A flash blog today, I’m on hols in sunny Spain but worth noting these announcements, as always I will add any further comments if and when I speak to the companies.
Diversified Energy Company
Diversified has announced executive leadership changes that allow for the continued execution of the Company’s long-term strategic vision. Eric Williams, Executive Vice President and Chief Financial Officer, has resigned from the Company, effective immediately, to pursue other professional opportunities. Mr. Williams will work with the Company through the end of September 2023 to ensure a smooth transition of leadership. Concurrent with Mr. William’s resignation, Brad Gray, the Company’s current Executive Vice President and Chief Operating Officer, has been promoted to President and will assume the role of Chief Financial Officer, effective immediately. As part of his transition in responsibilities, Mr. Gray has resigned from the Board of Directors. Leveraging a stable of top talent, Maverick Bentley, currently Senior Vice President of Midstream Operations, has been promoted to Executive Vice President of Operations; Benjamin Sullivan, currently General Counsel, has been promoted to Senior Executive Vice President and Chief Legal & Risk Officer; Ron Ridgway, currently Senior Vice President of Energy Marketing, has been promoted to Executive Vice President of Energy Marketing.
Rusty Hutson, CEO, commented,
“On behalf of the entire Diversified team, I would like to thank Eric for his contributions over the last six years. Since joining the Company in July 2017, Eric has been instrumental in transforming our finance team. We appreciate Eric’s leadership and commitment to Diversified’s success and wish him all the best in his future endeavors.”
Hutson continued, “I am thrilled to have the opportunity to promote and place Brad into the role of CFO, who has a deep understanding of Diversified, having also previously held the CFO position at the Company. Brad has developed strong relationships within every segment of our company, and these relationships position him and our finance teams for future success. Additionally, his promotion and appointment ensures we do not miss a beat in executing our strategy to responsibly deliver long-term value to shareholders.”
Eric Williams said, “I am grateful to Rusty, the Board, and the entire Diversified Team for the opportunity to be part of the Company’s success over the past several years. I count it both an honor and privilege to have worked with an extremely talented team.”
In this next evolution of the Diversified executive team, Hutson concluded, “The changes announced today are a testament to our deep bench and strong succession plans. Brad, Ben, Ron, and Maverick are incredibly talented leaders. They will allow us to build on the significant momentum we have at Diversified as we continue our journey to grow and position this Company for the future. I am proud of the agility and resilience of our team to stay focused and deliver strong results.”
Board of Director Updates
Following Brad Gray’s resignation from the Board of Directors, the following additional committee and governance changes are being made with immediate effect:
- Kathryn Klaber becomes the Chair of the Nomination and Governance Committee and becomes a member of the Audit and Risk Committee
- Martin Thomas leaves the Audit and Risk Committee
- David Johnson leaves the Nomination and Governance Committee
- Sylvia Kerrigan becomes the Senior Independent Non-Executive Director
- David Turner steps down as the Senior Independent Non-Executive Director
These committee leadership changes at the Board of Directors level align with the Company’s focus on gender diversity and independence.
At the time of writing I haven’t managed to speak to DEC, they being in the USA. But if I do and if it’s appropriate I will comment further. At first glance it looks to be a shake-up at executive and NED levels which happens to most companies as the grow.
Touchstone provide an update regarding natural gas and liquids production volumes from the recently commissioned Cascadura facility. Touchstone has an 80 percent operating working interest in the Cascadura field, which is located on the Ortoire block onshore in the Republic of Trinidad and Tobago. Heritage Petroleum Company Limited holds the remaining 20 percent working interest.
Touchstone achieved its forecasted Cascadura gross natural gas production rate of 60 million cubic feet per day (“MMcf/d”) on September 15, 2023. The Cascadura-1ST1 well is currently contributing approximately 40 MMcf/d while the Cascadura Deep-1 well is contributing approximately 20 MMcf/d of gross natural gas volumes. In addition, the wells are currently producing an aggregate 1,400 barrels per day of field estimated gross natural gas liquids volumes.
Paul Baay, President and Chief Executive Officer, commented:
“I am very pleased that we have reached our gross target rate of 60 MMcf/d at Cascadura after our first week of operations. The performance of the wells, both of which are being choked at surface, is in line with expectations and the surface facility is currently operating at approximately 67 percent of its capacity.“
This is a great performance by Paul Baay and his excellent team who have now brought gas production on at Cascadura as promised. On Friday the project reached 60/- MMcf/d from the two wells and some 1,400 b/d of liquids. A genuine company making achievement which is already transforming Touchstone into a full cycle hydrocarbons company with considerable revenues and a very bright future.
