WTI (Sept) $94.70 -$1.65, Brent (Sept) $103.20 -66c, Diff -$8.50 +$1.06. 

USNG (Sept) $8.30 +60c, UKNG (Aug) 317.0p +27p, TTF (Aug) €165.0 +€2.09

Oil price

Last week whilst Brent was up $2.04 WTI fell, by $2.89, this four dollar swing has meant that the differential is $8.50 today. Partly due to bigger demand for Brent but also as American drivers start to kick back against high gasoline prices which has led to lower demand from refiners.

But the natural gas price is powering ahead, immensely high temperatures across the USA has led to massive demand for air conditioning roofing it and as such gas demand. As reported last week Libya is increasing production and is over half its way to the targeted 1.6m b/d.

But hopes of increasing oil production domestically are still not being delivered, last week’s rig count showed up 2 units to 758 overall but oil was unchanged at 599 units.


Kistos is today announcing an update to the proposed combination with Serica Energy plc, first announced on 12 July 2022.

The Board of Kistos confirms that on 22 July 2022 it wrote to the Board of Serica setting out an update to the Proposed Combination, with Kistos revising the combination terms for the entire issued and to be issued share capital of Serica, as set out below.

The Board of Serica rejected the Revised Combination Terms, with no rationale given nor engagement with the Board of Kistos. The Board of Kistos, therefore, in the interest of continued transparency has decided to announce these Revised Combination Terms.

The Proposed Combination comprises a possible cash and share-for-share exchange offer by Kistos for Serica. Under the Revised Combination Terms, Kistos would offer for each Serica share:

·      0.4000 new Kistos shares; plus

·      cash of 213 pence, comprising:

 a distribution of capital to Serica shareholders via a cash payment of 67 pence per share; and

 cash consideration equivalent to 146 pence per Serica share.

Based on the closing price of 530 pencei per Kistos share on 22 July 2022, the Revised Combination Terms give an offer value of 425 pence per Serica share, representing a premium of:

·      19% to the closing price of 357 pence[i] per Serica share on the Latest Practicable Date;

·      39% to the closing price of 305 pencei per Serica share on 11 July 2022, being the last business day before the First Possible Offer Announcement; and

·      35% to the six-month volume weighted average price of 315 pencei per Serica share on the Latest Practicable Date.

The Revised Combination Terms represent an 11% increase to the headline offer value as set out in the First Possible Offer Announcement[ii].

Under the Revised Combination Terms, Serica shareholders would own approximately 58% of the issued share capital of the combined business, in addition to receiving a significant cash component.

The Revised Combination Terms represent a reduced level of leverage in the Combined Company by approximately £93 million relative to the terms presented in the First Possible Offer Announcement, reflecting feedback from both the Board of Serica and Serica’s shareholders.

In addition, the Board of Kistos also believes that the Proposed Combination would allow Serica shareholders to gain direct unhedged exposure to the stronger continental European gas market through Kistos’ Dutch gas assets. Over the three months prior to the Latest Practicable Date, Dutch Title Transfer Facility (“TTF”)[iii] prices have traded at an average premium of above 50% over British National Balancing Point (“NBP”)[iv] prices and as at the Latest Practicable Date TTF prices have a stronger forward outlook than NBP, with the expected 2023 forward curve trading at a c.7% premium over NBP[v].


In contrast to the proposal by the Board of Serica on 1 July 2022, Kistos also set out a framework for the governance of the Combined Company which included a Board to reflect a balanced contribution from each of Kistos and Serica and a proposal on the roles of Chairman and CEO.

Next Steps

Kistos continues to urge Serica shareholders to encourage the Board of Serica to engage in constructive discussions with the Board of Kistos regarding the Proposed Combination.

