WTI (June) $79.12 +86c, Brent (July) $83.36 +57c, Diff -$4.24 -29c.

USNG (June) $2.39 +14c, UKNG (June) 71.66p -0.34p, TTF (June) €29.55 -€0.105.

Oil price

As expected there is pre-Opec chat in the air already, yesterday it was allegedly Iraq  going for a quota bust today they have said that they are ‘committed to the support and objectives of the group’. That’s ok then, its Kushti from there ahead of the long walk to June 1st. 

US retail gasoline is steady at $3.608 per gallon on average, with Memorial Day on the 27th May and with it the start of the driving season, I’m hearing a bit of a shortage in the product market which might just manifest itself in the next few weeks. 

Zephyr Energy

Zephyr has provided an update on operations. In addition, Zephyr received a notice for the exercise of warrants in the Company.

State 36-2R well drilling operations update

Further to its announcement on 3 May 2024, the Company is pleased to report that operations on the State 36-2 LNW-CC-R well in the Paradox Basin, Utah continue to progress in line with expectations.  The 12-¼ inch intermediate section of the well was successfully drilled to the section total depth, after which 9 5/8-inch casing string was set and cemented in place. The current hole depth is 6,010 feet measured depth.  

The next phase of operations will involve drilling through the Paradox formation to the target Cane Creek reservoir zone. Drilling is planned to reach a total depth of 10,362 feet measured depth (9,600 feet true vertical depth) and will incorporate a short, 270-foot horizontal reservoir section.  

Williston project update

At the Company’s non-operated asset portfolio in the Williston Basin, North Dakota, U.S, hydrocarbon production in the first quarter of 2024  was in line with management’s expectations. The Company expects to provide further details in a full Q1 update by the end of May 2024.

Exercise of Warrants

The Company received notice for the exercise of warrants to subscribe for 171,429 new ordinary shares of 0.1 pence each in the Company (“Ordinary Shares”).  The warrants were issued in June 2023 and had an exercise price of 4.375 pence per new Ordinary Share, which generated proceeds of approximately £7,500 for the Company.

Application has been made to London Stock Exchange plc for the 171,429 new Ordinary Shares to be admitted to trading on AIM (“Admission”). It is expected that Admission will become effective and that dealings in the new Ordinary Shares will commence on AIM at 8.00 a.m. on or around 16 May 2024.

It’s good to see solid progress at the State 36-2 LNW-CC-R well in the Paradox Basin, Utah which ‘continues to progress in line with expectations’.  The 12-¼ inch intermediate section of the well was successfully drilled to the section total depth, after which 9 5/8-inch casing string was set and cemented in place. The current hole depth is 6,010 feet measured depth.  

All appears well at the Williston with an update imminent and a small exercise of the warrants has taken place which is good. All eyes on the Paradox Basin….

Union Jack Oil

Union Jack has announced, further to its notification of 17 April 2024, the details of a dividend payable to shareholders.

The financial position of Union Jack remains strong, especially with the additional revenues from the Company’s assets in the USA. Consequently, following a review of the Company’s capital requirements, notwithstanding an extended and dynamic drilling programme in the USA, the Board has decided it is appropriate to make a further distribution to shareholders.

The Board declares a dividend of 0.25 pence per ordinary share with a London Stock Exchange ex-dividend date of Thursday 4 July 2024, a record date of Friday 5 July 2024 and a payment date of Friday 26 July 2024.

This dividend is further proof, if any was needed, that UJO is in a very strong position and can maintain its capital distribution to shareholders policy. With good cash flow from Wressle, now already added to by the US revenue, shareholders should be happy…

As my report on the company from last week said, having moved into cash flow from America so quickly, UJO can be considered to be a truly international company and that the success of the programme shows us over here how fast wells can be drilled, turned to production and indeed very fast return on capital. 

With plenty of exposure to the Wressle area, West Newton yet to come and more drilling in the USA, UJO has a great deal to be excited about and given the upcoming activity in its portfolio, the upside in terms of capital and income growth should provide significant backing for share price growth.

Touchstone Exploration

Touchstone has reported its financial and operating results for the three months ended March 31, 2024 and provides an operational update. 

Selected financial information is outlined below and should be read in conjunction with our March 31, 2024 unaudited interim condensed consolidated financial statements and related Management’s discussion and analysis, both of which will be available under our profile on SEDAR+ (www.sedarplus.ca) and on our website (www.touchstoneexploration.com). Unless otherwise stated, all financial amounts presented herein are rounded to thousands of United States dollars, and all production volumes disclosed herein are sales volumes based on Company working interest before royalty burdens.

