WTI (Mar) $72.28 -$1.54, Brent (Apr) $77.33 -$1.37, Diff -$5.05 +27c.

USNG (Mar) $2.08 +3c, UKNG (Mar) 74.0p +4.25p, TTF (Mar) €29.52 +€0.595.

Oil price

Oil fell last week, a combination of economic strangulation by the Fed, who suggested ‘prudence’ and later in 60 minutes Powell said that Fed rates wouldn’t be altered in the March meeting and then of course we had the labour numbers which blew the whisper away at 353/- against forecasts of 180/- .

Chariot

Chariot has reported that it has received approval for its Environmental Impact Assessment from the Unified Regional Investment Committee for drilling activity on its Loukos Onshore licence  onshore Morocco (Chariot, Operator 75%, ONHYM, 25%).

·      The EIA covers a total of 20 well operations, including:

 Initial drilling campaign of 2 exploration wells on the Gaufrette and Dartois prospects

 Further 17 candidate well locations

 Re-entry of an existing gas discovery

·      The permit is valid for a period of 5 years

·      Civil works will now commence to prepare the first well locations and access routes


Pierre Raillard, Head of Gas Business and Morocco Country Director, commented:

“We are very pleased to receive approval of the environmental permit for drilling activity on our Loukos licence. This is not only an important step towards our initial drilling campaign but EIA approval for multiple additional locations gives us flexibility in future campaigns. In addition to this, the land access activities and civil work contracting have concluded, site construction activities are now underway and we are on track for commencement of operations around the end of Q1 2024. I would like to thank the efforts of the Morocco operational team in the progress we have made so far as well as the continuous support and assistance given by ONHYM.”  

Great news for Chariot as the all important Environmental Impact Assessment is approved and importantly for multiple additional locations which means that the 20 well programme can be very flexible. With this in place and progress continuing at Anchois, Chariot shareholders can be confident that the significant upside which has been on the cards for a while is now approaching swiftly. 

Serica Energy

Serica has provided the following operations update.

Mitch Flegg, Chief Executive of Serica, said:

“Pro-forma production in 2023 after including volumes from the Tailwind assets for the full year was just over 40,000 boe/d net to Serica. I am pleased that we met our operating cost target with pro-forma operating costs of around US$19 per boe despite the significant inflation being experienced by the offshore sector generally. We are aiming to keep unit operating costs below US$20 per boe during 2024.  

Production in 2024 is expected to be higher than in 2023 with guidance between 41,000 boe/d and 48,000 boe/d for the year. This reflects a range of outcomes in a year of significant activity including the speed with which the scheduled drilling and well work deliver incremental production.

Serica’s strategy of investing in its assets continues to be central to our record of consistently achieving high levels of reserves replacement, combined with increased levels of production. We are looking forward, therefore, to the start of the four well Triton area drilling programme in March, with the benefits of added production expected to start coming through in the second half of the year. During 2024 there is also an extensive programme of interventions in both platform and subsea wells on the Bruce and Keith fields. The objectives include re-establishing consistent production from the Keith field.

In addition, Serica has a healthy portfolio of potential new projects. This includes the possible developments of the Buchan and Belinda fields, which offer the prospect of further replacement of produced reserves and incremental production from 2026 onwards. Our plans for drilling two Bruce infill wells, the first new wells on the field since 2012, are progressing and, during the next eighteen months, we will be participating in the Parkmead operated Skerryvore exploration well situated in the UK Central North Sea. As a UK taxpayer, Serica will benefit from tax relief for its share of the associated development and exploration costs.

Serica is extremely well placed, therefore, to continue its track record of replacing reserves and increasing production. This platform has been achieved while maintaining a very strong balance sheet, which is both the result and enabler of our strategy to invest and grow organically and through disciplined M&A.”

With two days of the Capital Markets event on the way starting tomorrow and not including the news that they have to find a new CEO all is going well operationally for Serica. Production news is good, last year’s 40.1 kboe/d exited at 45.7 kboe/d and guidance for this year is 41-48 kboe/d a bit wide but takes possible shut-downs into account.

