A flash blog today as later on a few former JC friends will gather to say goodbye to Coulsy.
Diversified Energy Company
Diversified Energy has announced its Final Results for the year ended 31 December 2022 and other recent highlights. Diversified has published to the Company’s website its annual report and accounts for the year ended 31 December 2022 and notice of the annual general meeting of shareholders along with the form of proxy for the AGM.
Operating and Financial Highlights
• Record average net daily production: 135 MBoepd (811 MMcfepd)
◦ December exit rate of 141 Mboepd(a) (846 MMcfepd) excluding weather-related downtime
• Year end 2022 reserves of 830 MMboe and $6.1 billion; 61% value increase from year end 2021(b)
• Adjusted EBITDA of $503 million(c) generating Free Cash Flow of $219 million(d)
• Adjusted EBITDA Margin of 50%(e)
• Net loss of $620 million, inclusive of $668 million tax-effected, non-cash unsettled derivative fair value adjustments
• Total Revenue, Inclusive of Hedges up 49% to $1 billion(f), net of $896 million commodity cash hedge payments
◦ Total Revenue up 90% to $1.9 billion
• Dividends paid per share up 6% to $0.17; Total dividends paid up 10% to $143 million
• Recommending a final quarterly dividend of $0.04375 per share
• ~85% of 2023 production hedged at an average natural gas price of $3.83/Mcf
◦ Represents ~34% price premium and ~70% increase in coverage from year-end 2021
• Completed four sustainability-linked ABS transactions totaling $1.2 billion and amended the Company’s Credit Facility to include sustainability-linked features, with 70% of total borrowings now sustainability linked
• Completed a total of $566 million in recent acquisitions, including Tanos Energy II assets in February 2023 and the upstream, midstream and plugging acquisitions in 2022
• Current liquidity of ~$190 million(g) and Leverage (Net Debt-to-Adjusted EBITDA) of 2.2x(h)
• Awarded OGMP 2.0’s Gold Standard for emissions reporting during 2022
• 2022 Methane Emissions Intensity down 20% to 1.2 MT CO2e/MMcfe (FY21: 1.5 ), reflecting the impact of Diversified’s ongoing emissions detection and measurement activities, which included the following for the full year 2022:
◦ Completed 2+ surveys on ~95% of producing sites with a no-leak rate of over 95% on repeat surveys
◦ Conducted aerial surveys of ~60% of the Company’s ~17,700 mile midstream system
• Responsibly and efficiently retired 200(i) wells, up 47% from Appalachian well retirements in the previous year
◦ Next LVL Energy has been awarded well retirement contracts on over 150 wells in 2023 for state orphan well programmes and third-party operators
• The Company anticipates issuing its 2022 Sustainability Report in April 2023
Commenting on the results, CEO Rusty Hutson, Jr. said:
“2022 was another productive year for Diversified, growing our high-quality asset base, optimizing our production, continuing our vertical integration, generating significant Free Cash Flow, and returning meaningful capital to shareholders through dividends and share repurchases. We delivered a 49% increase in total hedged revenue resulting in approximately 50% margins for the fifth consecutive year, driven by our disciplined hedging strategy. This translated into Diversified ranking in the top 20 of total shareholder returns in the FTSE 250 for the year.
As the Company enters 2023, the progress we made during the past year, both financially and operationally, puts Diversified in a strong position for the expanding opportunity set that lies ahead. Our prudent hedge position of approximately 85% of the year’s current production with a floor of approximately $3.83 per Mcf, well above forecasted prices, will allow us to manage the current low-price environment. At the same time, we remain incredibly optimistic about the long-term outlook for natural gas. We are laser-focused on our strategy of consolidating mature assets at attractive multiples while enhancing our margins through vertical integration of the energy value chain from production to retirement. We have built a company that provides safe, reliable, and responsibly produced energy while delivering meaningful value to shareholders.”
Another excellent performance from DEC, it makes me wonder when investors will realise just how good this company is with its incredibly strong management seemingly capable of delivering better than market returns from a set of very strong metrics and on a regular basis.
Strong production growth through its smart acquisitions and even smarter efficiencies was 135 Mboepd, a record (811) with 141 Mboepd at exit rate in December 22 and excluding the extreme weather. This led to a dividend of 17 cents up 6% at +0.5c. y/y and at 94p this makes for a 15% yield, a quite astonishing opportunity. Perhaps even more importantly is the ~50% margin which is stable and especially during times of gas price weakness, the company say that margins can be maintained even in ‘dramatically different price environments’.
Hedging is the final piece in the jigsaw, and as I reported before some ~85% of 2023 production is hedged at an average natural gas price of $3.83/Mcf for 2023 which represents a ~34% price premium and ~70% increase in coverage from year-end 2021 and is better than expected. Add to that the fact that they are 80% hedged at $3.32 for 2024 which gives the company power to dominate rivals in the marketplace.