Important Takeover Code notes

As stated on 12 July 2022 in the First Possible Offer Announcement, in accordance with Rule 2.6(a) of the Takeover Code, Kistos must, by not later than 5.00 p.m. (London time) on 9 August 2022, either announce a firm intention to make an offer for Serica in accordance with Rule 2.7 of the Takeover Code (a “Kistos Firm Offer”) or announce that it does not intend to make an offer for Serica, in which case the announcement will be treated as a statement to which Rule 2.8 of the Takeover Code applies. This deadline will be extended only with the consent of Serica and the Panel on Takeovers and Mergers (the “Panel”) in accordance with Rule 2.6(c) of the Takeover Code.

Pursuant to Rule 2.5 of the Takeover Code, Kistos reserves the right to:

1.   Vary the form and/or mix of the consideration for the Proposed Combination at its discretion; and

2.   Make an offer at any time at a lower value or on less favourable terms:

a.   with the recommendation or consent of the Board of Serica;

b.   if Serica announces, declares or pays any dividend or any other distribution to shareholders (in which case Kistos will have the right to make an equivalent reduction to the Revised Combination Terms);

c.   if a third party announces a firm intention to make an offer for Serica on less favourable terms than the Revised Combination Terms; or

d.   following the announcement by Serica of a Rule 9 waiver pursuant to the Takeover Code or a reverse takeover (as defined in the Takeover Code).

A further announcement will be made as appropriate. There can be no certainty that a Kistos Firm Offer will be made.

Kistos confirms that this announcement is not being made with the consent of Serica.

Kistos has come back with a number of changes in areas they presumably had heard feedback from shareholders on. One such area I assume was to increase the equity proportion of the deal to gear up shareholders, this has been rejected.

Also it is clear from this that there has been no engagement between the sides even though it had looked like Serica had endorsed the logic of a combination, otherwise I guess that they wouldn’t have mounted a counter bid.

Finally, Kistos has suggested a mixed board with the Serica Chairman the Chairman of the new entity although the same is not the other way around. We shall see, below is the Serica statement.


The Board of Serica Energy plc confirms that it received a revised non-binding proposal from Kistos plc on 22 July 2022 regarding a possible cash and share offer for the entire issued and to be issued share capital of Serica.

The Kistos Revised Possible Offer comprises the following:

·      0.4000 new Kistos shares per Serica share; plus

·      cash of 213 pence per Serica share, consisting of:

 a capital distribution of 67 pence per Serica share; and,

 cash consideration of 146 pence per Serica share.

The Company notes that the Kistos Revised Possible Offer reduces the cash element of the offer by 33 pence per share and increases Serica shareholders’ share of the combined entity from approximately 50% to approximately 58% compared to the first offer that Kistos submitted to the Company on 24 May 2022 and which was publicly announced on 12 July 2022. The First Kistos Possible Offer was rejected by the Board of Serica on 1 June 2022.

The Kistos Revised Possible Offer purports to give an offer value of 425 pence per Serica share and is an 11% increase in the headline value to Serica shareholders when compared to the First Kistos Possible Offer[1]. However, Serica notes that over 60% of this increase in headline value is driven by the rise in the Kistos share price from 11 July 2022[2].

The Kistos Revised Possible Offer proposes that Mr Tony Craven Walker of Serica act as Chairman of the combined entity and Mr Andrew Austin of Kistos be the CEO.

Following careful consideration, the Board of Serica, together with its financial advisers, has unanimously rejected the Kistos Revised Possible Offer for the following reasons:

1.   The Kistos Revised Possible Offer significantly undervalues Serica

·      The Serica Board strongly believes that the Revised Kistos Possible Offer:

 Does not reflect the underlying value of Serica’s existing core producing oil and gas assets.

 Takes no account of Serica’s plans and capability for organic investment in its existing fields to increase production, reserves and asset life. For example, the Company has replaced practically all of its produced volumes in the last two years and recently announced positive early results from its LWIV[3] campaign which has increased the production from only two wells by over 3,000 barrels oil equivalent per day.

