Malcy’s Blog: Flash blog: PetroTal, Rockhopper, Coro.

A flash blog today as I’m in town for meetings and interviews so just to say that as usual any important extra news will be followed up tomorrow. As I write the Jadestone RNS has been withdrawn for a correction so that will come tomorrow which is a shame.

PetroTal Corp

PetroTal has announced its Q1 2023 operations and liquidity update.

Key Operations and Liquidity Highlights

·    Achieved Q1 2023 average production and sales of 12,193 and 12,618 barrels of oil per day (“bopd”), respectively, up 17% and 21% from Q4 2022;

·    Achieved a Brazilian export route sales record in March 2023 of approximately 606,521 barrels (19,565 bopd).  When combined with sales to the Iquitos refinery, the Company delivered record total sales of approximately 666,515 barrels in March (21,500 bopd);

·    Completed well 14H on March 27, 2023.  Similar to well 12H, well 14H has been producing at a constrained rate of approximately 3,000 bopd over the week ended April 24, 2023 and continues to produce as expected;

·    The Company commenced drilling well 15H on April 11, 2023.  This well is expected to cost approximately $14 million and is estimated to be completed in mid June 2023.  The well will reach a total measured depth of 4,550 meters with the lateral section expected to be 1,100 meters;

·    PetroTal exited Q1 2023 with approximately $56 million of unrestricted cash and $15 million of restricted cash for a total of $71 million.  Restricted cash includes amounts reserved for the social trust funds to be deposited at a later date;

·    Strong cash position supports the recently announced shareholder return program, with a US$0.015 per share quarterly eligible dividend (see advisories) to be paid in June 2023 and a normal course issuer bid (“NCIB”) buyback program to commence in Q2 2023, subject to approval by the Toronto Stock Exchange; and,

·    Working capital at March 31, 2023 was strong.  Accounts receivable of approximately $93 million are contractually current, with accounts payable of approximately $60 million, primarily due within the next 50 days. 

2023 Production and Cash Flow Update

PetroTal has been averaging over 20,000 bopd for over 60 consecutive days ending April 24, 2023, demonstrating the positive impact from recent key commercial and social initiatives.  Quarterly and full year 2023 production guidance remains unchanged at this time, as most recently detailed in the Company’s March 30, 2023 announcement.  2023 EBITDA guidance remains unchanged at $220 million for the year.  After tax free cash flow for 2023 is now expected to be approximately $85 million, an increase of $30 million from previous guidance, as a result of adjustments to tax loss pools available for carry forward into 2023.  This change provides PetroTal with additional cash flexibility during the year.

As announced by Petroperu on April 12, 2023, the Northern Peruvian Pipeline (“ONP”) has resumed pipeline operations after over a year of being shut down for maintenance and social unrest related reasons.  Following this news, the Company expects that an estimated 270,000 barrels of oil already in the pipeline will be exported in late Q2 2023 at Bayovar by Petroperu, generating between $5 and $7 million in net revenue for the Company at current oil prices.  PetroTal has not re-commenced shipping oil through the ONP and will consider that option once Petroperu’s full credit lines are reopened and functioning normally.

Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:

“We are extremely happy with our recent production and sales volumes that are exported via Brazil and to the Iquitos refinery, having set a monthly sales record of almost 670,000 barrels in one month to those locations.  We hope to carry this momentum throughout the remainder of the year, having already recovered 97% of the constrained Q1 2023 volumes in April 2023, and meet current 2023 full year expectations.  Our commitment is to look for other export routes, including the ONP, with the aim of reaching our previous production record of 26,000 bopd in the near term.”

This is another excellent performance from PTAL, with 1Q 23 production of 12.2 kbopd, up 17%. The Brazilian export route was a sales record of 19,565 bopd of the 21,500 bopd in March. Well 14H completed at 3,000 bopd last week as expected and 15H is now drilling. 

Cash at the Quarter end was $56m of unrestricted and $15m restricted (for the social programme) and solidly backs up the significant shareholder return process.

