WTI (Mar) $77.82 +$1.04, Brent (Mar) $82.87 +47c, Diff -$5.05 -57c.

USNG (Mar) $2.08 +3c, UKNG (Mar)* 72.0p +2.5c, TTF (Mar) €29.68 +€1.21.

*Denotes February contract expiry.

Oil price

Whilst oil rallied yesterday on the back of better US data and ahead of the Fed decision today in which rates won’t change but some definition about future potential cuts may be in the wording. Today China has produce poor economic data so handing the baton back to economics away from Middle East politics. Finally, the API inventory stats showed a 2.5m draw in crude against the whisper of a draw of 867/-, gasoline added 600/- b’s but distillates drew a handy 2m b’s.

Chariot

Chariot has reported that Etana Energy (Pty) Limited, the electricity trading platform in which Chariot owns a 49% interest, has signed a milestone Power Purchase Agreement  with Growthpoint Properties  to supply them with 195GWh of renewable energy a year. This represents 32% of Growthpoint’s total current annual electricity consumption and Etana will wheel electricity to their commercial property buildings located in several jurisdictions in South Africa.

Growthpoint is South Africa’s leading Real Estate Investment Trust that owns and manages a diverse portfolio of properties in the retail, office and industrial sectors. This agreement is the country’s first multi-jurisdiction, multi-building, multi-source renewable energy wheeling arrangement and the supply will mainly consist of wind power, with components of solar and hydroelectricity. Wheeling is a process where electricity is bought and sold between private parties, using the existing grid to transport power from the point of generation to end-users.

Through this agreement with Etana, Growthpoint has secured the rights to purchase hydroelectricity generating roughly 30GWh per annum by a 5MW hydroelectric power plant developed, owned and operated by Serengeti Energy, which will be wheeled by Etana. The hydroelectric power plant has reached financial close and is currently under construction and once in production, expected in Q2 2025, will generate baseload power on a 24/7 basis.

Benoit Garrivier, CEO of Chariot Transitional Power, commented:

“We are very pleased to report this deal signed with Growthpoint as it is an excellent example of how the Etana business model works. In linking renewable power sources to customers through our trading platform we provide access to sustainable energy solutions and help underpin development fundamentals of new projects – both with and without Chariot’s direct participation, including the ongoing maturation of a 400 MW gross portfolio of wind projects – by establishing robust offtake commitments.”

“Through Etana, we are directly facilitating the expansion of South Africa’s energy mix as well as providing energy that will have a positive impact on customers and their carbon footprints. This business is highly scalable, driven by tangible demand and we will continue to build on this exciting growth platform going forward.”

This is indeed a good example of how the Etana model works and that many new projects can and will go ahead either directly or in a third party fashion and given the potential of the market place has a great opportunity to grow this vast market. 

Jadestone Energy

Jadestone Energy plc has provided a trading update for the year ended 31 December 2023. The financial information in this update has not been audited and may be subject to further review and change.

Highlights

·    Record annual Group production for 2023 of 13,813 boe/d, representing c.20% year-on-year growth.

·    Net debt of c.US$4.2 million and available liquidity of c.US$220 million at 31 December 2023.  

·    The Akatara development project is c.93% complete, with first gas and final acceptance of the Akatara Gas Processing Facility remaining on schedule for the second quarter of 2024.

·    All conditions precedent for the CWLH 2 acquisition have been satisfied, with the acquisition expected to close in mid-February 2024.

Paul Blakeley, President and CEO commented:

“We delivered 2023 operating and financial performance in line with guidance, finishing the year strongly with robust production performance from both Montara and PM323 in particular. We further diversified our business through the Sinphuhorm acquisition and the increased interest in the CWLH fields, as well as making significant progress towards first gas at Akatara.  

