Malcy’s Blog: Oil price, Union Jack, Afentra, Jadestone, Prospex, Sintana.

WTI (Apr) $70.70 +30c, Brent (Apr) $74.78 +35c, Diff -$4.08 +5c.

USNG (Mar) $3.99  -24c, UKNG (Mar) 112.25p +1.71p, TTF (Mar) €46.94 +€0.31.

Oil price

Oil is down around a dollar today as a combination of further sanctions on Iran and its ‘shadow fleet’ and the US encouraging Iraq to reopen the Turkish pipeline are mixing the cocktail somewhat. 

Union Jack Oil

Union Jack has announced, further to the RNS dated 29 January 2025, a positive update on the testing of the Moccasin 1-13 well, located in Pottawatomie County, Oklahoma, USA. Union Jack holds a 45% working interest in this well.  Reach Oil & Gas Company Inc, the Operator, holds the remaining 55% working interest.

•     Moccasin has been declared a commercial discovery

•     Moccasin was drilled to a Total Depth of 5,690 feet to test a dip and fault closed structure, mapped from 3D seismic, downthrown on the west side of the Wilzetta fault

•     Several intervals were highlighted on electric logs as hydrocarbon bearing following evaluation

•     The primary target was perforated, tested and confirmed as a significant oil producer with no formation water present

•     Initial oil flows and log interpretation indicate excellent reservoir permeability with oil recovery rates of over 40% to be expected

•     Light oil with minimal associated gas recovered

•     The installation of permanent production facilities has commenced

•     Moccasin confirms the trapping of hydrocarbons in multiple zones within the structure

•     Test programme ongoing with two other zones to be perforated and evaluated in due course

•     Moccasin drill and completion costs have already been funded from the Company’s cash resources

Moccasin was an untested 3D seismic supported structural prospect with secondary targets in the Pennsylvanian Sands. The Moccasin structure is a compressive feature, associated with the regional Wilzetta Fault. This strike-slip fault was active through the Ordovician to early Carboniferous periods and is responsible for several large oil accumulations. The Woodford Shale, the main source for light oil across the region is present within the Moccasin structure and between the primary reservoir targets. In the area of the Moccasin well, a deviation in the fault has caused compressive forces forming numerous dome and fault structures which have led to proven oilfields, such as the adjacent productive North-East Shawnee and North-West Redhill fields.

David Bramhill, Executive Chairman of Union Jack, commented: 

“Moccasin has more than validated Management’s confidence in its success, being a further commercial discovery in Oklahoma for Union Jack.  Testing at Moccasin is ongoing, however, Union Jack and Reach are sufficiently confident of the results to date and the Joint Venture has commenced the installation of permanent production facilities.

“Although further testing is required, early indications suggest that Moccasin could provide material cash-flow going forward, contributing to the expansion of revenues from the Andrews Field and Mineral royalty portfolio in the USA, a country that offers fair, attractive and balanced fiscal terms.

“We are extremely pleased with this discovery as it has now confirmed our previous technical assumptions and a proof of concept that oil occurs in structures to the west of the prolific Wilzetta fault.

“Progress in Oklahoma by the Company is highly satisfactory, emphasising the positivity and encouragement given to industry entrepreneurs.

“We look forward to reporting further results from Moccasin on completion of testing and the installation of permanent production facilities, expected during Q1 2025.”

Miles Newman, Chairman of Reach, commented: 

“We’re delighted to see a nice well at Moccasin.

“The Reach team at our office in Oklahoma City has been working on the geology and geophysics of this area for many years and they’re especially pleased to deliver a discovery at Moccasin, safely and within budget.”

This Moccasin well has flowed light oil from the primary target reservoir and whilst there is more testing to be done the clue as to how good it is lies in the wording that says that permanent production facilities are being installed and importantly ‘potential for it to provide material cash flow going forward’.

I like the bit about ‘the USA, a country that offers fair, attractive and balanced fiscal terms’ because it shows just how you should run a domestic hydrocarbon industry and due to a very smart decision by the UJO board to expand and develop its revenues that will increase the value of the company substantially. 

I expect more of the same from a management that shares the dream of entrepreneurship and striking out abroad, this announcement is in my view deliberately low key, sometimes it’s not what you say but what you don’t say that really matters. Union Jack remains a favourite stock, adding value all the time…

Afentra

Afentra has announced that the KON-15 onshore license has been formally approved and awarded by Presidential Decree on 24 February 2025. 

This follows the Company’s announcement on 22 January 2024, confirming Afentra’s selection as the non-operating preferred bidder for both the KON-15 and KON-19 blocks. Since then, Afentra was awarded the adjacent KON-19 license, which was formally signed in July 2024.

