WTI (Mar) $76.84 +62c, Brent (Apr) $82.19 +56c, Diff -$5.35 -6c. 

USNG (Mar) $1.85 -7c, UKNG (Mar) 63.95p -2.8p, TTF (Mar) €26.23 -€1.015.

Oil price

Oil regained the previous week’s losses and gained just under $5, the situation in the Middle East having escalated a bit and now with a further move by Israel being considered it may deteriorate. Inventories gained in crude but drew sharply in products whilst natural gas drifted yer further.

The Baker Hughes rig count showed a rise of 4 units overall to 623, oil was unchanged at 499.

PetroTal Corp

PetroTal has announced the results of its 2023 year-end reserve evaluation by Netherland, Sewell & Associates, Inc. for the Bretana oil field, operated 100% by PetroTal. All currency amounts are in United States dollars and comparisons refer to equivalent information as at December 31, 2022.  All figures subject to rounding differences.

Highlights:

·    For 1P and 2P (each as defined below) categories respectively,  increases of 13% and 9% to Net Present Value (discounted at 10% after tax (“NPV-10 AT”)), and per share values to US$0.97/share (CAD$1.29/share) and US$1.80/share (CAD$2.39/share);

·    Increases in reserve categories:

Category

2023 reserves

2023 NPV-10 after tax

2023 NPV-10 after tax/bbl

mmbbls

$ billion

$/bbl

Proved (“1P”)

48 (+6%)

$0.9

$18.50

Probable (“2P”)

100 (+4%)

$1.6

$16.39

Possible (“3P”)

200 (+19%)

$2.5

$12.54

·    Strong results for various key year-end 2023 reserve-based metrics:

o 2023 reserves life index for 1P and 2P reserves, is approximately 9 and 19 years, respectively, using the average 2023 production run rate of 14,248 barrels (“bbls”) of oil per day (“bopd”); 

o Robust 2023 production reserves replacement ratios of 150% and 167% for 1P and 2P reserves, respectively;

o Original Oil in Place largely flat from 2022 levels.  Now at 326, 442, and 595 million bbls, respectively, for the 1P, 2P and 3P cases;

o Increased 1P and 2P total booked well counts in 2023 by 2 and 3 wells, to 23 and 32 wells, respectively.  Total 3P well count remains at 36; and,

o 2P recovery factor continued to increase in 2023 to 26% (from 24% at year-end 2022).

·    2023 Proved Developed Producing  reserves increased 18% to 29 mmbbls, representing 60% of 1P reserves, reflecting an attractive ratio of base production to low risk drilling proved undeveloped (“PUD”) targets;

·    2P Future Development Capital (“FDC”) increased 36% to $551 million from year-end 2022 reflecting an additional 3 wells booked at year-end 2023, erosion control costs, and associated water disposal capacity and facilities needed to accommodate anticipated flush and run rate production volumes; and,

·    For the first time since the Company’s inception, operating costs, in the current 2023 year ended reserve report do not include any diluent, reflecting the Company’s commercial efforts to find new ways to reduce operating costs.

Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:

The PetroTal team is committed to increasing value for all stakeholders from Bretana’s oil recovery enhancement.  It is noteworthy that our market capitalization is currently at a discount to our PDP after tax NPV-10 valuation even as the Company continues to make significant shareholder distributions and remains debt free.

Reserves attributed to the Bretana oil field have grown tremendously since 2017.  Our drilling success combined with the fields strong natural aquifer support that allows for recovery factors beyond 30% has underpinned a world class oil operation that is expected to deliver material free cash flow for the next 20 years.  The fields 2P and 3P reserves of 100 and 200 million barrels, respectively, will be extracted with one of the smallest operational footprints in the world, sustainable for years to come.

This report couldn’t be better if I had written it myself and proves what an amazing investment PetroTal is at these levels. The comments above by the CEO sum up all the good news presented in the reserves evaluation, 2P numbers of 100m bbls have an excellent recovery rate and the reserve life of 19 years is outstanding given the upside in both Bretana and elsewhere in the portfolio. 

Again Manolo has hit the nail on the head, the market cap is at a discount to the NPV and all these numbers are after several years of increasing production and especially in recent years, substantial distributions to shareholders. 