2024 is set to be a very important year of transition for Jadestone, with production expected to grow by c.55% year-on-year driven by first gas at Akatara, higher volumes from Malaysia and the completion of the CWLH 2 acquisition, all in turn adding significant diversification to our business.  Akatara remains on track for first gas in the second quarter of this year, maintaining great progress against the challenging fast-track schedule established at project sanction. CWLH 2 is expected to close in mid-February now that all conditions precedent have been met. Further growth beyond 2024 continues to be de-risked, through recent infill drilling success in Malaysia and, most notably, through last week’s signature of a heads of agreement for Vietnam gas sales.

The small end-year 2023 net debt position was achieved despite record levels of investment in Jadestone’s business, including the highest annual capital expenditure in Jadestone’s history. We will continue to manage our investment and expenditure with the aim of minimising leverage and maximising liquidity.” 

There is nothing much here that we do not know already, the production for last year was 13,813 b/d and given Montara a very creditable achievement. Guidance is a very conservative 20,000-23,000 which I. alluded to in my last piece, it should be a breeze to get through. 

Going forward, Akatara is a ☑️ as is CWLH ☑️ and of course the recent news from Vietnam ☑️ and the PSC in Malaysia could even be a ☑️☑️. Right now the time has come for the management to get on with all the good things they have talked about recently and deliver the goods. So far the share price has not taken all our optimism at face value yet but with delivery I’m sure it will…

2023 Operating Performance[1]

 

 

 

FY 2023

FY 2022

Production

 

 

 

Group production

boe/d

13,813

11,487

– Montara

bbls/d

3,655

4,227

– Stag

bbls/d

2,672

2,176

– CWLH (existing interest)

bbls/d

1,896

383

– Peninsular Malaysia (“PenMal”)

boe/d

4,288

4,702

– Sinphuhorm

boe/d

1,303

n/a

Liftings

– Oil

mmbbls

3.6

4.0

– Gas

mmcf

1.4

1.8

Group production for 2023 of 13,813 boe/d represented 20% growth year-on-year and an annual record for Jadestone, driven by a full-year of production from the existing interest in the CWLH fields, approximately 10 months of Sinphuhorm production and an increase at Stag following the successful infill drilling campaign in late 2022. This was offset by a reduced contribution from Montara due to the shut-ins during 2023 for tank repairs and natural decline at the PenMal assets, albeit with both Montara and PenMal performing strongly into the end of the year. 2023 production was just above the top end of the implied annual 2023 guidance range of 12,600-13,700 boe/d (based on issued guidance from April – December 2023 of 13,500-15,000 boe/d).

Oil liftings were lower year-on-year, primarily due to the shut-ins at Montara. Gas liftings were lower due to natural declines at the PM329 asset offshore Malaysia.

2023 Financial Performance[2]

 

 

FY 2023

FY 2022

Average oil price realisation

US$/bbl

87.4

103.9

– Brent

US$/bbl

81.8

96.0

– Premium

US$/bbl

5.7

7.8

End-year inventory/lifting position

– Montara and Stag inventories

Bbls

211,261

94,989

– CWLH and PenMal net overlift

Boe

141,618

216,813

Revenues

US$ million

319.8

421.6

Total production costs

US$ million

256.6

219.9

 – Underlying operating expenses

US$ million

175.5

157.2

 – Other costs[3]

US$ million

81.1

62.7

Capital expenditure

US$ million

117.0

82.9

Net cash/(debt) at 31 December

US$ million

(4.2)

123.3

The average oil price realisation for 2023 was impacted by the year-on-year decline in Brent prices, with the average premium to Brent for liftings broadly mirroring the fall in Brent oil prices. Revenues in 2023 reflect the trends in liftings and realisations highlighted above, and an expected outflow of US$10.3 million related to Q4 2023 oil price hedging.

Overall, 2023 production costs of US$256.6 million were towards the lower end of the 2023 guidance range of US$245-285 million (split between underlying operating expenses of US$180-210 million and US$65-75 million of non-recurring items and costs not associated with production (such as well workovers and transportation).

