Oilman Jim's Letter - 12 May 2024

Union Jack Oil plc (UJO.L UJOGF) announced a positive update in respect of the Andrews 1-17 well, Oklahoma, in which it holds a 45% working interest. The well has been declared a commercial discovery and is producing and selling high quality oil with an API gravity of approximately 41 degrees. A follow-up Andrews-2 well location is currently in the planning phase, in readiness for early drilling as a result of initial Andrews 1-17 success. In addition to Union Jack Oil, a number of other London listed companies are now shifting their focus away from UK oil and gas operations, even declining licenses awarded in the recent 33rd UK Offshore Licensing Round. Australian companies still appear to be interested; Hartshead Resources (HHR.AX) and Finder Energy (FDR.AX) were each awarded multiple licences. Deltic Energy (DELT.L) was awarded two licences over eight blocks and part blocks, but stated that in light of the current fiscal and political environment, the company will carefully consider whether accepting licences in the UK is in the best interest of the business and its shareholders. Europa Oil & Gas (EOG.L) declined the licence it had applied for.

Tamboran Resources (TBN.AX TBNRL) announced its intention to list on the New York Stock Exchange via a US Initial Public Offering under the ticker TBN. The company’s shares will also continue to trade on the Australian Securities Exchange. Tamboran’s board of directors believes that a US listing has the potential to improve liquidity and provide access to deeper capital markets that better understand the development of shale gas. Funds raised via the US IPO are expected to fund Tamboran’s activity in the Beetaloo Basin, including delivering production from the proposed Shenandoah South Pilot Project. Final Investment Decision following completion of the IPO is targeted in mid-2024.

Pulsar Helium (PLSR.V PSRHF) announced that Spring road restrictions in the north frost zone have ended and the company will immediately recommence field operations at the Jetstream #1 appraisal well. Activities will initially consist of road improvements and civil works, followed by down-hole logging, well completion, and flow testing with a pressure build up program. All necessary contracts are in place with vendors and equipment has been secured to complete the upcoming works. The Jetstream #1 appraisal well reached total depth of 2,200 feet (671 meters) on February 27, with helium concentrations of up to 13.8%.

PetroTal (TAL.TO PTALF PTAL.L) announced Q1 2024 financial and operating results, plus the strategic acquisition of Block 131 in Peru. Average Q1 2024 sales and production of 18,347 and 18,518 barrels of oil per day respectively were recorded, making for PetroTal's second best quarter to date. The company generated Q1 2024 EBITDA and free funds flow of $71.6 million ($42.85/bbl) and $52.6 million ($31.48/bbl), respectively, materially surpassing Q4 2024 levels due to higher sales volumes realized in the quarter. PetroTal exited Q1 2024 in a strong cash position with $85.2 million in total cash ($62.5 million unrestricted), with over $93 million in short term receivables due subsequent to March 31. Lifting and variable transportation costs were under $7.00 per barrel in the quarter helping generate a near 80% net operating income margin. Capital expenditures totaled $30.4 million in Q1 2024 and were focused on drilling well 17H, and continued infrastructure projects including water handling upgrades. The company successfully drilled one and completed two new oil wells in the quarter, both of which met expectations and continue to perform at strong rates. Well 17H has averaged approximately 4,050 barrels of oil per day for the month of April 2024. Q1 2024 net income was $47.6 million ($0.05/share). The company paid total dividends of $0.02/share and repurchased 5.2 million common shares in Q1 2024, representing approximately $21.5 million of total capital returned to shareholders (approximately 4% of March 31, 2024, market capitalization). The acquisition of a 100% working interest in Peru's Block 131, including the producing Los Angeles field, adds 900 barrels of oil per day of production effective January 1, 2024. Recoverable reserve estimates are up to 4.9 million barrels and there is significant upside potential from deeper reservoirs. The purchase price is approximately $5.0 million in cash

VAALCO Energy (EGY EGY.L) reported operational and financial results for Q1 2024. The company achieved working interest production of 21,807 barrels of oil equivalent per day and net revenue interest production of 16,848 barrels of oil equivalent per day: net revenue interest sales were 1,490,000 barrels of oil equivalent (16,373 barrels of oil equivalent per day), near the high end of guidance. The company reported Q1 2024 net income of $7.7 million ($0.07 per diluted share) and adjusted net income of $6.5 million ($0.06 per diluted share). Adjusted EBITDAX was $61.7 million and funded $16.7 million in cash capital expenditures from cash on hand and cash from operations. Unrestricted cash was $113.3 million after paying out $6.5 million in dividends in the quarter and completing $5.5 million in share buybacks (since inception of the share buyback program, VAALCO has purchased approximately $30 million in shares). A quarterly cash dividend of $0.0625 per share was announced to be paid on June 21, 2024. During the quarter, the company closed the accretive all cash acquisition of Svenska Petroleum Exploration for a net purchase price of $40.2 million and following the planned shutdown for maintenance in April, the Baobab field is back on production with a current rate in excess of 5,000 VAALCO working interest barrels of oil equivalent per day (99% oil). This strategically expands the West African focus area with a sizeable producing asset that has significant upside potential and future development opportunities in Cote d’Ivoire, a well-established and investment-friendly country.