Arrow has provide an update on the Carrizales Norte-3 (“CN-3”) well on the Tapir Block in the Llanos Basin of Colombia where Arrow holds a 50% beneficial interest.
The Company has completed the previously announced testing of the Carbonera C7 formation in the CN-3 well and the well has been put into production. The well penetrated a 23 foot pay zone in a high quality upper C7 sand, with an estimated porosity of 25%. An electric submersible pump (ESP) has been inserted and the well was initially producing at an average rate of 1,149 BOPD gross (575 BOPD net) of light crude oil of 33° API with a water cut of less than 0.5% over a 22 hour period. To efficiently manage the reservoir, and prevent premature water breakthrough, the ESP has been shut off and the well is naturally flowing. A 23/128 choke is being used to ease production back to a target of 640 BOPD gross (320 BOPD net). The Company maintains the optionality to increase production once the well has stabilized.
Initial production results are not necessarily indicative of long-term performance or ultimate recovery.
The Gacheta formation was not tested in the CN-3 well. Management plans to test the Gacheta formation at Carrizales Norte in future wells.
Forward Work Program
The rig has commenced mobilization to the Rio Cravo Este (“RCE”) field where Arrow plans to further exploit the multi-zone RCE structure with two dedicated Gacheta wells and a follow up to the RCE-6 C7 producer. The drilling rig is then expected to return to the Carrizales Norte field (“CN”) to begin a multi horizontal well project. Management plan to target the proven Ubaque formation at CN with six horizontal wells. Plans are to spud the first horizontal well in early 2024.
Field operations and production continue to improve. Current production, including CN-3, is between 2,800 and 3,000 BOE/D net. Capella production, approximately 280 BOPD, remains shut-in, waiting on government and operator meetings with communities in the area. Two wells at the Oso Pardo field, approximately 80 BOPD in aggregate, are shut in waiting routine maintenance. To minimize capital requirements, Management will use the same rig to conduct this maintenance program and for drilling operations on Oso Pardo 3 and 4. The rig is expected to arrive at the Oso Pardo field in mid-October.
Marshall Abbott, CEO of Arrow commented:
“The CN-3 testing results of the C7 formation have confirmed that the Carrizales Norte field is transformational for the company. Multiple development locations are anticipated based on current results, including horizontal drilling in the Ubaque reservoir. Horizontal wells typically produce at higher rates, increasing recovery and the economics of heavy oil fields.”
“Arrow’s fully funded, low risk drilling program continues to build momentum across our extensive portfolio, where we aim to spud five additional development wells between now and year-. We are also encouraged by the initial interpretation of the Tapir 3D seismic and look forward to providing further updates in due course.”
As expected in his interview with me last week ,Marshall Abbott has brought on to production the CN-3 from the C7 formation. Starting with the use of an ESP it is now flowing naturally without the pump at 640 b/d which will be closely monitored.
The link below is from the aforementioned interview I did last week, just in case anyone hadn’t seen it it is an excellent run through of Arrow and shows why, in my view this is one of the most exciting companies in the sector and my 50p TP is looking well on the conservative side.
Afentra has announce that, further to the announcement made on 19 July 2023 regarding the proposed acquisition of interests in Block 3/05 and Block 3/05A from Azule Energy Angola Production B.V. and the amendment to the terms of the SPA with Sonangol dated 20 April 2022 to reduce the interest being acquired by Afentra in Block 3/05 from 20% to 14%, and together with the Azule Acquisition, an Admission Document in relation to the Acquisition and Notice of General Meeting to approve the Acquisitions will be posted to shareholders today and is available to download from the Company’s website.
Following the publication of the Admission Document, the Company anticipates that the suspension of the trading in the Company’s shares will be lifted and that trading in the Company’s Ordinary Shares will recommence at 8.00am BST this morning.
The General meeting to approve the Acquisition will be held electronically on https://web.lumiagm.com/ at 10.00am BST on 5 October 2023.