With Tailwind pretty much bedded in, the next piece of recent M&A, farming-in to the substantial Greater Buchan Area will get underway this year with FID expected late this year. The company has tagged plenty of activity this year operationally, from a campaign at Triton to intervention and drilling at Bruce and Keith. 

Serica has plenty to be getting on with and has a very strong balance sheet with which to do it. I’m very confident that assuming the board calls right on the new CEO then the company has a powerful period coming up. 

Production in 2023

Serica’s pro-forma net production in 2023 which includes production from the fields owned by Tailwind since 1 January 2023 averaged 40,121 boe/d. The gas/liquids split of production in 2023 was 56:44.

FY 2023

boe/d

Bruce

6,487

Rhum

12,490

Bittern

4,012

Gannet E

6,098

Evelyn

3,780

Guillemot West and North West

237

Columbus

2,178

Erskine

1,325

Orlando

3,514

Production in the second half of the year was lower than the first half due mainly, as previously reported, to the planned summer shutdowns for both the Bruce and Triton hubs overrunning to rectify safety related issues. There were also a number of facilities issues on Bruce and Triton which caused short-term interruptions to production late in the year and carrying over into early January. These are now largely resolved.

Notwithstanding these issues, production in the fourth quarter of 2023 averaged 45,748 boe/d.

2024 Production Guidance

The production guidance for 2024 is 41,000 to 48,000 boe/d (net to Serica). This represents an increase on pro-forma production for the combined Serica and Tailwind portfolios in 2023.

2024 year to date production has averaged 43,184 boe/d[1]. Erskine has been shut in since 25th January 2024 due to an issue with a compressor. It is expected to restart during March.  

As a result of the work completed during the extended Bruce summer shutdown in 2023, an extended shutdown is not planned in 2024. There is a planned one-week outage which overlaps with scheduled shutdown of third-party infrastructure downstream of the Bruce platform.

There is a planned six-week shutdown of the Triton FPSO during the summer of 2024. This will be accompanied by a ‘walk to work’ campaign designed to further improve the performance of the facilities. It follows successful ‘walk to work’ campaigns in 2022 and 2023.

These planned maintenance periods are incorporated into the production guidance.

Investment programme

As previously announced, Serica is planning an ambitious programme of organic investments during 2024 extending into 2025 and 2026.

The investments in 2024 include four wells in the Triton area (Bittern B1z sidetrack, Gannet E GE-05, Guillemot North West EC1 and Evelyn EV-02)[2] and well work on the Bruce and Keith fields.

The start date of the B1z sidetrack is now expected to be in March 2024. This well and the subsequent three wells are scheduled to take about three months each, meaning that drilling will continue into 2025. Serica has also exercised an option to keep the rig for a further well following completion of the fourth well in the programme (EV-02).

Production from the B1z sidetrack is expected to start shortly after the completion of drilling. Production from each of the other three wells is expected to start around thirty days after the completion of drilling each well.

The Bruce and Keith Light Well Intervention Vessel (“LWIV”) campaign is on track to take place between March and May. This follows previous campaigns in 2022 and 2023, which have delivered low-cost incremental production. It is hoped to restart production from the Keith field during 2024 following successful preparation work on the Keith subsea facilities carried out in 2023. Additional well interventions from the Bruce platform are scheduled for the second half of 2024.

The estimated cost to Serica of the currently approved capital investment in its producing assets in the Bruce and Triton hubs is approximately £210 million, before tax relief. Most of the expenditures are expected to be incurred in 2024. 

Looking further forward, both the Buchan field redevelopment and Belinda field development projects are moving towards potential sanction. The Environmental Statement and draft Field Development Plan for the Buchan project have been submitted, with completion of Serica’s acquisition of a 30% interest is expected to occur during February. As previously reported, the Belinda draft Field Development Plan was submitted in September 2023.

Serica is also maturing plans for two infill wells on the Bruce field with the aim of drilling in 2026.

The Skerryvore joint venture, in which Serica holds a 20% interest, is working towards drilling a licence commitment exploration well during late 2024 or the first half of 2025.

Abandonment costs in 2024 are forecast to be about £14 million (pre-tax) net to Serica. These will be incurred mainly on the final decommissioning of the Arthur field, situated in the UK Southern North Sea, which was held by Tailwind Energy.