Valeura Energy (VLE.TO VLERF) announced Q1 2024 financial and operating results. Oil production was 21.9 million barrels per day, up 14% from the previous quarter; oil sales for the period were 1.8 million barrels, at an average realised price of $84.6 per barrel, generating revenue of $149.4 million. Adjusted EBITDAX was $89.0 million and adjusted cashflow from operations was $47.8 million. Cash and net cash balance as of March 31, 2024 was $193.7 million, with no debt; and the adjusted net working capital surplus was $141.9 million. Year to date achievements comprise: five horizontal development wells successfully drilled on the Wassana field (block G10/48, 100% interest) resulting in Q1 2024 average oil production of 3,979 barrels per day, and 4,900 barrels per day for the first six days of May 2024; three oil discoveries announced from one exploration well in the Nong Yao concession (block G11/48, 90% working interest) and two exploration wells north of Wassana field; scheduled shutdowns for maintenance on the Manora and Jasmine field production facilities were conducted safely and under planned time and budget; and the company installed the Nong Yao C mobile offshore production unit T7 Shirley on the Nong Yao field in preparation for development drilling.

Genel Energy (GENL.L GEGYF) issued a Q1 trading and operations update. Per Paul Weir, Chief Executive: “The business is in a robust financial position, with multiple potential catalysts for the delivery of significant shareholder value ahead.” Cash was $372 million at 31 March 2023 ($363 million at 31 December 2023) and following the first of the $11 million bi-annual bond interest payments in April, cash at the end of April was $361 million. The company expects its costs to be covered by income for the remainder of the year. Gross production was 76,310 barrels of oil per day in Q1 2024 (65,770 barrels of oil per day in Q4 2023), all from the Tawke licence, where local sales demand remains robust. Net production was 19,080 barrels of oil per day in Q1 2024 (16,440 barrels of oil per day in Q4 2023). Following negotiation with local buyers, the sales price from the Tawke licence has been raised to the upper-USD 30s per barrel level. The arbitration process, which includes Genel’s claim for substantial compensation from the KRG following the termination of the Miran and Bina Bawi PSCs, is ongoing. Written closing submissions will now be made next week, subsequent to which written reply submissions will be made in the first half of June. The result is expected by the end of 2024.

Canacol Energy (CNE.TO CNNEF) reported financial and operating results for the three months ended March 31, 2024. Adjusted funds from operations increased 29% to $42.2 million, compared to $32.7 million for the same period in 2023, mainly due to an increase in EBITDAX combined with a decrease in current income tax expense. Adjusted EBITDAX increased to $61.0 million for the three months ended March 31, 2024, compared to $60.9 million for the same period in 2023. The corporation realized a net income of $3.7 million for the three months ended March 31, 2024, compared to a net income of $16.9 million for the same period in 2023, the decrease in net income driven by a non-cash deferred income tax expense of $0.5 million as compared to a deferred income tax recovery of $17.4 million in 2023. Net cash capital expenditures were $35.9 million compared to $47.1 million for the same period in 2023 and as at March 31, 2024, the corporation had $25.1 million in cash and cash equivalents and $11.2 million in working capital deficit. For 2024, Canacol remains focused on: maintaining and growing reserves and production in its core gas assets in the LMV; executing comprehensive development and exploration programs; optimising production and increasing reserves by drilling up to five development wells; installing new compression and processing facilities; and workover operations of producing wells in the key gas fields. The corporation expects to drill the higher impact Cardomomo-1 exploration well in mid-summer of 2024.

GeoPark (GPRK) announced the execution of an offtake and prepayment agreement with Vitol, one of the world’s leading energy and commodity companies. The offtake agreement provides for GeoPark to sell and deliver to Vitol a minimum of 20,000 barrels of oil per day of production from the Llanos 34 Block, which is GeoPark operated with a 45% working interest. The offtake agreement will start on July 1, 2024, for a minimum of 20 months and up to 36 months. As part of this transaction, GeoPark will obtain immediate access to committed funding from Vitol for up to $300 million, with an option to increase by another $200 million for a total of $500 million, in prepaid future oil sales over the period of the offtake contract. Funds committed by Vitol will be made available until June 30, 2025. Amounts drawn on this prepayment facility can be repaid through future oil deliveries or prepaid at any time without penalty. The improved commercial performance and access to competitive and flexible financing secured by this transaction is said to provide GeoPark with immediate value and optionality for future growth.

88 Energy (88E.AX EEENF 88E.L) announced that the 2D seismic acquisition program for Petroleum Exploration Licence 93, Namibia, has been awarded to Polaris Natural Resources Development. The seismic program has already been paid for by 88 Energy as part of the farm-in agreement with Monitor Exploration (Namibia) to earn its initial 20% working interest in PEL 93. The program is to acquire a minimum of ~200-line km of 2D seismic, with data acquisition to commence mid-2024. Data will be used to validate 10 independent structural closures identified from airborne geophysical methods (and part existing 2D seismic), in pursuit of a maiden prospective resource declaration. PEL 93 is a 18,500km2 onshore acreage position comprising blocks 1717 and 1817 in the Owambo Basin, Namibia and 88 Energy can earn up to a 45% non-operated interest via the farm-in. There is considerable potential for more leads to be identified as the dataset is expanded. Fast-tracking of drilling with the first potential exploration well as early as 2H 2025 is targeted. A nearby operator is drilling 3 to 4 wells in the Owambo basin and is expected to spud the first well in mid-2024. This is said to represent a significant catalyst for understanding of the onshore resource potential in Namibia, which already holds a ready path to market.

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