Flash blog: Genel, San Leon, Zephyr, SDX, Rockhopper.

A flash blog today, in town with a couple of companies. Oil is rallying sharply ahead of Opec+ on Sunday and Chinese drawing back from Covid shutdowns but we’ve heard that before.

Genel Energy

Genel has announced that all payments have now been received from the Kurdistan Regional Government relating to oil sales during July 2022.

Genel’s share of those payments is as follows:

Genel was owed $120 million, excluding interest, for deferred receivables from the KRG for oil sales from November 2019 to February 2020, and has now received $130 million. In addition, the override was suspended from March to December 2020, which would have earned Genel $38 million.

Speaks for itself as usual with the monthly payments.

San Leon Energy

San Leon has announced a further update in relation to the Proposed MLPL Reorganisation, the ELI Reorganisation and the Further ELI Investments, details of which were set out in the Company’s AIM Admission Document published on 8 July 2022.

Proposed Transactions update 

Further to the announcement made on 1 November 2022, the process of finalising the New Eroton Debt Facilities has continued during November 2022, but due to the complex nature and number of parties involved, further additional time is still needed to finalise the loan agreements and ancillary documentation.  Consequently, the timeline for the satisfaction of the condition relating to the New Eroton Debt Facilities being entered into, which had already previously been extended to 30 November 2022, has now been extended to 31 December 2022 by agreement between the Company and Midwestern.

In addition to the requirement to enter into the New Eroton Debt Facilities, the MLPL Reorganisation Agreement required the Sahara OML 18 Acquisition Agreement to be entered into by all parties by 30 September 2022, which was previously extended to 30 November 2022. The Sahara OML 18 Acquisition Agreement will not be entered into until after the New Eroton Debt Facilities have been entered into and the funds to allow the Eroton OML 18 Transactions to proceed are available, and therefore this date has now been further extended to 31 December 2022 by agreement with Midwestern, in line with the extension agreed in relation to the New Eroton Debt Facilities.

For the reasons outlined above, it is now apparent to the Board of San Leon that the Proposed Transactions are unlikely to complete in the final quarter of 2022 but are instead more likely to complete during the first quarter of 2023.

The longstop for completion of the MLPL Reorganisation Agreement has therefore been extended to 31 March 2023.  In addition, the deadline for the ELI Reorganisation, which is conditional (amongst other things) upon completion of the MLPL Reorganisation, has also been extended to 31 March 2023.

San Leon US$50 million loan facility

As announced by the Company on 1 November 2022, whilst the Company has a loan facility available to it of US$50.0 million from MM Capital Holding Limited for the purposes of funding its working capital requirements and financing the Further ELI Investments (as set out in the Admission Document), the Company has been discussing alternative financing with a new lender on terms that are better aligned with the Company’s overall strategic and financing objectives. During November 2022 good progress has been made on agreeing full loan documentation in respect of this alternative financing facility which is expected to be concluded by mid-December 2022 and drawdown of the funds will occur immediately thereafter.  The drawdown of funds will enable the Company to pay its outstanding creditors (details of which were set out in the Company’s interim results announcement on 30 September 2022) and fund the Further ELI Investments (details of which are set out in the Admission Document).

Oisin Fanning, CEO of San Leon, commented: 

“Against a backdrop of challenging macro-economic conditions and working with multiple different entities to conclude the arrangements described in our Admission Document, I am pleased that considerable progress has been made on a number of fronts. We continue to move closer to finalising the Proposed Transactions, including alternative financing facilities, which, when completed, will be truly transformational for the Company and will deliver value to our shareholders. 

“The longer timetable than originally anticipated is of course frustrating. However, all parties are working hard and I look forward to updating shareholders in the coming weeks.”

It will come as no surprise that due to the complexity of the deal that there has been a further delay in completion. I expect that when it does get closed it will not only transform SLE but shareholders will be on the receiving end of massive returns, the patient will indeed be rewarded, this is no time to bottle out. 

