WTI (Nov) $87.27 -$2.08, Brent (Dec) $92.45 -$1.84, Diff -$5.18 +24c.

USNG (Nov) $6.43 -16c, UKNG (Nov) 295.0p +15.0p, TTF (Nov) €162.005 +€2.74.

Oil price

No surprise that oil has fallen as the agencies either have or are about to drop their demand estimates. This only proves that the Saudis were right in cutting supply ahead of this panic and can to an extent massage the price.

China’s ongoing Covid problems coupled with the strong dollar on the back of the poor CPI data are a problem but I still believe will be transitory. Inventories later will be important but I suspect that it is most important to look at the heavy end of the product market.

PetroTal Corp

PetroTal has announced the following operational and corporate updates.

Q3 2022 Production

PetroTal’s Q3 oil production was approximately 1.12 million barrels, representing 12,229 barrels of oil per day, which was the Company’s second best producing quarter to date.  The current technical production capacity of the Bretana oilfield is approximately 18,000 bopd, prior to the upcoming completion of well 13H.  The third quarter is a seasonally dry quarter, but this year the river water levels were unusually low, so PetroTal took the precaution of loading barges to a reduced capacity to ensure their safe operation while traveling.  As a result, production was constrained during this period to match reduced export capacity, which has been impacted from the continued closure of the Northern Peruvian Pipeline.  As the dry period passes and water levels rise, the Company expects to return to increased levels of barge capacity.

Well 13H Update

On October 4, 2022, well 13H reached its total depth and is now being completed.  At an unconstrained level, the Company expects to again have production capacity of over 20,000 bopd that can be quickly activated once river levels normalize, and additional barges are made available. 

ONP and Barging Update

The ONP remains down as Petroperu continues to work through maintenance activities related to damage at various points on the pipeline.  The Company is working with the new management of Petroperu to develop a view on when it may be able to resume exports through the ONP, but currently assumes this will not happen in 2022.

The Company is also working actively to expand the capacity of its export route to Brazil, both through expansions of the barge fleet and optimization of the round trip time with the eventual goal of reaching 1 million barrels of capacity.  The Company expects to continue increasing its monthly Brazilian export capacity from the initial 120,000 barrels exported in December 2020 to an average of 600,000 barrels per month in 2023, without reliance on the ONP.  In May and August 2022, the Company exported 470,000 and 450,000 barrels respectively, to Brazil, prior to being impacted by low river levels.

Liquidity Update

As at September 30, 2022 the Company had approximately $93 million in total cash with $18 million being restricted.  At the end of Q3 2022, accounts payable were approximately $50.6 million, and estimated accounts receivable were $123.7 million.  Subsequent to the quarter end, $12 million was received related to Brazilian export sales.  The majority of remaining receivables are amounts owing from Petroperu related to June’s sales export at Bayovar and for oil that entered the ONP in February 2022.  The overdue amount owing from Petroperu, related to the July sales export is $64 million (including VAT).  PetroTal has been working diligently with the finance group at Petroperu to establish a repayment schedule for the $64 million and to ensure the February invoice amount is a priority once their credit is reactivated.

Adjusted 2022 Guidance – Assuming no ONP availability

Adjusted Guidance

Q1 (actual)

Q2 (actual)

Q3 (actual)

Q4 (constrained)


Oil wells completed

1 (10H)

1 (11H)


2 (13H + 12H)


Average Production (bopd)





13,500 – 14,000


 USD millions, unless otherwise stated


Realized Brent (USD/bbl)


Average Production (bopd)

13,500 – 14,000

Net operating income




Net derivative settlements


Adjusted EBITDA




Free cash flow


Debt Reduction Strategy

The Company now expects the full bond settlement to be made by the end of Q1 2023, at which time, there will be a reduction of the call premium, saving approximately $2.6 million in buyout costs.  Thereafter, as previously indicated and liquidity permitting, the Company expects to begin a capital return program to shareholders.  PetroTal is currently in compliance with all bond covenants and expects to remain so prior to the expected retirement date.

Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:

“We continue to work with our trader to increase their overall available contracted barging fleet size to alleviate oil export constraints, which have been compounded by the unavailability of the ONP since early 2022.  We are adjusting our 2022 guidance to reflect a conservative sales scenario, which we hope to exceed should the ONP become a viable sales option in Q4 2022.  Under this conservative scenario, cash flow is still very strong allowing the Company to deliver on its promised shareholder return program in 2023.  Additionally, we are looking forward to finalizing the ongoing successful working table discussions related to the social trust.” 

Whilst the third quarter showed production slightly below guidance there were understandable reasons for this, primarily lower exports through the ONP which is shut-in for maintenance and also in the dry season barges are loaded lower for safety reasons. 

 This has meant that the Brazil export route has become significantly more important and with that and Iquitos a substantial, indeed pretty much total amount of the capacity can be diverted from the ONP. This will be more important when the 13H well completes and pushes capacity to over 20/- b/d. which is good as the ONP is not expected back this year.

Full year guidance is now 13.5-14/- b/d which generates excellent EBITDA and FCF contribution, this means cash of $93 million in total cash with $18 million being restricted. This will enable the bond repayment in Q1 2023 and the red letter day when shareholder returns can be started. 