 Is opportunistic given the:

·      recent and potentially temporary disconnect between Continental and UK gas prices (noting these gas prices are currently very volatile); and

·      North Eigg exploration prospect currently being drilled (Serica working interest 100%) and targeting over 60 million boe of net P50 unrisked recoverable prospective resources

 Results in Serica shareholders funding much of the purported premium themselves: Kistos’ market capitalisation is significantly smaller than Serica’s and the Kistos Revised Possible Offer is approximately 50%[4] in shares.

2.   The Kistos Revised Possible Offer relies on using Serica’s own cash to partly fund the cash component of the transaction

·      The proposed cash payment to shareholders in the Kistos Revised Possible Offer includes a 67 pence capital distribution made from Serica’s own cash resources.

·      Serica’s Board has already committed to a combination of profitable reinvestment in its existing assets and returning cash to shareholders, whilst still seeking value accretive acquisitions. This is evidenced by the operational achievements described above, a rising profile of paid and announced dividends along with the recently secured authority for share buy-backs, and a considered M&A strategy.

·      The structure proposed in the Kistos Revised Possible Offer is fundamentally unchanged from the First Kistos Possible Offer leaving the combined entity with a weaker balance sheet when compared with Serica currently, thereby compromising the scope for future investments and significantly increasing exposure to inherent business risks.

3.   Serica’s management team has an outstanding track record

·      The Kistos Revised Possible Offer would result in a change in the Serica leadership during a crucial period for the industry

·      Serica’s leadership and organisation has generated outstanding returns for shareholders. Serica’s share price has consistently outperformed its UK-listed E&P peers having risen 1,120% over the past 5 years against an average 66% increase for its UK-listed E&P peers[5]

·      The Company’s financial performance is underpinned by a strong track record of safe and effective stewardship of its operated assets which are strategically important for the UK, including:

 Successful execution of multiple challenging capital projects.

 Reserve replacement ratio of approximately 100% over last 2 years.

 Maintaining overall production from the Bruce Hub fields close to the level when acquired in 2018.

 Most recently boosting production from the Bruce field by just over 3,000 barrels oil equivalent per day through low cost well interventions.

 Deferring the expected cessation of production from the Bruce Hub fields from 2026 to 2030 and plans to extend Bruce Hub production well into the 2030s.

The Board reiterates its position that it will not recommend any deal on terms which it believes are unattractive to its shareholders and wider stakeholders.

Serica shareholders are strongly advised not to take any action.

Serica confirms that this announcement is not being made with the consent or approval of Kistos.

Nothing to add on this statement from the last one by the look of it, they are backing themselves to deliver on their own.

Union Jack Oil

Union Jack has announced that material landmark net revenues of US$8,000,000 have been achieved from the Wressle hydrocarbon development, located within licences PEDL180 and PEDL182 in North Lincolnshire on the western margin of the Humber Basin.

Union Jack holds a 40% economic interest in this development.


·    Landmark US$8,000,000 revenues generated to Union Jack since re-commencement of production on 19 August 2021

·    Well continues to produce under natural flow with zero water cut

·    Union Jack continues to be cash flow positive covering all G&A, OPEX and contracted or planned CAPEX costs, including any drilling activities for at least the next 12 months

·    At 24 July 2022, cash balances and short term receivables stood at over £9,150,000

·    Union Jack confirms a maiden profit to be posted for the unaudited half year period ended 30 June 2022

·    To date, due to Union Jack’s current capital expenditure programme, the recently introduced Energy Profits Levy of 25% is not expected to be material to the Company

·    Debt free

Executive Chairman of Union Jack, David Bramhill, commented:

The revenues of in-excess of US$8,000,000 from the Wressle development continue to bolster the Company’s Balance Sheet.

“Since the last production update published during June 2022, another impressive production performance from the Wressle-1 well has been recorded and the trend remains positive.