Under the terms of the KON-15 award, Afentra has secured a 45% non-operating interest in the block, alongside Sonangol who will be block operator. The formal signing of the contract is expected at a later date.

The award of the KON-15 license represents another important step in Afentra’s strategy to build a meaningful presence in Angola’s onshore Kwanza basin. 

CEO Paul McDade commented:

“We are pleased to confirm the formal approval of the KON-15 license by Presidential Decree. This award reinforces our commitment to Angola’s energy sector and underscores our focus on building strong partnerships with local operators. We look forward to working closely with Sonangol and the relevant authorities to fully understand the potential of KON-15 and KON-19 and the wider onshore Kwanza basin. We consider that this proven hydrocarbon basin, which has a history of production but where there has been very limited activity for over 40 years, has the potential to deliver significant upside potential for Afentra within our diversified portfolio. We will update the market with further developments in due course.”

Nothing new here but good to see the rubber stamping of the KON-15 license in Angola. As Afentra gets under way onshore the country it can hopefully find hydrocarbon resources last seen over forty years ago.  

Jadestone

Jadestone has announced a trading update for the year ended 31 December 2024, the results of its independent year-end 2024 reserves evaluation and 2025 guidance. 

2024 Highlights

·      2024 average production of 18,696 boe/d, a year-on-year increase of 35% (2023: 13,813 boe/d).

·      Successful commissioning of the Akatara gas processing facility, with year to date 2025 production in line with expectations.

·     Independently audited 1P reserves by ERCE of 48.6 mmboe at year-end, with a 1P reserves replacement ratio of more than 200%, greatly increasing the Group’s resilience.

·   Independently audited 2P reserves by ERCE of 68.3 mmboe at year-end, resulting in a 2P reserves replacement ratio of 104%. 

·    The 2P reserves are valued by ERCE at US$799 million, or an implied per share value of 102 GBp[1] after deducting the Group’s year-end 2024 net debt position of US$104.8 million.

·      2C contingent resources of 125.7 mmboe at year-end 2024.

·      No material safety events in 2024 and a lost time injury (“LTI”) rate lower than the industry IOGP average, with Malaysia and Indonesia operations achieving a combined 10 million manhours without an LTI.

2025 Guidance Highlights

·      Production: 19,000 – 22,500 boe/d.

·      Operating costs: US$250-300 million.

·      Capital expenditures: US$75-95 million.

·      Unlevered free cash generation[2]: US$270-360 million (2025 – 2027).

Adel Chaouch, Executive Chairman of Jadestone, commented:

“We have entered 2025 as a re-energized business, boosted by the onset of stable production from Akatara, driving overall Group production significantly higher and setting a new monthly record and annual exit rate in December 2024.  Our primary focus in 2025 is to deliver operational excellence in the form of safe, stable and efficient operations, and setting realistic targets and delivering on them. Our 2025 production guidance of 19,000-22,500 boe/d reflects this mindset and would represent another year of record production for Jadestone.  Our expectations for 2025, supported by a disciplined approach to capital allocation across the business, will pave the way for Jadestone to start generating meaningful levels of free cash flow.

Jadestone’s current share price does not reflect the value of our portfolio.  This is clear from the results of our year-end 2024 independent reserves evaluation, which shows that we fully replaced production on both a 1P and 2P basis in 2024, but more importantly, calculates a 2P NPV10 of US$799 million for our producing assets as at 31 December 2024.  After taking into account our year-end 2024 net debt position, the resulting value of our producing assets is a multiple of our current share price.  Furthermore, this does not attribute any value to the growth options of the Group, particularly our significant gas resources in Vietnam, which we are progressing closer towards commercialization.  We also continue to see opportunities to create value from our existing platform through acquisitions, but we will be financially disciplined in the pursuit of growth.”

Jadestone is in the process of recovery, the management team has much to prove as can be seen by the very cautious guidance offered for this year, after unceremoniously moving out the former CEO you had better make it a great deal better, I see little sign of this yet. 

2024 Trading Update[3]

·    2024 production averaged 18,696 boe/d, in line with guidance and an annual record for Jadestone, representing 35% production growth year-on-year.  The 2024 exit rate (December 2024 average) was c.24,000 boe/d, a monthly record for the Group and an increase of c.40% compared to January 2024.

·      The average realised price for the Company’s oil sales was US$85.2/bbl in 2024 (2023:US$87.3/bbl), with the underlying Brent price comparable with the prior year, while the average premium to Brent for the Group’s oil sales decreased, primarily due to the greater weighting of CWLH liftings in sales. Initial Akatara LPG and condensate sales totalled c.150,000 barrels and sold for a weighted average price of US$56.7/bbl. The average gas price increased to US$3.63/mmcf, year-on-year, reflecting the initial impact of gas sales from Akatara.