Operating costs

Despite the significant inflationary pressures being experienced by all operators in the UK North Sea, Serica achieved unit operating costs in 2023 of around US$19/boe based on pro-forma production of 40,121 boe/d. 

The Company’s target in 2024 is to maintain unit operating costs at below US$20/boe.

Balance Sheet

Year-end cash and cash equivalents stood at £291 million and borrowings at £210 million. This is after payment during 2H 2023 of:

·      two instalments of 2023 taxes totalling £139 million (final payment approximately £58 million in Q1 2024), and

·      dividends of £89 million being the total of the 2022 final and 2023 interim amounts.

Cash and cash equivalents included £28 million of cash security temporarily lodged with a third party in respect of decommissioning obligations pending the issue of letters of credit to replace the security. This is expected to occur shortly.  

Organisation

Martin Copeland has assumed the role of Serica’s CFO and has been appointed to the Board effective today, 5 February 2024. Martin succeeds Andy Bell, who has resigned from the Board. Andy will continue to support Serica during the transition and preparation of the 2023 Annual Report.   

Sell-side Analysts Event

A presentation will be published later this week on Serica’s website to accompany the previously reported event for sell-side analysts being hosted by the Company on 7th and 8th February.

Predator Oil & Gas

Predator has announced that it has signed an extension to the Company’s 2022 rig contract for the use of the Star Valley Rig 101, which is currently available in Morocco.

The extension will facilitate, subject to regulatory approvals and consent, the drilling of the MOU-5 well to evaluate the 177km² Jurassic structural closure in a crestal location, the limit of which was penetrated in MOU-4 in 2023.

MOU-5 is expected to be drilled between 1 April to 31 May 2024 in order to avail of in-country well services that will remain following the completion of the Company’s rigless testing programme, which is currently underway, thereby reducing mobilisation costs for well equipment and services.

The majority of the critical long lead items required for drilling are available from the Company’s surplus well inventory stored  in its Guercif warehouse, thereby potentially further reducing drilling costs.

MOU-5 is not expected to be drilled over-balanced with heavier drilling mud as the problematic mobile clay formations present in MOU-1, MOU-2 and MOU-3 are not expected to be developed at the MOU-5 well location.

The primary objective is a potentially thick development of porous and permeable, early Jurassic carbonate reservoirs sealed by overlying claystones. 

The Company is fully-funded to drill MOU-5 using currently uncommitted, discretionary, cash on the Company’s balance sheet.

Paul Griffiths, Executive Chairman of Predator, commented:

“We are delighted to have concluded the extension to our 2022 rig contract as it provides us with the perfect opportunity to accelerate the cost-effective and fully-funded drilling of a large Jurassic structure adjacent to our area of focus for rigless well testing.

A successful MOU-5 drilling, testing, appraisal and development programme would potentially open up opportunities to exploit our onshore proximity to the Maghreb Gas Pipeline, which is located less than 10 kilometres from the MOU-5 drill site. This is a significant advantage for any future potential developer of a gas find as it will reduce capital infrastructure costs and the lead time to “First Gas”.

We also completed a very successful planning trip to Trinidad last month as a result of which we made significant progress towards establishing an operating and administrative presence.  We also identified additional workover opportunities on the Cory Moruga licence area and evaluated opportunities for re-perforating wells by deploying the Sandjet testing technology to pinpoint missed oil pays in some of the legacy wells.

The Board remains committed to generating activity and newsflow in the weeks and months ahead and are seeking potentially to take the Company to another level through continued drilling success.”

An important time for Predator and the shares have doubled as excitement grows ahead of the drilling programme in Morocco.  With the rig contract extended and the project about to be tested, the actualité is about to be discovered, the chance was never closer for Predator…

 

And finally…

England lost the second test against India, putting up a good fight in the end not quite enough.

In the Prem there weren’t many wins, lots of high scoring draws but the winners were the Seagulls, Villa, Wolves, the Red Devils and the Gooners. Some big names went down like Chelsea and Liverpool.

And in the 6 Nations Ireland saw off new look France, England beat the Azzurri and Scotland held on for a rare win in Cardiff.