WTI (Jan) $74.29 -$1.82, Brent (Feb) $79.04 -$2.17, Diff -$4.75 -35c. 

USNG (Jan) $6.60 -37c, UKNG (Jan) 281.34p -34.2p, TTF (Jan) €108.75 -€14.85. 

Oil price

A mixed week for oil, all started well but the Fed worrying about recession and also the BoE and the ECB raising rates held it back later but crude was still up around $3 on the week.

Baker Hughes reported that rigs overall in the US were down 4 units to 776 and in oil were down 5 to 620, hardly the stuff dreams of higher production is made of….

Angus Energy

Highlights

·    Proposed Fundraise of approximately £7 million to cover;

 Acceleration of the field development and production

 Development of storage at Saltfleetby

 Cover cost overrun and hedge payments

·    Sidetrack currently being drilled, expected completion in January despite weather issues

·    Second compressor has arrived onsite and is expected to be operational during the course of January

·    Angus is actively looking at inorganic and organic growth opportunities

·    Proposed partial settlement of deferred consideration due to Forum Energy in shares

Angus Energy announces its intention to raise gross proceeds of approximately £7 million by means of a placing of approximately 115,000,000 new Ordinary Shares, to raise approximately £2 million, to certain institutional and other investors and a direct subscription of 316,000,000 new Ordinary Shares, to raise approximately £5 million, in each case at a price of 1.65 pence per share.

The Company also proposes to issue Warrants to Placees and subscribers in the Fundraising on the basis of one Warrant for every two New Ordinary Shares subscribed under the Fundraising.  Each Warrant grants the holder the right to subscribe for one additional new Ordinary Share at the Fundraising Price and is exercisable for a period of 3 years from the date commencing six months after the date of issue.

The Fundraising is being conducted in two tranches; with the initial tranche of new Ordinary Shares being issued under the Company’s pre-existing share capital authorities and the second tranche of new Ordinary Shares, and Warrants in respect of the entire Fundraising, being subject to shareholders passing the Resolutions at the General Meeting. The Placing Shares and certain of the Subscription Shares are to be issued in the first tranche of the Fundraising, with any Warrants to be issued to Placees and subscribers being subject to the passing of the requisite Resolutions.  

The Fundraising Price represents a discount of approximately 11 per cent. to the Closing Price of 1.86 pence per Ordinary Share on 16 December 2022, being the latest practicable business day prior to the publication of this Announcement.

The Placing element of the Fundraising is to be conducted by way of an accelerated bookbuild process which will commence immediately following this Announcement and will be subject to the terms and conditions set out in Appendix III to this Announcement.

A further announcement confirming the closing of the Bookbuild and the number of new Ordinary Shares to be issued pursuant to the Placing is expected to be made in due course.

Partial Satisfaction of Deferred Consideration

In addition, and conditional upon the passing of the Resolutions, Forum Energy Services Ltd (“Forum“) has agreed in principle to accept the allotment and issue of 60,606,061 new Ordinary Shares (the “Forum Shares”) at the Fundraising Price (together with the issue of 30,303,030 Warrants on the same basis as applicable to the Fundraising) in settlement of the Company’s obligation to pay certain deferred consideration of £1,000,000 to Forum in accordance with the Saltfleetby SPA as announced on 24 May 2022. The issue of the Forum Shares, and associated Warrants, to Forum is expected to be confirmed later today and is conditional on shareholder approval at the forthcoming General Meeting.

The partial satisfaction of the deferred consideration due to Forum through the issue of the Forum Shares (the “Forum Transaction“) is a related party transaction under the AIM Rules given Forum is wholly owned by Paul Forrest, a 15.86% shareholder and Non-Executive Director of the Company. Accordingly, the independent directors (being the Board with the exception of Paul Forrest), having consulted with the Company’s nominated adviser, Beaumont Cornish Limited, consider the terms of the Forum Transaction to be fair and reasonable insofar as shareholders are concerned.

Following the issue of the Forum Shares, Forum is expected to hold 520,856,061 Ordinary Shares in the Company representing 15.2% of the Enlarged Issued Share Capital.

Fundraising Highlights

·     Two tranche fundraising by way of the Placing and a Subscription to raise, in aggregate, approximately £7 million (before expenses) through the issue of, in aggregate, approximately 431,000,000 new Ordinary Shares at the Fundraising Price.

