as they say, show me the money and shareholders can expect generous rewards. I expect them to see both income and capital gains that continues to make Genel a must have stock in the sector. 

Sound Energy

The board of directors of Sound Energy, the energy transition company, notes the recent announcement by Angus Energy Plc of the commencement of a strategic review and formal sale process pursuant to the relevant requirements of the Code and announces that it is evaluating a possible all-share offer for the entire issued and to be issued share capital of Angus. Sound Energy confirms that it has previously made indicative proposals to Angus regarding a potential all-share combination. The board of directors of Angus unequivocally rejected the indicative proposals.

Indicative proposals

Sound Energy has submitted three non-binding indicative proposals of 1.00 pence per Angus share, 1.30 pence per Angus share and 1.40 pence per Angus share to Angus’s Chairman and Managing Director on 18 December 2021, 30 December 2021 and 5 January 2022 respectively, such possible consideration to be satisfied by the issuance of Sound Energy shares to Angus shareholders. These proposals represent premiums of approximately 54%, 100% and 115% respectively to the closing share price of 0.65 pence per Angus share on 17 December 2021, being the last business day immediately prior to Sound Energy’s initial proposal. Each of these proposals was unequivocally rejected by the Angus Board. On 14 January 2022, Gneiss Energy Limited, in its capacity as financial adviser to Sound Energy, made a further formal approach orally to the Managing Director of Angus and Beaumont Cornish Limited, financial adviser to Angus, confirming the terms of the Possible Offer (which are described below) and noted Sound Energy’s desire to proceed with the Possible Offer on the basis of a recommendation from the Angus Board.

Transaction rationale

The Company has evaluated this Potential Combination for some time and believes that the Potential Combination would be a strategically compelling proposition.

Sound Energy believes the Potential Combination would represent the combination of two complementary businesses, with attractive onshore gas developments in high gas price jurisdictions.

The board of directors of Sound Energy consider that the Potential Combination would create a more effective operating entity and an enlarged business with substantial capabilities that would be greater than the sum of the two parts.

The Potential Combination would allow both the Company’s and Angus’s shareholders to participate in any future value generated by the Combined Group and its more diversified portfolio.

Specifically, the Sound Energy Directors believe that a combination with Angus would provide the Combined Group with the following key benefits:

1.       An enlarged platform for investment and growth;

2.       A larger portfolio with diversification across sectors and maturity of assets;

3.       The potential to deliver multiple projects for the Combined Group’s shareholders; and

4.       An experienced team with complementary industry backgrounds.

The strategy of Sound Energy has been to actively further the energy transition. The focus of the Sound Energy Board has been on the development of gas assets in jurisdictions where high gas pricing, attractive fiscal terms and a beneficial regulatory environment are supportive to project development.

The Possible Offer

The terms of the Possible Offer would comprise the issue of 0.680 Sound Energy ordinary shares for each Angus ordinary share. By way of example, the Exchange Ratio represents a value of approximately 1.50 pence per Angus share based on a closing price of 2.20 pence per Sound Energy share on 17 January 2022, being the last business day immediately prior to the date of this announcement.

At the value of 1.50 pence per Angus share implied by the Exchange Ratio, the Possible Offer, if made, would represent a premium of approximately:

·    93 per cent. to the Angus closing price of 0.775 pence per share on 5 January 2022, being the last business day immediately prior to the announcement by Angus of the commencement of a strategic review and formal sale process;

·    111 per cent. to the volume weighted average price for Angus shares over the two-month period ended on and including 5 January 2022, being 0.709 pence per share; and

·    32 per cent. to the Angus closing price of 1.13 pence per share on 17 January 2022, being the last business day immediately prior to the date of this announcement.

The Exchange Ratio would give an implied value for the entire existing issued and to be issued share capital of Angus of approximately £21.6 million (based on a closing price of 2.20 pence per Sound Energy share on 17 January 2022, being the last business day immediately prior to the date of this announcement).

Under the terms of the Possible Offer, it is expected that Angus shareholders would own approximately 38 per cent. of the Combined Group, and Sound Energy shareholders would own approximately 62 per cent. of the Combined Group.

Given the Possible Offer is proposed to be structured as an all-share offer, Sound Energy is currently only minded to proceed with the Possible Offer on the pre-condition that a recommendation from the Angus Board is ultimately forthcoming. This pre-condition can be waived by Sound Energy, and further pre-conditions are set out below.

Sound Energy has received support for the Possible Offer from Angus shareholders in respect of a total of 152,203,626 Angus shares, representing, in aggregate, 13.92 per cent. of Angus’s issued share capital as at 17 January 2022 (being the last business day immediately prior to the date of this announcement). Further details of the irrevocable undertaking and letters of intent are set out in Schedule 1.

The Sound Energy Directors look forward to constructive engagement with Angus regarding the Possible Offer.

