Oilman Jim's Letter - July 7, 2024

Serica Energy (SQZ.L SQZZF A3P.F) announced that it has completed the first semi-annual redetermination under its reserve-based lending facility. Reflecting the increased reserves, together with the programme of hedging recently implemented, the borrowing base has been increased from $463 million up to the full amount of the committed facility of $525 million. Following this redetermination, Serica's liquidity is now in excess of £500 million. Previous news was an operations and financial update. Production guidance is unchanged at 41,000 to 46,000 barrels of oil equivalent per day and operating costs for the year to date are consistent with the target of $20 per barrel of oil equivalent. Average net production for the year to date is 43,781 barrels of oil equivalent. Well intervention to reinstate production from the Keith field has been successfully completed and the reservoir section of the B1z sidetrack (re-named as the B6 well) on the Bittern field has been drilled, with initial well logging giving good indications of high quality, oil filled reservoir. The forward plan is to complete the well and commence testing in August 2024. Following completion of the B6 well, the rig will move to the Gannet E field in order to drill the GE-05 well. Production from this well is expected to start in November 2024. At 26 June 2024 the company held cash and cash equivalents of £301.6 million and debt drawings of £182 million. Estimated cash spend on capital items during 2024 as a whole is currently estimated at about £200 million pre-tax. I first bought SQZ in 2015 at under 5p per share. It’s now over 135p, having been as high as 454p since then and paid out dividends totalling multiples of the purchase price along the way. You can see what I said at the time on Twitter (now X) where I post as @Oilman_Jim (I’ve been posting there for over 10 years now and logged up over 18,000 posts). For those who don’t know me, I have been involved in the stock markets, UK and North America, for over 40 years. Along the way, I’ve also been a director of a number of publicly traded oil, gas and mining companies.

Moving on with the company news, Sunda Energy (SNDA.L), formerly Baron Oil (BOIL.L GHA.F), announced that its change of name has become effective. The name change was said by the company to encapsulate the change of emphasis towards the Orient. Sunda’s principal asset is a a 60% working interest in the TL-SO-19-16 production sharing contract, offshore Timor-Leste. The operational plan is to drill and flow test the Chuditch-2 appraisal well in early 2025, subject to rig and drilling services availability and the completion of drill financing. The cost of the Chuditch-2 appraisal well is anticipated to be approximately $32 million, including the costs of a full production flow test. Discussions with a number of potential funding partners are ongoing. Progress is said to be encouraging, and the board states it is confident of the financing being in place in time to enable drilling of the Chuditch well as planned. There is significant potential here, subject to the terms agreed.

Capricorn Energy (CNE.L CRNCD FKG0.F) continues to announce daily market repurchases of its shares. These are likely to continue. Meanwhile, operational and trading updates are positive. The company is said by the CEO to enter the second half of 2024 offering a clear value opportunity against the backdrop of an improving fiscal landscape and re-start of drilling operations in Egypt, and the potential to grow a non-operated production base to capitalise on its advantaged legacy position in the UK North Sea. Up to the end of June 2024, working interest production across the four main concession areas in the Western Desert averaged 25.4 thousand barrels of oil equivalent per day, of which 45% were liquids. Two new wells, completed at the start of the year in the Badr El Din concession where Capricorn owns a 50% working interest, have recently been brought online and delivered rates at the upper end of expectations. Drilling activity recommenced at the end of June with three rigs under contract. A drilling sequence for the remainder of the year has been approved by Capricorn and is expected to deliver seven development wells in the Badr El Din concession area. In addition, drilling will also target development opportunities in the Alam El Shawish concession where Capricorn owns a 20% working interest.

Panoro Energy (PEN.OL 0N08.L 1PZ.F) announced that the drilling program is to recommence in Equatorial Guinea with the arrival of the Noble Venturer drill ship, as confirmed by Trident Energy, the operator of offshore Block G. The drilling campaign, which is expected to recommence shortly, will comprise of two infill wells located in water depths of 250 metres and 740 metres, before moving to the adjacent Block S to drill the Kosmos Energy (KOS KOS.L KOS1.F) operated Akeng Deep infrastructure led exploration well. The contract was awarded to Noble Corporation for its Noble Venturer drill ship in April 2024 by Trident Energy on behalf of the joint venture partners including Panoro, Kosmos Energy and GEPetrol. Panoro has a 14.25% participating interest in Block G which holds the producing Cebia Field and Okume Complex and a 12% participating interest in Block S. Kosmos also issued news last week, announcing the successful start-up of oil production at the Winterfell development in the Green Canyon area of the U.S. Gulf of Mexico. Winterfell, in which Kosmos holds a 25.04% working interest, is a phased development with the initial two production wells of the first phase now online and ramping up production. A third well is currently being drilled and is expected to be online by the end of the third quarter of 2024. The three initial wells are expected to deliver gross production of approximately 20,000 barrels of oil equivalent per day. The first phase of the development, with five wells in total, is expected to deliver around 100 million barrels of oil equivalent with upside from subsequent phases. The other partners in the Winterfell unit are Beacon Offshore Energy (operator), Westlawn Americas Offshore, Red Willow, Alta Mar Energy, and CSL Exploration.

Finally, Reconnaissance Energy Africa (RECO.V RECAF 0XD.F) went significantly better last week following its operations update. All camp, rig and equipment moves have been completed with all major equipment now on site of the Naingopo exploration well. Third party service contractor teams were either on site or expected to mobilize to the site last week ahead of the expected spud today. On Prospect P, debushing and road access activities are ongoing with major civil works including well pad construction expected to commence in the next month. This prospect is expected to spud immediately after completion of the Naingopo exploration well. The company says it continues to progress its farm out joint venture process and an announcement relating to that is expected soon.

RECO.V/RECAF has more or less doubled in price over the past three months and regarding other upcoming drills (many of which do much better than that), as mentioned above I have been publishing this information privately each week for a number of years. These are great plays to trade and we have seen gains of up to 750% this year. It is valuable information and has different values to different people, so pay what you want, just click here

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