WTI (Aug) $80.83 -80c, Brent (Aug) $85.01 -$1.00, Diff -20c.

USNG (July) $2.76 -5c, UKNG (July) 81.65p +1.15p, TTF (Aug)* €34.7 u/c.

*Denotes TTF July contract expiry.

Oil price

Oil is a bit drifty today after falling a bit yesterday, the US is not inspiring after consumer confidence disappointed and maybe the Fed might be as spineless as the B of E…

The API stats after the market were also mixed, a small build of 914/- barrels of crude with a draw at Cushing were OK but the gasoline build of 3.843m was odd.

Arrow Exploration Corp

Yesterday I interviewed Arrow CEO Marshall Abbott, the interview adds considerably to our background knowledge and especially with regard to the recent horizontal well which exceeded expectations, was cheaper to drill than expected and should pay back in a month.

Tomorrow I’m publishing my major piece on my recent visit to Bogota, meantime here is the link to the interview.

Core Finance CEO Interview: Marshall Abbott, Arrow Exploration

Zephyr Energy

Zephyr has provided an operations update including an update on progress on the State 36-2R LNW-CC well at the Company’s flagship project in the Paradox Basin, Utah.  

Update on State 36-2R well production test

Zephyr is pleased to report that operations related to the forthcoming well production test have commenced, with the well currently in its clean-up phase. Operations are proceeding at a conservative pace and the period of clean-up is longer than originally forecast. The production test is expected to commence shortly after clean-up and related operations have been completed. A further update will be provided once the production test has commenced.

Successful redetermination, new loan facility, and bridge loan fully repaid

Zephyr is pleased to announce that the Company’s lender, North-Dakota based First International Bank & Trust (“FIBT”), has completed its semi-annual redetermination of the Company’s revolving credit facility (“RCF”).

The redetermination process reaffirmed the collateral value of Zephyr’s non-operated asset portfolio in the Williston Basin, North Dakota, and included the six wells operated by Slawson Exploration Company (the “Slawson wells”) that came online in the fourth quarter of 2023.

The successful redetermination process reaffirmed Zephyr’s existing US$15.15 million RCF. 

In addition to the re-affirmation of the RCF, Zephyr has been provided with a new senior secured bank term loan for US$5.6 million by FIBT (“New Term Loan”). The New Term Loan will amortise monthly over four years and has an interest rate of 10% per annum.

Proceeds from the New Term Loan (along with US$400,000 of the Company’s existing cash) were used to retire the remaining US$6 million of the bridge loan which had funded the initial consideration and capital expenditure related to the Slawson wells, as announced on 21 December 2022 (the “bridge loan”).  The bridge loan has now been fully repaid.

Following the redetermination process and the repayment of the bridge loan, the Group borrowings are currently circa US$29.35 million, and consist of:

·      US$8.75 million of amortising term loan (at 6.74% interest per annum) 

·      US$5.60 million of amortising New Term Loan (at 10% interest per annum)

·      US$15.0 million of debt drawn on the RCF (at 11% interest per annum).

The impact of retiring the bridge loan with proceeds from the New Term Loan, combined with the impact of the conversion of a portion of the bridge loan to equity as announced on 3 May 2024, has resulted in a reduction in the Company’s blended interest rate to 9.5% (down from 10% at 31 December 2023) and an overall reduction in annualised interest costs of circa US$579,000.

The next semi-annual redetermination for the RCF is scheduled to take place in the fourth quarter of 2024.

Extension to Salt Wash drilling deadline

As announced on 18 October 2023, the Company entered into an agreement to further expand the Paradox project by farming-in to the Salt Wash Field, a previously producing asset with proven oil, gas and helium reserves located three miles to the south of Zephyr’s White Sands Unit.  

A key term of the agreement was a requirement that Zephyr must spud a well (the “commitment well”) on the farm-in acreage prior to 30 June 2024. 

Given the ongoing operations at the State 36-2R well, all relevant parties (including the mineral interest owners) have agreed to extend the drilling deadline to 1 September 2024.

Further to its update announcement on 27 March 2024, Zephyr remains in conversations with multiple industry participants and other investors regarding the potential to fund up to 100% of the costs of the commitment well at the asset level, and the Company’s board of directors (the “Board”) is considering which alternatives will best maximise value for Shareholders.