·     The Subscription has raised approximately £5 million through the issue of 316,000,000 Ordinary Shares to Aleph Commodities Limited (“Aleph”) and its affiliates along with counterparties introduced by Aleph. Of the 316,000,000 Ordinary Shares to be issued pursuant to the Subscription, 226,219,000 are to be allotted and issued at First Admission and 89,781,000 are conditional on shareholder approval as detailed above.

·     Placing element to be conducted via an accelerated bookbuild process launching today.

·     The Fundraising Shares, assuming full take-up of the Placing and receipt of shareholder approval for the Second Tranche Shares, will represent approximately 14.7 per cent. of the Enlarged Issued Share Capital.

·     The net proceeds of the Fundraising will be utilised by the Company to accelerate the drilling programme to expand production, the evaluation of acquisition opportunities, fund operational activities, settle a liability that has recently arisen under the Company’s hedging arrangements and for the Group’s general working capital purposes, as further detailed below.

The Fundraising

The Fundraising comprises a proposed Placing and Subscription of new Ordinary Shares to be effected in two tranches. The Company intends to issue, in aggregate, up to 341,219,000 new Ordinary Shares to participants in the Placing and Subscription under the Company’s pre-existing share capital authorities to allot equity securities granted at the Company’s general meeting held on 13 June 2022, to raise gross proceeds of approximately £5.6 million (the “First Tranche Shares”). The First Tranche Shares are expected to be admitted to trading on AIM on or around 23 December 2022. Subject to, inter alia, the passing of the Resolutions, the Company intends to issue approximately 90,000,000 new Ordinary Shares, by way of direct subscriptions to raise gross proceeds of approximately a further £1.4 million. The Second Tranche Shares are expected to be admitted to trading on AIM on the first business day following the General Meeting, assuming that the Resolutions are passed. A further announcement will be made at that time.  

Related Party Transaction

Aleph will be issued with 90,000,000 warrants to subscribe for Ordinary Shares at the Fundraise Price on the same terms as the Warrants attached to the Fundraise (the “Broker Warrants”). Accordingly, the issue of the Broker Warrants and Subscription as organised by Aleph and subscribed for by Aleph and its affiliates is a related party transaction under the AIM Rules given Aleph and affiliates are substantial shareholders in the Company). Accordingly, the Board, having consulted with the Company’s nominated adviser, Beaumont Cornish Limited, consider the terms of the Forum Transaction to be fair and reasonable insofar as shareholders are concerned. In forming this view, the Board notes that the Placing is being undertaken on the same terms with investors which are not related parties.

Following the issue of the First Tranche Shares, Kemexon is expected to hold 219,142,894 Ordinary Shares in the Company representing 6.7% of the Enlarged Issued Share Capital.

And since that announcement.

Angus has announced that, further to its announcement of earlier today it has successfully closed the Placing and Subscription to raise £7.1m, of which £1.48m is conditional on shareholder approval.

The Placing has raised, in aggregate, gross proceeds of £1.89m through the placing of 115,000,000 Ordinary Shares (the “Placing Shares”); and the Subscription has raised an initial £3.7m through the issue of 226,219,000 Ordinary Shares (the “Initial Subscription Shares”), at a price of 1.65p per share (for a total initial fundraise of £5.6m, subject only to Admission.

In addition, the Company has conditionally raised further gross proceeds of £1.5m through a subscription of 89,781,000 new Ordinary Shares, subject to approval of certain Resolutions at an upcoming General Meeting of the Company (the “Conditional Subscription Shares”), also at a price of 1.65 pence per share.

George Lucan, CEO, commented: 

“The sidetrack well SF-07 is now drilled and cased right up to and into the target Westphalian gas bearing reservoir.  The most risky part of the drilling programme is now behind us with the section most prone to hole collapses, which has been problematic on many previous sidetracks, now fully secured and cased.  We look forward to completing the final horizontal open hole section in the first two weeks of January and reporting flow tests immediately thereafter.

There is much to look forward to in the year ahead: not least the bringing online of the second compressor and the ability to run the process plant at rates above 10mmscfd with a backdrop of high gas and rolled gas hedge prices, alongside the potential to develop gas and energy storage projects whilst we continue rapidly paying down the existing development debt and satisfying the deferred consideration payable in respect of the acquisition of the remaining 49% of this Field earlier this year. 