At this stage, there can be no certainty that an offer will be made.

There is little to add with all the regulations in force but there are a few things that might be worth bearing in mind.

There is nothing to disagree with in putting these two businesses together, both sides have good quality assets and combining them would provide a platform despite being on different continents. A rough 60:40 split would give both existing shareholders a realistic stake and dependent on management a platform for growth.

I’m sure that this bid battle will go the distance and as is often the case will probably be decided on price even though 14% have gone with Sound already. Having said that there are five other companies in the ring so competition will be fierce. 

Notwithstanding any other offer I have to say that Graham Lyon is an excellent oil and gas executive and I’m sure that if Sound’s offer is the best he will do very well with the combined business. E&OE


Chariot has announced the completion of the successful gas drilling operations, on the Anchois gas project within the Lixus licence, offshore Morocco. Chariot has a 75% interest and operatorship of Lixus in partnership with the Office National des Hydrocarbures et des Mines (“ONHYM”) which holds a 25% interest.

·      Anchois-1, the original discovery well drilled in 2009, was efficiently located and the wellhead was inspected, prepared and successfully coupled with the Stena Don rig confirming its potential viability as a future producer well.

·      To maintain efficiency a decision was taken to not take a Sand A gas sample in the Anchois-1 well as gas samples were successfully obtained in the previously drilled Anchois-2 well.

·      Anchois-1 operations will now complete with the well in a condition to allow for potential utilisation in the future development of the field.

·      Anchois-2 well, drilled just prior to the Anchois-1 well operation and successful in its appraisal and exploration objectives with over 100m of net pay, has already been safely and efficiently suspended for potential completion as a production well in the future development of the field.

·      Extensive data recovered from the multiple gas discoveries in the Anchois-2 well, including from a comprehensive sub-surface formation testing programme, which recovered twelve gas samples across seven gas bearing reservoirs, which are currently enroute to the laboratory for detailed analysis.

·      Stena Don rig will begin demobilisation from the well sites imminently.

Mrs Amina Benkhadra, General Director Office National des Hydrocarbures et des Mines, commented:

“My congratulations to Chariot and ONHYM teams for the successful Anchois drilling operations. I also would like to thank the Moroccan authorities for their support and help in achieving the drilling operations efficiently despite the Covid-19 pandemic restrictions. We look forward to working with Chariot in order to quickly progress the gas development.”

Adonis Pouroulis, Acting CEO of Chariot, commented:

“I am pleased to announce the completion of our very successful Anchois gas appraisal and exploration campaign, offshore Morocco. In addition to having now two confirmed gas discovery wells, we have directly de-risked a material portfolio of prospects on the Lixus licence area.

Our ambition is to bring the Anchois gas development online as quickly as possible, to fuel Morocco’s economic growth, but also to deliver near-term cash flows to the Company. We will now look to conduct further analysis on our findings, to optimise our development plan for the field, with both wells earmarked to become potential production wells, as part of an accelerated field development plan for the benefit of all stakeholders.

I would again like to thank ONHYM, our partners on the licence and all the Moroccan authorities involved, for their invaluable support, as well as the Chariot drilling team, Stena, Halliburton and other contractors who have enabled us to conduct these drilling operations safely, efficiently and successfully.

As a team, we are very excited about these positive results and the commercial potential of the expanded Anchois field along with the material upsides in the wider Lixus licence area and we will look to update the market in more detail on the findings of our further analysis in due course.”

Make no mistake this is a tremendous result and takes Chariot a number of steps all in one giant leap and I am not exaggerating by saying that this is a momentous step for Morocco as well. This result is relatively straightforward in that the 2nd leg and completion of the successful gas drilling operations, on the Anchois gas project has been swift. 

The operation needed to find the Anchois 1 discovery, confirm the integrity of the well, latch it on to the drilling rig, confirm that it would be able to be a producer and even cleaned up the BOP. This was so efficiently done that there was no need to take any sample of A sands in particular as from the last announcement 2 A samples have been sent to the lab. 

This was another piece of good news and also enhances the well economics, by not perforating the well money was saved, the well looks ready now and Chariot has two fully workable first steps to development. The rig leaves site tomorrow making it an efficient and successful, not to mention cheaper than expected well. 

Support for the Anchois development is lining up outside Chariot as banks jostle to lead the consortium of financiers and I’m absolutely sure that not only will other major companies be involved in the development but Chariot could easily take a wedge of that investment themselves. 

Finally as I indicated earlier this is a success that is being shouted from the rooftops in Morocco. Partner ONHYM, whom I know well, are clearly delighted as is the Government who have power plants in a number of areas which could take any amount of gas at any time. 

The market has not yet got the hang of this, to repeat I think that the shares could and should rise by a multiple and it’s going to be quicker than many imagine, not often a five or even ten bagger sits in front of investors.