WTI $66.08 +80c, Brent $69.32 +77c, Diff -$3.24 -3c, NG $2.97 +1c, UKNG 64.34p -1.97p
By Malcolm Graham-Wood
Oil has succumbed to the market panic over inflation, whilst the Fed have said that rates won’t go up until 2023 most either don’t believe that or feel that other measures may be needed to chill the economy a touch. It is difficult not to be an inflation bull when the country is throwing money around like confetti with no seeming end. Oil was a bit better yesterday after a decent if uninspiring set of EIA inventory stats although off the top, today it is down two bucks as I speak.
Genel has, in line with other operators, received a letter from the Kurdistan Regional Government proposing an amendment to the repayment schedule for monies owed. Under the communicated revised payment terms, for each cent above a monthly dated Brent average of $50/bbl, 0.2 cents per paying interest barrel produced will be received towards monies owed (previously 0.5 cents per paying interest barrel). The revised payment terms are stated by the KRG to be a result of the Dated Brent price having consistently stayed well above $50/bbl, and the ongoing challenges presented by the COVID-19 pandemic in Iraq.
The KRG has stated that the amended payment schedule will be applied to the March 2021 invoices onwards, and that payment terms will be 60 days after the submission of invoices. The KRG has also stated that, should markets see substantial volatility, it will re-evaluate this payment model, override payments, whereby Genel receives 4.5% of monthly Tawke gross field revenues, will continue.
Whilst this is disappointing for Genel and all the Kurdistan players it should be taken in context and is not actually a loss of any income merely a short term deferral. This is because the KRG are, like many other countries under pressure from the Covid virus and a modest tinkering with the pay-out formula will help Governmental cash flow in times of austerity.
Indeed the companies operating in-country are financially robust and whilst it is never a valid reason to change policy on the hoof, it was probably not envisaged to see nearly $70 oil when the plan was put in place, a price that has in some places quadrupled company pay-outs.
For Genel it should not have any material effects, they have a very busy few months ahead including a potentially bullish drilling programme, the production profile looks good and finances are strong, investors should bear in mind when worrying about today’s share price fall that the shares are ex dividend some 10 cents. I remain confident that Genel remains in a very strong position, indeed the fact that this move has been made as oil approaches $70 should and could be read as a positive.
A Saffron update this morning from BPC, mobilisation of the rig to site is complete and all remains on track for the planned spud date of 23rd of May.
The company has also appointed Robert Riley as a Non-Executive Director, he is the former Chairman and Chief Executive Officer of BP in Trinidad and Tobago, has agreed to join the Board of the Company as a Non-Executive Director, effective subject to customary new director due diligence, consistent with the Company’s forward business strategy of seeking to grow production and cashflow primarily from assets in Trinidad and Tobago.
Bill Schrader, BPC Chairman said:
“As previously advised, we are focussed on resetting the Company and positioning it for future value growth, consistent with a simple strategy: increasing production and generating cashflow. At present, all of our production and most of our near-term production growth activities are focussed on assets in Trinidad and Tobago. It is thus with great pleasure I can advise that Mr. Robert Riley has agreed to join the Board of the Company, subject to completion of normal onboarding processes. Robert brings a wealth of industry, legal and commercial experience, and specifically in regards to the oil and gas sector in Trinidad and Tobago, having held a number of the largest and most senior sector roles in that country. We expect that Robert, together with Stephen Bizzell who as previously advised will also be joining the Board subject to completion of normal onboarding processes, will be able to make immediate and extremely valuable contributions to the effectiveness of our operations going forward. On that front, the state of operational readiness of the Saffron-2 well continues to advance at pace, with all the rig components arriving on site and currently being assembled.”
Angus has announced that the Loan Facility, conditional only on the setting of the hedge, regulatory approval of the royalty arrangement by the Oil and Gas Authority and a handful of administrative provisions, has now been signed between Angus and Saltfleetby Energy Limited, as Borrower and Guarantor respectively, and Mercuria Energy Trading Limited and Aleph Saltfleetby Limited, as the co-Lenders. As previously notified, the Company awaits approval of the Field Development Plan from the OGA although this is now expected to follow the initial drawdown under the Facility.
The terms of the Loan Facility remain substantially unchanged from those advised in our RNS of 30 November 2020 with changes to the profile, but not amount, of shares issued to Lenders, to be detailed at drawdown, and tighter provisions on change of control.