And this is a play for the long term, careful stewarding of the rocks and producing at sensible levels will ‘deliver material cash flow for the next 20 years’. My Target Price of 150p is locked in, for choice I would be increasing it based on these excellent numbers but for the time being this is a huge store of value and should be appreciated…

2023 Year-end Reserves Summary

The summary below sets forth PetroTal’s reserves as at December 31, 2023, as presented in the reserves report prepared by NSAI, an independent qualified reserves evaluator.  The figures in the following tables have been prepared in accordance with the standards contained in the most recent publication of the Canadian Oil and Gas Evaluation Handbook (the “COGEH”) and the reserve definitions contained in National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”). In addition to the summary information disclosed in this announcement, more detailed information will be included in PetroTal’s annual information form for the year ended December 31, 2023 (the “AIF”) to be filed on SEDAR+ (www.sedarplus.ca) and posted on PetroTal’s website (www.petrotal-corp.com) in March 2024.

Five Year Crude Oil Price Forecast – NSAI Report

Year-End Forecast:

2024

2025

2026

2027

2028

5 Yr Avg

Brent (USD$/bbl) – January 1, 2024

$78.00

$79.18

$80.36

$81.79

$83.41

$80.55

Brent (USD$/bbl) – January 1, 2023

$82.69

$81.03

$81.39

$82.65

$84.29

$82.41

The oil price projections used by NSAI are based upon an average of December 31, 2023 and 2022 forecasts of Brent Crude futures prices prepared by three qualified reserves evaluators: GLJ Petroleum Consultants Ltd., McDaniel & Associates Consultants Ltd. and Sproule Associates Limited.  The five year average for the NSAI Report reflects an average Brent oil price of $80.55, which as at the time of this press release, is approximately $2/bbl higher than current market Brent prices.

Year-End Crude Oil Reserves (mmbbls)

CATEGORY

2023

2022

Change

Proved

       Developed Producing

28.5

24.1

+18%

       Undeveloped

19.5

21.4

-9%

Total Proved

48.0

45.4

+6%

       Probable

52.2

51.3

+2%

Total Proved plus Probable

100.2

96.7

+4%

       Possible

99.4

71.6

+39%

Total Proved plus Probable & Possible

199.6

168.3

+19%

Represents gross and net bbls since PetroTal has a 100% working interest and a 100% net revenue interest in these properties.  Royalties are paid from sales proceeds. 

Year-End Net Present Value at 10% – Before Tax ($ millions)   

CATEGORY

2023

2022

Change

Proved

        Developed Producing

$748

$635

+18%

        Undeveloped

$623

$529

+18%

Total Proved

$1,371

$1,164

+18%

       Probable

$1,169

$1,124

+4%

Total Proved plus Probable

$2,540

$2,288

+11%

       Possible

$1,346

$1,485

-9%

Total Proved plus Probable & Possible

$3,886

$3,773

+3%

Year-End Net Present Value at 10% – After Tax ($ millions)

CATEGORY

2023

2022

Change

Proved

        Developed Producing

$487

$446

+9%

        Undeveloped

$401

$339

+18%

Total Proved

$888

$784

+13%

       Probable

$751

$724

+4%

Total Proved plus Probable

$1,639

$1,509

+9%

       Possible

$869

$959

-9%

Total Proved plus Probable & Possible

$2,508

$2,468

+2%

Forecast Revenues and Costs(1-5) ($ millions) 

Undiscounted

Undiscounted

Undiscounted

Undiscounted

Undiscounted

Discounted

Discounted

CATEGORY

Revenue

Royalties

OPEX

FDC

B-Tax Net Revenue

B-Tax Net Revenue

A-Tax Net Revenue

Total Proved

$3,729

$289

$1,188

$125

$2,127

$1,371

$888

Total Proved plus Probable

$8,146

$703

$1,884

$551

$5,009

$2,540

$1,639

Total Proved plus Probable & Possible

$18,017

$1,597

$4,286

$768

$11.367

$3,886

$2,508

 

1)  Royalties include the 2.5% social fund for all years.

2)  Future Development Capital (“FDC”) includes abandonment.

3)  Net Revenue is defined as revenue less royalties less operating costs less FDC.

4)  B-tax and A-tax refer to before and after tax.