Colin Harrington, Zephyr’s Chief Executive, said: 

“I am delighted to announce that we have commenced operations in preparation for the production test on of the 36-2R well.  Well clean-up operations are proceeding at a measured and conservative pace, and we are prepared to begin testing production volumes once the clean-up phase is complete.  We look forward to sharing the results from the test in due course.

“In the interim, the successful RCF redetermination process and the addition of the New Term Loan, on favourable terms, is a testament to the strength of the Company and its underlying asset base. The reduction in total debt and the lowered blended interest rate on the remaining borrowings will provide additional free cash flow to help fund future growth across the Company. I would like, once again, to thank FIBT and its dedicated team for their continued strong support of Zephyr.

“I’d also like to thank our partners at the Salt Wash Field.  Much progress has been made since we executed the agreement, both at the field level (with siting and permitting) and in asset-level partnership discussions with other helium industry participants.  We look forward to progressing those discussions over the coming month.”

A good roundup from Zephyr, the State 36-2 well may be taking a little longer to clean up but this is not a problem and testing is due soon. 

Elsewhere it is a report on the RCF facility half year redetermination as well as the announcement of a new $5.6m loan over four years and with a 10% coupon and which repays the bridge facility.

The Salt Wash farm-in nearby was due to drill a commitment well by the end of June but that has been extended until September and and the company are in conversations with ‘multiple industry participants’ and other investors to fund 100% of the costs of this well. Sounds promising…

Southern Energy Corp

Southern Energy announced yesterday that the Company intends to issue 745,391 common shares of Southern to holders of its 8% convertible unsecured subordinated debentures issued on June 14, 2019 and January 15, 2021 (collectively, the “Debentures”) as payment in kind of accrued interest on the Debentures due on June 30, 2024 in the aggregate amount of CAD$171,440.00 (the “Interest Payment”). The number of Common Shares to be issued is equal to the amount of the interest, divided by the volume weighted average trading price per Common Share for the 20 consecutive trading days ending on the fifth trading day preceding June 30, 2024, being $0.23 per Common Share. Southern gave notice to Computershare Trust Company of Canada, as debenture trustee, that it intends to exercise its right to make the Interest Payment by issuing common shares. The settlement of the Interest Payment through the issuance of Common Shares remains subject to final acceptance of the TSX Venture Exchange.

Director/PDMR Participation

It is noted that a certain Director and PDMR of the Company holds Convertible Debentures, on the same terms as all other participants, and, accordingly, in aggregate, 9,044 Common Shares will be issued. Further details regarding individual participation of the Company’s Director and PDMR is set out in the PDMR notification forms below.

Admission and Total Voting Rights

The new Common Shares issued in respect of the Interest Payment will be credited as fully paid, rank pari passu in all respects with the existing Common Shares, and are expected to be admitted to trading on AIM on or around 8.00 a.m. (GMT) on or around 2 July 2024 (“Admission”).

Following Admission, the total number of Common Shares in the Company in issue will be 167,242,824, and this figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company.

Nothing spooky here I suspect, with the natural gas price looking better the further out one looks this is an eminently sensible transaction. 

Petro Matad

Petro Matad has announced that following the accelerated bookbuild which was announced on 25 June 2024, the Company has conditionally raised gross proceeds of GBP 7.0 million (US$8.9 million) through the Placing of new Ordinary Shares, and Subscription by each of a director and shareholder of the Company at a price of 2.0 pence per share.

Capitalised terms used in this announcement  have the meanings given to them in the launch announcement, unless the context provides otherwise. 

Highlights

·    The Company has conditionally raised, in aggregate, GBP 7.0 million (US$8.9 million) at a price of 2.0 pence per new Ordinary Share.

·    Petrovis Matad Inc. (a Substantial Shareholder as defined under the AIM Rules) is participating in the Subscription for a total of 39,370,077 Subscription Shares with a total value of US$1 million.

·    Mike Buck, CEO of Petro Matad, is participating in the Subscription for a total of 3,937,007 Subscription Shares with a total value of US$100,000.

·    Conditionally, in aggregate, a total of 350,000,000 New Shares will therefore be issued, representing approximately 24 per cent. of the enlarged share capital. 