Paul R. Baay, President and Chief Executive Officer, commented:

We are pleased to announce positive first quarter 2024 results during what has been a very busy time for the Company. Since coming onstream in September 2023, the Cascadura field has transformed Touchstone both operationally and financially, having contributed an estimated $20 million in operating netbacks, ahead of tying in the two further successfully drilled development wells from the surface location. Initial decline rates on our two producing Cascadura wells have been steeper than we first expected but we are learning more about the reservoir for further exploitation. We are maintaining our full year guidance given production increases are heavily weighted towards the fourth quarter of 2024.

As announced on May 1, 2024, we were delighted to reach an agreement with the Board of Directors of Trinity Exploration and Production Plc on the terms of a recommended all-share acquisition. We believe the benefits of the proposed transaction will provide further scale and strength to Touchstone in addition to growth opportunities that will be driven by the increased production of the two companies. We are excited at the greater flexibility such a deal would give us around future capital programs, in addition to allowing us to potentially accelerate our development plans.

We look forward to updating shareholders on our ongoing operating and corporate workstreams in due course.

There is nothing as they say in these historic figures that we didn’t already know, but suffice it to say that TXP is on a roll, producing more all the time and that as I wrote about recently, that Cascadura is powering forward and as part of the learning process will kick on again in the 4th quarter of this year.

Guidance for the year remains the same and as I said, Q4 weighted as per my recent report. The way that TXP is building its position in Trinidad is very impressive on an organic basis and this year and next will show the importance of Cascadura. 

Also the recommended acquisition of Touchstone is in my view going to be a very important deal for TXP, it will as they say ‘provide scale and strength’ along with flexibility almost my exact words from the blog after its announcement. The way that onshore Trinidad works it is crying out for consolidation and now TXP are the big cheese in country they will have more sway where it counts.

 

First Quarter 2024 Financial and Operating Highlights

·      Achieved average quarterly production of 7,015 boe/d (80 percent natural gas), representing a 228 percent increase from first quarter 2023 average production volumes of 2,139 boe/d (40 percent natural gas). First quarter 2024 production decreased by 18 percent relative to 8,504 boe/d produced in the fourth quarter of 2023 (79 percent natural gas), mainly reflecting natural declines from our Cascadura field.

·      Realized petroleum and natural gas sales of $16,584,000 (Q4 2023 – $20,759,000).

–     Cascadura field production volumes in the quarter contributed $6,961,000 of net natural gas sales at an average realized price of $2.49 per Mcf and $1,657,000 of net NGL sales at an average realized price of $69.59 per barrel.

–     Natural gas production from the Coho-1 well averaged net volumes of 2.8 MMcf/d (460 boe/d) in the quarter and contributed $542,000 of net natural gas sales at an average realized price of $2.16 per Mcf.

–     Crude oil production from our legacy fields contributed $7,424,000 of net sales at an average realized price of $69.95.

·      Generated an operating netback of $10,463,000, a 24 percent decrease from the fourth quarter of 2023, primarily due to decreased natural gas and NGL sales volumes.

·      Achieved quarterly funds flow from operations of $6,142,000 in the first quarter of 2024 compared to $10,489,000 in the preceding quarter.

·      Delivered net earnings of $3,628,000 ($0.02 per basic and diluted share).

·      $11,962,000 in quarterly capital investments primarily focused on expenditures directed towards one CO-1 crude oil development well and two Cascadura development wells, and progressing construction on the flowline from the Cascadura C surface location to the Cascadura natural gas processing facility.

·      Exited the first quarter of 2024 with a cash balance of $9,537,000 and a net debt position of $27,621,000, resulting in a reduced net debt to annual funds flow from operations ratio of 1.45 times.

Post Period-end Highlights

·      Successfully drilled and cased the CO-375 development on our CO-1 block, with openhole logs and drilling data indicating a sand thickness of approximately 530 feet in the Forest Formation and approximately 625 feet in the Cruse Formation.

·      On April 18, 2024 we executed a third amended and restated loan agreement with our existing lender providing for an additional $13 million of bank debt capacity, which will be used to finance our previously announced initial 2024 capital program.

·      On May 1, 2024, we announced that we reached an agreement with the Board of Directors of Trinity Exploration and Production Plc on the terms of a recommended all-share acquisition.