Zephyr Energy

Zephyr has announced that, following the completion of facilities construction and commissioning operations, the next phase of production testing has commenced on the State 16-2 LN-CC well and hydrocarbons are now flowing from the well.  The well is located on the Company’s flagship project in the Paradox Basin, Utah, in the United States of America.

The well was successfully drilled, completed, and tested in December 2021. Initial production rates peaked at approximately 1,100 barrels of oil equivalent per day despite production being constrained and heavily choked throughout the initial production test due to surface equipment limitations, details of which were announced by the Company on 8 December 2021.

Since the initial test, Zephyr’s operations team, working with specialised facility consultants, spent significant time designing and augmenting surface facilities at the well in order to:

1. a) test plans for improved flow assurance;
2. b) prepare for eventual gas export and continual production operations; and,
3. c) obtain further production data for overall well and field management.

Further updates from the production test are expected to be provided as appropriate in the coming weeks. 

Colin Harrington, Zephyr’s Chief Executive, said: “I am pleased to announce that following the completion of the significant upfront planning, design, construction and commissioning operations, the next phase of production testing has commenced and hydrocarbons are once again being produced from the well.

“I would especially like to commend our operations team and contractors who worked tirelessly to get the facilities completed and the test underway, particularly as this work has taken place in parallel with the ongoing drilling of our State 36-2 LNW-CC well.

“We look forward to keeping our stakeholders informed as the test progresses over the coming weeks – and, as always, we will endeavour to operate in line with our core mission:  to be responsible stewards of our investors’ capital and responsible stewards of the environment in which we work.”

More good news from Zephyr today, as promised they are delivering at the Paradox Basin already and with so much to look forward to in terms of in terms of knowledge gained about potential flow rates and also reservoir understanding, things look very exciting for shareholders. 

The shares are 60% up from the low in the summer but still offer substantial upside, I’m expect a minimum 5 bagger from here. 

SDX Energy

SDX has announces the appointment of Jay Bhattacherjee as Interim Executive Chairman and Daan Hanssen, currently Group Financial Controller, as Interim CFO both with immediate effect. 

Jay brings with him over 20 years’ experience of operating and leading both public and private companies in the energy and natural resources industries.

The Company also announces that Mark Reid, currently CEO, will be leaving the Company with immediate effect.

The Board will now comprise of Jay Bhattacherjee as Interim Executive Chairman, Tim Linacre as Senior Independent Director and Chairman of the Audit Committee, and Krzysztof Zielicki as Non-Executive Director and Chairman of the Remuneration Committee.

Jay Bhattacherjee said:

“On behalf of my Board colleagues, I want to thank Mark for his efforts leading the Company. We wish him all the best for the future.

I am excited to take on the role as Executive Chairman, and I look forward to working to create meaningful value both organically and inorganically.”

No surprises here, with Jay coming in he was always going to have an executive role for as long as it takes, that meant that Mark was always going to be short dated stock. There will be a new team and things to do with this portfolio and I don’t expect it to take very long, one to watch for 2023 methinks…

Rockhopper Exploration

Rockhopper yesterday announced that, following discussions with the Falkland Islands Government, FIG has agreed to extend each of the Company’s South Falkland Basin Production Licences, in which the Company holds a 100% interest, until 3 December 2024. The Licences were previously due to expire on 3 December 2022. There are no additional licence commitments.

Samuel Moody, Chief Executive Officer, commented: 

“The Company is grateful to the Falkland Islands Government for the extension of its South Falkland Basin licence interests. Whilst our primary focus is on working with Navitas to bring the Sea Lion development in the North Falkland Basin to fruition, this extension will enable us to progress our understanding of these highly prospective licences in the south – in particular, the PL011 licence which adjoins the Borders & Southern Darwin discovery – which offer the opportunity for future regional development in the Falklands.”

Worth keeping its hand in in the South of the islands but Sam Moody is right, we need to concentrate on the North Falkland Basin.