I think that the market is being geed up for a potentially very big 2023 for DEC, we know that there are plenty of attractive investment opportunities, made more economically viable because the company has significant advantages over their competition by using Smarter Asset management and the philosophy of being a ‘full service company’ as they call it, next level energy.
Finally, I am confident that the concentration of the company on maximising shareholder values will mean that with its 15% yield it is a no-brainer for inclusion in portfolios and as for this year, well in a cheeky finale in his presentation to analysts CEO Rusty Hutson Jr told analysts to prepare for a busy year with ‘plenty of activity’.
United Oil & Gas
United Oil & Gas PLC (AIM: “UOG”), the full-cycle oil and gas company with a portfolio of production, development, exploration and appraisal assets is pleased to announce an update on the ASH-8 development well (“ASH-8”) in the Abu Sennan licence, onshore Egypt. United holds a 22% working interest in the licence, which is operated by Kuwait Energy Egypt.
– ASH-8 well commenced production on 16 March at an initial stabilised rate of c. 2,980 bopd and 2.64 mmscf/d gross (c. 656 bopd and 0.58 mmscf/d net)
– Production has come onstream six weeks ahead of the anticipated schedule, at a higher rate than originally forecast resulting in group H1 production now expected to be at the upper end of the guided range of 700 – 900 bopd net
As previously announced, the ASH-8 development well was interpreted to have encountered 22 metres of net oil pay in the primary Alam El Bueib (“AEB”) reservoir target, in line with pre-drill expectations. After reaching TD on the 21 February, the well was completed and tested on a number of different choke sizes, as summarised in the table below.
Duration of test
Average gross flow rate
The well has now been tied into the existing facilities and brought on stream at an initial rate of c. 2,980 bopd and 2.64 mmscf/d gross (656 bopd and 0.58 mmscf/d net) on a 32/64″ choke. The production from the well will continue to be monitored, so that the long-term production potential can be assessed. However, the currently stable rates coupled with the lack of water-cut and the pressures observed in the well provide positive indicators for its longer-term potential. With the well coming onstream nearly six weeks ahead of schedule, and with rates above pre-drill expectations, the Company’s H1 actual production is expected to be at the upper end of the production guidance of 700-900 bopd net.
The ST-1 rig is now moving towards the ASD-3 location to drill the second development well in the 2023 drilling programme, which is expected to spud in the coming weeks.
Brian Larkin, CEO, commented:
“We are very happy with the results from the ASH-8 well, and it is pleasing to see the well being brought on stream at a stabilised production rate of over 2,900 bopd some six weeks ahead of schedule. This is the fifth well in the highly productive ASH field, which has so far produced in excess of 4 million barrels of oil. The successful result at ASH-8 will have a positive impact on group production levels and revenue and further highlights the long-term value of the field. We look forward to drilling the next development well at ASD-3 on a location that was high-graded by the JV Partners following the success of the ASD-2 well in March 2022.”
Congratulations are due to UOG after reporting a better than expected well result and are now bringing nearly 3/- b/d onstream ahead of schedule. It makes the iminent drill of ASD-3 all the more exciting.
Eco (Atlantic) Oil & Gas
Eco and its partners are applying for Environmental Authorisation to undertake exploration activities in Block 3B/4B in the Orange Basin off the Northern Cape/South-West Coast of South Africa.
The Joint Venture Partners have contracted Environmental Impact Management Services (Pty) Ltd of South Africa to apply for a permit to drill one well and one contingent well (and potentially up to five wells) within an area of interest in the north of the Block. Block 3B/4B is located offshore western South Africa and is centred approximately 180 km from the coast, in water depths averaging approximately 1000m. EIMS has been appointed to undertake the required Environmental Impact Assessment.
The Block 3B/4B JV Partners are Africa Oil SA Corp, a wholly owned subsidiary of Africa Oil Corp., the Operator of the Block, holding a 20% Participating Interest, Azinam Limited, a wholly owned subsidiary of Eco Atlantic, holding a Participating Interest of 26.25%, and Ricocure (Proprietary) Limited, holding the remaining 53.75% Participating Interest. The JV partners continue to progress the collaborative farm-out process, up to 55% gross working interest in the Block, with various potential parties.
Colin Kinley, Co-Founder and COO of Eco Atlantic commented:
“We are excited about 3B/4B and the inventory prospective resource targets on the Block as recently announced in the Operator’s Competent Persons Report. This creates an outstanding resource exploration and development opportunity for the Joint Venture partnership and South Africa.