First Quarter 2024 Financial and Operating Results Overview

 

 

Three months ended

March 31,

2024

December 31, 2023

March 31,

2023

 

 

 

Operational

 

 

 

 

 

Average daily production

 

Crude oil(1) (bbls/d)

1,166

1,133

1,285

NGLs(1) (bbls/d)

262

622

Crude oil and liquids(1) (bbls/d)

1,428

1,755

1,285

Natural gas(1) (Mcf/d)

33,521

40,491

5,124

Average daily production (boe/d)(2)

7,015

8,504

2,139

 

Average realized prices(3)

 

Crude oil(1) ($/bbl)

69.95

72.26

64.86

NGLs(1) ($/bbl)

69.59

72.92

Crude oil and liquids(1) ($/bbl)

69.88

72.49

64.86

Natural gas(1) ($/Mcf)

2.46

2.43

2.12

Realized commodity price ($/boe)(2)

25.98

26.53

44.03

 

Production mix (% of production)

 

Crude oil and liquids(1)

20

21

60

Natural gas(1)

80

79

40

 

 

Operating netback ($/boe)(2)

 

Realized commodity price(3)

25.98

26.53

44.03

Royalties(3)

(5.76)

(5.53)

(13.01)

Operating expenses(3)

(3.83)

(3.46)

(12.05)

Operating netback(3)

16.39

17.54

18.97

 

 

 

 

Financial ($000’s except per share amounts)

 

 

 

Petroleum and natural gas sales

16,584

20,759

8,476

 

 

Cash from operating activities

5,369

8,512

913

 

 

Funds flow from operations

6,142

10,489

803

 

 

Net earnings (loss)

3,628

(21,236)

(279)

Per share – basic and diluted

0.02

(0.09)

(0.00)

 

 

Exploration capital expenditures

108

595

8,750

Development capital expenditures

11,854

591

269

Capital expenditures(3)

11,962

1,186

9,019

 

 

Working capital deficit(3)

14,121

7,581

4,383

Principal long-term balance of bank debt

13,500

15,000

19,500

Net debt(3) – end of period

27,621

22,581

23,883

 

 

Share Information (000’s)

 

 

 

Weighted average shares outstanding – basic

234,213

233,487

233,037

Weighted average shares outstanding – diluted

236,548

233,487

233,037

Outstanding shares – end of period

234,213

234,213

233,037

 

Notes:

(1)   Refer to “Advisories – Product Type Disclosures” for further information.

(2)   In the table above and elsewhere in this announcement, references to “boe” mean barrels of oil equivalent that are calculated using the energy equivalent conversion method. Refer to “Advisories – Oil and Natural Gas Measures” for further information.

(3)   Non-GAAP financial measure. See the “Advisories – Non-GAAP Financial Measures” for further information. 

Outlook and Guidance

Our 2024 capital program is progressing as planned, with four of the six wells in the program successfully drilled and cased. Road and pipeline construction to tie-in our two recently drilled Cascadura development wells to our natural gas facility is progressing and we expect the infrastructure will complete prior to the end of the third quarter of 2024.

Although Cascadura field production has declined higher than originally anticipated, we currently forecast to maintain our preliminary 2024 guidance announced on December 19, 2023. The material forecasted 2024 production increase is expected to be weighted to the fourth quarter of 2024 based on estimated initial production from our two recently drilled Cascadura development wells. Management will update its 2024 guidance for the proposed acquisition of Trinity Exploration and Production Plc if and when appropriate.

Operational Update

Cascadura

The Cascadura field produced approximately 5,388 boe/d (95 percent natural gas) in the first quarter of 2024, representing 77 percent of our total quarterly net production. Since initial production in September 2023 through March 31, 2024, our Cascadura-1ST1 and Cascadura Deep-1 wells have cumulatively produced approximately 8.77 Bcf of gross natural gas volumes (net – 7.02 Bcf) and over 121,000 barrels of gross NGLs (net – 97,000 barrels) in 208 total days. Over the same period, the field has contributed a net operating netback of approximately $19.96 million.

During the first seven-months of production we have continually monitored and optimized natural gas rates from the two Cascadura wells. In the Cascadura-1ST1 well, we replaced the original choke valve with a larger valve. In the Cascadura Deep-1 well, we ran a production logging tool to indicate the source of gas within the wellbore and we added perforations above and below the original completion interval which marginally increased production. Both Cascadura-1ST1 and Cascadura Deep-1 continue to produce through surface chokes to control pressure.

Production in the first quarter of 2024 was impacted by natural declines as well as approximately six days of downtime in the Cascadura Deep-1 well associated with the operations noted above. Based on our analysis to date, including higher than expected initial decline rates as compared to pre-production models, the wells are exhibiting a dual porosity/permeability system which indicate that production is derived from both sand porosity/permeability as well as a fracture porosity system. A fracture porosity system can deliver high initial production rates and pressure which can decline quickly while sand matrix porosity/permeability may deliver at lower production rates for longer periods of time.

Given the nature of the production, and the apparent influences of natural fractures in the structure, we have commenced a feasibility study to determine the potential benefits of a stimulation program to optimize natural gas and associated liquids recovery from the wells.