We are delighted with the support shown from new and existing investors in this fundraising and look forward to the year ahead for the Company. “

I remain supremely confident about the potential within Angus and this raise actually gives the shareholders a unique opportunity to top up while these operational issues are finished off and the shareholdings rebalanced, no wonder the placing and subscription was closed so quickly.

As for the well, the weather and technicals did delay but not so much that they havent been able to stop here, case the well and return in January to finish off. With the extra compressor comes the ability to run the process plants at the 10 mmscfd as previously intimated and a solid build of the business.

CEO George Lucan has always remained confident about the future and in this statement he again looks to the longer term with organic and inorganic growth opportunities. With the paying down of debt and deferred consideration the company will be financially well set and the management’s thoughts about distributions to shareholders will start to be considered.

I attach the link to an interview with George Lucan, it is taken from May of this year but does give some interesting thoughts from his point of view and doesn’t lose anything in the passing months. 

Core Finance Managing Director interview: George Lucan, Angus Energy

Gulf Keystone Petroleum

Gulf Keystone, a leading independent operator and producer in the Kurdistan Region of Iraq, today provides an operational, corporate and AGM update.

Operational

  • Continued strong focus on safety, with no Lost Time Incident (“LTI”) recorded for over 420 days
  • Gross average production in 2022 year to date of c.44,100 bopd; current production of c.44,400 bopd as at 17 December 2022
    • Production recently impacted by temporary shut-in of one well caused by an isolated ESP electrical failure
    • Following a prompt workover, the well has just been restarted and is gradually ramping up. All other well ESPs continue to function without any issues
    • Ahead of installation of water handling facilities, we continue to prudently manage our wells to avoid traces of water and optimise production
  • Maintaining drilling momentum:
    • SH-16 drilled, completed and brought online this month on schedule and on budget
    • While the SH-16 well has good productivity, production is currently constrained due to the temporary use of a SH-12 flowline. We are planning to further ramp up production following installation of a dedicated flowline into PF-2 in Q1 2023
    • SH-17, situated on the same well pad as SH-16, was recently spudded with first production targeted into PF-2 in Q1 2023
    • Plan to drill SH-P, the next well in the sequence, following completion of SH-17; SH-P will be drilled from the existing SH-9 well pad and will produce into PF-1 with targeted start up in Q2 2023
  • Carefully managing ongoing equipment lead time and cost pressures in a supply constrained market to progress preparatory work for the expansion of the production facilities, including water handling capacity procurement activities

Financial

  • Significant cash flow generation in 2022 year to date, with $450.4 million net to GKP received from the Kurdistan Regional Government  for crude oil sales and revenue arrears
  • Record dividends paid in 2022 of $215 million, representing a sector-leading dividend yield of 41% based on GKP’s closing price on 16 December 2022
  • Robust, debt-free balance sheet, with a cash balance of $116.9 million at 16 December 2022

Outlook

  • 2022 gross average production expected to be at lower end of 44,000 – 47,000 bopd guidance range, recently impacted by the temporary shut-in of one well caused by an isolated ESP electrical failure. The well was recently brought back online after a work over and production is gradually being ramped up
  • 2022 net capital expenditure guidance of $110-$120 million unchanged, with additional costs related to the drilling of SH-17 offset by phasing of production facility expansion procurement activities
  • 2022 gross Opex guidance of $2.9-$3.3/bbl unchanged
  • While timing of FDP approval remains uncertain, we continue to engage with the Ministry of Natural Resources (“MNR”) towards project sanction and are progressing the tendering process for the Gas Management project that will materially reduce emissions
  • We are currently in the process of agreeing the 2023 work programme with our partner and look forward to providing production, capex and opex guidance in the new year
  • The Company is currently negotiating with the MNR to amend the Shaikan Lifting Agreement, including a change in reference price for Shaikan crude oil sales from Dated Brent to the local benchmark KBT (“Kurdistan Blend”), effective 1 September 2022. The final outcome and impact on realised prices remain uncertain and further updates will be provided as appropriate
  • Assuming timely payment of invoices and strong oil prices, we expect continued robust cash flow generation, which would provide flexibility to continue to invest in the Shaikan Field and consider further distributions to shareholders, while preserving adequate liquidity

Board changes

Jaap Huijskes, the Company’s Non-Executive Chair, has expressed his intention to retire from the Board and will not seek re-election at the 2023 AGM. In line with our succession plan, we are reviewing alternatives, including commencing a process to appoint a new Non-Executive Chair with Mr Huijskes remaining as Chair until the AGM to ensure a smooth transition. The Company would like to thank Mr Huijskes for his leadership and guidance over the past five years, a period which has seen significant progress by the Company.