“Understanding the latest research and information of changing natural patterns of the environment, and the use and effects that we have on the sea and its natural state is key to successful exploration. The EIMS team and the JV partnership are working closely on seeking Environmental Authorisation to permit and drill these promising and significant opportunities for South Africa in the now proven Orange Basin. We successfully met with regional stakeholders, received their approval, and recently drilled a safe exploration well on Block 2B. During this project we proved our capacity to protect regional culture and the environment and safely steward exploration for South Africa’s own much needed energy. In parallel to the research related to our reports and the application for authorisation, we will again directly engage with regional stakeholders and communities as we look to do our part for the South African energy solution.”
Like others, I’m very excited about these blocks, this is step one and starts the process in the Orange Basin.
Longboat Energy, the full cycle emerging E&P business, announces its full-year results for the period ended 31 December 2022.
· Five wells drilled over the period with two significant discoveries: Kveikje and Oswig
· Kveikje (Longboat 10%):
§ Encountered hydrocarbons at all four targets levels.
§ Discovered light oil in excellent quality injectitie reservoir in the main target reservoir.
§ Estimate of recoverable resources between 35 and 60 mmboe gross 1).
§ Operated by Equinor in prolific area to the north of the giant Troll field with significant infrastructure.
§ Likely to form part of the Ringvei Vest multi-hundred million barrel cluster development.
· Oswig (Longboat 20%):
§ Gas-condensate discovery in large fault block with Jurassic Tarbert formation reservoir.
§ Preliminary estimate of recoverable resources between 10 and 42 mmboe gross 2) based on in-place volumes of 100 to 215 mmboe and condensate/gas ratio of 110-130 bbl/mmscf.
§ High pressure, high temperature find next to Equinor operated producing Tune and giant Oseberg fields with oil and gas export facilities.
§ Drill stem test in sidetrack well flowed approximately 2.1 mmscfd of gas and 280 bpd of condensate (approximately 650 boepd in aggregate) through a 10/64-inch choke.
§ Focus on identifying optimal well design for delivering economic flow rates, most likely by fracturing the well, to unlock the discovery.
· Awarded three new licences in the 2022 Norwegian Award in Predefined Areas (‘APA’) Licensing Round:
§ Lotus (Longboat 30%) is located next to Kveikje and contains an analogous injectite low risk prospect, which has the potential to add significant value. The firm well is planned for 2024.
§ The Kveikje extension license (Longboat 10%) covers possible extensions of the Kveikje discovery to the west and east.
§ Oswig South licence (Longboat 20%) contains the potential southerly extension of Oswig. The prospect has already been significantly de-risked by the Oswig discovery and has the potential to double the size of the existing discovery.
· Awarded the Norwegian non-operator “Explorer of the Year Award” by GEO365 for the exploration results including Kveikje and Oswig, which are amongst the five largest discoveries made in Norway in 2022
· Entered Malaysia by successfully winning operatorship of a Production Sharing Agreement for Block 2A (Longboat 36.75%) in the Malaysian Bid Round 2022:
§ Exploration block offshore Sarawak in deep water covering an area of more than 12,000 km2 with material exploration opportunities.
§ Low initial cost obligation and with three years until a drill decision.
§ Malaysia entry significantly expands Longboat’s opportunity set.
§ Cash reserves of £12.1 million as at 31 December 2022 (31 December 2021: £26.3 milion) with borrowings under the EFF of £36.8 million (31 Dec 2021: £nil) and a tax rebate receivable of £40.8 million (31 December 2021: £8.1 million) due in November 2023.
§ Exploration Finance Facility increased to NOK800m (approximately £67.5 million) available for 2023 and 2024.
· Loss after taxation of £(15.5) million (31 December 2021: £(4.7) million) which includes write down of four wells.
· Currently focused on monetisation and conversion of the value created by the exploration success into reserves, production and cash.
· Velocette exploration well (Longboat 20%) expected to spud in Q3 targeting a large fault block with expected Cretaceous gas filled reservoir indicated by seismic amplitudes confined to structure.
· Acquisition and growth in 2P reserves and production remains a key objective.
· The strategy remains unchanged to build Longboat into a full-cycle E&P company with Norway remaining the core area.
Helge Hammer, Chief Executive Officer of Longboat Energy, commented:
“In 2022, Longboat was one of the most active independent exploration companies in Norway where we drilled five wells and made two significant discoveries. Kveikje and Oswig are among the largest discoveries made in Norway in 2022 and, going forward, we are focussing on maturing the assets technically, unlocking the commercial value of our discoveries, and growing reserves and production.
“While Norway remains of prime importance, we are delighted to have established a presence in Malaysia and in the coming year we will seek to build cashflow generating E&P portfolios in both Norway and Malaysia.”
