Oilman Jim's Letter - 13 May 2024

Mining Minerals & Metals (MMM.L), an investment vehicle established to undertake an acquisition of one or more businesses ‎‎that has operations involved in natural resource exploration, announced an update on the proposed all share acquisition of Georgina Energy, a UK-domiciled company with prospective helium, hydrogen and natural gas development assets in Australia. The companies are currently finalising the proposed acquisition, which is expected to complete in late Q2 2024. A finalised competent person's report over Georgina's key asset, Hussar, has been received confirming an in-situ value of over US$60 billion from the defined net attributable 2U prospective resources of helium, hydrogen and natural gas. Combined with current, non-independently verified estimates from the Mount Winter project the company will hold an overall in-situ value in excess of US$100 billion. The company says it has received significant institutional interest from preliminary investor meetings in connection with the fundraise.

Gulf Keystone Petroleum (GKP.L GUKYF) announced an operational update and the launch of a share buyback programme for up to a maximum aggregate consideration of $10 million. Local sales have continued to be robust in recent weeks, with gross average sales in 2024 year to date of c.37,000 barrels of oil per day and realised prices recently increasing to c.$27/barrel. As a result, the company’s liquidity position has continued to improve. Given GKP’s weak share price, which the board believes trades at a significant discount to the intrinsic value of the Shaikan Field and does not adequately reflect the near-term cash flow generation potential from local sales, the board has decided to initiate a share buyback programme of up to $10 million. The company sees strong local sales demand in the near term, enabling continued free cash flow generation. Gross production potential is currently between 45,000 – 48,000 barrels of oil per day following recent optimisations to well performance.

Africa Oil (AOI.TO AOIFF) announced that the company repurchased a total of 1,043,100 Africa Oil common shares during the period of May 6, 2024 to May 10, 2024 under the previously announced share buyback program. During this period, the company repurchased 478,100 shares on the TSX and/or alternative Canadian trading systems and 565,000 shares on Nasdaq Stockholm. All common shares repurchased by Africa Oil under the share buyback program will be cancelled. Since December 6, 2023, a total of 14,546,832 shares have been repurchased. A maximum of 38,654,702 shares may be repurchased before December 5, 2024. Africa Oil has producing and development assets in deepwater Nigeria, an interest in the Venus light oil and associated gas discovery, offshore Namibia, and an exploration/appraisal portfolio in the west and south of Africa, as well as Guyana.

W&T Offshore (WTI) reported operational and financial results for the first quarter of 2024 and declared a second quarter 2024 dividend of $0.01 per share. The company completed an accretive acquisition of six shallow water Gulf of Mexico fields in January 2024, paying $77.2 million for the Cox acquisition where W&T acquired and will operate 100% working interests in six fields that are located adjacent to existing W&T operations. Year-end 2023 proved reserves based on an independent engineering report prepared by Netherland Sewell and Associates were 21.8 million barrels of oil equivalent, around 17% higher than W&T’s expectation of 18.7 million barrels of oil equivalent at the time of acquisition. The company generated production of 35.1 thousand barrels of oil equivalent per day (55% liquids) in the first quarter of 2024, an increase of approximately 3% over fourth quarter 2023 and above the midpoint of guidance. Three of the Cox fields, Mobile 916, West Delta 073, and Eugene Island 064, were shut-in during the first quarter 2024. As such, adjusted EBITDA of $49.4 million did not reflect the full potential of the Cox acquisition. The company produced net cash from operating activities of $11.6 million and free cash flow of $32.4 million in the first quarter of 2024, marking the 25th consecutive quarter of positive free cash flow. Cash and cash equivalents of $94.8 million and net debt of $296.4 million at March 31, 2024 were reported, which reflects the impact of funding the Cox acquisition using cash on hand. The company continued to maintain a low leverage profile with net debt to trailing twelve months adjusted EBITDA of 1.6x. WTI adopted a quarterly cash dividend policy in November 2023 and paid dividends of $0.01 per common share in December 2023 and March 2024. The company has declared a second quarter of 2024 dividend of $0.01 per share, which will be payable on May 31, 2024.

Harbour Energy (HBR.L HBRIY) announced a significant gas discovery at Tangkulo, Indonesia. The company noted the operator Mubadala Energy's announcement that the Tangkulo-1 exploration well has made a significant discovery on the South Andaman licence (Harbour 20% interest), offshore North Sumatra, Indonesia. This follows the major discovery at the Layaran-1 well on South Andaman in December 2023. The rig will now move to appraise the Layaran discovery, marking the final well of this exploration and appraisal campaign.

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