Update on Federal Iraqi Government & KRG dispute regarding Kurdistan oil & gas assets

In our 2022 Half Year Results Announcement, we reported the Iraqi Ministry of Oil had commenced proceedings in the Baghdad Commercial Court against various International Oil Companies (“IOCs”) operating in the KRI, including GKP, seeking to nullify the Production Sharing Contracts (“PSCs”) issued under the Kurdistan Oil and Gas Law (“KROGL”). Since then, the Company has learned from media reports that, on 23 October 2022, the Court issued decisions in absentia against Gulf Keystone and two other IOCs. Gulf Keystone did not have legal representation in the Court. Media has also reported similar judgements issued against several other IOCs.

The KRG continues to affirm that KROGL is validly constituted and the PSCs issued are valid and in full force and effect. Media reports indicate that high level political discussions are ongoing between the KRG and the recently appointed Federal Iraqi Government with a view to resolving the matter. The Company’s operations in the Shaikan Field are currently unaffected. However, the matter continues to be closely monitored, including any potential impact on the restrictions placed on the export of crude oil, service contractors or any other parties by the Iraqi Ministry of Oil.

The Company is also aware of the ongoing arbitration case between the Federal Government of Iraq and the Turkish Government on the management of the Iraq to Turkey pipeline.

AGM update

At the Company’s Annual General Meeting  held on 24 June 2022, all resolutions were successfully passed. However, resolutions 2 and 7, being the re-election of the Company’s Chairman and Chief Financial Officer, failed to attain the support of 80% of the shareholders who voted. Voting turnout continued to be low relative to prior years, with approximately 52% of the total shareholder register voting. The Company continues to look at ways to increase voting turnout at future general meetings.

Substantially all the votes against resolutions 2 and 7 were from a single major shareholder, who voted against the re-election of the same Directors at the 2021 AGM. The Company also notes that the proxy agencies Glass Lewis and ISS were in favour of all resolutions, including resolutions 2 and 7. In accordance with Provision 4 of the 2018 UK Corporate Governance Code, the Board has consulted with the single shareholder, and, as part of this exercise, also consulted with the Company’s other major shareholders. Feedback received from the single shareholder encompassed issues principally related to the Company’s operational progress, organisational structure and capital allocation.

The Board has carefully considered all feedback and has addressed issues, to the extent possible or necessary. The independent members of the Board continue to hold every confidence in both the Chairman and Chief Financial Officer, recognising the value and contribution each bring to the Company.

The Company will continue to engage with the major shareholder in question and welcomes ongoing engagement and feedback from all shareholders.

Jon Harris, Gulf Keystone’s Chief Executive Officer, said:

“Our leverage to strong oil prices, low-cost production base and focus on capital discipline has led to significant cash flow generation in 2022, enabling us to deliver sector leading dividends of $215 million, repay our $100 million bond leaving us debt-free and continue to invest in Shaikan Field production growth.

2022 production is expected to be at the lower end of our 44,000 – 47,000 bopd guidance range, recently impacted by the temporary shut-in of one well due to an isolated Electrical Submersible Pump electrical failure, which has just been worked over and restarted. We are currently producing c.44,400 bopd as we gradually ramp up production from both the restarted well and SH-16, which was brought online earlier this month.

To drive production and cash flow growth, we are maintaining drilling momentum, recently spudding SH-17 and subsequently planning to drill SH-P. We are reviewing our 2023 work programme with our partner and look forward to providing production, capex and opex guidance in the new year.

Jaap Huijskes, GKP’s Non-Executive Chairman, has expressed his intention to retire from the Board following the 2023 AGM. I would like to thank him for his outstanding contributions to the company over the past five years and in particular his guidance during my tenure.”

As an exercise in storing up months worth of news and putting out at Christmas this is a fine example, but GKP is delivering solid Shaikan production even though it will now be at the low end of guidance due to an ESP failure. 

The shares have fallen by 31% along with the oil price decline but all that serves to do is to emphasise the total return available at GKP, the company itself claims a dividend yield of some 41% and with plenty of money in the bank. 

