Chariot LON:CHAR the AIM-listed, Africa focused energy group is hoping to start drilling in Morocco around the end of this quarter at its majority-owned Loukos Onshore project after receiving approval from the Moroccan government for its Environmental Impact Assessment (EIA) earlier this month.
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The EIA for Loukos covers up to 20 well operations and Chariot will kick off with an initial exploratory drill on two prospective wells at Gaufrette and Dartois and has the option to re-enter an historic gas discovery.
Pierre Raillard, head of gas business and Morocco country director said: “…This is not only an important step towards our initial drilling campaign but EIA approval for multiple additional locations gives us flexibility in future campaigns. In addition to this, the land access activities and civil work contracting have concluded, site construction activities are now underway, and we are on track for commencement of operations around the end of 1Q24.”
Chariot owns 75% of the Loukos Onshore project, the other 25% of is held by Morocco’s national energy company ONHYM.
The Guernsey-headquartered exploration company focuses on three areas: Transitional Gas; Renewable Energy and Green Hydrogen and has a number of interests in other projects on the African continent.
Chariot is an onshore-offshore play
Chariot has been exploring Morocco’s coastline for some time and secured the Lixus Offshore licence, an area of nearly 1,800 square kilometres, with water depths ranging from the coastline to 850 metres in 2019. Within that tenement lay the Anchois Field an 18 billion cubic metre development opportunity. Proving the field through a drilling programme, Chariot confirmed Anchois’ geological model and development potential as a significant gas discovery.
The company also holds an interest in the adjacent Rissana licence, another offshore developmental gas play covering an area of almost 8,500Km2 and with the aforementioned Loukos Onshore development makes up the troika of Chariot’s Moroccan gas projects.
Chariot’s management announced a farm-in with a developmental partner for the Offshore assets in December and brought in FTSE250-listed Energean LON:ENOG as operator to develop the Offshore projects into production.
Energean acquired a 45% interest in Lixus, and a 37.5% interest in the Rissana licence and assumed operatorship. Chariot retained a 30% stake in Lixus and 37.5% of Rissana with ONHYM keeping a quarter of each licence and will receive USD10m in cash on completion, which is expected shortly, followed by another USD15m on Final Investment Decision and USD85m gross carry which covers all Lixus costs up to Final Investment Decision including an additional Anchois well with a gas flow test. The planned Rissana seismic acquisition costs were separately capped at USD7m.
Once Anchois is complete, Energean has the option to acquire another 10% of Chariot’s share in Lixus in return for USD850m gross development carry to first gas and USD50m five-year zero-coupon convertible loan note with a strike price of GBP20 adjusted down for dividends, or the issuance of three million Energean shares, at Chariot’s option on FID. Chariot would also be due a 7% royalty payment on Energean’s gas production revenues in excess of a base hurdle on the realised gas price.
All-in, that’s a good deal for Chariot and a fair deal for Energean and Morocco, with Chariot being suitably compensated for its set-up work on the project, de-risking its portfolio, and allowing it to use the capital realised from the Offshore assets to develop its Onshore project. Energean gets into a new market on what could be a fantastic project for a low initial cost, that Chariot has already spent time and treasure developing to a launchpad level and Morocco gets a partner that has a proven track record taking independent offshore development plays into production. Win-win.
Renewable interests expanding
The company, which operates in six African nations, is also developing 515MW of renewable energy projects at four different sites. The energy developer has zeroed into the mining sector in Africa, providing renewable energy solutions at Iamgold [TMX:IMG]’s Essakane project in Burkina Faso; Tharisa’s PGM mine in South Africa; First Quantum [TMX:FM.]’s Zambian copper-gold mine and Karo Mining’s Zimbabwean PGM mine. Chariot is working in partnership with TotalEnergies, to co-develop these projects on a 49:51 basis.
Chariot has also broadened its exposure and approach to the renewable energy sector within South Africa, in acquiring an interest in Etana Energy, which holds one of a few electricity trading licences to be granted in the country.
Etana’s objective is to deliver unique renewable energy mix solutions at competitive prices to help address the significant power requirements across South Africa with the licence opening access to a range of high-volume off-takers including municipal, industrial and retail customers.
Recently, Chariot announced both an increase to 49% of its stake in this venture and a landmark deal signed with Growthpoint Properties [JSE:GRT] to supply them with 195GWh of renewable energy a year. This represents 32% of Growthpoint’s total current annual electricity consumption and Etana will wheel electricity to their commercial property buildings located in several jurisdictions in South Africa. Electricity trading will bring an additional revenue stream into Chariot and further enable Chariot’s participation in large renewable projects in Southern Africa.
Chariot aims to become leading producer and exporter of green hydrogen
Chariot also operates in Mauritania, where it is working in partnership with TEH2 (80% owned by TotalEnergies and 20% owned by the EREN Group) and the Government of Mauritania to support their ambition to become a leading producer and exporter of green hydrogen.
The project, Project Nour, spans two onshore areas totalling approximately 5,000 square kilometres, across northern Mauritania, which has significant wind and solar potential. As previously reported wind, solar and hydroelectric power is used to electrolyse hydrogen from water and Chariot hopes to develop up to 1.2 million tonnes per year of hydrogen by 2030 with 10GW of renewable energy.
Mauritania would look to use this both domestically and export it to European markets. Project Nour could become one of the largest global projects of its kind and the company has already undertaken a Pre-Feasibility Study and has just completed the Feasibility Study which will be presented to government this quarter.
The project could be transformational for Chariot and Mauritania.
In its last results to end-June 2023, published in September, the company was still loss-making. In the six-month period to end-June 2023 Chariot’s total comprehensive loss was USD7.7m, which was more or less on par year-on-year, but the company remains well-capitalised with USD2.7m cash in the bank, supplemented through a USD19m fundraising completed in July 2023. The company has no debt and minimal licence commitments.
The company opened trading on 13th February at 8.1p and has fallen 51.5% over one-year, with its shares ranging between 7.52p and 18.88p. The company has a market capitalisation of GBP87.3m.
Important catalysts upcoming
The share price is historically low for Chariot, but in the coming months it has important catalysts upcoming with its first drills in Morocco to prove its Loukos project, which should, if proved commercial, start to bring revenue and profit into the company and the well this year at the Anchois project in partnership with Energean.
The potential of its Mauritania hydrogen project could also be transformational for the transitional energy company and its renewable energy business creating independent power plants for mining ventures and electricity trading has the potential to also create a predictable revenue stream.
The market reaction has been a bit harsh on Chariot, and a misunderstanding of the upsides of the Lixus/Rissana deal with Energean have seen something of an over-reaction by the market, given that Chariot still retains significant value in Anchois and its adjacent properties, with a hefty uptick if Energean takes the projects into production. We think that over the next 12-months the share price will start to move north again and could well be within the mid-20p territory and beyond that the stock last saw in 2022.
