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It's not nearly as contagious as Covid

Aim-traded Africa-focused energy group Chariot (CHAR:7.1p) has raised $6.4mn (£5mn) net proceeds from an oversubscribed $7mn placing to strengthen its balance sheet, secure a new venture in Namibia, and progress its onshore gas commercialisation plans in Morocco.

The directors subscribed for $1mn of shares in the placing and existing shareholders can participate in an open offer (one share-for-46 shares held), which aims to raise an additional $2mn (£1.5mn). Chief executive Adonis Pouroulis invested $0.7mn in the fundraise, noting that Chariot has multiple key catalysts coming up over the next few months that could transform the growth profile of the business.

First, drilling and testing of the Anchois-East offshore well near Morocco, in partnership with Energean (ENOG), will commence in mid-August. The aim is to upscale the development of the Anchois gas project by testing two undrilled gas sands with the potential to increase the field resources by 60 per cent. It would enable Energean to move to a Final Investment Decision (FID) shortly after and unlock a $15mn payment due to Chariot under the terms of the farm-out agreement. Moreover, on completion of the Anchois-East well, Energean has the right to acquire an additional 10 per cent interest in the Anchois field from Chariot in exchange for a development carry to first gas.

Second, the board is progressing with the third-party financing of Chariot’s transitional power division to provide a direct look-through valuation for this business, unlock large-scale renewable projects in South Africa and support the expansion of Etana, the group’s electricity trading platform.

Third, Chariot plans a flow test at the OBA-1 onshore well on its Loukos licence in the current quarter, the data set from which will help unlock and develop an early commercial opportunity through the recently announced partnership with Vivo Energy.

Fourth, Chariot is trying to secure a new multi-billion barrel opportunity in licences adjacent to recent giant discoveries in the Orange Basin, Namibia. Since the discovery of the Graff oil field in 2022, it has become one of the world’s top oil and gas basins with oil majors Shell, Total Energies and Galp Energia all announcing major discoveries.

Chariot currently holds a 10 per cent back-in-right in its previously operated 2714A & B blocks offshore Namibia. The two blocks are located immediately north west of where Galp Energia and its partners discovered the Mopane field – reported to contain 10bn barrels of oil – and immediately west of the block where Woodside Energy and its partners plan to drill in 2025. Should Chariot secure the new venture, it intends to partner as quickly as possible and use this partnering process to fund further exploration and a drilling programme.

House broker Cavendish has updated its valuation from 57.7p to 51p per share to reflect the dilution from the equity fundraise, but that is still eight times higher than Chariot’s current share price. I last rated the shares a hold at 7.15p (‘A potential catalyst for Chariot's shares’, 18 June 2024), and I would take up your open offer allocations. Hold.

Is that really how concessions are granted ?

Will this affect us?

Onshore for domestic -but once that satisfied off shore will be ready with greater quantities for export (to Europe) I suppose

Thats the point though- the costs of off shore are huge and have risen massively

Roject still expected to go ahead

Analyst Brendan Long at WH Ireland expects that “the fiscal policy for the UK North Sea following the UK general election will be favourable for domestic energy security, HMRC tax revenues, UK jobs and the production of energy on a low carbon emissions basis. We anticipate the UK Government will provide fiscal clarity such that the operator of the Buchan redevelopment will have sufficient confidence in the fiscal regime to progress with project sanction.”

Long also adds that the Buchan field is overwhelmingly the best undeveloped oilfield of its kind in the UK North Sea in terms of it being of considerable scale and low-risk. Specifically, the field is estimated to contain 70mn barrels of oil equivalent (95 per cent oil) and benefits from 36 years of production history. Moreover, its petrophysical characteristics provide high confidence that the reservoir will respond favourably to a water flood strategy. The point is that the Buchan field has always had, in Long’s opinion, the odds stacked overwhelmingly in its favour – that hasn’t changed.

It’s a view shared by Daniel Slater at Zeus Capital who notes that although the introduction of the UK EPL tax regime in 2022, alongside somewhat nebulous comments from the Labour Party as to its attitude to UK oil and gas taxation, has created an element of uncertainty for new investments in the sector, Labour will find it very challenging to take a decision to make UK oil and gas taxes even less favourable than currently.

Jersey remains well funded

Importantly, Jersey remains fully funded with a cash position of over £13mn (39p) and a forecast annual base cash spend of £3mn. The Buchan project remains fully carried to FDP with a further $20mn (47p) payment due to Jersey following approval by the North Sea Transition Authority of the Buchan FDP and receipt of the associated regulatory and legal consents.

So, having viewed the investment case positively when I covered the annual results (‘Jersey Oil & Gas still has multi-bagger potential’, 13 May 2024), I feel that investors have massively overreacted to today’s announcement, which formalises the joint venture partners position relative to the forthcoming election and ultimately the UK’s oil & gas fiscal regime. I would not be selling the shares ahead of a likely autumn budget which should provide the fiscal clarity needed for the project’s partners. Hold.

Hares in Jersey Oil & Gas (JOG:125p) lost 16 per cent of their value after the North Sea-focused upstream oil and gas company announced that the timing for achieving key milestones and project sanction on its flagship Buchan field development project will depend on the result of the general election and securing fiscal clarity. Jersey retains a 20 per cent fully carried equity interest to first oil in the project, which are to be approved in the Field Development Plan (FDP).

While the Buchan operator, NEO Energy, is making good progress on advancing the work programme required for FDP approval by the year-end, project sanction is dependent on securing fiscal clarity from the next UK government and ensuring that the project remains financially attractive.

Completion of the necessary engineering work is on track and the first offshore survey was completed in May, obtaining the geophysical data used for the subsea and drilling rig contract tendering process. Work is also advancing on completion of two key workstreams: the subsurface studies required to finalise the drilling programme and operational verification; and preparation for the handover of the floating production, storage and offloading vessel to the Buchan joint venture.

Following the receipt of fiscal clarity and subject to FDP approval, the major contract awards and capital commitments for the project are now expected in 2025, which leads to Buchan first production being targeted for late 2027. Under the current fiscal policy, the project’s valuation does not materially change as a result of the later first production date. Analysts at brokerages WH Ireland and Zeus Capital are maintaining total risked NAV estimates at 705p and 617p, respectively, while Cavendish expects to reduce its 534p a share valuation by less than 5 per cent.

Mumbo - no great fan of Malcy but he has a very valid point about testing - why has there been no testing? no one has come up with a plausible reason

Wow a comment straight out of the 1980's

Jimmy

I am very sorry to see that you are continually doubted and shaded by people who don't add one jot to this board or who talk in riddles and overly hype this stock

Jimmy you correctly identified what needed to happen - at least the company now seem to be coming into line

I am enjoying this one, more stories please

GRH was around - spiders famous calculator- lol - yes remember it well

hope Kozel is still rotting in jail

Shaker "Seeing As GRH has shaken hands with the King of Saudi Arabia"

I thought you were saying this tongue in cheek but I see you were not - lol

What happened?

Does anyone know the rigs we are using? there is an interesting doc on the viabilty of rigs at x price for leccy - after halving

Nigel - you make a bell end of yourself every time you post

To be honest I had enough of the "What if" and "ROB says" nonsense - far too much ramping from someone who clearly should and does know better