CO-1 Drilling Operations

The CO-375 development well, located on our CO-1 block, was spud on April 3, 2024 and reached a total depth of 6,500 feet on April 30, 2024. The Forest Formation, which was the secondary target,  was observed at a depth of 2,805 feet and the primary Cruse Formation target was encountered at a depth of 4,598 feet. Drilling samples and openhole wireline logs indicated the presence of sands in both formations. The Forest Formation indicated 530 feet of sand, with approximately 250 feet of net hydrocarbon pay. Similarly, the Cruse Formation indicated 625 feet of sand, with an estimated 240 feet of net hydrocarbon pay. The well has been cased in preparation for oil production and the drilling rig has been released.

The completion rig was mobilized to the surface location and completion operations are underway on the CO-374 well, following which the CO-375 well will be completed. We expect that both development wells will be online by the end of May 2024.

Production

In April 2024, we produced average net volumes of 5,940 boe/d as follows:

·      Cascadura field contributed net sales volumes of 4,360 boe/d consisting of:

–     natural gas sales volumes of 25.4 MMcf/d or 4,226 boe/d with a realized price of $2.51 per Mcf; and

–     natural gas liquids volumes of 134 bbls/d with an average realized price of $76.12 per barrel;

·      Coho net average natural gas sales volumes were 2.6 MMcf/d or 426 boe/d at a realized price of $2.28 per Mcf (excluding third party processing fees); and

·      average net daily crude oil sales volumes were 1,154 bbls/d with an average realized price of $76.12 per barrel.

2024 Annual Meeting of Shareholders

Touchstone’s virtual-only Annual Meeting of Shareholders (the “Meeting”) will be held on Wednesday, June 19, 2024 at 10:30 a.m. (Mountain time).

Registered and beneficial shareholders will be mailed a notice-and-access notification and form of proxy on or around May 17, 2024, advising as to the electronic availability of the Meeting materials, including the 2024 Management Information Circular, the 2023 audited consolidated financial statements and related Management’s discussion and analysis.

For holders of our depositary interests, hard copies of our Management Information Circular and form of direction will be mailed on or about May 17, 2024.

Subsequent to the mailing date, the Meeting materials will be available on our website (www.touchstoneexploration.com/investors/shareholder-meetings) and under our profile on SEDAR+ (http://www.sedar.com/www.sedarplus.ca).

Management Update

As Touchstone continues to pursue its growth strategy and operations are becoming engineering intensive, Touchstone is pleased to announce that Mr. Brian Hollingshead has been promoted to Executive Vice President, Engineering and Business Development. In addition to joining our executive team, Mr. Hollingshead will oversee our production, engineering and facilities departments. In conjunction, Mr. James Shipka’s title has been amended from Chief Operating Officer to Executive Vice President, Asset Development and HSE, where he will continue to lead our HSE, drilling and subsurface teams.

Serica Energy

Serica has announced the appointment of Chris Cox as Chief Executive Officer. This will take effect on 1 July 2024[1], with David Latin (Chairman of Serica) ceasing his temporary role as Interim CEO at the same time.

Chris Cox has over forty years experience in oil and gas in a wide range of roles with Majors and Independents. For the last two decades he has been leading complex multi-asset and multi-country businesses including as CEO of Spirit Energy, Interim CEO at Capricorn Energy and Chairman of Kellas Midstream. Chris has experience as a non-executive director of both private equity and publicly listed companies, most recently with Nostrum Oil and Gas. Chris holds a BSc in Petroleum Engineering from Imperial College, London.

David Latin, Chairman and Interim CEO of Serica commented:

We are delighted to have secured the services of Chris Cox after a rigorous recruitment process. His technical and commercial acumen, combined with his track record in leadership and teambuilding as CEO of substantial upstream entities operating in multiple geographies including the UK and Norway, make him an excellent fit with Serica’s existing operations, exciting drilling programme currently underway and ambitions to grow through M&A. With this appointment, we have our new executive team in place and I look forward to working with them to deliver growth and returns for our investors.”

Chris Cox commented:

I am honoured to be given the opportunity to lead the team at Serica at this very important time. In the last several years, Serica has established itself as one of the leading producing companies in the UK North Sea. I will do my utmost to continue the Company’s reputation for safe high quality operational performance, to realise the significant potential for growth within the existing portfolio and to add further value for shareholders through M&A.”

Serica have gone for a top quality, highly experienced industry heavyweight for their new CEO. Chris has masses of experience at international companies and whilst his most recent appointments have been good companies he has saved the best until last. For once a nominations committee has made a really top call. 

And finally…

Last night the Villa drew 3-3 with Liverpool who now cannot win the Premier League amongst other things…

But, tonight is probably the most important 90+ minutes of the season as Spurs host the Noisy Neighbours and there will be a great number of Gooners fans who will be supporting Spurs for the night, I assume…