Malcy’s Blog: Oil price, Challenger, Sintana, Rockhopper, Gulf Keystone, Petro Matad.

WTI (Jan) $58.25 -63c, Brent (Feb) $ 61.94 -55c, Diff -$3.69 +8c.

USNG (Jan) $4.57 -34c, UKNG (Jan) 71.36p +0.43p, TTF (Jan) €27.01 -€0.265.

Oil price

Oil is up marginally today but it’s not obvious why. The Ukraine deal maybe around the corner and won’t be helpful but given that Russia is breaching sanctions all over the place and Iran is too, then many commentators expect oversupply to continue. 

The API stats actually showed a decent 4.8m draw in crude which is probably why oil is better but the bears are pointing to a big build of 7m in gasoline and 1m in distillates but then when all the market watchers agree it’s usually time to look in the other direction…EIA stats tonight. 

But the big refining number which is delivering lower prices across the US, even California shows an average price per gallon of just $2.94 and below the magic $3 level. Finally the Fed announce the new rate this afternoon, 87% of analysts are going for a 25bps drop but maybe the sting will be in the statement….

Challenger Energy Group

Challenger has advised that the Uruguayan Ministry of Environment has issued necessary permits to a number of applicant seismic vendors to allow for the commencement of seismic acquisition in Uruguayan territorial waters. As relates specifically to the Company, the permits allow for acquisition of 3D seismic on AREA OFF-1. Further updates will be provided once the nature, scope and timing of the intended seismic program for AREA OFF-1 is finalised. This follows on from the recently announcement that ENI is farming-in to a 50% stake and operatorship of YPF’s AREA OFF-5 block, and indications that APA Corporation is proceeding with plans to drill a deepwater exploration well on its AREA OFF-6 block, potentially as soon as the second half 2026.

The Company also notes the announcement by Galp of agreements whereby TotalEnergies will acquire from Galp a 40% stake in PEL 83 in Namibia and assume operatorship, in exchange for 10% of PEL 56 (home to the Venus discovery), 9.39% of PEL 91, and a funding / partial carry arrangement for PEL 83. TotalEnergies and Galp agreed to launch an exploration and appraisal campaign on PEL 83, including three wells over the next two years, with a first well planned in 2026, to further derisk resources and progress diligently toward the development of the Mopane discovery. Sintana Energy, the proposed acquiror of the Company pursuant to a scheme of arrangement announced on 9 October 2025, holds a 4.9% indirect carried interest in PEL 83.

Eytan Uliel, CEO of Challenger Energy, said: 

“The issue of permits for seismic acquisition in Uruguay is an important milestone, which should be understood more generally in the context of increasing activity and industry interest in Uruguay’s offshore, and we thus look forward to what we expect will be value-adding progress over the coming months. This comes as we approach completion of our transformative transaction with Sintana Energy, and we are thus equally excited by the news that TotalEnergies will be taking a major position in PEL 83, Sintana Energy’s flagship asset in Namibia. Further updates will be provided as to progress of the seismic campaign at AREA OFF-1, progress at PEL 83, and developments more broadly in Namibia, Uruguay and Angola, once Challenger Energy is a part of the broader Sintana Energy group, a process which we expect will finalise in the near term”.

All is looking good for Challenger right now, the approval for seismic acquisition in Uruguayan waters is good as it allows 3D seismic to go ahead in AREA OFF-1 and the company will update when the details of the upcoming programme is finalised. 

As I covered recently, when CEG noted that ENI is farming into a 50% stake and operatorship of YPF’s AREA OFF-5 block, things are hotting up in the area with increasing activity and industry interest in Uruguay’s offshore. With indications that the APA Corporation is proceeding with plans to drill a deepwater exploration well on its AREA OFF-6 block, potentially as soon as the second half 2026, I expect a significant rise in interest as big corporations start to move in. 

Challenger are in a very strong position indeed, the amazingly canny acquisition of the two offshore Uruguay blocks has already rewarded via the Chevron farm-out but the best is yet to come. The seismic should propel AREA OFF-1 just when excitement is rising and of course as Eytan states here, the move with Sintana gives exposure to the huge fields in Namibia which were highlighted by the TotalEnergies farm-in yesterday. 

My 50p TP for CEG and Bucket List place guaranteed stands as I think that there is huge upside, this will be only better when part of the broader Sintana Group and shareholders need not worry, the future looks exceptional.

Sintana Energy

No further comment from me here, I jumped the gun yesterday by publishing the Galp release and following that Sintana put this out and indeed in the Challenger RNS CEO Eytan Uliel comments on how good it is for the Sintana Group.

Rockhopper Exploration

Rockhopper has announced that its Board has taken a final investment decision (“FID”) relating to the development of Phase 1 of the Sea Lion field located offshore to the north of the Falkland Islands and has accordingly now sanctioned the Project. Partner and Operator, Navitas Petroleum Development and Production Limited, has also taken FID relating to the Project. 

