Malcy’s Blog – Oil price, Eco, DGO, Falcon, GKP, Reabold Resources & finally

WTI $59.02 -18c, Brent $64.25 -14c, Diff -$5.23 +4c, NG $2.23 – 10c

By Malcolm Graham-Wood

Oil price

Little to add, a drifty start to the week after the recent excitement as Chinese data was disappointing and trade talks continue.

Eco (Atlantic) Oil & Gas

The Orinduik block JV partners have elected to enter the next exploration phase and have submitted to the Government of Guyana, this will see the JV maintain control of the license for a further three years. The work completed so far exceeds all of the original license commitments making this process a no-brainer.

It is however worth making a few points following yesterday’s second profit warning from Tullow which this time included the firing of the longstanding CEO and Exploration Director leaving the company in a massively weakened state. I did not comment yesterday as I don’t write about companies that won’t meet with me, in this case made worse by, despite regular requests, to be put back on the mailing list which I was summarily taken off a while ago. It’s a shame as over many years I have had a great relationship with the company only to be ended when they left the Bucket List after a great run.

Making a few comments on Orinduik though necessitates mention of TLW as with consummate irony it now looks to me that the company is going to have to knuckle down and start delivering in Guyana as it is now probably the part of the portfolio with most upside. That is rubber stamped by the fact that Ian Cloke, EVP, New Ventures remains at his desk as he is the Guyana supremo thus proving that point, all of a sudden Orinduik is the jewel in the crown across the company…

For Eco, and the rest of the Orinduik JV it is very much business as usual with budgets approved for at least two wells next year and live further assessments of the mapping of the wells which will be done as soon as the Carapa-1 well result comes in. The well is still drilling but indications are that it might also be a success, it has been drilling for longer than you might expect if it was a duster and didn’t get a mention yesterday. Should this well come in it would be another massive validation of the area for all concerned. If there is oil there the chances of Orinduik being full of oil suddenly just got a lot better, after all with Carapa being closer to shore that would make Hammerhead, Jethro and Joe look properly pleasing.

So, we can expect an updated CPR from Eco soon after Christmas and my guess would be that it has certainly not written off Jethro and Joe, that would be a serious mistake. Eco has taken collateral damage on both occasions that Tullow has recently warned on profits which is pretty hard lines. Whilst the problems at TLW are by no means over, and a combination of a new CEO doing a ‘kitchen sinking’, as well as that profit warnings normally come along in threes mean that today’s rally is probably a dead cat bounce. It may be that the new management end up trying to sell Guyana which would be odd, it  being now the star in the portfolio, in which case the Total/Qatar cheque book would gobble it up no problem.

Eco shares were at 80p before they drilled anything, they have made two discoveries which whatever the quality of the crude is have material value, raised money and gained institutional shareholders and are now 43.5p, Guyana is still a massive frontier success story which although I’ve said it before makes them very very cheap.

Diversified Gas & Oil

DGO has declared a dividend of 3.5 cents per share for the 3rd quarter. (3Q 2018 3.3c) With an indicated gross yield of around 10% and based on its highly successful model DGO looks very much worth taking a look at.

Falcon Oil & Gas

Falcon has announced that the Kyalla 117 N2-1 well has started horizontally drilling, expect 1-2,000 metres followed by fraccing and production testing. The vertical evaluation shows three source rock reservoirs identified with 900m of thickness in the Kyalla shale formation which is most encouraging.

Gulf Keystone Petroleum

An update on production this morning from GKP where ytd is 32,127 bopd, November being 40,582 and currently 42/- bopd. Well SH-12 came onstream on 13/11 and is currently producing some 4/- bopd. The SH-9 well assessing gas injection potential encountered a faulted section and is being side-tracked which will necessitate a delay to the schedule by around one month, the target of 55/- bopd is now realistically 3Q 2020.

The PF-2 shut-down was safely completed in October and the PF-1 export pipeline is now complete making trucking from Shaikan a thing of the past. With $206m of cash GKP are in a  strong position and the company has today announced another $25m share buy-back programme.

Reabold Resources

Reabold has announced that it has commenced drilling at the VG-6 well at west Brentwood licence in California. Having bought itself in by paying for the first two wells RBD is now only paying its own way, something it has the resources for.

And finally…

The Hammers were happy at 1-0 last night but the Gooners found their feet and ran out 1-3 winners. Tonight Chelski host Lille and Liverpool are at R B Salzburg

By Malcolm Graham-Wood

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