WTI (Dec) $86.92 +$1.05, Brent (Jan) $93.86 +72c, Diff -$6.94 -50c. 

USNG (Dec) $6.03 +10c, UKNG (Dec) 280.0p -20p, TTF (Dec) €120.0 -€4.7.

Oil price

The see saw in oil prices continued yesterday as prices rose with markets following the better than expected US inflation numbers causing dollar weakness. Also the problems with the Druzhba pipeline between Russia and Hungary where pressure drops saw volumes fall and markets worried.

The IEA warned that EU bans on Russian seaborne crude and the ending of the G7 price cap ‘will create unprecedented uncertainty in oil markets’. They also in their monthly report followed other agencies by dropping next years demand outlook by 40/- b/d to 1.6m b/d.

Finally the API reported that crude stocks dropped by 5.8m barrels last week with gasoline up 1.7m b’s and distillates fell by 850/- b’s.


Kistos held a Capital Markets Day last week at which it updated analysts on trading and confirmed that operationally the assets in the Netherlands and the recently completed GLA North Sea package will have doubled daily production rates.

Strong gas prices from H1 have slipped a little but the company remains unhedged with plenty of upside from the existing portfolio and with the management’s excellent record of acquiring high quality, swift returning assets, proven over many years  investors can rest assured of further growth in the future.

Clearly the tax position of the company was inevitably going to be raised at the meeting but with the UK position expected to be outlined tomorrow and the Netherlands one under significant opposition those subjects were understandably off the table. 

So, the future of the Netherlands assets will be dependent on the assumed tax regime but for the time being the current programme for 2022 and 2023 will get underway soon, after all the tax is scheduled to be paid 18 months in arrears. Also it may well be that the Government either back down or water down the tax proposals in the face of stiff opposition from the EU who might feel the tax against EU law or other household named gas producers in the Netherlands who will also challenge the proposals.

In the Greater Laggan Area it turns out that the timing of the deal was impeccable, with the later completion date of July 2022 and the very high gas prices since the announcement of start date in January let it be said that the deal was immediately highly cash generative. The GLA offers plenty of upside, with Glendronach development offering infill drilling starting next year and will extend life from 2024 and beyond. 

Benriach is the next gas play on the acreage and Kistos has 25% here, it will be partially de-risked by Glendronach but a well is also expected in 2023 and with success it could lead to a multi-well development by the end of the decade. 

The Shetlands gas plant is an important part of the deal, in this Kistos has a 20% interest with it being important  to realise that higher throughput by the joint venture and third parties will bring benefits, ie with Shell having bought Corallian last month it is clear that they plan to go ahead with the Victory field and tie-back to the GLA which would bring Kistos tariff income and more importantly a life extension of the GLA as a whole.

I remain highly positive about Kistos, as always it is in a number of data rooms and I expect more deals, indeed the company has made it clear that they can invest up to $1bn without the need for new equity and as shown during the summer it is not put off by approaching quoted competitors if the deal looks right. 

Finally as in previous incarnations Kistos has made it clear that they will if appropriate return money to shareholders, a special dividend would be very efficient and significant and a buy-back would be considered if it didn’t hit liquidity too much. 

The company has underperformed since September as a result of tax concerns addressed above in the Netherlands and the UK. Despite that I am of the view that the strength of the management in the M&A market and the highly positive nature of the organic business will lead to a recovery in the share price and a Target Price of 750p in the short term would not be a demanding target, indeed it should be higher than that on a years view. 

Canadian Overseas Petroleum Limited

Canadian Overseas Petroleum Limited  announced its financial results for the three month period ending September 30, 2022 yesterday and update its financing and operations objectives:

Financial Highlights for Q3-2022:

·    On July 26, 2022, the Company’s affiliate, COPL America Inc. closed the acquisition of the assets of Cuda Energy LLC  with the court-appointed receiver for Cuda for cash consideration of $19.1 million plus the assumption of Cuda’s operating arrears owed to the Company of $1.6 million and acquisition costs of $0.1 million for a total cost of $20.9 million.