·     Revenues for 2024 increased by 28% to US$395.0 million, primarily reflecting the increase in liftings during the year, partially offset by a US$27.4 million loss from hedges originally entered into during 2023 to support the Group’s reserves-based lending facility.[4]

·    Total estimated production costs for the year of US$261.1 million.  Excluding royalties and carbon taxes of US$17.7 million, the net figure of US$243.4 million came in at the lower end of the US$240-280 million guidance range, exhibiting good cost control throughout the year. The increase in production costs compared to 2023 primarily reflects the increased interest in the CWLH fields and the onset of production from Akatara.

·    Capital expenditure for 2024 is estimated at US$69.7 million, below the lower end of the guidance range of US$80-110 million. This was due to the timing and deferral of several capital projects originally included in 2024 guidance. Capex declined year-on-year, primarily reflecting the completion of development activity at Akatara.

·   Net debt of US$104.8 million at 31 December 2024 reflects US$95.2 million of consolidated Group cash balances (restricted and unrestricted cash) and US$200 million of debt drawn at the year end.

2024 Reserves Update

·    Group 1P reserves as at 31 December 2024 have been independently assessed by ERCE at 48.6 mmboe, representing 202% 1P reserves replacement in 2024. 1P reserves replacement was driven by inclusion of the 1P reserves associated with the CWLH 2 acquisition, which completed in February 2024, as well as improved well performance and uptime at Montara and the PM 323 asset in Malaysia.

·   Group 2P reserves as at 31 December 2024 have been independently assessed by ERCE at 68.3 mmboe, representing 104% 2P reserves replacement in 2024. 2P reserves replacement was primarily driven by inclusion of the 2P reserves associated with the CWLH 2 acquisition.

·      ERCE has assessed the remaining 2P NPV10 of Jadestone’s producing assets at US$799 million¹.  

·     After deducting the Company’s year end 2024 net debt of US$104.8 million, this implies a per share for the Company’s reserves, net of debt, at 102 GBp¹.

·    Group 2C resources as at 31 December 2024 are estimated at 125.7 mmboe, an increase of c.19% year-on-year, mainly reflecting the addition of 2C resources associated with the Puteri Cluster and the CWLH 2 acquisition.  Approximately 75%, or 93.9 mmboe, of the Group 2C resources at 31 December 2024 relates to the significant resource contained in the Company’s gas discoveries offshore Vietnam.

·    Following the year-end reserves evaluation, the Group expects to record a modest impairment to the carrying value of the Stag asset in the Group’s accounts for the year ended 31 December 2024.

2025 Guidance

·     2025 production is expected to average 19,000-22,500 boe/d, an 11% increase on 2024 at the midpoint, which would represent an annual record for Jadestone.  2025 production is expected to be split approximately 80:20 oil:gas.

·    2025 Group operating costs are expected to be in the range of US$250-300 million.  On a like-for-like basis compared to the preliminary estimate of 2024 operating costs[5], 2025 guidance at the midpoint would see operating costs broadly flat year-on-year.

·      2025 Group capital expenditure is expected to be US$75-95 million.  The majority of 2025 capex is the drilling of the Skua-11 sidetrack, which is currently expected during the second quarter of 2025, subject to arrival of the rig on schedule, and which is expected to increase Montara production when brought onstream.

·    Based on an US$70-80/bbl Brent oil price range, the Group expects to deliver c.US$270-360 million of free cash flow (pre debt servicing) over the 2025-2027 period².  

·    A key focus for 2025 is the operating model and cost structure of the Group, and to ensure an appropriate capital structure to support the ongoing growth and future strategy of the Group.

The financial information in this update is unaudited and may be subject to further review and change.

An updated investor presentation has been uploaded to the Company’s website at www.jadestone-energy.com.

Prospex

Prospex has provided an operational update on its production, development and drilling schedules across its portfolio of three producing natural gas assets onshore Europe: Viura, Selva and El Romeral.  The net production across Prospex’s portfolio of investments is now at ≈86,000 scm/d (≈3.1MMscfd), a 230% increase in production rate from January 2024.  For the ownership of each of the assets in the Company’s investment portfolio, please refer to the notes section below.

Prospex Energy Net Production

Viura Production (55% of Net Production)

Gross gas production from the Viura field averaged ≈323,000 scm/d (≈11.4MMscfd) for the month of January 2025, which net to Prospex was ≈47,000 scm/d (≈1.7MMscfd).  The original producing well on the Viura field known as Viura-1 ST3 was not in production in this period.

Viura Drilling Schedule

The two new development wells Viura-3A and Viura-3B are targeted to spud in April 2025.  The procurement of long lead items and the necessary equipment required for drilling are progressing well.

