Oil price, Galp, Kistos, Pharos.

WTI (Jan) $58.88 -$1.20, Brent (Feb) $62.49 -$1.26, Diff -$3.61 -6c.

USNG (Jan) $4.91 -38c, UKNG (Jan) 70.93p +0.7p, TTF (Jan) €27.275 -€0.46.

Oil price

Oil has fallen again today as the Ukraine peace process moves on and President Trump appears to value his rapport with Putin over the Ukraine. This is despite the European efforts to stop him and the German leader looked mighty mad yesterday. 

The Iraqi pipeline is back so 500/- barrels returning in due course and rumours of Iran selling to China are rife, despite US sanctions Iran is pumping as high as ever…

It’s Fed week so 25 bp’s expected tomorrow…

Galp

Galp partners with TotalEnergies in Namibia

Galp has announced a relevant partnership and expands its position in Namibia’s Orange basin.

After reaching an agreement with TotalEnergies to exchange a 40% participating interest in PEL 83, where the Mopane discovery lies, for a 10% interest in PEL 56, home to the Venus discovery, and a 9.4% interest in PEL 91.

TotalEnergies, operator in PEL 56 and PEL 91, will take operatorship in PEL 83. Through this agreement, Galp will retain a 40% stake in PEL 83 and ensures alignment on further maturing the Mopane discovery, with commitment to launch an exploration & appraisal campaign of at least three wells over the next two years to continue de-risking the block and support the unlocking of a development hub. The first potential well is under assessment for 2026.

Galp and TotalEnergies also signed a funding agreement where 50% of all Galp’s investments for a first development in Mopane will be carried. The carry will be repaid following the first commercial oil through 50% of Galp’s future cash flows from the project.

Additionally, by obtaining a position in PEL 56 and PEL 91, Galp also secures exposure to the Venus project, for which TotalEnergies is maturing a development concept for a 160 kbpd FPSO, with final investment decision estimated for 2026.

The transaction is subject to customary third-party approvals from the Namibian authorities and joint venture parties, with completion expected to occur during 2026.

“After Galp’s remarkable exploratory efforts in Namibia, leading PEL 83 with an 80% stake, we are happy to partner with TotalEnergies, a highly experienced ultra deepwater operator, and significantly de-risk Mopane by aligning a concrete path forward for the asset.

We expand our footprint in Namibia’s prolific Orange basin, reinforcing our commitment to the development of the country’s oil and gas industry, whilst strengthening our upstream portfolio with high-potential projects, such as Venus, which will further support Galp’s continued growth profile.”
Paula Amorim, Chairman of Galp

I dont follow Galp as such but obviously do cover a number of companies involved either in or near Mopane and of course Venus in Namibia. I have always maintained that Mopane is a monster and with Total partnering up the development is in good hands. 

Upon completion of the transaction, participating interests in the blocks will be:

Kistos

Kistos has announced that it has entered into a binding agreement to acquire a 5% working interest in Block 9 and a 20% working interest in Blocks 3 & 4 from Mitsui E&P Middle East B.V., both located onshore in the Sultanate of Oman.

Acquisition highlights:

·    Consideration of $148 million, with an effective date of 1 January 2025 which is subject to customary closing adjustments, payable on completion and will be funded with existing cash in Kistos

·    Expected to add 25.6 mmboe (operators estimates) of 2P reserves net to Kistos (as at 1 January 2025)

·    Additional estimated production of approximately 9,000-10,000 boepd net to Kistos in 2025, made up of approximately 91% liquids with the remainder gas

·    The Acquisition is expected to be immediately cash-generative

·    The Acquisition equates to a valuation of approximately $5.80/boe of 2P reserves

Kistos’ entry into the Middle East adds geographical and onshore production diversification to the Company’s existing portfolio. Representing an evolution in the Company’s M&A strategy, the Acquisition aligns with the Board’s core ambition of pursuing assets that have strong near-term production with significant development and exploration upside.

