WTI (Dec) $88.17 -$1.83, Brent (Jan) $94.67 -$1.49, Diff -$6.50 +34c.
USNG (Dec) $5.97 -29c, UKNG (Dec) 316.0p -9.01, TTF (Dec) €128.9 -€8.1.
The US non-farm payrolls finish a week of international data that has seen 75bp rate rises in the US and the UK and further Covid cases in China that has meant no sign yet of industrial pick-up there. Despite that, with as I write oil being around $3 higher this morning the week will likely prove to be an up one, this is after confirmation from the US that the SPR sales concluded yesterday with the last 15m barrels offloaded into the market. The plan is to buy them back when the price falls to $70 pb…..
Events at the Adipec conference in Abu Dhabi have seen a significant degree of confidence from Gulf countries, the Opec report at the beginning of the week, various speeches and the closing speech from the UAE’s Energy Minister Suhail Al-Mazrouei were formidable. In his speech Al-Mazrouei said that ‘whilst oil was in long term decline mode it would continue to grow all the way to 2045 when it will still have a 29% market share’. He added that all major fuel types ex coal woulds grow until then.
The next few weeks are going to be important for the oil price, opec cuts, EU acts coming in early December, Chinese Covid follow through and so on will have their effects. Add to that the US midterms next week and continued uncertainty about US energy policy and anything is possible. I think my market views are well known enough by now.
Chariot Limited, the Africa focused transitional energy group, Mohammed VI Polytechnic University (“UM6P”) and Oort Energy (“Oort”), collectively the “Parties”, are pleased to announce they have agreed to collaborate on green hydrogen pilot projects in Morocco. Utilising a polymer electrolyte membrane (“PEM”) electrolyser system, patented by Oort, which splits water to produce hydrogen and oxygen using renewable energy, this partnership will run initial proof of concept projects while evaluating the feasibility of the implementation of large scale green hydrogen and ammonia production.
With Chariot’s experience in evaluating the economic viability of such projects, along with UM6P’s network and expertise in-country the partnership will concurrently develop education and capacity building around green hydrogen and ammonia production. It is intended that one of the pilot projects will be hosted at Research and Development facility in OCP Jorf Lasfar, Morocco.
“We are delighted to be partnering with Chariot and Oort on this project to implement a new technology PEM Electrolyser in UM6P Lab for Education & research and to work jointly on new projects on electrolyser technologies, exchange and transfer of information. The green hydrogen sector needs collaboration of this nature to develop education and research in this new and strategic domain for Morocco.” stated Mohamed Bousseta, Director of Innovate for Industry at UM6P
“Oort’s mission is to bring the cost of green hydrogen production down so that it becomes a widely accessible source of energy. Testing our unique electrolyser technology in this setting will be a key step in demonstrating its capabilities whilst also assessing its efficiency, durability and cost structure for implementation in large scale projects.” said Nick van Dijk, CEO of Oort
“We are very pleased to be working alongside Oort and UM6P in evaluating the viability of another significant green hydrogen project and expanding our footprint beyond our work in Mauritania into Morocco. Chariot’s ambition is to become one of the world’s leading green hydrogen producers and ensuring access to reliable, cost-efficient electrolyser capacity will be a vital part of our pathway to production. We look forward to getting started on this pilot as well as collaborating on other projects of this nature in the future.” added Adonis Pouroulis, CEO of Chariot Limited
Chariot continue to set the pace in the concept of larger scale green hydrogen and ammonia production projects in Morocco with this imaginative deal involving both UM6P and the Oort facility. Their commitment to this long term concept is laudable and should be rewarded as proof of such capacity is confirmed in due course.
I also understand that progress continues to be made on all fronts of the wider business. Work with Societe Generale on funding solutions for the Anchois Gas Project, offshore Morocco, continues to advance and I think we can expect to hear more from the Company before the end of the year. This remains an exciting time for Chariot, and with the shares where they currently are, I believe there is significant upside potential that could be delivered by the team in the near to medium term.
Canadian Overseas Petroleum Limited has issued 6,996,500 common shares pursuant to a conversion of $800,000 principal of 2024 Bonds and $600,000 principal of 2025 Bonds.
Following these conversions, a total of seven 2024 Bonds and eighteen 2025 Bonds have been converted into Shares. The principal amount of convertible bonds outstanding has reduced to $11.2 million of 2024 Bonds and $9.0 million of 2025 Bonds.
Applications will be made to the FCA for these shares to be admitted to the Official List and to the London Stock Exchange for the Shares to be admitted to trading on the London Stock Exchange’s main market for listed securities within the next twelve months, in accordance with Listing Rule 14.3.4. Following this issue of Shares the Company has a total of 275,331,966 common shares issued and outstanding. There are no Common Shares held in treasury and therefore the total number of voting rights in the Company is 275,331,966. This figure may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company under the Financial Conduct Authority’s Disclosure Guidance and Transparency Rules.