Total production costs increased by c.US$37 million year-on-year, largely explained by higher workover activity and tanker costs at Stag (+US$16 million), a full-year of production at CWLH (+US$14 million), shuttle tanker operations at Montara (+US$14 million) and a charge relating to decommissioning activity on the Company’s formerly non-operated interests offshore Malaysia (+US$13 million), offset by lower supplementary charge payments in Malaysia (-US$15 million). The 2023 production cost disclosures above are preliminary, subject to review and change, and do not include any impact from the change in inventory and lifting position over 2023.

2023 capital investment of c.US$117.0 million was at the midpoint of the guidance range of US$110-125 million, with c.US$83 million spent in Indonesia on the Akatara development, c.US$28 million on the East Belumut drilling campaign in Malaysia with the remainder comprising minor investment activity across several assets.

Net debt of US$4.2 million at 31 December 2023 reflects c.US$153 million of consolidated Group cash balances (restricted and unrestricted cash) and c.US$157 million of debt drawn at end-2023 under the Company’s reserves-based lending (“RBL”) facility.

Available liquidity at year-end 2023 totalled c.US$220 million, reflecting unrestricted cash balances, undrawn RBL balances (based on the current borrowing base) and the undrawn working capital facility.

The Group’s 2024 production, operating costs and capital expenditure guidance remain unchanged from the announcement on 15 January 2024:

 Production: 20,000 – 23,000 boe/d, a c.55% increase on 2023 at the midpoint.

 Operating costs: expected to total US$240-290 million (excluding forecast royalties and carbon taxes totalling c.US$30 million), essentially flat year-on-year on a comparable basis and which would represent a c.30% year-on-year reduction on a unit cost basis due to increased production of lower cost barrels.

 Capital expenditure: expected to total US$80-110 million.

 Other cash expenditure: expected to total c.US$77 million on a net basis, primarily relating to the abandonment trust fund payments associated with the CWLH 2 acquisition. These are expected to be largely funded through revenues from the next two liftings attributable to the CWLH 2 interest.

Akatara Update

The Akatara development project is currently 93% complete. Approximately 1,850 workers are currently on site, with c.4.7 million safe manhours for the Akatara project worked to date.

First gas and final acceptance of the Akatara Gas Processing Facility remains on schedule for the second quarter of 2024.

Construction of the sales gas pipeline is approximately 93% complete, including all canal crossings.

The workover of the Akatara-B2 well was successfully completed in mid-January 2024, with the Akatara-A4 well workover in progress. The workover programme on the five existing wells, which will provide the raw gas feed into the Akatara Gas Processing Facility, is expected to complete by end-March 2024.

CWLH 2 Acquisition

The Company is pleased to announce that all conditions precedent to the CWLH 2 acquisition, originally announced in November 2023, have now been satisfied. As a result, the acquisition is expected to close in mid-February 2024.

Malaysia Licence Award

As part of the recent Malaysia Bid Round, Jadestone was awarded the PM428 PSC as operator with a 60% interest, with the joint venture partner being Petronas Carigali.

The PM428 PSC represents potential upside in the event that Jadestone is successful in its application for the Puteri Cluster (previously known as the PNLP assets), since it not only surrounds the Puteri Cluster, but is also in close proximity to the Jadestone operated PM323 and PM329 PSCs. The PM428 award carries a minimal financial commitment to reprocess some existing seismic. A decision on the Puteri Cluster is expected around mid-year 2024 as part of the Malaysia Bid Round Plus.

 

Gulf Keystone Petroleum

Gulf Keystone has provided an operational and corporate update. The information contained in this announcement has not been audited and may be subject to further review.

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

“2023 was a challenging year for GKP and our industry as Kurdistan crude exports were suspended in March and payments from the Kurdistan Regional Government for oil sales were further delayed. By adapting to the new environment and commencing sales to the local market we have been able to protect our business and balance sheet. I’m proud of the GKP team, who have swiftly transitioned from a focus on profitable production growth to preserving liquidity and restarting trucking operations, maintaining an excellent safety record throughout.

