WTI (Mar) $76.41 -$2.46, Brent (Apr) $82.84 -$2.62, Diff -$6.43 -16c. 

USNG (Mar) $2.45 -22c, UKNG (Mar) 150.0p +1.0p, TTF (Mar) €59.5 +€2.87. 

Oil price

Oil fell sharply, not because the Opec meeting kept quotas unchanged, nor because the Fed raised rates in line with expectations by 25 bp’s although Mr Jerome did say that ‘the disinflationary process has started’. No, the inventory stats showed builds across the board with product demand drifting and were worse than expected. Today’s interest rates were also as expected.

Jadestone Energy- A year of two halves Guv…

Jadestone has provided a trading update for the year ended 31 December 2022.  The financial information in this update has not been audited and may be subject to further review.

 2022 production averaged 11,487 boe/d (2021: 12,545 boe/d), in line with expectations1, with the asset split as follows:

̶      Montara: 4,227 bbls/d, a 45% decrease on 2021 primarily due to the field being shut in from mid-August to year-end 2022

̶      Stag: 2,176 bbls/d;

̶      Peninsular Malaysia: 4,702 boe/d

̶      CWLH: 383 bbls/d, representing the annualised contribution based on average net production of 2,290 bbls/d since completion of the acquisition on 1 November 2022

 2022 revenues estimated at US$421 million (2021: US$340 million), an annual record for the Company, as higher realisations offset lower production from Montara.

 2022 liftings estimated at 4.0 mmbbls (2021: 4.6 mmbbls) of oil and 1.8 mmcf (2021: 0.6 mmcf) of gas. Oil liftings were lower than 2021, primarily due to the shut-in at Montara partially offset by a full-year contribution of the Peninsular Malaysia assets acquired in 2021 and the first lifting from the CWLH asset in November 2022.

 The Company realised an average oil price of US$103.93/bbl (2021: US$74.34/bbl) during 2022, compared to an average lifted Brent price of US$96.05/bbl (2021: US$70.94/bbl).  The average premium to Brent in 2022 of US$7.88/bbl (2021: US$3.39/bbl) reflected strong pricing across Jadestone’s portfolio, particularly at Stag, which averaged a US$22.78/bbl premium to Brent across the three liftings during the year.

 Unaudited operating expenses2 for 2022 are estimated at approximately US$37/boe, primarily impacted by the temporary shut-in production from Montara and therefore at the upper end of the guidance range after the customary adjustment for non-routine maintenance items and workover costs.

 2022 capital expenditure was approximately US$87 million, just below the guidance range of US$90 – 105 million. The Stag infill drilling programme accounted for US$60 million of total capex, with US$21 million initial spend on the Akatara gas development, lower than anticipated due to phasing of procurement activity. Akatara project progress, and delivery of first gas, remain on track with original planning.

 Cash balances at the end of the year are estimated at US$122 million, a slight increase on the opening 2022 figure of US$118 million.

 To date, the Company has acquired 20.2 million shares under its buyback programme, at a total cost of US$17.9 million, representing an average repurchase price of 76p per share.  

 The Company is currently debt free but continues to progress the proposed reserves based lending facility, which was always intended to fund the Akatara field development expenditure and for general corporate purposes.  

 The Company’s 2023 operational and financial guidance will be announced once production from Montara has resumed.

Paul Blakeley, President and CEO commented:

“As previously reported, 2022 was a year of two halves. Whereas in the first half, the Company delivered record financial results, the second half was impacted by the shut-down of our main producing field, Montara.  Despite this temporary setback, Jadestone achieved several notable successes during the year.

We completed the CWLH acquisition offshore Australia, which adds a strategic and value accretive asset to our portfolio, including funding 50% of the decommissioning liability upfront.  Additionally, the team on Stag successfully completed two infill wells, one of which was the longest well drilled by Jadestone to date.  Initial well delivery is ahead of expectations and provides increased confidence in a number of additional infill well locations for the future.  At the operated Peninsular Malaysia assets, we made solid progress in improving operating performance and production is up 10% within just twelve months from acquisition, and ahead of any new drilling activity, with the first wells here planned later in 2023.  The Akatara gas development is progressing well, both in line with cost estimates, and on schedule towards first gas in the first half of 2024.