5)  Discounted values are discounted at 10%.

Year-End Reserves Value per Share – After tax.

CATEGORY

Dec. 31, 2023

Dec. 31, 2022

Reserves per share

US$/sh

CAD$/sh

GBP/sh

US$/sh

CAD$/sh

GBP/sh

Proved

$0.97

$1.29

0.76

$0.90

$1.23

0.75

Proved plus Probable

$1.80

$2.39

1.41

$1.75

$2.29

1.45

Proved plus Probable & Possible

$2.75

$3.65

2.16

$2.86

$3.47

2.37

Represents NPV-10 (after tax) divided by the number of common shares issued as of December 31 of each respective year and excludes other balance sheet items at the relevant date.  Canadian and GBP share prices are converted at the respective year end foreign exchange conversion rates.  Common shares issued at December 31, 2023 total 912.3 million shares and at December 31, 2022 total 862.2 million shares.

Reserve Life Index(1-3)

CATEGORY

Dec. 31, 2023

Dec. 31, 2022

Proved

9.2 years

10.1 years

Proved plus Probable

19.3 years

21.5 years

Proved plus Probable & Possible

38.4 years

37.4 years

(1)      2023 values based on 2023 year-end reserves divided by average 2023 production of 14,248 bopd.

(2)      The license for Block 95 expires in 2041.

(3)      2022 values based on 2022 year-end reserves divided by average 2022 production of 12,200 bopd.

Future Development Costs

The following information sets forth development and abandonment costs deducted in the estimation of PetroTal’s future net revenue attributable to the reserve categories noted below:

CATEGORY ($ million)

2023

2022

Change

Proved

        Developed Producing

$25

$105

-76%

        Undeveloped

$99

$124

-20%

Total Proved

$125

$229

-45%

       Probable

$426

$176

+142%

Total Proved plus Probable 

$551

$404

+36%

       Possible

$217

$220

-1%

Total Proved plus Probable & Possible

$768

$624

+23%

 

Future development costs ($/bbl)

2023

2022

Change

Proved

$6.40

$10.69

-40%

Proved plus Probable

$7.69

$5.56

+38%

Proved plus Probable & Possible

$4.49

$4.33

+4%

The future development and abandonment costs are estimates of the future capital expenditures required to convert the corresponding reserves to PDP reserves.  Future development per bbl is determined using the future development capital divided by the 1P, 2P, or 3P reserves, less cumulative PDP.

2023 Year-End Gross Reserves Reconciliation (mmbbls)

Proved

Proved plus Probable

Proved plus Probable & Possible

December 31, 2022

45.4

96.7

168.3

Technical Revisions

8.0

8.7

36.5

Economic Factors

(0.2)

Production

(5.2)

(5.2)

(5.2)

December 31, 2023

48.0

100.2

199.6

Well 16H and Corporate Production Update

January 2024 average production was 20,450 bopd with an associated Brent price of $80/bbl, ahead of Company guidance on a production and revenue basis.

Well 16H continues to produce at above expected level rates with a 26 day production average of approximately 4,850 bopd as at February 11, 2024 and an estimated investment payback in Q2 2024.

Corcel Energy

Further to the announcement of 28 December 2023, Corcel has provided an update on the testing of the Tobias-14 well in the onshore Block KON-11, in Angola where it has a 20% working interest (18% net). The Operator is Sonangol, one of the largest hydrocarbon producers in Angola.

Operations Update:

The Operator has now reported to the Company that testing of the TO-14 well has formally begun.  Delays in testing start have been encountered over recent weeks primarily due to longer than expected timelines for deliveries of required testing equipment, combined with severe inclement weather at the well location, which included heavy rains and regional flooding.   

Once completed, the Operator will then move the test equipment to the TO-13 well pad, which is already being prepared for testing, and will conduct flow testing on the TO-13 well.      

With testing underway, the Company now expects to receive initial flow tests results for TO-14 over the next several weeks and will update the markets on the results of the test programme in due course. 