As a prerequisite of taking FID, the Boards of both companies have approved the financing arrangements and signed the relevant documentation required to fund Phase 1 of the Project.

Financial close of the Financing is subject to a limited number of customary conditions precedent and Rockhopper expects this to occur over the coming weeks.

All approvals and consents necessary at this stage have now been received for the Project.  The Falkland Islands Government (“FIG“) has approved the field development and production programme for Phases 1 & 2 of the Northern Development Area within the Sea Lion field (the “FDP“). Following the approvals, the licences covering Sea Lion will move into the Exploitation Phase, which lasts 35 years, or longer if needed to complete production.

As noted in the Company’s announcement on 31 July 2025, completion of the Company’s US$140 million placing (further details of which are set out in that announcement) (the “Placing”) is subject to each of Navitas and the Company having made a public announcement that FID has been taken and that Phase 1 of the Project has received all regulatory consents and approvals required at this stage, and Financial Close has occurred. As such, a further announcement will be made at the time of Financial Close, at which point it is expected the the Placing will proceed to completion and the previously announced open offer (the “Open Offer”) will be launched. Further details on the Placing and the Open Offer will be included in that announcement.

Following finalisation of work undertaken on both a technical and commercial level to support the financing of the Project, the total post-FID funding requirement is US$1.8 billion to First Oil and US$2.1 billion to project completion (including contingencies and financing costs). 

The Project financing consists of US$1.0 billion of senior debt (of which US$350 million is Rockhopper debt), with the balance provided via a combination of joint venture equity and post First Oil cash flows. Rockhopper benefits from previously disclosed financing loans from Navitas in relation to the Project and, as a result, the net Rockhopper equity requirement is approximately US$102 million, in addition to the previously disclosed Rockhopper share of a 5% Equity Overrun Support which is approximately US$10 million (therefore in aggregate US$112 million). 

The potential value to Shareholders of the Sea Lion Project proceeding is highlighted in the recent independent resource evaluation conducted by Netherland, Sewell & Associates, Inc. (“NSAI”) on behalf of Rockhopper (the “June 2025 NSAI Report”). Whilst this report was produced prior to the final development cost being confirmed, the Board believes it still provides useful guidance to Shareholders. The June 2025 NSAI Report confirmed total gross full field 2C Resource of 917 mmbbls of which 321 mmbbls are attributable to Rockhopper’s net working interest. Of the 917 mmbbls, 727 mmbbls (255 mmbbls net to the Company) are categorised as ‘Development Pending’. NSAI further provided that the 2C Resources of 255 mmbbls has an NPV10 net to Rockhopper (after FIG royalties and taxes) of US$1.85 billion using US$70 brent oil price.[1]   

As previously disclosed, Sea Lion will be developed in phases. Phase 1, which has been sanctioned, targets 170 mmbbls (59.5 mmbbls net to Rockhopper) at a peak production of approximately 50,000 bbls/d. Subsequent phases are expected to be self-financing using the excess cash flows of Phase 1. First Oil from Phase 1 is current planned for 2028. Phase 2, which forms part of the same FDP approved by FIG, is anticipated to recover a further gross 2C resource of 149 mmbbls (52.15 mmbbls net to Rockhopper).

At the time of launching the Placing, the estimated net cost to Rockhopper of the Early Project Failure (“EPF”) support required by FIG was US$40 million, which Rockhopper believed could be provided at a cost of US$25 million in the form of a surety bond. While the total cost will not be finalised until closer to the time of spudding the first pre drilled well, that estimate has now increased from US$40 million to an estimated US$52.5 million. Currently, it is anticipated that the first well will not be spudded for over 12 months. Rockhopper is currently investigating various options to cover the required EPF support, including increased surety cover, parent company guarantees, cash or any suitable cash backed instrument.  

There remains some uncertainty around actual project costs and the EPF requirements from FIG.  Any material increases in these items could result in an additional equity requirement for Rockhopper ahead of project completion, or potentially ahead of spudding the first pre drilled well.

Despite these additional costs, Rockhopper remains fully funded to take FID and also has potential for further cash receipts post-Financial Close through the proceeds of the Open Offer and any further exercise of the warrants to be issued in connection with the Placing. 

Should any of the required conditions precedent in relation to the financing arrangements not be satisfied, then Financial Close will not occur, the Sea Lion Project will not go ahead, the Placing will not complete and the Open Offer will not be launched. In that unlikely event, it is possible that Rockhopper will have incurred additional costs that would have otherwise have been covered by Navitas loan arrangements. All of the conditions precedent to Financial Close are at an advanced stage and Rockhopper expects them to be completed over the coming weeks.