“Cash balances are expanding significantly on a monthly basis, and we are funded for G&A, OPEX and contracted or planned CAPEX costs, including any drilling activities for at least the next 12 months.

“The Gaffney Cline report continues to be updated and upgraded to reflect increased production rates and also incorporate other ongoing positive reservoir modelling and production profiling exercises into its final analysis.

“Since Gaffney Cline commenced their report, oil production at Wressle has increased by circa 45% and, accordingly their report is being updated to reflect these new positive developments and is now using a reference date of 30 June 2022.

“In addition, Gaffney Cline are compiling three illustrative production scenarios for the Wressle oilfield, indicating average oil production plateaus for the low, medium and high cases, showing the conceptual production curves in each case for the remaining planning period of 13 years.

“Gaffney Cline have also been instructed to comment on any possible untapped resources at the Wressle-1 well that may be present. The report is currently being finalised and the results will be announced in due course.”

 There is only  so much good news one can release from Wressle, the asset that just keeps on giving. Today’s news that the $8m revenue has been passed and will mean that at the interim stage a maiden profit will be announced is further good news for UJO shareholders. 

Add to that what might be in the updated Gaffney Cline report and of course the lure of a dividend and that makes UJO significantly undervalued, a price five times this level would not be expensive. 

Hurricane Energy

Hurricane has announced that it has repaid in full its outstanding $78,515,000 7.50 per cent Convertible Bonds plus $1.5 million of accrued interest by the maturity date of 24 July 2022.

The Bonds will now be delisted from The International Stock Exchange and cancelled.

The repayment leaves the Company debt free, with significant cash on hand, further cash due from the imminent lifting from the FPSO, and ongoing cash generative production from the Lancaster field.

Antony Maris, CEO of Hurricane, commented:

“The repayment of the convertible bonds is an important and key milestone for Hurricane as we move into a new phase for the company, focusing on building a long-term future for the business and creating additional value for our shareholders. The excellent operational performance of the Lancaster field, for which I pay a huge tribute to our whole team, combined with high oil prices has underpinned the establishment of a strong financial platform for the company.

We continue our work to identify the most effective capital allocation opportunities both within and outside of our existing asset base, and which best fit within our growth plans in the context of both our own and the UK’s transition goals.

I believe that Hurricane going forward is attractive to investors and well positioned to look for new growth opportunities. Our focus is on creating value for shareholders and we are being very rigorous in assessing which opportunities will best deliver that.”

Hurricane shares are up 20% as I write, what the did the market not see or understand about all the noise that has been made in recent weeks about the debt being paid off? There is absolutely nothing in this update that investors on Mars would not know about and that happened at the time of the ludicrous court case when equity holders were within a judges pen stroke of total wipeout. 

Hurricane is in a very good place, with around $80m of cash and a fantastic asset as a cornerstone the world is indeed its lobster…

President Energy

President has provided an update on the first steps made by its new Green House Capital subsidiary and an update on Argentina and Group.


On 28 June 2022, President announced that as part of its stated objective of demonstrable diversification of the Company’s interests and migration to businesses to which investors will ascribe higher value, it has become a 75% beneficial shareholder in Green House, a company intended to be an incubator for/investor in alternative energy.

Business Model

The business of GH will be to source, seed finance and incubate early-stage opportunities in the green and/or alternative energy sub-sector. GH is intended to hold its interest in each business within a separate special purpose legal entity (“SPV”) domiciled in an appropriate jurisdiction for business efficacy.

Whilst it is intended that GH will initially be seeded by President in each of its businesses, subsequent material funding will be determined by the specific needs and characteristics of the relevant business. GH will consider in each SPV the various monetization possibilities of the equivalent of farm out, joint venturing, venture capital / private equity funding or IPO. This will provide flexibility to GH to both mobilise and/or release capital in due course. The structure will also facilitate the ability of the Group to divest itself of any appropriate component parts to the benefit of President shareholders.