Purely a formal announcement from COPL but worth investors bearing in mind.
- Third Quarter 2022 Average Production of 30,391 BOPD, Up 5% from One Year Ago
- Fourth Quarter-To-Date 2022 Average Production(1) of 32,291 BOPD
- Net Income of $39 Million, $168 Million Over The Last 12 Months
- Adjusted EBITDA(2) of $121 Million, Up 48% Year-on-Year, $462 Million Over Last 12 Months
- Net Cash Provided by Operating Activities of $109 Million, Up 82% Year-on-Year
- Funds Flow from Operations(2) of $94 Million, Up 36% Year-on-Year, $350 Million Over Last 12 Months
- Free Cash Flow(2)of $37 Million, $146 Million Over Last 12 Months
- Cash Balance of $118 Million and Net Debt(2) of $462 Million, as of September 30, 2022
- Colombia Exploration: Rose-1 Drilled and Undergoing Testing, Rig Mobilizing for Gaitas-2 Exploration Well
- Ecuador Exploration: First Two Exploration Wells Drilled in Ecuador with First Well Yielding Oil and Second Well to be Tested
Gran Tierra announced on Tuesday the Company’s financial and operating results for the quarter ended September 30, 2022 (“the Quarter”). All dollar amounts are in United States dollars, and production amounts are on an average working interest (“WI”) before royalties basis unless otherwise indicated. Per barrel (“bbl”) and bbl per day (“BOPD”) amounts are based on WI sales before royalties. For per bbl amounts based on net after royalty (“NAR”) production, see Gran Tierra’s Quarterly Report on Form 10-Q filed November 1, 2022.
Key Highlights of the Quarter:
- Gran Tierra’s total average production for the Quarter was 30,391 BOPD, up 5% from third quarter 2021 (“one year ago”) and approximately flat with second quarter 2022 (“the Prior Quarter”).
- During the Quarter, the Suroriente Block in Colombia’s Putumayo Basin experienced occasional disruptions due to localized blockades. The impact of these blockades lowered the Company’s total average production for the Quarter by approximately 920 BOPD.
- The Company’s fourth quarter-to-date 2022 total average production(1) has been 32,291 BOPD.
- Oil Price: The Brent oil price averaged $97.70 per bbl, up 33% from one year ago, but down 13% from the Prior Quarter.
- Quality and Transportation Discount: The Company’s quality and transportation discount widened to $13.37 per bbl, up from $13.00 per bbl in the Prior Quarter and $11.50 per bbl one year ago. The increases in this discount were driven by the widening of Colombian oil price differentials relative to the Brent oil price.
- Net Income: Gran Tierra generated net income of $39 million, up 10% from one year ago, and down versus net income of $53 million in the Prior Quarter. The Company’s net income over the last 12 months was $168 million.
- Diluted Earnings Per Share: Gran Tierra generated earnings of $0.10 per share, compared to $0.14 per share in the Prior Quarter and $0.10 per share one year ago.
- Adjusted EBITDA(2): Adjusted EBITDA(2) increased by 48% to $121 million compared to $82 million one year ago, and decreased 13% from $140 million in the Prior Quarter. The trailing twelve month Adjusted EBITDA(2) was $462 million, resulting in an annualized net debt(2) to Adjusted EBITDA(2) ratio of 1.0 times.
- Net Cash Provided by Operating Activities: The Company realized net cash provided by operating activities of $109 million, up 82% from one year ago and down 24% from the Prior Quarter.
- Funds Flow from Operations(2): Funds flow from operations(2) was $94 million, up 36% from one year ago and down 10% from the Prior Quarter. Over the last 12 months, Gran Tierra’s funds flow from operations(2) was $350 million.
- Free Cash Flow(2): Gran Tierra generated free cash flow(2) of $37 million, up from $34 million one year ago and down slightly from $38 million in the Prior Quarter. During the last 12 months, the Company’s free cash flow(2) was $146 million.
- Share Buybacks:
- NCIB: On August 29, 2022, Gran Tierra announced via press release that the Toronto Stock Exchange (“TSX”) had approved its notice of intention to make a normal course issuer bid (the “NCIB”) for its shares of common stock (the “shares”). Pursuant to the NCIB, the Company will be able to purchase up to 36,033,969 shares for cancellation, representing 10% of Gran Tierra’s public float, for a one-year period commencing on September 1, 2022, and ending on August 31, 2023.
- Share Buybacks: Pursuant to the NCIB, during the Quarter, Gran Tierra purchased approximately 10.7 million shares, representing about 2.9% of shares outstanding, for a total purchase price of $14.4 million, at an average price of approximately $1.34 per share.
