Malcy’s Blog – Oil price, Ascent Resources & Gulfsands Petroleum

WTI $35.44 -5c, Brent $38.32 +48c, Diff -$2.88 +53c, NG $1.77 -7c

By Malcolm Graham-Wood

Oil price

Oil is around 50-80c up this morning pushing Brent to within 64 cents of the magic $40 mark which at the moment is still my year end expectation….Whether crude stays firm may well depend on Thursday when the virtual Opec+ meeting called by current President Algeria, takes place. With the KSA pinning its colours to the mast, ie an extension until the end of the year and Russia intimating in recent comments that it would prefer a 1 month extension I suspect that only the former would keep the upward pressure intact…

Between then and now of course we have the inventory stats where analysts are forecasting a build of around 3m barrels, in itself that wouldnt be so bad in what is about the worst time of the year for stocks. Its Tuesday so it’s retail gasoline day and unsurprisingly prices continue to rise albeit modestly. The USA average price for a gallon of gasoline is now $1.974, up marginally w/w and a more significant 18.5c m/m, but still 83.3 cents lower than this time last year at the beginning of the driving season.

Ascent Resources

Ascent has received a court ruling with regard to the requirement for an EIA in order to re-stimulate the PG-10 and PG-11A wells in which the ruling is that an EIA is required. The company is already in the process of beginning preparations for submission of an EIA alongside the stimulation and field development planning which was recently kicked off.

To be honest the new permitting improvements seem to be already having an impact given how quickly this appeal was closed out which is good for everyone, indeed I am sure that EIA’s are a normal part of such business and I would be surprised if the company wasn’t already on the case. Indeed this is a new era for AST and all will benefit from processes being brought in and indeed maybe justifying the legal claim.

Overall these are looking like interesting times at Ascent.  The Company is rapidly becoming a diversified play with huge upside in Slovenia (access either via the legal claim or a more traditional industrial route) albeit slow to monetise, combined with a new and exciting portfolio emerging in Hispanic America.

The timing of the Cuban entry is smart (if the US elections don’t go Trump’s way, it could be a significant turning point for Cuba!) and the need for a second leg to the portfolio is demonstrated nicely with today’s EIA news.

This is one to watch.  Phoenix out of the ashes and all that….

Gulfsands Petroleum

An update this morning from Gulfsands which I still feel has the chance in the longer term to provide significant upside for the patient in search of a ten bagger or similar. Post the Covid-19 pandemic the company has undertaken a thorough assessment of all aspects of its operations even though the virus has had no specific revenue effects on the business.

Even so the company has implemented various capital efficiency measures to ensure it ‘survives and thrives’ when the crisis is over. These actions include permanent and temporary measures such as salary cuts for all staff and directors to assist the group. Gulfsands MD John Bell commented 2019 was a year of considerable progress as we simplified the Group and focused the business on our core asset, Block 26 in North East Syria, where net 2C contingent resources increased from 77.4 million boe to 83.7 million boe.  Block 26 has the capability of producing for over 20 years at above 50,000 boepd from existing discoveries with a very low cash break-even, as well as having significant potential upside. We have reduced costs and are well funded for the medium term as re-entry planning gathers pace.”

This gives a good idea of the massive potential from Syria for GPX could be in the longer term, also I’m quite surprised that they have found much more in the way of ‘efficiency measures’ as it has been one of the tightest run ships in the sector in recent years.

Malcolm Graham-Wood

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Disclaimer: Malcy’s Blog is provided for general information about the international oil and gas industry and the companies that operate within it. It does not constitute investment advice and Malcy does not buy or sell shares, warrants or bonds in any company written about within the blog. Information is taken from publicly available sources and any comment is that of the author who does not take any third party comment in the publication.

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