George Lucan comments: “We are delighted to have signed the Loan Facility and when completed to have the financial support of Aleph and Mercuria, which combined will unlock the substantial shareholder value of the Saltfleetby Gas Field as well as provide financial, commercial and technical support for Angus’s energy transition plans. Attaching this calibre of funders demonstrates the quality of the Saltfleetby asset and further validates the strategic direction of the board. I look forward to continuing to work closely with our new funders as we develop this field and our other projects.
We have continued to progress the detailed engineering design for the rehabilitation of Saltfleetby during the documentation process and have decided, with the support of the Aleph and Mercuria, to drill the third production well at Saltfleetby before reconnecting the two existing gas wells. This will allow us to begin with the daily plateau production of 10mmscf originally envisaged by the Competent Person’s P90 case, immediately after the new processing facilities have been commissioned and as such it is expected that first gas will begin in Q4 2021. The timing of this will allow us to benefit immediately from winter gas prices at the capacity rate of the facility thus enhancing the initial revenues from the field.
Concurrently, we are progressing our potential geothermal projects in the South West, while evaluating other acquisitions and renewable opportunities with our new funding partners and investors. I look forward to updating the market on this in the coming months.”
With Saltfleetby now funded and ready to go investors can now have decent visibility to first gas in Q4 2021, it wasn’t always this good looking. George Lucan and his team have delivered operationally and now financially and the shares should soon start to move up ahead of first gas.
Gulf Keystone Petroleum
Following the previously announced resumption of the Company’s annual dividend policy and declaration of a $25 million dividend, Gulf Keystone will be seeking shareholder approval at the Annual General Meeting on 18 June 2021 to pay total dividends of $50 million, comprising the $25 million annual dividend and today’s announced $25 million special dividend.
GKP has inspired timing with this announcement coming on the same day that the KRG has changed the payment scheduling thus taking away any defence my Lord…
IGas announce today their AGM statement as well as a board change. In current trading they comment ‘We continue to anticipate net production of between 2,150-2,350 boepd for 2021. As at 30 April 2021, cash balances were £2.4 million and net debt was £12.8million. As at 4 May 2021, the Group had hedged a total of 270,400 bbls for the remainder of 2021 at an average floor rate of US$44/bbl and 60,000 bbls for the first quarter of 2022 at an average rate of US$60/bbl’.
With regard to geothermal the company comment ‘whilst we await planning approval for the Stoke-on-Trent project, we are making progress on securing specific sites at high potential locations as part of our development pipeline and look forward to providing further updates. We continue to have positive discussions with Government regarding future financial support for our geothermal projects.
A new industry report on the economic and environmental importance of UK deep geothermal resource by the ARUP Group and the Association for Renewable Energy and Clean Technology (REA) is published today. The Report estimates that, with immediate government support, the UK could deliver 360 geothermal projects by 2050. This would include an estimated 12 projects being operational by 2025 with 1,300 jobs created and c.£100 million of investment flowing into the UK economy’.
‘The Committee on Climate Change stated that only decarbonisation of heat in the UK could deliver the major reduction in emissions needed to meet the 2050 net zero target. By delivering on average 12 heat projects per year over the next three decades, the UK could expect to generate up to 15,000 GW hours (GWh) of heat from geothermal, annually by 2050’.
IGas has received notice of intention to resign from Hans Årstad, Non-executive Director, from the board of directors of the Company with effect from the conclusion of the AGM. Hans leaves with our thanks for his contribution.
Cuth McDowell, Interim Non-executive Chairman said:
“The ongoing challenges of COVID-19 mean that unfortunately, I am again unable to address our AGM as an open-door meeting but look forward to some measure of normality returning for next year.
In a year of unprecedented disruption caused by the ongoing pandemic and associated lockdowns, much has been achieved thanks to the professionalism and hard work of the IGas teams and our partners and suppliers. While the rollout of vaccines is a welcome sign of a return to some semblance of normality, our sympathies are with anyone who is suffering and who may have lost family or friends during the crisis. The health and wellbeing of our staff remain the Company’s overriding priority, while ensuring that the business continues to operate safely and effectively.
Reflecting on our 2020 results, despite highly challenging circumstances, the Company has continued to make progress in a number of key areas and to develop its business strategies. We delivered production within our revised guidance, brought our waterflood projects online and completed the pivotal acquisition of GT Energy, the UK developer of geothermal energy.