In identifying opportunities, as stated on 28 June, GH will capitalize on contacts and experience of its and President’s shareholder and stakeholder base.

Lithium identified as first project

The importance of lithium to the global commitment to Net Zero is well known.

The Lithium Triangle, a resource rich region of the Andes around the borders of Chile, Bolivia and Argentina is considered to hold over 50% of the World’s commercial lithium reserves. In Argentina, one of the largest lithium producers in the world, the resource is mostly found in the Province of Salta – the region in which President has the Puesto Guardian Concession from which it produces oil.

President has now entered into a Memorandum of Understanding with the Argentina State owned company responsible for managing the energy and mining resources of the Salta Province, Recursos Energéticos y Mineros de Salta S.A (“REMSA”).

REMSA has certain properties that may have potential for lithium mining and extraction. REMSA and the Company have agreed to set up a joint committee for selecting areas of a minimum size of 1,000 hectares for prospecting and initial topical exploration to determine next steps.

Whilst the Memorandum does not guarantee that President would be able to acquire any prospective areas that REMSA and it identifies, there is a written understanding that President would have, under a private initiative process, both first offer and last offer rights to any areas that the Company wishes after making such initial exploration and marks a first significant step in the start of cooperation with REMSA in a Province in which President is already a major investor and where it has established business and management structure.

President is confident that the lithium market and global demand for the metal has long term attractive prospects with the Salta Province having significant interest from international companies including the recently announced investment of US$825 million by Rio Tinto in December 2021 and US$962 million by the Chinese lithium giant Ganfeng earlier this month.

Lithium, like President’s oil and gas businesses, is a dollar-based business. As such they are shielded to a material extent by the high inflation currently being experienced in Argentina, as is further reinforced by the interest of many international companies in both hydrocarbon and mineral production in Argentina.


It is important to view this announcement in the context that President has a solid core business and robust trading position, as referred to in the announcement dated 28 June 2022 providing shareholders with details of the 2021 Annual Results together with a 2022 trading update and outlook.

The strategic transition is intended to re-energise President with the Group evolving into new horizons whilst at the same time benefiting from its profitable core business which delivered profits after tax of nearly US$5 million in 2021, free cash generation of some US$13 million with turnover projected for 2022 at over US$40 million and significant current operating profits, material exploration opportunities as well as the 28% investment interest in ATOME.

The intention going forward is that each division of President will evolve to have its own separate management under the Group main board. As part of the Group refreshing and re-imagining itself whilst making use of its current asset base, the following steps are intended:

1.   Peter Levine, the major shareholder and funder of the Company, has indicated to the Board that on or before the end of Q1 2023 he will step back from his current broader role in the Group to focus on developing the Green House part of President and deal making. Whilst remaining as non-executive Chairman, supportive shareholder and funder, he will work with the directors to restructure the Board to provide right sized, right ability management succession that can in the future exploit the potential of President and continue a progressive pathway for the benefit of shareholders.

2.   Within the next few months, it is the current intention to propose changing the name of the Group to reflect such evolution and business philosophy and away from connotations of its past.

3.   At the same time the Company will propose a share consolidation to move away from the penny/micro share image and mitigating the ability of market investors and market makers to allow or cause large volumes of shares but with low aggregate value to affect prices. Details of both this and the proposed name change will be notified to shareholders later this year.

Peter Levine, Chairman, commented:

“It is fact that the creation of ATOME Energy by President, its spin out and flotation has been value accretive to President shareholders. However, the value of the retained investment interest of nearly 28% in ATOME has clearly not been reflected in President’s share price. Our conclusion is that investors do not ascribe proportionate value to President’s core hydrocarbon business, which therefore acts as a negative influence to the value proposition of President as a whole. Green House marks the commencement of the evolution of the AIM listed President Energy and emergence from the past whilst at the same time not neglecting its present core hydrocarbon business