The Spanish Ministry in Madrid officially approved the permit to drill Viura-3A on 24 January 2025.  This was announced in the Official State Gazette on 7 February 2025.

The permit to drill the Viura-3B well was approved in 2024.

Selva Production (35% of Net Production)

Gross gas production from the Selva field averaged ≈80,000 scm/d (≈2.8MMscfd) for the month of January 2025, which net to Prospex was ≈30,000 scm/d (≈1.1MMscfd).  Production operations continue to run smoothly from this asset which has achieved gross flow rates of between 78,000 – 80,000 scm/d throughout 2024.

Selva 3D Seismic Acquisition and Drilling Schedule

The 3D seismic acquisition on the Selva Malvezzi concession will now occur in Q3/Q4 2025 since the required permitting for the equipment mobilisation and execution of the project had to avoid the agricultural planting season in the Po Valley, which lasts from 15 March to the end of July each year.  Since the 3D seismic acquisition is scheduled to be completed within a three week period and the data processing and interpretation will be completed immediately following acquisition, it is not expected to result in any delay to the drilling schedules.

The permit applications to drill the four new wells on the Selva Malvezzi concession were officially lodged with the central Italian Ministry in Rome on 24 December 2024.  The current estimate of the commencement of drilling once full permits are received and the necessary equipment has been procured is Q4-2025/Q1-2026.  The Environmental Impact Assessment (“EIA”) has been submitted and the statutory consultation process is underway.  Discussions with landowners for access to the required sites is underway and is expected to take several months in parallel with the EIA process.

El Romeral Production (10% of Net Production)

Gross gas production from the El Romeral concessions in Q4-2024 averaged ≈18,000 scm/d (≈0.6MMscfd), which net to Prospex was ≈9,000 scm/d (≈0.3MMscfd).  All the gas was converted into electricity and sold on the hourly spot market generating an average of ≈1,700MW throughout the quarter (≈850MW net to Prospex).

On 11 January 2025, the main 9MW transformer at the El Romeral plant which exports the generated electricity to the national grid failed, resulting in the shutdown of the plant which occurred safely and with no harm to personnel or other equipment.  The local team of the Tarba Energía operator sourced a replacement transformer on rental which was successfully installed and electricity generation re-started on 1 February 2025.  The original transformer was more than 22 years old and its repair was deemed uneconomic and it has been sold for its inherent and valuable scrap value.  The new rental transformer is a higher specification at 16-20 MW and will be replaced by a new appropriately sized transformer in due course.

El Romeral Drilling Schedule

Significant progress was made last week on the permitting process for the five new wells to be drilled on the El Romeral concessions.  As announced on 20 February 2025, the Statutory Consultation of the EIA for the application to drill the five new natural gas wells was publicly gazetted on the State Official Bulletin on 19 February 2025.  The announcement was also published on the Official Gazette of the Province of Seville on 20 February 2025.

This is the link to the official State Bulletin:

This means that the 30-working day consultation period ends on 4 April 2025.

A new Corporate Presentation for Q1-2025, which contains the latest estimate of these drilling schedules in a GANNT chart is available on the Company’s website. https://prospex.energy/investors/corporate-documents

Mark Routh, Prospex’s CEO, commented:

“The Company is embarking on an exciting phase of its organic growth strategy with plans to drill 11 natural gas wells across its three production concessions within the next 18 months.  Two of these wells, Viura-3A and Viura-3B are already fully permitted.  The four wells in northern Italy and the five wells in southern Spain are progressing through the necessary regulatory and permitting processes in order to secure the full legal rights to drill once the environmental impact assessments have been evaluated and approved.

“With energy security rising to the top of the agenda for most European nations, there is now a favourable sentiment for expanding the development of onshore, indigenous natural gas.  Such natural gas production has a fraction of the carbon footprint when compared with the importation of natural gas by pipeline over long distances and an even smaller fraction when compared to the importation of liquefied natural gas.

“Ideally, Prospex will be able to fund the development of the new wells from existing revenues, limiting shareholder dilution.  However, this is dependent on a number of factors including the continued and uninterrupted production of gas,  gas and electricity prices, the timing of bringing the new wells into production, which is subject to permitting, and the availability of other sources of finance. The Company has made significant operational advances in the last six months and I look forward to updating shareholders on our continued progress.”

The market for Prospex’ gas is not in any doubt and so on the best case the company will look in a very favourable place when these wells get drilled and paid for. In the meantime there are multiple variables which could possibly delay the best case scenario. 

Most likely delays in regulatory processes will hold things up, we can only go on the records in Spain and Italy and of course the final paragraph above reads like a litany of potential banana skins with regard to financing. I would suggest that the model and ultimate market for Prospex is fantastic but may be slightly affected by delays and need for finance which should be in the model for investors.

Sintana Energy