Key Commercial Contracts

As part of FID, Navitas as operator has entered into a number of key commercial contracts which include, but are not limited to, an FPSO charter agreement (and associated EPC and O&M contracts), drilling rig contract, a framework agreement for the supply of drilling and completion services; and an agreement for the Engineering, Procurement, Construction, Installation and Commissioning of Subsea Umbilicals, Risers, and Flowlines (SURF).

Key Terms of Debt

The Rockhopper senior debt facility will be for US$350 million with a tenor of 7 years. First drawdown shall not be permitted until the agreed equity amount has been distributed into the Project. Semi annual straight line amortisations commence on 31 March 2029. The margin is SOFR² + 525bps during the pre-completion period, moving to 425bps in years 1 and 2 post Project completion, 450bps during year 3 post completion and 475bps thereafter. Mandatory hedging of 50% PDP³ is required during Year 1 post project completion, 33.3% in Year 2 and 25% in Year 3. A commitment fee of 30% of margin on available undrawn is payable semi annually. The senior debt facility contains other representations, covenants and default provisions that are customary for a facility of this nature. 

FIG taxation agreement

As part of the FID process, Rockhopper and FIG have entered into a final settlement agreement relating to a previously disclosed disputed taxation amount on the farm out to Premier Oil in 2012 (as the existing arrangement was incompatible with achieving FID at Sea Lion) and the final settlement agreement will also settle any tax liability in relation to the farm out to Navitas in 2022. The new arrangement provides that Rockhopper shall pay to FIG the tax liability in instalments, amounting to a total of £30 million on an undiscounted basis. The payment schedule is as follows:

·    £1 million at signing of the final settlement agreement (paid)

·    £2 million at Phase 1 sanction / Financial Close

·    £1 million 30 calendar days from First Oil (the “Payment Date”)

·    £2 million on the first anniversary of the Payment Date

·    £3 million on the second anniversary of the Payment Date

·    £7 million on the third anniversary of the Payment Date

·    £7 million on the fourth anniversary of the Payment Date

·    £7 million on the fifth anniversary of the Payment Date

The final settlement provides that early payments can be made, attracting a discount of 10% per annum. If payments are made late, the agreement provides for interest to be paid at a rate of 10% per annum. FIG’s existing security, including charges over certain Group subsidiary assets, will be replaced by security over a dedicated Rockhopper bank account into which all of the net post financing and post Navitas loan repayment cash flows will be distributed.

Next steps

A further announcement will be made at Financial Close which will, should it occur, trigger completion of the Placing and the launch of the previously announced open offer.

Sam Moody, Chief Executive Officer of Rockhopper Exploration, commented:

“The sanctioning of Sea Lion is a major milestone for Rockhopper and all its stakeholders and represents the culmination of over 20 years of work. When we first discovered Sea Lion in 2010, it was a hugely exciting play-opening well, and the vast amount of work undertaken since then, first in the ensuing drilling campaigns and then the many years of engineering and commercial refinement, is now moving towards its ultimate fruition as we move into the development phase.  While much remains to be done as the partnership progresses the project and executes the significant amount of work required to deliver First Oil, I would like to take this opportunity to thank both Navitas and our team at Rockhopper, without whom this would not have been possible. We now look forward to continuing our excellent working relationship Navitas as we look to continue to unlock value for all our stakeholders.”

This is particularly good news and if I may I will just say that I am delighted to be vindicated in my forever belief in Sea Lion and will only be more vindicated on first oil. All those Premier meetings where I pestered management and wrote positive things about the Falklands appear to be rewarded. 

I remain confident that Rockhopper will be a rewarding investment and with partner Navitas who are the new wonder-kids on the block and will be as keen as anyone to get to that first oil target.  

Gulf Keystone Petroleum

Gulf Keystone has today provided an operational and corporate update.

Jon Harris, Gulf Keystone’s Chief Executive Officer, said:

“2025 has been a milestone year for the Company after pipeline exports from the Shaikan Field were successfully restarted in September following a hiatus of over two and a half years. Liftings allocated to Gulf Keystone and other IOCs commenced in November and we are pleased to have recently received our first payment. The process as outlined in the interim exports agreements is working and we look forward to a return to full PSC entitlement at international prices following the international independent consultant’s review.

We are on track to meet our production, capital and cost guidance for 2025. Strong operational and financial performance in the year has enabled us to safely advance key projects while distributing $50 million of dividends to shareholders. Cumulative production from the Shaikan Field recently surpassed 150 million barrels, underlining the scale and quality of the asset. Looking ahead to 2026, we are expecting a base work programme focused on the progression of current projects. We are also embedding optionality to restart drilling and review disciplined field development, contingent on consistent exports payments at international prices. We are excited about a potentially transformational year for the Company and remain focused on executing for our shareholders.”