At just shy of 50p today the shares offer excellent value backed as they are by a great portfolio with good growing production, plenty of upside, excellent management and a highly distributive shareholder reward programme. It is one of the best performers in the Bucket List and will likely remain so, my 150p TP is easy to continue to flag. 

Rockhopper Exploration

Tribunal orders Rockhopper & Italy to mitigate the risk of non-recoupment by Italy with the anticipation of the Stay being lifted

Rockhopper has provided the following update on its International Centre for Settlement of Investment Disputes  arbitration with the Republic of Italy.

As announced on 24 August 2022, the arbitration panel unanimously held that Italy had breached its obligations under the Energy Charter Treaty  entitling Rockhopper to compensation of €190 million plus interest at EURIBOR + 4%, compounded annually from 29 January 2016 until time of payment (except the four-month period immediately following the date of the Award).

On 28 October 2022, Italy submitted an application to the ICSID seeking to annul the Award under Article 52 of the ICSID Convention. Italy also requested a provisional stay of the enforcement of the Award pursuant to Article 52(5) of the ICSID Convention. The provisional stay prevents Rockhopper from taking legal action to enforce the Award in any jurisdiction.

Following a hearing on 6 March 2023 the ad hoc Committee convened by ICSID to rule on the annulment has issued the following orders with regard to the provisional stay of enforcement:

1: that Italy and Rockhopper shall confer – in good faith and using their best efforts to cooperate and find an effective arrangement – for the mitigation of the risk of non-recoupment using a first-class international bank outside the European Union (or as Italy and Rockhopper otherwise agree) to be put into place in anticipation of the termination of the provisional stay of enforcement of the Award.  This is to mitigate the perceived risk that, in the event the Award is annulled, Italy may not be able to recover Italian assets seized or frozen by Rockhopper (before the ad hoc Committee issues its decision on annulment) in court enforcement proceedings.

2: that Rockhopper shall, within 30 days of the date of the decision, apprise the Committee of arrangements agreed with Italy for the mitigation of the risk of non-recoupment or that negotiations have failed and, in the latter event, propose concrete arrangements in accordance with the decision for the mitigation of the risk of non-recoupment. Italy may then briefly comment on Rockhopper’s proposal within 10 days, constructively highlighting any areas of disagreement between the Parties.

The provisional stay remains in force during this time, pending further order from the Committee.

The decision to lift the provisional stay of enforcement is unrelated to the merits of Italy’s annulment request. A final hearing in relation to Italy’s request to annul the Award is scheduled to take place in Q1 2024.  Guidance given by Rockhopper in the Company’s 31 October 2022 announcement that the entire annulment process is likely to take 18-24 months from that date remains in place. Rockhopper is currently paying all legal costs associated with the annulment.

Sam Moody, Chief Executive of Rockhopper Exploration, commented: 

“We welcome the pragmatic approach adopted by the ad hoc Committee and look forward to working with Italy to find a suitable outcome which will allow us to commence enforcement with no risk to Italy of non-recoupment pending the outcome of the annulment.”

This is good news for Rockhopper where the patience they are showing on this matter should be rewarded. Of course not forgetting Sea Lion which is also going along very well I imagine with the Operator cracking on with the project. 

Coro Energy

Coro Energy PLC, the South East Asian energy company with a natural gas and clean energy portfolio, announces that, further to the announcements on 12 October 2022 and 16 January 2023, that it has now capitalised the local Philippine subsidiary and re-submitted its application for the Philippines Department of Energy’s Wind Energy Service Contract (“WESC”) in respect of an area of interest for the onshore Oslob Wind Power Project in Oslob, Cebu

Michael Carrington, Managing Director: Renewables, commented:

“Submitting our application for the Wind Energy Service Contract is a significant positive step for our Philippines business and, once secured, would increase the core NAV of our Philippines portfolio significantly.”

Good news for Coro should this come off, they are certainly getting prepared…