While local market demand remains variable, we are actively working to increase volumes and remain focused on at least covering our estimated monthly capex and other costs of c.$6 million in 2024, while proactively managing our accounts payable.

We continue to engage with government stakeholders to push for the restart of exports and payment surety for past and future sales. We see considerable upside should the operating environment improve, underpinned by the attractive fundamentals of the Shaikan Field and our historic track record of value creation.”

There is nothing to add to this statement really, operating in Kurdistan is all about making something from what is a poor situation and GKP are just breaking even and in a relatively poor situation until things change. 

Operational

  • Zero Lost Time Incidents for over a year, demonstrating GKP’s rigorous commitment to safety despite significant operational and project changes in 2023
  • 2023 gross average production of 21,891 bopd (2022: 44,202 bopd), reflecting the suspension of exports and subsequent initiation of local sales
    • Gross production averaged 49,165 bopd between 1 January and 24 March 2023 prior to the Iraq-Turkey Pipeline closure
    • Gross average sales of 23,331 bopd between the initiation of local sales on 19 July and 31 December 2023
  • Gross average sales in 2024 year to 29 January of c.21,600 bopd
    • Continued fluctuation in volumes reflects seasonal logistics and demand challenges, refinery capacity constraints and supply from other producers in the region
    • Realised prices are currently c.$27/bbl, in line with local market pricing (current breakeven at gross sales of c.20,500 bopd); reduced from an average of $30/bbl in the second half of 2023
    • The Company continues to receive advance payments for its net entitlement of 36% of gross sales revenue
  • No operational impact from regional tensions; we continue to closely monitor the security environment and have taken precautions to protect the organisation

Financial

  • Total 2023 revenue receipts of $109.2 million (2022: $450.4 million), reflecting:
    • $65.7 million related to invoices paid for export sales in August and September 2022, received in January and March 2023 respectively
    • $43.5 million proceeds from local sales in H2 2023
  • Capital expenditures and costs were significantly reduced in 2023 to preserve liquidity in response to the suspension of exports
    • Aggregate net capex, operating costs and other G&A monthly run rate reduced to c.$6 million in H2 2023 that was covered by local sales revenues
    • 2023 net capex of c.$59 million (2022: $114.9 million), of which c.$12 million was in H2 2023, as the Company suspended all Shaikan Field expansion activity
    • 2023 operating costs of c.$36 million (2022: $41.9 million), reflecting the shut-in of production for the majority of Q2 2023 and cost saving initiatives
  • Prior to the suspension of dividends, $25 million interim dividend paid in March
  • Cash balance of $82 million at 30 January 2024 with no debt
    • Proactively managing and reducing accounts payable with balances trending towards levels in line with ongoing monthly expenditures
  • The Kurdistan Regional Government (“KRG”) owes $151 million net to GKP for October 2022 to March 2023 export sales

Outlook

  • The Company remains focused on maximising local sales to at least cover monthly costs while proactively managing accounts payable
  • While local market demand remains variable and difficult to predict, we are actively pursuing opportunities to increase sales volumes
  • Expect to maintain aggregate net capex, operating costs and other G&A monthly run rate at c.$6 million in 2024:
    • Estimated 2024 net capex of c.$20 million, comprising safety critical upgrades and production maintenance expenditures
    • Continuing to focus on minimising costs while retaining operational capability to increase local sales and resume exports
    • Production and gross Opex per barrel guidance remains suspended
  • The Company continues to actively engage with government stakeholders to push for the restart of pipeline exports:
    • Political and commercial negotiations between the Government of Iraq (“GOI”) and the KRG are ongoing
    • First tripartite discussions between the GOI, KRG and International Oil Companies recently held in Baghdad, at which GKP was present
    • We continue to emphasise the importance of payment surety for future oil exports, the repayment of outstanding receivables and the preservation of current contract economics
  • With the resumption of exports and normalisation of KRG payments, GKP will consider incremental field investment to realise Shaikan’s substantial reserves base and return to previous production levels