- Bond Buybacks:
- As part of Gran Tierra’s ongoing commitment to reduce its net debt(2), during September 2022, the Company bought back approximately $20.1 million in face value of Gran Tierra’s 6.25% senior notes due February 2025 (the “2025 bonds”), representing approximately 6.7% of the outstanding 2025 bonds. The cost of the 2025 bonds’ buyback was approximately $17.3 million, representing a discount of about 14% to the face value of the 2025 bonds.
- Cash and Net Debt:
- As of September 30, 2022, the Company had a cash balance of $118 million and net debt(2) of $462 million (net of the buyback of 2025 bonds described above).
- Gran Tierra’s credit facility, with a capacity of up to $150 million, remains undrawn.
- Additional Key Financial Metrics:
- Capital Expenditures: Capital expenditures of $57 million were lower than the Prior Quarter’s level of $65 million, as the majority of Gran Tierra’s capital development programs in both Acordionero and Costayaco were completed during the Prior Quarter. During the Quarter, Gran Tierra drilled three exploration wells: the Bocachico-1 well in Ecuador and the Gaitas-1 and Rose-1 wells in Colombia.
- Oil Sales: Gran Tierra generated oil sales of $168 million, up 24% from one year ago and down 18% from the Prior Quarter. The changes in oil sales were driven by the previously described changes in Brent oil price and quality and transportation discounts over the same time periods.
- Operating Netback(2)(3): The Company’s operating netback(2)(3) was $44.26 per bbl, up 28% from one year ago and down 26% from the Prior Quarter. As with oil sales, changes in operating netback were largely driven by the previously described changes in Brent oil price and quality and transportation discounts over the same time periods.
- Operating Expenses: Compared to the Prior Quarter, Gran Tierra’s operating expenses increased 4% to $14.91 per bbl, up from $14.38 per bbl, due mostly to higher workover activities. Compared to one year ago, operating expenses increased by 5% on a per bbl basis, primarily as a result of higher environmental and community-related costs and lower partner recoveries as a result of temporary blockades in the Suroriente Block.
- General and Administrative (“G&A”) Expenses: G&A expenses before stock-based compensation were $2.95 per bbl, up slightly from $2.86 per bbl in the Prior Quarter as a result of higher costs for optimization projects, and up from $2.01 per bbl one year ago due to higher costs for optimization projects and lease obligations.
- Cash Netback: Cash netback per bbl was $33.42, compared to $37.71 in the Prior Quarter, which was only a 11% decrease despite the 13% decrease in Brent pricing. Compared to one year ago, cash netback per bbl increased 31% from $25.50.
Message to Shareholders
“Gran Tierra has generated significant free cash flow(2) of $146 million over the last twelve months, which has allowed us to execute on our share buyback plan and to strengthen our balance sheet via bond buybacks and the complete pay down of our former credit facility,” commented Gary Guidry, President and Chief Executive Officer of Gran Tierra. “We are excited about the initial exploration results that the Company has achieved in both Colombia and Ecuador. With current production(1) of 32,291 BOPD, we look forward to finishing 2022 on a strong note and are excited about our 2023 development and exploration capital programs and ongoing share and bond buybacks.”
I am trying to watch Gran Tierra a little closer in recent months and the share price has doubled this year and the company seems to be dong all the right things. Readers know that I don’t formally adopt companies until I have met them and at present I don’t have a trip to Calgary in the book (although a number of good companies listed over here are headquartered there) so for the time being I can’t add much more. Watch this space…
Last night in the Boropa Cup the Gooners beat Zurich 1-0 and the Red Devils beat Real Sociedad 0-1. In the Plate the Hammers were 0-3 winners at FCSB.
In the Prem this weekend Leeds are hosting the Cherries, the Cottagers are at the Emptihad, Forest host the Bees, Wolves entertain the Seagulls and the Foxes go to the Toffees. Sunday sees some big games, the early start is a London derby with The Gooners going to Stamford Bridge and the Red Devils are at the Villa. The Saints host the Magpies and in another London derby the Eagles visit the Hammers. The last match on Sunday is Spurs v Liverpool which is crucial for both teams.
It is also the First Round of the FA Cup where the lower league teams come in and play the non-league sides for the first time. Many are on TV and always worth watching…
Lot’s of rugby too but the Autumn Internationals continue with Scotland hosting Fiji, Wales play the All Blacks and Ireland host the Springboks on Saturday whilst England play the Pumas on Sunday.
In the T2o World Cup Washout Australia beat Afghanistan this morning and now England must beat Sri Lanka at 0800 hrs tomorrow morning to have any chance of a semi-final place. New Zealand beat Ireland.
The Philadelphia Phillies face an uphill battle in the World Series after losing two consecutive games to the Houston Astros. Houston now leads 3-2 heading back home for the remaining game(s). The Phillies will hope to snatch game 6 on Saturday night and take the series to a deciding game 7 on Sunday.