About KON-11 and the Kwanza Basin:

As previously announced, KON-11 is considered a brownfield development and includes the historically producing Tobias field, drilled, and developed by Petrofina in the 1960s and 1970s, and inactive since the late 1990s.  The Tobias field constituted 12 historic vertical wells, and Corcel and the operator believe that a revised interpretation of the existing structures along with the application of modern drilling and completion technology, including potentially adding sidetracks or horizontal drilling to the Field Development Plan will lead to a higher Original Oil in Place figure recognized in the reactivated field and subsequently more producible field resource potential.

The traditional Tobias field reservoir is in the Binga limestone, located at a depth of approximately 700m along the crest of the structure, with 4-14% primary rock porosity which is enhanced by an extensive, naturally fractured carbonate system.  Historic peak production at Tobias was 17,500 bbls/d with 29 MMbbls produced over the life of the field. 

Corcel’s estimated unproduced prospective oil resources are 65 MMbls with 11.7 MMbls net to CRCL.  The field will qualify for marginal field fiscal terms, as outlined by the Angolan government, resulting in advantageous royalty, tax and depreciation regimes.

I haven’t started covering Corcel yet but have been watching what is going on closely and am planning a meeting with directors shortly. Accordingly I’m not going to say much here but it is clearly not something that can have been expected due to the bad weather. 

Beacon Energy

Beacon has announced an operational update on the Schwarzbach-2(2.) (“SCHB-2(2.)”) well in the Erfelden field.

Further to the Company’s announcement of 29 January 2024, the sand jetting operations with a coiled tubing unit has now been completed and the Company expects to recommence production in the coming days following reinstallation of the rod pump.

The impact of the sand jetting will only be known once production has been restored and a stabilised and sustained flowrate from the rod pump has been achieved, at which time the company will provide an update. Once the well has been fully cleaned up following the sand jetting operations, which is anticipated to take several weeks, it is expected that the rod pump will be replaced with an Electrical Submersible Pump (“ESP”) to maximise production – this is currently scheduled to take place in April 2024.

Beacon Energy Chief Executive Officer, Larry Bottomley commented:

“We are pleased to have safely completed the sand jetting operations to stimulate the well and are now working to recommence production in the coming days with the rod pump.”

“We remain fully focused on establishing optimal production from the SCHB-2(2.) well as quickly as possible following this well stimulation operation and ultimately the installation of the ESP.”

“We look forward to the results of this operation and providing an update to shareholders in due course.”

Nothing much I can add here really, as we already knew the jetting operations were continuing and now they are completed we won’t know the results until the flowrates are published, in ‘several weeks’. A delay yes but at least things are moving along and by April the ESP should be installed and doing its job. 

Star Energy

Star has announced an updated Competent Persons Report for its conventional oil and gas interests.  The CPR was carried out by DeGolyer & MacNaughton (D&M), an independent third-party auditor.

Key highlights

Net Reserves & Contingent Resources as at 31 Dec 2023 (MMboe).

1P

2P

2C

Reserves & Resources as at 31 Dec 2022

11.17

17.04

18.72

Production during the period

(0.71)

(0.71)

Additions & revisions during the period

1.25

1.14

(0.13)

Reserves & Resources as at 31 Dec 2023

11.71

17.47

18.59

*Oil price assumption of c.$72/bbl for 5 years, then inflated at 2-3% p.a. from 2028 to 2050

·    1P NPV10 of $143 million(2021: $144 million)

·    2P NPV10 of $235 million (2021: $215 million)

The full report will be uploaded to https://www.starenergygroupplc.com/investors/reports-publications-presentations/

No comment from the company is always a worry, but the bare number appear to be good enough and the shares have added a few much needed pence, the overall strategy however remains yet to be proven however so the price will remain in the doldrums for the foreseeable future. 

And finally…

In the Prem this weekend there were wins for the Noisy Neighbours, the Cottagers, Liverpool, the Blades, Spurs, the Bees, the Magpies, the Gooners and the Red Devils. All that means no change at the top of the table but some tweaking at the lower end.

In the 6 Nations Scotland lost 16-20 to France but were victims of a peculiarly odd TV verdict when they should have triumphed. England came from behind to beat Wales at Twickenham and Ireland played like champions beating Italy 36-0.

And finally, in Los Vegas the Super Bowl went the way of the Kansas City Chiefs after Patrick Mahomes threw a touchdown pass that broke the hearts of the San Francisco 49ers.