Retail Offer

As part of the Capital Raising, the Company announced on 25 June 2024 that it was launching a separate retail offer of up to 20 million new Ordinary Shares at the Placing Price on the BookBuild Platform to raise up to a further £400,000 (US$0.5m) to provide existing retail shareholders in the United Kingdom with an opportunity to participate in the Capital Raising. A separate announcement will be made on the result of the Retail Offer, expected to be released on 1 July 2024.

Related Party Transaction

As a substantial shareholder, Petrovis Matad Inc.’s participation in the Subscription is deemed to be a related party transaction for the purposes of AIM Rule 13. The independent director of Petro Matad (being for this purpose Tim Bushell), having consulted with the Company’s nominated adviser, Shore Capital, considers that the terms of Petrovis Matad Inc.’s participation in the Subscription are fair and reasonable insofar as Shareholders are concerned.

As a director, Mike Buck’s intended participation in the Subscription is deemed to be a related party transaction for the purposes of AIM Rule 13. The independent Director of Petro Matad (being for this purpose Tim Bushell), having consulted with the Company’s nominated adviser, Shore Capital, considers that the terms of his participation in the Subscription are fair and reasonable insofar as Shareholders are concerned.

Mike Buck, CEO of Petro Matad, said:

“This capital raise will allow Petro Matad to commence the development of the Heron oil discovery with the goal of generating sufficient production revenue to cover the operating costs of the company and to accumulate cash to allow for the drilling of future appraisal and development wells to increase proven reserves and production. The raise also includes funds to drill the low cost, high impact Gobi-Bear 1 exploration prospect at the southern end of the prolific Tosun Uul sub-basin. The prospect has estimated recoverable resource potential of circa 100 million barrels close to the Heron field.

In addition, with Petro Matad’s SunSteppe Renewable Energy joint venture already having secured two development projects, a number of new opportunities are being worked up and ranked to prioritise the most attractive near term targets. The raise includes a small amount of extra development funding to bring the high-graded projects to internationally bankable, build ready status.

Petro Matad expects to sign two new Production Sharing Contracts with the government of Mongolia later in 2024 or early in 2025, and the company is keen to advance these projects in parallel with its existing business.

We are pleased to have been able to access the funding needed to kickstart development operations and to offer participation in the raise to existing shareholders through the Bookbuild platform.

A decent raise  here which is what MATD needed after finally getting their approvals, now they can get after the development at Heron with the goal of building it sufficiently to run the company. They will also drill Gobi-Bear 1, (are you sure?) which has a recoverable resource potential of c. 100m barrels near Heron. Elsewhere there are opportunities in the renewable JV to which the raise will add modestly.

I haven’t heard from Mike Buck recently, odd as we used to chat regularly but I guess he’s not over here much at the moment, maybe on his next visit and I will report back. On that subject it’s good to have him and Petro Matad back.

Coro Energy

Coro has announced that, further to the announcement of 24 April 2024, it has now identified an intended additional Director for appointment to the Coro board. The process in respect of his appointment is progressing well and is expected to be completed prior to 5 July 2024.  

As a result the Company also announces that, with the board not being quorate prior to the appointment of an additional Director, the Company’s Annual Report and Accounts for the year ended 31 December 2023  will not now be published by 30 June 2024. Once the additional Director is appointed, the board’s first business will be to review and conclude the 2023 Annual Report. It is expected that the 2023 Annual Report will be published during July 2024, after which the Company expects its suspension from trading on the AIM Market of the London Stock Exchange to be lifted.

After a bit of a ‘stewards’ as they say, it seems that Coro appear to be on track to start trading again next month once the board is quorate again and ARA signed off. 

And finally…

Last night England put in another dire performance and news today that Phil Foden, actually probably the best player on the pitch is coming home doesn’t help. But, as they say, by hook or by crook England topped the Group having scored only twice in three games and now are in the bottom half of the draw. And why is that important you ask? Well, Spain, France, Germany and Portugal are all in the top half, go consult your kids wall chart…!

And in the T20 Cricket World Cup Afghanistan beat the Bangas, why is that important you ask? well it knocks Australia out of the tournament that’s why it’s important…