Following the reopening of the pipeline, and thus exports from Shaikan resuming, GKP are able to announce that liftings have taken place and they have received their first payment. However there is a slight problem in that it seems that payment is in part as the company say that ‘we look forward to a return to full PSC entitlement at international prices following the international independent consultant’s review’.

In the release the company say that they ‘expect future payments for export sales within 30 days of liftings’ but also note that ‘the Company is accruing a receivable balance for exports sales under the interim agreements, reflecting the transition from pre-paid local sales and the differential to international prices’. 

The prices received are up, at c.$30 per barrel which compares with the $27-28 that they were getting locally and of course production averaged c.41,400 b/d, in line with guidance but the December number so far is c.44,000 b/d, a useful increase should it continue, which it should. 

GKP looks set fair given the quality of the Shaikan field and its potential for further development. In addition they have commented that they are ’embedding optionality to restart drilling and review disciplined field development, contingent on consistent exports payments at international prices’ which looks to be having the put and the call should payments not come through and receivables mount up. 

The outlook for GKP, and perhaps more importantly the ability to reward shareholders, looks pretty good, whether the call to sell through the pipeline was the right one has yet to be determined, the jury is still out but the company has positioned itself for what might indeed be a ‘potentially transformative year’. 

Operational

• Strong safety performance, with zero Lost Time Incidents for over 1,050 days
• Gross average production of c.41,400 bopd in 2025 year to date (as at 8 December 2025), in line with tightened 2025 annual guidance of 40,000 – 42,000 bopd
  • Smooth transition from trucking sales to pipeline exports via the Iraq-Türkiye Pipeline on 27 September 2025, with volumes quickly ramped up towards full well capacity
  • Gross average production in December to date of c.44,000 bopd
• Continued execution of the 2025 work programme:
  • Ongoing well workover programme expected to lead to incremental increases to production rates in Q1 2026 once two wells are brought back online
  • Further progression of safety upgrades at PF-2, with equipment tie-ins expected as part of a planned plant shut-down of around three weeks in 2026
  • PF-2 water handling installation on track for commissioning at the beginning of 2027, with engineering design work well advanced

Financial

• First payment received for export sales following commencement in November of monthly liftings of Kurdistan crude allocated to Gulf Keystone and other International Oil Companies (“IOCs”)
  • Average realised prices for cash received to date equate to c.$30/bbl, in line with the signed interim exports agreements and representing an improvement to local sales
  • Expect future payments for export sales within 30 days of liftings
  • The Company is accruing a receivable balance for exports sales under the interim agreements, reflecting the transition from pre-paid local sales and the differential to international prices
• $50 million returned to shareholders in 2025 through semi-annual dividends in April and September
• Cash balance of $75 million as at 9 December 2025

Outlook

• On track to meet tightened 2025 gross annual average production guidance of 40,000 – 42,000 bopd
• Confirmed 2025 annual guidance for net capital expenditure ($30-$35 million), operating costs ($50-$55 million) and other G&A expenses (below $10 million)
• The current interim exports agreements are expected to be extended into next year while a review by an international independent consultant of IOC invoices and contractual costs takes place
  • A reconciliation to full PSC entitlement at international prices and the negotiation of long term exports agreements continue to be anticipated on completion of the review
  • The Company is progressing its negotiations with the Kurdistan Regional Government (“KRG”) regarding a number of historical Shaikan commercial matters, including the settlement of past oil sales arrears and other KRG-related assets and liabilities, and will provide an update in due course
• Guidance for 2026 will be provided in an Operational & Corporate Update announcement in January 2026, with a base work programme expected to focus on the progression of current projects:
  • Enhancing the safety and reliability of the production facilities
  • Maintaining the capacity of existing wells through interventions and workovers
  • Installing water handling facilities at PF-2 to drive incremental production growth and reduce reservoir risk from the beginning of 2027
• The Company will embed optionality in its work programme to restart drilling and review disciplined field development, contingent on consistent exports payments and a return to international prices
• Gulf Keystone continues to consider a potential listing of its shares on the Euronext Growth Oslo, subject to favourable market conditions

Petro Matad

Petro Matad has announced that Mike Buck, Chief Executive Officer, and members of the Company’s management team will make an Investor Presentation on the Investor Meet Company platform on 16 December 2025 at 10:00 GMT.

The presentation is open to all existing and potential shareholders. Questions can be submitted pre-event via your Investor Meet Company dashboard up until 15 December 2025, 09:00 GMT, or at any time during the live presentation.

Investors can sign up to Investor Meet Company for free and add to meet Petro Matad Limited via:

https://www.investormeetcompany.com/petro-matad-limited/register-investor

Investors who already follow Petro Matad Limited on the Investor Meet Company platform will automatically be invited.

 Worth putting in the diary, I’m looking forward to hearing Mike Buck speak.