Jadestone finished the year with a cash balance of US$122 million.  This is a good outcome given not only the impact of the Montara outage, but also the significant capital expenditure at both Akatara and Stag, as well as the acquisition of the CWLH interest and the ongoing share buy-back programme, all of which were managed within the cash generated during the year.

Finally, we are pleased to report a strong start to 2023, with the recent acquisition of an initial stake in Sinphuhorm field, and progress towards a restart of Montara, which remains on track for later this month.  We are engaged in several M&A processes at present, and I am optimistic that we will be successful in resuming our growth trajectory in 2023, while remaining very disciplined about the opportunities we pursue.”

Jadestone is a Bucket List stock, has one of the best management teams in the sector and a portfolio which apart from Montara and Maari would in most years do better than pretty much anything in its peer group. 

Montara excepted and clearly they made the best decision with regard to Maari, even though they had been led to believe that the deal would go ahead as negotiated, life goes on and I am totally confident that the M&A team will come up with a number of high quality deals. 

With regards to trading these results are acceptable but anyone who knows Paul Blakeley will know that that is simply not good enough. Capex below guidance does not cut the mustard indicating as it does the company has not been busy enough. 

Good performances from Stag and Peninsula and with Akatara due to bring on first gas in 1H 2024 mean that 2023 starts well and assuming Montara resumes in Q1 2023 JSE should be on a sound footing. Bring on the M&A team, if they can find more deals like the CWLH one then this year could restore faith in the company. 

Hurricane Energy

Hurricane has provided an update regarding the Company’s proposed reduction of capital, which was approved by the Company’s shareholders at a General Meeting held on 11 January 2023 and then subsequently approved by the High Court of England and Wales on 31 January 2023.

The Shareholder Circular sent to all shareholders dated 12 December 2022 sets out the details of the reduction of the Company’s capital involving the cancellation of the Company’s share premium account in order to create distributable reserves.

The Company is pleased to confirm that the sealed court order confirming the Reduction of Capital and the associated statement of capital that was approved by the High Court at the hearing held on 31 January 2023 has been sent to the Registrar of Companies. The Reduction of Capital will become effective upon the registration of the order by the Registrar of Companies, expected to be in the next few working days.

The Company confirms that, following the Reduction of Capital taking place, the issued share capital of the Company remains at 1,991,871,556 ordinary shares of £0.001 each.

Philip Wolfe, Chairman of Hurricane Energy, commented:

“The registering of the court order with the Registrar of Companies will complete the Reduction of Capital process, which allows the Company to make capital returns to shareholders. The completion of the process does not itself automatically trigger a capital return and, as previously announced, the next steps in terms of timing and exact quantum of a return of capital to shareholders will be decided in conjunction with the ongoing Formal Sales Process and we look forward to updating shareholders in due course.”

Sooner rather than later I hope that we will all be put out of our misery by the ongoing mess that Hurricane has become. Word is that potential bids are few and far between so maybe the best bet is to give the money back to the shareholders, they must be able to do better than the management…..

Capricorn Energy- What a shambles…..

Following today’s General Meeting, Capricorn confirms the appointment of six new members of the Board of Directors: Chris Cox, Maria Gordon, Richard Herbert, Hesham Mekawi, Tom Pitts, and Craig van der Laan. The new directors join sitting members Catherine Krajicek and Erik B. Daugbjerg to form a reconstituted Board.

Subsequently, the new Board met to agree immediate priorities and appointed Craig van der Laan as Capricorn’s Chair, Chris Cox as Capricorn’s Interim CEO and Richard Herbert as Senior Independent Director.

The Board will be conducting a comprehensive strategic review of Capricorn’s business and the several potential directions for the future of the Company. These will be evaluated from the perspective of both maximising the Company’s value and acting in the best interests of all stakeholders.  We will update the market as and when those discussions have concluded.

The Board also recognises matters that require immediate attention, including the adjourned shareholder meeting on the proposed NewMed transaction and plans to consider a significant distribution of cash to shareholders in excess of operating requirements. The decision by the previous Board to adjourn the General Meeting to seek shareholder approval for the NewMed transaction, currently planned for 22 February 2023, provides an opportunity for the current Board to evaluate the merits of the transaction and determine the best path forward/make a recommendation to shareholders.