·    The Cuda asset acquisition was financed with $19.7 million of proceeds from the issuance of convertible bonds which are initially unsecured and structured to accommodate COPL’s current Senior Credit Facility and the implementation of new senior debt.

·    Net average crude oil sales before royalties averaged 1,107 bbls/d as compared to 961 bbls/d in the second quarter of 2022. The increase in oil production in the third quarter is due closing the acquisition of assets from Cuda Energy partially offset by operational interruptions at certain high impact wells. The interruptions were as a consequence of the miscible flood program, which involves the injection of high-pressure solvent which both raises the reservoir pressure and mobilizes the oil in place. The arrival of the high-pressure miscible bank at producing wells generated higher pressure conditions at the wellhead. This circumstance led to the requirement to shut in the wells for a period of time and modify the well configuration by removing the low- pressure pumping equipment and replacing it with a high-pressure flowing configuration  

·    Petroleum sales, net of royalties were $7.1 million as compared to $7.1 million in the second quarter of 2022. Petroleum sales remained consistent as a decrease in commodity prices offset the increase in oil production.

·    In aggregate the Company incurred a net realized hedging loss of $2.3 million as compared to loss of $2.6 million in the second quarter of 2022. Specifically, it realized a loss of $3.4 million on crude oil hedge contracts as compared to a loss of $4.7 million in the second quarter of 2022, which was offset by a realized a gain of $1.1 million on butane hedge contracts as compared to a gain of $2.1 million in the second quarter of 2022. The butane hedges were put in place to protect the liquid purchases required for the miscible flood injection program.

·    The operating netback was $38.26/bbl, before the net realized gain on crude oil and butane commodities contracts as compared to $55.72/bbl, in the second quarter of 2022. The decrease is due mainly to the reduction in WTI from $108.41/bbl in the second quarter of 2022 as compared to $91.56/bbl in the third quarter of 2022.

·    A cash position of $5.7 million as at September 30, 2022 as compared to $7.8 million as at December 31, 2021.

Progressing Debt Financing

The Company is pleased to be evaluating debt facilities with multiple US and International Banks to secure a term sheet to refinance COPL America’s US$42 million Senior Credit Facility and close the outstanding hedges, which run to February 2024, currently estimated to cost US$11 million.  A term sheet from a bank is the first step in the process and COPL and its advisers are focused on securing terms that provide increased operating flexibility and improved cost of capital.  The Company looks forward to providing updates on this process.

Operations Update

The Company continues to make progress in its Wyoming operations as outlined in its November 1, 2022 Operations Update.

·    The re-simulation of miscible flood at Barron Flats is progressing and should be completed by the end of the month to early December. The objectives of the re-simulation are to plan for the resumption of enriched gas injection at the field in 2023 by targeting the western injection patterns which are currently under injected in addition to providing an updated reservoir model to more accurately forecast future field production volumes. The new simulation appears to be able to match production responses observed in certain high-pressure wells as well as further outline possible high pressure/productive trends observed in the field.

·    Flaring gas has commenced at Barron Flats with production from restricted wells continues to be brought up incrementally post approval of the flaring permit on October 11. Oil production increases are slowly increasing as the process proceeds. Flowing wells have exhibited additional paraffin plugging issues through the process which require higher frequency condensate treatments and more incremental drops to flowing production pressures.

·    Six wells have currently been identified for recompletion in the Frontier 1 at Cole Creek offering a near term low-risk opportunity to materially increase oil production and reserves. The Company is in the process of lining up fracture services to re-complete the first of the six wells. While the Company hopes to secure all of the services required for December operations, the tight oilfield services market may cause field operations to be initiated in January.

·    Due diligence and discussions continue with respect to a possible Joint Venture on the Company’s deep oil discovery by a large oil company which approached COPL’s COPL America Inc affiliate. The Company will provide an update at the appropriate time. The Company is encouraged by the progress to date.

This looks to be the worst of the quarterly numbers for COPL and along with the debt discussions still being under way point to a more exciting future for the company. A statement by the CEO might have helped…

And finally…

Get up at 0320 hrs tomorrow morning and watch the start of the first of three ODI’s against Australia, so soon after the T20 World Cup final…