Block 9, operated by Occidental Petroleum, covers two producing areas. Blocks 3 & 4, operated by CCED, comprise seven producing fields and cover approximately 29,000 km² in eastern Oman.

Both Block 9 and Blocks 3 & 4 are governed by Exploration and Production Sharing Agreements (each one being an “EPSA”). The Omani EPSA is a well-developed and accepted framework that includes the concession area and term, payment mechanisms, and the conditions under which exploration, appraisal, commercial discovery, and extraction are to take place.

Completion of the Acquisition is subject to customary governmental and regulatory approvals and partner consents. Further announcements will be provided in due course, upon completion of the Acquisition, including any information on completion mechanics and the financial impact of the transaction on the Company.

Andrew Austin, Executive Chairman, commented:

“This acquisition marks a significant milestone for Kistos as we expand our footprint into a new and strategically important region, acquiring interests which align with our strategy of acquiring high-quality value-accretive assets, in both the near and long term.

Our entry into the MENA region represents an important step forward in our mission to build a resilient, future-facing energy company. It not only complements our existing portfolio in the North Sea but also provides a platform for long-term growth and enhanced cash flow. Effective 1 January 2025, this acquisition will increase our reserves to 50 mmboe and is expected to deliver a material uplift in Kistos’ production in 2026 to approximately 20,000 boepd.

While we continue to consider the North Sea for further acquisitions, we view this foundational step into the MENA region as a way to diversify our portfolio, allowing us to broaden the opportunities we look at, potentially unlocking future synergies through further expansion in the region.

On behalf of the Board, I would like to thank our shareholders for their continued support and look forward to sharing further updates as we continue to grow and evolve.”

This is one excellent deal, in a geography I am published as saying I like a lot and have visited a number of times. Moving into Oman which is amongst the very best postcodes worldwide for hydrocarbon exploration and production and where some of the best acreage is available and offers production and huge long term potential. 

I look forward to interviewing Andrew Austin later this week especially as we know that Kistos has looked at the area before and a deal such as this has been widely trailed. Doing this deal does not mean that the company is abandoning the UKCS, they are still looking at any M&A opportunities here but I feel that they needed to have a different play and MENA in general and Oman in particular is a great place to start. 

Looking at the detail there is a great deal that I like, these material plays add 25.6m barrels of 2P+ and 9-10,000 b/d of mainly liquids production. At a stroke this doubles both 2P reserves and production, the former is now over 50m barrels with upside of c.1.9bn barrels (Gross) and the latter is around 19-21,000 b/d with scope for more. 

Kistos has paid $148m in cash for the deal and is effective January 2025 and is expected to complete in 1Q 2026, backdating the deal makes a small but positive difference given that this year has been a high capex year.

Kistos is paying just $5.80 per 2P barrel which is to be frank astonishing and that makes it both accretive on day 1 and cash flow generative. The size of this acquisition is really meaningful for the company, they move into a different space, producing 20/- b/d which has a knock-on effect on the cost of debt, moving that to parent company level will knock points off it and away from the Norwegian subsidiary. 

As I said at the top, I think that this is a fantastic deal for Kistos and its loyal group of shareholders. Management has pulled a deal with immediate and substantial cash flow and is accretive to boot, with the significant upside for long term growth. I am interviewing Andrew Austin this week and look forward to asking him for more details. The shares are up by over 21% today and 70% y/y, they remain in the Bucket List and with deals like this the outlook is indeed very rosy.

Pharos Energy

Pharos  providing the following Trading and Operations Update for recent operational activities. The information contained herein is not audited and may be subject to further review and amendment.

Katherine Roe, Chief Executive Officer, commented:

 “The second half of the year has been busy, with two drilling rigs currently in operation as we execute our six-well infill and appraisal drilling programme in Vietnam, the most significant investment into these assets since their original development. Initial performance of the first well on the TGT Field has been very positive and is currently exceeding our pre-drill expectations, which will contribute to our exit rates as we approach the end of the year. As the campaign progresses into 2026, the upcoming wells will contribute to next year’s guidance, which we will share in the new year. We look forward to continuing a safe and successful drilling campaign and to updating the market in due course.