Highlights from the Admission Document
Increased equity in a material Production and Development Portfolio1
· Combination of existing equity and the Azule and Amended Sonangol acquisitions deliver a material equity position in both Block 3/05 (30%) and Block 3/05A (21.33%)1,2
· Net 2P reserves of approx. 33 mmbbls1,3 and net 2C resources of approx. 20 mmbbls1,3,4
· Production of approx. 5,700 bbl/d net (including production from Block 3/05A)6
· Exposure to significant upside potential through improved recovery from over 3 billion bbls of OIIP in Block 3/053 and development of multiple fully appraised discoveries in Block 3/05A
· Decommissioning costs to date have been substantially pre-funded by previous and existing JV partners5
Value Accretive Deals in an Attractive Investment Environment
· Azule Acquisition and Amended Sonangol Acquisition are expected to complete by the end of 2023 and will benefit from the accrued cash flow associated with the net interests from the respective effective dates (Amended Sonangol Acquisition: 20 April 2022, Azule Acquisition: 1 October 2022)
· Azule production benefits from higher inherited cost pool and more advantageous contingent payment structure
· Extension of Block 3/05 until December 2040 provides significant runway for the Joint Venture Partners to invest and realise the upside value from the assets
Improvements to asset performance positively impacting delivery
· Block 3/05 production increased following a programme of successful light well interventions with gross production rates now exceeding 20,000 bbl/d (H1 23 average 18,000 bbl/d)
· Extended production test on Block 3/05A delivering flow rates of approx. 1,450 bbl/d and providing critical information to allow partners to establish the long-term resource potential and appropriate development strategy
· Reserves replacement of 150% in 1H 20237
Re-admission process and key timings
· Resumption of trading, and commencement of dealings on AIM of the Company’s existing Ordinary Shares expected to become effective at 8:00am BST
· Admission Document available to download from the Company’s website in accordance with the AIM Rules: https://afentraplc.com/wp-content/uploads/2023/09/c120747CCL.pdf
· The general meeting to approve the Acquisition will be held electronically on https://web.lumiagm.com/ at 10.00am BST on 5 October 2023.
· Both Acquisitions anticipated to complete by the end of 2023
· Admission of enlarged group to trading on AIM expected by the end of 2023
This is already in the news, just being the highly important admission document and the shares are re-listed this morning.
Orcadian has entered into a non-binding Heads of Agreement with a North Sea operator, which details a potential farm-out of the Pilot development project.
· This is a provisional agreement and there can be no guarantee that any transaction will occur. Any deal is subject to, amongst other matters, completion of due diligence; negotiation of documentation; and various regulatory and shareholder consents as well as Board approvals of the Operator and Orcadian.
· Orcadian has granted the Operator a commercial exclusivity period until 30 November 2023. to complete definitive documentation for the overall deal.
If the deal completes as documented in the HoA:
· This will enable Orcadian and the Operator to progress the development of the Pilot field, one of the largest undeveloped discoveries in the Central North Sea (“CNS”), with significant upside potential in the surrounding area.
· The Operator will become operator of the Pilot development and will acquire an 81.25% interest in Licence P2244 and will become operator of the Pilot development.
· Based upon the Competent Person’s Report (“CPR”) prepared by Sproule in 2021, the Operator will acquire net reserves or resources of 63.4 MMbbl on completion of the deal, with Orcadian retaining 14.6 MMbbl of 2P reserves, carried to first oil.
· The Operator and Orcadian will work to deliver a Field Development Plan (“FDP”) to the North Sea Transition Authority (“NSTA”) for a polymer flood development of the Pilot field with industry leading emissions performance.
· Orcadian management expect this updated development plan will now increase Pilot field reserves or resources by 5-10% relative to the 2021 CPR scenario audited by Sproule.
· Orcadian will retain an 18.75% carried interest in the Pilot development with the Operator paying 100% of the pre-first oil scope of work. After first oil, Orcadian will pay its working interest share of expenditure.
· Orcadian and the Operator have requested that NSTA extend the second term of licence P2244 and will also request an out-of-round application for the area of former Licence P2320 (which Orcadian had to relinquish earlier this year), in support of the Pilot development and the area plan.
· On completion of the transaction, extension of the P2244 licence, and a licence award over former P2320, Orcadian would receive a cash consideration of up to US$200,000 from the Operator, with a further US$3,000,000 being received on Pilot FDP Approval.
As previously noted, working capital remains very constrained. Cash at today’s date is c£90k, with a current monthly burn rate of less than £20k.
Steve Brown, Orcadian’s CEO, commented:
“We are delighted to have reached this agreement, which sets out a potential pathway to production for the Company’s Pilot field.
“The Pilot field has a substantial proven reserve base with material upside potential in the surrounding area. We are delighted this transaction could enable Orcadian to retain a significant interest in the project and to enjoy the long-term benefits of producing oil for the UK.
“Developing energy in our own backyard contributes to the UK’s Energy Security and balance of payments; delivers long-term high-quality jobs; and minimises emissions associated with satisfying the UK’s need for energy.
“We look forward to progressing the next stages of this proposed transaction and providing further updates.”
Nothing much to add to this, Orcadian has hopefully done this deal and by the looks of it, just in the nick of time, I wish them well.