The conventional business is continuing to deliver very well for IGas right now and the portfolio is delivering the goods. High oil prices will contribute to revenues adding to the cash. I’m beginning to getting a warm feeling about IGas as the geothermal opportunities build and with the Stoke planning imminent it may be time to go and see the company…
1 Q figures from Touchstone achieved quarterly crude oil sales of 1,297 barrels per day (“bbls/, a 2 percent increase relative to the preceding quarter and an 18 percent decrease relative to the 1,589 bbls/d produced in the same period of 2020.
Executed an incident free $2,954,000 exploration program, primarily focused on production testing the Chinook-1 and Cascadura Deep-1 exploration wells drilled in the fourth quarter of 2020. Realised crude oil prices averaged $52.43 per barrel, representing a 39 percent increase from the fourth quarter of 2020 and a 14 percent increase from the first quarter of 2020.
The company generated an operating netback of $21.98 per barrel from an average Brent price of $61.04 per barrel, the highest operating netback reported since the fourth quarter of 2019. this enabled maintained financial flexibility, exiting the first quarter with cash of $15,451,000, a working capital balance of $10,552,000 and $7,500,000 drawn on our $20 million term credit facility, resulting in a net surplus of $3,052,000.
Paul Baay, President and Chief Executive Officer, commented:
“Our financial and operational results reported in the first quarter of 2021 were in line with our expectations, reflecting our continued focus on the Ortoire exploration program. We proceeded with many aspects of the Ortoire exploration program, highlighted by testing the Chinook-1 and Cascadura Deep-1 prospects. While the results at Chinook showed evidence of light oil rather than natural gas, we were excited to identify a large distinct, separate sheet of natural gas at Cascadura Deep-1 to sit alongside the already significant find made at Cascadura-1ST1.
Our priority is to bring our Coho and two Cascadura wells onto production as soon as possible while also drilling Royston-1, our final Ortoire licence commitment well. We are excited to commence our transition into a natural gas producer while continuing to progress our exploration program in Trinidad. The Company is well positioned financially, and we look forward to updating shareholders in due course.”
At 100p TXP are well off their highs mainly due to the ‘disappointment’ at Chinook but elsewhere the company has continued to deliver value which is accentuated by comments above with regard to ‘transition into a natural gas producer. The shares could easily return to previous highs but a TP of 150p is not asking too much.
Helium One Global
Helium One has announced the official award of an Environmental Impact Assessment (EIA) Certificate for its planned exploration drilling programme at Rukwa Project (100%) in Tanzania. The official award of the EIA certificate, which was signed on the 4th May, means that Helium One has all necessary permits in place to commence exploration drilling in early June.
David Minchin, Chief Executive Officer, commented:
“We are delighted to have officially received all the necessary permits and clearances to commence our drilling activities. This will allow us to start our maiden exploration drilling campaign as planned in early-June.
“The award of our drilling EIA demonstrates the support of the government for our ongoing exploration in Rukwa. Under the leadership of President Samia Suluhu Hassan, Tanzania is promoting itself as a pro-business jurisdiction seeking external investment. President Hassan has publicly declared her support for helium extraction in Tanzania and is working to reduce delays in the development process.
“We are grateful to the Honourable Selemani Jafo for concluding the signature of the EIA as one of his first acts since assuming the role of Minister of State (Union and Environment). Helium One appreciates the continued collaboration and support of the Government of Tanzania, Regional Officials, District and Village Government Councils as we look to deliver our maiden drilling campaign.
“We look forward to continuing to work closely with the community in Rukwa as we commence our maiden exploration drilling campaign in early June.”
HE1 has had a magnificent run recently but encountered understandable profit taking, but even at 18p it wouldnt be expensive in the event of successful drilling. As such it is appropriate to view it as an exploration play with commensurate risks, for me with that borne in mind it is worth the bet. Finally I am hearing continuing good news from the Government in-country.
Last night in the Prem Chelski lost 0-1 to the Gooners showing that the Champions League positions are proving quite some challenge. Tonight Villa host the Toffees and Red Devils supporters have been punished by the authorities for the demo at Old Trafford as they play Liverpool tonight having only played on Tuesday night and before that on Sunday.
The Champions League have also announced that the Final between the Noisy Neighbours and the Chelski will be played at Porto so that fans can attend.
(The opinions expressed here are those of the author, a columnist for Share Talk.)
Website Link www.malcysblog.com
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 blog
If anyone reads this article found it useful, helpful? Then please subscribe www.share-talk.com or follow SHARE TALK on our Twitter page for future updates.
Terms of Website Use
All information is provided on an as-is basis. Where we allow Bloggers to publish articles on our platform please note these are not our opinions or views and we have no affiliation with the companies mentioned