“In Egypt, we were pleased to receive approval from EGPC in September of a consolidated Concession Agreement which provides an attractive investment framework for both Pharos and our partner IPR. With the improved fiscal terms effective from October this year, preparations for the committed work programme are now underway, and we look forward to returning to drilling in Egypt to enhance the value of these assets, whilst we continue the recovery of our outstanding receivables.

“I would like to thank our in-country teams for their hard work and continued strength of relationships with partners, and our shareholders for their continued support through the year. With robust production levels and strong balance sheet setting a solid foundation, we are confident we can continue to fund future capital investments to drive growth within the existing portfolio and beyond, whilst also maintaining sustainable returns to our shareholders.”

Pharos has indeed had a busy and successful quarter, production is 5,391 b/d which is in line with guidance of 5,200-6,000 b/d. In Egypt the consolidated Concession Agreement was welcome and brings with it a single PSC with enhanced fiscal terms, this makes Egypt more acceptable going forward and whilst receivables are still there the number is falling. 

Elsewhere, Pharos ticks a lot of boxes, cash of $16.6m gives it a good platform going forward and as mentioned the receivable number of $27m should come down in due course.  Operationally there is much to be pleased about, in Vietnam with two rigs working activity is constant with good news already.

This came from the H1 well on TGT which came in ahead of pre-drill expectations and will ‘contribute to exit rates as we approach the end of the year’. Elsewhere H5 is already drilling and will complete by the year end and is expected to be on production soon after that. 

The TGT-18X appraisal well follows and then the H4 infill well should add to production. The second rig will drill the CNV-8P infill taking c.90 days and will complete late 1Q ’26 and then CNV-5X will commence 1Q ’26v and finish in mid-year. 

So, there is much going on, and at blocks 125 and 126 the company continues the farm-out process and say that there is ‘encouraging interest’ which I would expect. The shares are up today but going forward I am extremely confident that with so much operational activity, better news from Egypt and potentially massive long term upside the shares are very attarctive indeed. 

Operational Highlights                                

·    Year to date average production of 5,391 boepd net, in line with 2025 guidance of 5,200 to 6,000 boepd. We expect full year production to be in line with the YTD average production

·      In Vietnam:

o  Fully funded six-well drilling programme commenced on 18 October with two drilling rigs, GunnLod and Thor, running in parallel (the first rig operational since October and the second rig since early December):

§ TGT: the infill well on H1 completed drilling on 13 November and was placed on production on 20 November. The second infill well, targeting H5 fault block, commenced on 2 December and is expected to take 28 days to drill and complete. The TGT-18X appraisal well will then be drilled, taking around 40 days to complete before the rig moves to the H4 infill well, the final well in the field

§ CNV: Infill well CNV-8P commenced on 5 December and is expected to take 90 days. Appraisal well CNV-5X is expected to commence in 1Q 2026 and finish mid-2026

o  All wells can be brought immediately into production utilising existing facilities; drilling programme to be completed by mid-2026

o  Working interest production as at 30 November 2025 of 4,074 boepd net

o  Blocks 125 & 126: formal farm-in process continues with encouraging interest

·      In Egypt:

o  Approval received in September from EGPC’s Executive Board for the consolidated Concession Agreement. Full Parliamentary ratification is expected in early 2026, with improved fiscal terms effective from 5 October 2025

o  Preparations underway for the committed work programme

o  North Beni Suef (NBS): 3D seismic data processing completed in September; 3D seismic interpretation ongoing

o  Working interest production as at 30 November 2025 was 1,317 boepd net

Financial Highlights

·     Continued debt free position and cash balances at 7 December 2025 of c.$16.6m (31 December 2024: $16.5m), reflecting part funding of the ongoing capital expenditure programme

·    Continuing regular receipt of payments in Egypt: received $17.3m from EGPC year to date, with a receivables balance at 30 November 2025 of $27.0m (31 December 2024: $29.5m)