“The progression to a Group with separate business divisions having their own motivated management and funding capabilities yet delivering value to the public company shareholders has been successfully demonstrated by the spin off and listing of ATOME Energy PLC. ATOME has created for shareholders in President multiples of the value of money originally invested in its creation and continues to benefit the Group through its near 28% holding

“The move of Green House into the strategically important lithium market is a first step. We believe that by the end of this year there will be other prospective projects coming under the Green House division

“President will capitalize on this experience and create more such opportunities within the broader alternative energy economy 

“Nevertheless, for now we must also not neglect the fact that we are also a traditional energy company, currently with increasing turnover and profitable core earnings from hydrocarbons. This will continue to be the case for the foreseeable future, but with this business unit in good operational shape I personally can turn my focus to deal-making where I believe can be of most value 

“I am energised by moving to have a focused emphasis on the innovation and deal making I thrive upon. I will remain a major shareholder and principal funder of President. A new, motivated Group CEO / Management team at the top of the Group structure will be put in place before this move.”

Starting Green House Capital to become another child of President and an incubator for alternative energy investments is intended to become another Atome which has become more valuable than its parent. By changing its name and consolidating the shares will also hopefully fool the investors but will also in addition create another fast growth, high beta company.

Add to that a change in Management as Peter Levine steps down from his executive role and moves to Non Executive Chairman he will be able to advise and fund each of the subsidiaries. This is not to say that President itself as the core hydrocarbon part of the business will change, just hopefully be more appropriately valued. 

Echo Energy

Echo has provided an operational update regarding progress in the execution of the Santa Cruz Sur assets Production and Infrastructure Enhancement Plan previously announced by the Company on 7 July 2022.

As previously announced, the first operational priority under the Plan is to upgrade the power generation capacity sufficient to sustain the elevated production levels anticipated as possible under the plan, the Company is therefore pleased to announce that a contract for the long-term provision of gas-powered electricity generation units to the Joint Venture for installation across the Cerro Molino Oeste, El Indio Oeste and Oceano fields has now been signed.

Accordingly, equipment has now been mobilised to the field in Santa Cruz Sur and installation is anticipated to take a month from commencement. The new generation infrastructure consists of one unit of 1,375 Kilo Volt Amps (KVA) capacity for the Cerro Molino Oeste field, one unit of 375 KVA capacity for the El Indio Oeste field, and one unit of 375 KVA capacity to be installed in the Oceano field.  The on-site installation and commission of all three units will begin during the week commencing 25 July 2022, notwithstanding the winter conditions currently being experienced at Santa Cruz Sur. The work will be undertaken by Santa Cruz Sur Joint Venture staff.

El Indio Oeste will be installed first, followed by Oceano and then Cerro Molino Oeste. These works will be carried out with the intention of minimising any disruption to existing gas and oil production, although some temporary impact is expected. Following these units’ installation, additional power will be available to support existing and future production levels. Although there may be some increase to current production, these infrastructure upgrades are in preparation for the recommissioning of shut-in wells using the Joint Venture rig. Work has also commenced on upgrading this pulling rig in anticipation of this upcoming set of operations.

The installation of the additional power generation capacity, alongside the upgrading of the workover rig, represents a critical step in the delivery of the Plan. The Company looks forward to continuing to update shareholders on progress on these plans throughout this year.

A second set of planned infrastructure improvements will be focused on the maintenance and optimisation of the compressors at Cerro Norte and Campo Bremen to enable the increased volumes of associated gas to be processed and then sold into the main gas export line. This operation is anticipated to take approximately three months from commencement and will be carried out with the intention of minimising any disruption to existing gas production, although some temporary impact is expected.

I will look forward to comments from Echo CEO in due course.

And finally…

The final ODI was washed out in Leeds yesterday leaving the series tied up between England and South Africa 1-1. The T20 series starts on Wednesday night in Bristol.

Chas Leclerc made another mistake in France yesterday and handed the race and quite possibly the title to Max, Lewis was second and George third.