Malcy’s Blog – Oil price, Genel Energy, Longboat Energy, IGas Energy, Gulf Keystone & finally

WTI $76.08 +87c, Brent $78.98 +$1.20, Diff -$2.90 +33c, NG $3.82 +9c, UKNG  207.0p -0.23p

By Malcolm Graham-Wood

Oil price

Straight back in after the new year and it’s an Opec+ meeting today, yesterdays preliminaries appointed the new Secretary-General as Haitham al – Ghais from Kuwait who takes over in August. Today’s meeting is likely to roll over the 400/- b/d number as there is little incentive to listen to listen to the White House and anyway even getting to the quotas this month will be tricky I suspect.

The Iran talks started again yesterday but many watchers think any agreement is far away with even the US saying that Iran were ‘dragging their feet’. Retail gasoline prices are flat ahead of the inventory numbers and confirmation of driving over Christmas and the rig count was unchanged last week.

Genel Energy

Genel has announced that drilling operations on the QD-2 well at Qara Dagh (40% working interest and operator) have been suspended.

As previously stated, the well had been side-tracked in response to encountering more complex geology above the target reservoir than expected. Two further side-tracks have been initiated, but the licence partners have now concluded that it is impractical to continue the drilling operations from this wellbore in an attempt to reach the primary objective because of insurmountable technical problems. The decision has therefore been taken to suspend QD-2, with the minimum work obligation satisfied.

Licence partners Genel and Chevron will conduct a thorough evaluation of the QD-2 well and its results in 2022 to inform next steps on the licence.

Bill Higgs, Chief Executive of Genel, said:

“This has been a very challenging operation, and the decision to suspend drilling at this stage is prudent. It is of course not the outcome that we wanted, but the geological case for Qara Dagh remains intact and attractive. We will work with Chevron to ascertain the best way forward on the licence. In the meantime we will continue working with the community on our social initiatives, as we retain our commitment to the region.”

Not much to add here I’m afraid, it will simply be a question of the teams to get around the table and look at the well data and see if it would be possible and financially wise to drill another well. I’m sure they would love to do it but only if it looks technically rewarding. 

Longboat Energy

Longboat has announced the commencement of drilling operations on the Ginny and Hermine exploration well (Company 9%) in the Norwegian Sea. The well spud on 31st December. These are the first in a high impact, four-well 2022 drilling programme targeting 75 million barrels of oil equivalent net to Longboat.

The Ginny and Hermine prospects are estimated to contain gross mean prospective resources of 41mmboe for Ginny and 27mmboe for Hermine with further potential upside to bring the total to 84mmboe and 45mmboe, respectively. The geological chance of success associated with the Ginny prospect is 27% and for Hermine 22% with the key risks being related to fault seal and fluid phase.

The drilling of the Ginny and Hermine prospects is being undertaken by the West Hercules drilling rig operated by Equinor.  Well 6407/9-13, in production licence PL1060, is targeting both the Upper Jurassic Ginny and the Middle Jurassic Hermine prospects. The stacked reservoirs opportunity is located between the Galtvort discovery and Hasselmus field development.

The well is expected to take up to five weeks to drill with an estimated pre-carry net cost to Longboat of c.$2 million (c.$0.45 million post tax). Equinor Energy AS is the operator with a 31% working interest; the other licensees are OKEA ASA (40%) and Chrysaor Norge AS (20%). An announcement will be made, if applicable, when hydrocarbons are encountered, and/or on completion of drilling operations.

Helge Hammer, Chief Executive of Longboat Energy, commented:

“I am pleased that we have commenced drilling operations on the fourth exploration well in our seven well programme. We are in an active period of drilling with each well having the potential to create very significant shareholder value.

“A discovery in the Ginny and Hermine prospects could be developed rapidly through use of the existing infrastructure, notably through the OKEA operated Draugen platform or the Equinor operated Njord infrastructure.

“With evaluation underway to quantify the upside resource potential at the material Egyptian Vulture discovery, Longboat is now looking forward to drilling Ginny and Hermine as we continue our fully funded programme with the Kveikje and Cambozola wells spudding in the spring.”

Plenty of news to digest for Longboat shareholders at the moment who will be looking forward to success with the exciting portfolio that has been lined up by Helge and his team. I remain confident that LBE will produce above industry returns with the drill bit, they know the area well and the odds are stacked in their favour to outperform the industry and the stock market. 

IGas Energy

IGas is pleased to confirm it has completed its scheduled six-monthly RBL facility redetermination process.  The redetermination exercise confirms £19.3 million of debt capacity.

Cash balances at 30 November 2021 were £3.2 million with net debt of £13.4 million.  216,000 bbls are currently hedged in 2022 using swaps at an average price of $68/bbl and 114,000 bbls using puts with an average guaranteed minimum price, net of premiums, of $44/bbl. 

Commenting, CEO Stephen Bowler, said

I am pleased that we have once again been successful in the completion of our redetermination process.  Our hedge pricing is much improved in 2022 and we continue to progress opportunities to increase shareholder value through the continued diversification of the business into low-carbon energy and on our cash-generating production assets.”

Whisper it quietly but IGas is positioning itself to be a leading player in energy transition and has started with a number of deals that make its ambitions plainly obvious and clearly planning to get bigger and faster. Today’s RBL news is good and the hedging for 2022 is looking better. The shares are half the years peak and deserve to revisit the 30p level.

Gulf  Keystone Petroleum

Gulf Keystone confirms that it has received aggregate gross payments for the combined September 2021 and October 2021 crude oil sales and arrears payments of $89.0 million ($69.7 million net to GKP) from the Kurdistan Regional Government.

The September gross payment of $37.8 million ($29.6 million net to GKP) is comprised of gross $31.6 million ($24.7 million net) for Shaikan crude oil sales and gross $6.2 million ($4.8 million net) in relation to the arrears from the outstanding December 2019 to February 2020 invoices.

The October gross payment of $51.2 million ($40.1 million net to GKP) is comprised of gross $41.6 million ($32.6 million net) for Shaikan crude oil sales and gross $9.6 million ($7.5 million net) in relation to the arrears from the outstanding December 2019 to February 2020 invoices.

Following receipt of the arrears payments, the current outstanding arrears balance is $28.6 million net to GKP related to the January and February 2020 invoices. 

It looks like GKP has had a good month in terms of payments from the KRG, if I didnt know any better I would say that the monthly payments are pretty random, so look smart and say thank you when you get  a big month like this. 

Further to the publication of the Bucket List before Christmas, I did an interview with Jeremy Naylor of IG, the link is below. 

IG Outlook 2022: UK small-cap oil

And finally…

It didnt take long for Ralf Rangnick to find out what was wrong at Old Trafford and they showed it last night losing 0-1 to Wolves.

Tonight at 1130 sees the 4th test in Sydney but with England having already lost the series and The Ashes it is a dead rubber. With only Graham Thorpe around to coach the squad the ‘caged tigers’ as he has called them are on their own. The situation out there is atrocious and almost every fan at home could be a better selector or coach, I certainly could, waking up tomorrow will be with significant trepidation

The opinions expressed here are those of the author

Malcolm Graham-Wood

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


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