PTAL shares are undoubtedly significantly undervalued, they doubled earlier in the year but have recently fallen back to the 40p level, a significant discount to my target price of 150p and therefore with so much operational upside the shares represent excellent value.

Scirocco Energy

Scirocco has provided the following update regarding the Company’s investment in Energy Acquisitions Group Ltd, and progress through the first year of that investment.

On 25 August 2021, Scirocco announced the completion of its £1.2 million investment into EAG, a specialist acquisition and operating vehicle in the sustainable energy sector, and in which Scirocco holds 50% interest.  EAG subsequently used the funds to acquire 100% of Greenan Generation Limited (GGL) and its 0.5MWe Anaerobic Digestion (AD) plant in Northern Ireland, completing that deal on 1 October 2021.

In the 12 months since completing that investment, GGL has performed strongly, surpassing revenue and EBITDA projections set at the point of acquisition.  Key operational and financial highlights associated with the first year of GGL ownership include:  

·    GGL delivered c. 4 million kWh during 12 month period of EAG ownership (equivalent to annual usage of 1,250 homes on average)

·    Operational availability in excess of 93%

·    EBITDA estimate for 12 months to 30 September 2022 of £602,000 (unaudited)

·    The above EBITDA estimate is after c. £295,000 of mechanical upgrades and improvements made to future proof the GGL asset

·    The above EBITDA estimate is also after GGL provided c. £80,000 of support to EAG for running costs and in support of BD activity to grow the wider business and identify further investment opportunities

Commenting on the update, Scirocco’s CEO Tom Reynolds said:

“We’re delighted to provide an update covering the first year of the JV with EAG and its ownership of GGL.  As noted, GGL has performed strongly, exceeding projections at the point of acquisition and demonstrating the highly cash generative, profitable nature of the asset acquired. This strong cash flow profile has meant that EAG/GGL is self-sustaining and has enabled re-investment into the asset to enhance operational performance and improve EBITDA margins, with no further investment from Scirocco. Surplus cash generated by GGL will now be available to support further acquisitions.

The initial investment in EAG/GGL has validated the strategic focus on this asset type, and the EAG team is actively assessing a highly attractive pipeline of additional investments.  The proposed business model benefits from economies of scale, as operating techniques and technologies are utilised to improve performance, and the inaugural investment in GGL provides a strong template to replicate as we seek additional value accretive investments of this kind.

This now presents Scirocco and its stakeholders a superb opportunity to invest in a growing, profitable asset base which in due course will deliver further cash flow for re-investment.  Scirocco’s divestment of legacy oil and gas investments supports the Company’s strategic focus on energy transition opportunities, and will provide the Company with additional liquidity to pursue compelling opportunities.”

Commenting on the update, Chris Kerr, MD of EAG, said:

“Given the pipeline of projects that EAG has secured in the green gas and circular economy spaces over the last 12 months, we are looking forward to the continued support of Scirocco as our primary investor. Delivering even half of our current pipeline will create a business of significant scale which we can all be hugely proud of. Optimisation of the Greenan asset by the EAG team has delivered excellent numbers in our first year of ownership, and we are excited to deliver additional similar projects in 2023, as well as partnering with a global nutrient manufacturer to deliver phase one of our bio-fertiliser plant roll out. With the technical pathway to upgrade our AD residues into high value growth media and fertiliser, EAG is in the perfect position to serve the ever growing demand for sustainable gas and fertiliser.”

It is now the time for the EAG business to shine as Scirocco is able to show just how well the acquisition of GGL has gone. I like the fact that it has beaten both revenue and EBITDA projections and is at 93% of operational availability. 

More importantly the business is ‘highly cash generative and profitable’ and can be invested in to bring fast growth. Also non-organically EAG are as they say ‘actively assessing a pipeline of similar investments. 

If this is indeed the case then Scirocco have a winner on their hands and with the ability to roll it out and expand substantially then why not continue to invest. 

Arrow Exploration

Arrow has provided an operations update.

Operations Update

Rigs and equipment are currently moving into place for the Q4 tie in, workover and drilling program.

·      East Pepper tie-in

 All licences and approvals have been received

 Tie-in work began on September 28

 Production expected to begin by the end of October

 Expected IP rate of 1,000 boe/d and the Company expects typical production declines thereafter

·      RCS-1 and RCE-1 Workovers:

 Workover rig began mobilization on October 11

 The rig expected is to arrive at the Rio Cravo field by the end of this week

 Workover program on RCS-1 and RCE-1 expected to begin shortly thereafter and be completed by early November

 The workover program will add production from the C7 stringer and C7A units at RCS-1 and the C7 stringer at RCE-1. This program is expected to have a material impact on overall RCE production

 Management expects the two workovers to add in excess of 500boe/d.

·      RCE-3 and RCE-4 Development Drilling:

 Rig mobilization to the Rio Cravo field expected to begin mid-November, as the rig has been delayed by the previous operator.