With the move into Malaysia Longboat is moving away from its Norwegian homeland in order to find new projects to work on. It won’t stop them in their own backyard and I would expect not only more drilling there in H2 but also some asset trading to maintain a balanced portfolio.
Beacon Energy, an energy company seeking growth through acquisition or farm-in to interests in discovered upstream projects, is pleased to announce that, further to the Share Purchase Agreement with Tulip Oil Holding B.V. and Deutsche Rohstoff A.G. (as announced on 16 December 2022), the Company has today published an admission document dated 21 March 2023, incorporating a formal Notice of Extraordinary General Meeting, in relation to, among other things, the conditional acquisition of 100% per cent. of the share capital of Rhein Petroleum GmbH for a consideration of 3,488,549,633 new Ordinary Shares and an associated conditional issue of 5,491,516,026 new Ordinary Shares at a price of 0.11 pence to raise, in aggregate, gross proceeds of £6.04 million (approximately US$7.34 million).
The Acquisition constitutes a reverse takeover pursuant to the AIM Rules and is therefore subject, among other things, to the approval of Shareholders at the Extraordinary General Meeting, notice of which is set out at the end of the Admission Document and which will be held at 9.00 a.m. London time on 5 April 2023 at the offices of 55 Athol Street, Douglas, Isle of Man, IM1 1LA.
Restoration of Trading
The Company’s Existing Ordinary Shares were suspended from trading on AIM on 9 September 2022 pending the completion of the Acquisition, classified as a reverse takeover under the AIM Rules. Application will be made to the London Stock Exchange in due course for the Enlarged Share Capital to be admitted to trading on AIM following completion of the Acquisition. Admission of the Enlarged Share Capital to trading on AIM is expected to take place on or around 11 April 2023, subject to the passing of the Resolutions and the satisfaction of all other conditions. The expected timetable of events can be found at the end of this announcement.
· The Acquisition provides Beacon with a beneficial interest in a proven oil field with material existing resources.
– The Rhein Petroleum Assets contain a 2P net reserve base of 3.85 mmbbl and a 2C net contingent resource base of 22.96 mmbbl, located across four core assets.
· The Transaction will deliver a full-cycle portfolio of largely operated production, development, appraisal and exploration assets.
– The Board believes that the region provides significant potential for growth where, over time, it believes a substantial business can be built.
– The Rhein Petroleum Assets provide a near-term active work programme, commencing with the SCHB-2 development well at Erfelden, designed to enhance production and cash flow, and a well understood existing production base which will generate immediate revenue.
– Completion of the Acquisition would provide access to a built-in growth pipeline of onshore, material, near-term development and appraisal targets considered by the Board as probable high-margin, low-to-medium risk opportunities. The Rhein Petroleum Assets also include a mix of low, medium and higher risk exploration opportunities that are expected to be low cost and potentially transformational.
· Highly experienced Beacon Energy Board and management team, with significant combined regional, technical and capital markets experience.
– The experienced operating team at Rhein Petroleum, which has a track record of exploration, appraisal, development and production operations, is expected to remain in place following the Acquisition.
– Subject to the Acquisition completing, it is proposed that Stewart MacDonald and Leo Koot will join the Board as Chief Financial Officer and Non-Executive Director, respectively.
– In conjunction with the Acquisition, the Company has conditionally issued 5,491,516,026 Fundraise Shares by way of a Placing, a Primary Bid Offer, the Subscription and the issue of the Director and Adviser Fee Shares at the Fundraise Price of 0.11 pence to raise total gross proceeds of £6.04 million.
– The net proceeds together with the Company’s existing cash resources will be used to fund the drilling of the SCHB-2 development well [onshore Germany] and for general working capital requirements.
– The Company’s Existing and Proposed Directors (excluding Ross Warner) have subscribed for, in aggregate, £0.47 million of new Ordinary Shares pursuant to the Fundraise.
Further comprehensive information on the Rhein Petroleum assets, the Acquisition and the Resolutions can be found in the Company’s Admission Document (and the Notice of Extraordinary General Meeting set out therein), which will today be made available on the Company’s website at www.beaconenergyplc.com and posted to Shareholders.
Larry Bottomley, Chief Executive Officer of Beacon Energy, commented:
“We are delighted to have closed out this Fundraise which, despite the very challenging market conditions of the past couple of weeks, reflects good demand for the investment proposition that we put in front of new and existing shareholders. The acquisition of Rhein Petroleum is truly transformative for Beacon, providing the Company with proven reserves, existing and near-term production growth, material upside potential and an exciting pipeline of value catalysts in the next 18 months. We look forward to updating the market in due course regarding the final outstanding milestones associated with the RTO process.”
For information only today, I will write more after I have met the company although all the players involved are well known faces in the energy sector.