Craig van der Laan, Capricorn Chair, said,

“It is a privilege to have the opportunity to Chair Capricorn at an important point in the Company’s history. Each new member of the Board joined Capricorn because we believe in the Company’s potential and see untapped opportunities to maximise value.

This transition presents an opportunity for a fresh start: to identify what the Company needs without preconceptions. As a first step to achieve this goal, we will conduct a thorough review of all available strategic directions before we determine the best path forward.

On behalf of the Board, I would also like to thank Simon Thomson, who leaves the Company today, for his contribution to this organisation over the last 27 years and wish him well in his future endeavours.”

So, the shareholders have gone with Palliser Capital by the looks of it and the next stop is the vote on the NewMed deal on February 22nd. 

The situation at Capricorn, née Cairn is a complete farce worthy of the fringe and no wonder the LGIM people wanted to jump ship. What on earth would Sir Bill have made of all this? 

Echo Energy

Echo Energy, the Latin American focused energy company, is pleased to provide the following commercial update regarding the Company’s gas sales from the producing Santa Cruz Sur assets, onshore Argentina, and a financial update.

New Gas Sales Contracts

The Company confirms that, following a successful commercial process for industrial clients, it has secured two new gas sales contracts (the “Contracts”) for the upcoming 2023-2024 period with materially improved terms compared with the contracts announced on 3 May 2022.

The Contracts have an initial term of 12 months, with gas sales under the Contracts beginning in May 2023. The Contracts provide gross 6.8 MMscf/d of committed production (4.8 MMscf/d net to Echo) at an increased average price of US$4.48 per Mmbtu for the 2023-2024 period (compared with US$4.33 per Mmbtu for the previous period). In addition, an upfront gross cash payment of US$1 million (US$0.7 million, net to Echo) will immediately be paid and applied towards the working capital of the Santa Cruz joint venture.

The Company is able to elect to sell additional volumes of up to 0.7 MMscf/d (net to Echo) under the Contracts. This optionality, at the election of the Santa Cruz Sur partners, allows for the potential sale of additional volumes under the Contract at contract pricing, whilst also providing the Santa Cruz partners with a degree of flexibility with which to capitalise on spot market or other pricing when attractive. The Contracts additionally enable the potential for the parties to mutually extend arrangements for a further two years, subject to future negotiation and market pricing.  

The improved pricing terms and the upfront cash payment (without financing costs), combined with volume flexibility, represent a significant step for the Company in its strategy to maximise the commercial value of its production as it continues with the ongoing programme of increasing production. 

Reduction in Joint Venture Creditor Balances

The Company reported total creditors of approximately US$19.5 million in its unaudited Interim Results announced on 30 September 2022. Of this total, approximately US$11.5 million related to the Company’s joint venture in Argentina (net to Echo), which has since been estimated to have reduced to approximately US$9.3 million (unaudited) as at 31 December 2022 using the official ARS$ to US$ exchange rate of 177. This estimated creditor amount when calculated using the current ARS$ to US$ international market exchange rate (blue chip swap) of 368, is US$4.5 million (unaudited). This reduction is due to a combination of creditor negotiations, positive business developments, favourable exchange rate movements and the repayment of creditors from production cash flows.

The Company continues to focus on successfully reducing its creditor balances in a controlled manner, whilst also pursuing the strategic objective of investing in order to further increase production and asset value at Santa Cruz Sur.

The Company’s unaudited cash balance as at 2 January 2023 was US$1.1 million.

Martin Hull, Chief Executive of Echo, commented:

“We are very pleased to see our financial and commercial positions continuing to improve and provide firmer foundations for our growth strategy, as we look to increase production and revenues across our asset base. These enhanced gas sales contracts will contribute to that process while the decrease in our joint venture creditors contributes to a stronger financial footing for Echo as we grow the business.”

Good things are happening at Echo, albeit slowly. The contacts will bring in more cash and the creditor number is looking a fair bit better, there is some way to go but with the political scene possibly changing, things are looking up. 

And finally…

In the Haribo Cup The Red Devils beat Forest 2-0 making it 5-0 over the two games and will now meet the Magpies in the final.