 RCE-3 expected to spud in December.  Expect drilling and completion to take circa one month with first production anticipated in early 2023

 RCE-4 will follow immediately after completion of RCE-3

 RCE-3 and RCE-4 are infill development wells with initial productivity rates estimated to be similar to the C7 and C7 Stringer production at RCE-2

·      Carrizales Norte

 Drilling at Carrizales-1 and -2 is anticipated to begin in Q1 2023

Corporate production as of October 11, 2022, is approximately 1,500 boe/d. Production from the RCE-2 well is approximately 550 bbls/d net (1,100 bbls/d gross) producing from the C7A and C7 stringer zones. Production from the RCS-1 well is approximately 170 bbls/d net (340 bbls/d gross) from the C7B zone. As set out above, organic production growth is expected from the workovers of RCE-1 and RCS-1, and the development drilling of RCE-3 and RCE-4 wells to further exploit known hydrocarbon accumulations. Current production from the RCE-1 and RCS-1 wells is ahead of forecast in aggregate.

The West Pepper well, owned 100% by Arrow and located in Canada, is producing 280 boe/d currently, with production curtailed due to third party facility constraints. Management expects that production will return to approximately 400 boe/d in early Q4 2022. Arrow is currently working on the tie-in for the East Pepper gas well in Canada (100% owned by Arrow). This second well, along with continuing and expected robust natural gas prices in North America, is expected to further enhance the value of the Pepper field. 

In addition to the 3D seismic survey Arrow purchased earlier this year, the Company intends to execute on a 130 square kilometer 3D seismic survey on the northwest section of the Tapir block in Colombia. This will further delineate low risk exploration fault structures that have been identified on 2D seismic data and, if successful, will provide material running room through 2023 onwards. The shooting of this seismic survey is expected to begin in Q1 2023.

Marshall Abbott, CEO of Arrow Exploration Corp., commented:

“Arrow is excited about the upcoming capital program and expects material production and reserve additions.  The Arrow team continues to execute our strategy to increase shareholder value”

After my note last week from Cape Town there isn’t much to add but this update makes very pleasing reading indeed. 1,500 b/d plus the East Pepper tie-in adds, say 1,000 b/d and RCS-1 and RCE-1 workovers will add 550 b/d. In addition the development drilling of RCE-3 is expected to spud this year and RCE-4 will follow that. With Carrizales-1 and -2 expected in Q1 2023 there is much to come. 

I see the doubling of production target as easily captured and looking at the numbers above it looks like around 3,500 b/d as suggested in my last note at the very least. With so much going on I am confident that my target price of 50p to be a very conservative one and the Bucket list is a near certainty. 

Block Energy

Block Energy Plc, the exploration and production company focused on Georgia, is pleased to announce its operations update for the three months ended 30 September 2022.


·    Over 102,300 operational man-hours worked in Q3 2022, with no Lost-Time Incidents

·    Minimum Work Programme Commitments completed across the entire portfolio

·    Deepening of well JSR-01 drilled successfully and below budget, testing programme has now commenced

·    Competent Persons Report reaffirms opportunity and investment case for Project I, NPV10 US$57MM (3P Reserves case)

·    Q3 production of 37.1 Mboe (Q2: 47.2 Mboe)

·    Q3 revenue of $1,833,000 (Q2: $2,228,000)

·    As at 30 September 2022 cash balance of$1.1m (30 June 2022: $1.4m) and over 13,000 bbls of oil inventory

Block Energy plc’s Chief Executive Officer, Paul Haywood, said:

“Q3 saw the Company deliver robust production, good cashflows and end the period with cash and oil inventory that will support the ongoing and self-funding development of its three-project strategy.  The successful deepening of well JSR-01 saw the progression of this strategy and reflected the Company’s technical and operational excellence. Block is better placed than ever to progress and realise the value opportunity that exists across its portfolio, whilst testing JSR-01 DEEP and preparing for drilling the next well in our multi well drilling programme”.

This looks like a disappointing update from Block but the JSR well could easily reverse this, having said that it is difficult to make a case for holding the shares until something becomes clear on this front. 

Angus Energy

Angus announced yesterday that, following a scheduled maintenance shutdown last week, hourly throughput rates through the process plant (i.e. sales gas) now exceeds our October target production rate of 6 million standard cubic feet per day with well pressures holding in the high forties.  Condensate production has stabilised at or around 120 barrels per day.  As previously advised, we will report monthly gas sales figures at the end of each quarter.

Side-track planning progresses apace with a slight adjustment to spud date from 20 October 2022, as previously advised, to 24-26 October 2022 in order to accommodate a potential supply chain issue.

Another good update from Angus where the team is delivering the goods and things get better every time they come back to the market. CEO George Lucan made it clear in my recent interview that the target is to be much bigger and paying a dividend, see it here.

Core Finance CEO interview: George Lucan of Angus Energy

And finally…

England beat Australia in the second T20 and hence the series, as it was the Aussie first team it bodes well for the world cup.

In the Champions League on Tuesday Chelsea beat AC Milan 0-2, the Noisy Neighbours drew 0-0 with FC Copenhagen and Celtic lost 0-2 to RB Leipzig. Last night Liverpool beat Rangers 1-7.