Malcy’s Blog: Oil price, Reabold Resources.

WTI (June) $79.00 -$2.43, Brent (July) $83.44 -$2.95, Diff -$4.44 u/c.

USNG (June) $1.93 -6c, UKNG (June) 70.0p -2.19p, TTF (June) €29.465 +€0.74.

Oil price

Oil has continued to fall as ceasefire talks continue and the US economy remains inflationary, whilst Jerome Powell said yesterday that the next move ‘would not be a rise’ that wasn’t quite what people wanted. Also the inventory stats were worse than even the API numbers, crude built by 7.265m barrels and even gasoline added a touch, not to be expected at this time of year.

Reabold Resources

Reabold has announced the execution of a non-binding Heads of Agreement between Gunvor International B.V. and LNEnergy Limited for the purchase of liquefied natural gas by Gunvor from LNEnergy from the Colle Santo gas field, located onshore Italy. LNEnergy has the exclusive right to acquire a 90% interest in Colle Santo and Reabold owns a 26.1% equity interest in LNEnergy.

The HoA provides the terms on which Gunvor will purchase LNG from LNEnergy at its planned small-scale LNG production facility at the Colle Santo gas field. Gunvor will purchase approximately 44,000 tonnes of LNG per annum. The point of sale will be the truck loading flange at the small-scale LNG plant, and the LNG will then be delivered by truck in Italy. The price for the LNG will be aligned with the Italian PSV price. The contract term will be for an indefinite period with a minimum term of five years.

The HoA also provides for a potential prepayment by Gunvor for a portion of the first five years of deliveries, with such amounts subject to prepayment being a total of approximately 66,000 tonnes of LNG, or 999,000 MWh. The average forward Italian PSV gas price for the years 2025-2030 is currently approximately €30 / MWh. The prepayment is conditional on agreeing definitive transaction documentation and LNEnergy obtaining the required permits to construct and operate the LNG production facility.

On the basis of the HoA, LNEnergy and Gunvor intend to negotiate a fully-termed LNG sale and purchase agreement over the next six months. During such time, LNEnergy will exclusively discuss the sale and purchase of LNG from Colle Santo with Gunvor.

Further announcements will be made in due course.

About Gunvor Group

Gunvor is one of the world’s largest independent commodities trading houses by turnover, creating logistics solutions that safely and efficiently move physical energy from where it is sourced and stored to where it is demanded most. Gunvor has strategic investments in industrial infrastructure – refineries, pipelines, storage and terminals – that complement our core trading activity and generate sustainable value across the global supply chain for our customers. The company, which in 2023 generated US$127 billion in revenue on 177 million MT of volumes, is the leading independent global trader of liquefied natural gas (LNG).

Stephen Williams, Co-CEO of Reabold commented:

“We are delighted with this progress towards an extremely significant milestone for our LNG project at Colle Santo in Italy. The agreement envisages a counterparty of the highest quality potentially providing both offtake and a prepay, which is extremely valuable for the project in these times of capital scarcity in the industry.

“In keeping with Reabold’s broader strategy, Colle Santo has the potential to provide significant, reliable and low carbon energy into the Italian market, improving European energy security whilst contributing to an efficient energy transition.”

This is a red letter day for Reabold who have done what many others have failed to achieve recently and moved to the next base of a substantial development with not only an offtake agreement but, and perhaps more importantly, with a substantial prepayment upfront.

Looking at the numbers, the deal is for 44/- tonnes p.a. over a minimum of five years, starting next year and to give an idea of value, the average forward Italian PSV gas price is €30/ MWh. The prepayment is for 66/- tonnes of LNG or 999/- MW h and only conditional on agreeing definitive transaction documentation and LNEnergy obtaining the required permits to construct and operate the LNG production facility.

The demand for gas in Italy is strong and getting stronger, recent news of the end of Russian imports mean that the country will import more from elsewhere and of course the country is going hell for leather in production domestically. Expect the necessary approvals for the field to go through and with the deal with Italfluid also to come in the field looks pretty well fully funded going forward.

Investors should be delighted with this excellent contract and more importantly the vote of confidence it gives to Reabold, justifying its view that Colle Santo can be a very substantial addition to the value and with Production potentially starting next year the share price is looking very cheap even after a modest rise today.