Eco (Atlantic) Oil & Gas

Eco Atlantic has announced an update, further to its announcement of 27 June 2022, in relation to the acquisition by its wholly owned subsidiary Azinam Limited of an additional 6.25% Participating Interest in Block 3B/4B, offshore South Africa from the Lunn Family Trust, one of the shareholders of Ricocure (Proprietary) Limited.   Eco is pleased to confirm that it has now received the requisite regulatory approvals from the Department of Mineral Resources and Energy of South Africa and the Petroleum Agency of South Africa in respect of the Acquisition, which was the final condition in respect of completion. 

Accordingly, Eco Atlantic, through Azinam, will now close the Acquisition and hold an increased Participating Interest of 26.25% in Block 3B/4B, with Africa Oil Corp., the Operator of the block, holding a 20% Participating Interest, and Ricocure, holding the remaining 53.75% Participating Interest.   

In accordance with the completion consideration outlined in Eco’s announcement on 27 June 2022, the Company will now:

·    pay a cash amount of US$500,000 to the Vendor;

·    issue to the Vendor new Common Shares at the agreed price of 30p (CAD$0.48) having an aggregate value of US$500,000

·    issue to the Vendor new Common Shares at the agreed price of 30p (CAD$0.48) having an aggregate value of US$3 million, which will be subject to special lock up restrictions (as further detailed below) (the “Restricted Shares”);

·    issue to the Vendor new Common Shares at the agreed price of 30p (CAD$0.48) having an aggregate value of US$2 million; and

·    issue to the Vendor, new Common Shares equal to US$2 million divided by the greater of (i) the value of the 30 day VWAP per Common Share prior to the date of the press release announcing the issue of such Common Shares; and (ii) the lowest issuance price then allowed by the rules of the TSXV and AIM (to the extent then listed on such markets, otherwise the average (if listed on more than one market) on such markets as the Common Shares are then listed). This shall be subject to obtaining prior TSXV approval in the event that such issue of Common Shares would cause the Vendor to own more than 9.99% of the issued and outstanding Common Shares (calculated at the time of issuance).

Lock up arrangements

The Restricted Shares will be subject to a lock up agreement restricting the sale or transfer of all or any portion of the Restricted Shares until the earlier of (i) signature of a farmout agreement between the Block JV partners and a third party; or (ii) March 15, 2023, provided that such transfer is compliant with UK securities laws and Canadian securities laws.

Issue and Admission of the Common Shares

In accordance with the terms of the farmout agreement announced on 27 June 2022, the Consideration Shares will be issued within the next 30 days. A further announcement will be issued upon issuance of the Consideration Shares, confirming the date for admission of the Consideration Shares to trading on AIM.

The Consideration Shares will all be subject to a restrictive hold period of four months and one day from the day of their issuance (the “Hold Period”), which restricts them from being sold, transferred, hypothecated or otherwise traded through the facilities of the TSX Venture Exchange (the “TSXV”) or otherwise in Canada or to a Canadian during the Hold Period without the prior written approval of the TSXV and compliance with all applicable securities laws.

Gil Holzman, President and Chief Executive Officer of Eco Atlantic, commented: 

We are extremely pleased to have received the South African authorities’ final approval and to be increasing our interest in Block 3B/4B to 26.25%. The Block looks to be a very exciting licence for all the partners involved. Recently completing a full reprocessing of the 3D data on the Block, we are upbeat about the prospectivity of the licence and following the significant oil discoveries, Venus & Graff, made earlier in the year offshore Namibia Orange Basin, and we are pleased to be strengthening our working relationship with Ricocure and Africa Oil Corp. 

“We are seeing growing industry interest in the entire Orange Basin, and in particular in Block 3B/4B, and as announced last month, a collaborative farm out process (of up to a 55% working interest) is underway. In the past six months, we have worked very closely with our partners to identify and determine the Block drilling prospects for a drilling campaign we are contemplating for next year.”

Nothing new here as such, apart from approvals but for me this is very exciting news indeed for Eco and its shareholders and quite correctly has been described as being a step by step acquisition within the big picture at Eco. 

And finally…

A World Cup Final that was not only one of the best but in a match in which it was almost impossible to support either side we were on tenterhooks until the end. BTW a hatrick is not official if one or more of the goals is a penalty…

In the cricket 18 year old Rehan Ahmed took a 5 for as England bowled out Pakistan for 216 and chasing 160 odd were 112-2 at the close with 2 days to go.