Malcy’s Blog – Oil price, Genel Energy, SDX Energy & finally

WTI $63.69 -$1.77, Brent $66.45 -$1.78, Diff -$2.76 -1c, NG $3.83 -2c, UKNG 100.98p -8.25p

By Malcolm Graham-Wood

Oil price

Oil and markets continue to fall but nothing has changed fundamentally, there is a deal of virus effect in a number of big economies where data has at least in the short term been unfavourable. Add to this the fact that the mighty Fed tipped markets into further uncertainty whilst creating a strong dollar.

Accordingly as I said yesterday, Opec+ will be able to tinker with production numbers which will tighten any market. MbS has warned only this year that it is unwise for your financial health to bet against Saudi Arabia or even Opec+ together. Markets should be worrying about shortages not the other way around.

Genel Energy

Genel has announced that it has received notice from the Ministry of Natural Resources of the Kurdistan Regional Government (‘KRG’) of its intention to terminate the Bina Bawi and Miran PSCs. Genel believes that the KRG has no grounds for issuing its notices of intention to terminate.

In its statement Genel said this morning  that it ‘wishes to continue operations under the PSCs and to work with the KRG on the development of these fields. However, Genel will take steps to protect its rights under the PSCs and, if necessary, seek compensation, including for its material investment. As a first step, Genel intends to issue notice of dispute to the KRG under each PSC, contesting the right of the KRG to issue any such termination notice and, in doing so, trigger an obligation to hold good faith negotiations to resolve this matter promptly and without the need for either party to refer the matter to international arbitration’.

Genel stated at its half-year results, that it found it difficult to engage the KRG under the PSCs to obtain the necessary approvals to proceed with the development of the assets, and every effort has been made to obtain these so that the projects can be progressed. Genel had earlier reached a commercial understanding with the KRG in September 2019 to develop the fields using a staged and integrated oil and gas development concept. In the course of those negotiations leading to updated terms of the parties’ agreements, the KRG confirmed to Genel that it would not serve notice of intention to terminate the PSCs while these negotiations remain ongoing. Genel has subsequently prepared and submitted proposals to the KRG, which honoured the terms agreed in September 2019, each of which would have resulted in the progression of development of the assets.

In my view whilst this is a surprise it may not be much of a shock. Given so much delay in both PSC’s there was little expectation that the developments were set to go ahead anytime soon. Having said that I am assuming that both prospective developments are viable and profitable and that it would be in both sides interest to continue, after all I imagine that plenty of investment of all types has already been committed.

When all is said and done, for Genel the core value in Kurdistan is their oil business and this move is not a distraction to them in any way, in fact with what has been a most protracted brace of projects it could make it a cleaner company. The market will be keen to see ongoing payments, and as confidence in these returns then the value inherent in the oil assets should again reassert itself.

SDX Energy

In its 6 month figures today SDX announce that netback was US$22.1 million, 26% higher than the Netback of US$17.6 million for the six months to 30 June 2020, driven by net revenue increase of US$5.2 million due to a $1.2 million higher revenue at West Gharib as lower production (2021: 516 bbl/d, 2020: 647 bbl/d) was more than offset by higher realised service fees (2021: US$51.10/bbl, 2020: US$30.18/bbl).

$4.4 million higher revenue in Morocco due to increased production following strong demand rebound following COVID-19 shutdowns in early 2020 and an additional factory being supplied (2021: 993 boe/d, 2020: 707 boe/d). Revenue was further boosted by higher prices due to the strengthening of the Moroccan dirham and the additional factory taking gas at a higher price than the contractual average; offset by

$0.4 million lower South Disouq revenue due to lower production (2021: 4,422 boe/d, 2020: 4,825 boe/d) as a result of natural decline at several wells and downtime for workover activity, partly offset by new production from the SD-12X well and a higher realised price for condensate.

Operating costs increased by US$0.7 million from the prior period due to increased well management costs at South Disouq and a greater number of wells producing in Morocco, partly offset by lower costs at West Gharib due to cost savings and lower workover activities.

Mark Reid, CEO of SDX, commented:

“I am very pleased to report first half 2021 results that show strong growth in revenue, netback, EBITDAX and operating cash flows versus the same period in 2020, as well as ending the period with a strong liquidity position. The producing assets in Egypt and Morocco are performing well and we remain above our mid-point guidance for the year. Our drilling activities have yielded three successful wells in Morocco, all of which are now onstream and contributing to cash flow, and one at South Disouq, which is due to start up shortly. As previously announced, whilst the result of the Hanut-1X well is disappointing, I remain positive about the remaining prospectivity in the area which has not been materially impacted.”

SDX has its conference call at 3pm this afternoon, an August weekend and I hope to be on it…………………..

And finally…

Last night in the Boropa Conference League FK Qarabag beat Aberdeen 1-0 whilst the mighty Saint Johnstone got a useful 1-1 at LASK and Spurs went down 1-0 at Paços de Ferriera.

This weekend in the Prem, Liverpool host Burnley, the Magpies go to the Villa, the Eagles host the Bees, Leeds entertain the Toffees, the Canaries go to the Noisy Neighbours and the Seagulls host the Hornets, all tomorrow. On Sunday the Saints host the Red Devils, Spurs go to the Wolves and arguably the big game of the weekend is the Gooners hosting Chelski.

The York meeting continues with the Ebor, with racing at Sandown as well.

In cricket The Hundred finishes tomorrow.

And the rugby down under has been hit by the virus too, the All Blacks v the Wallabies has hit the deck as has the Springboks fixtures but the Pumas play the Springboks tomorrow.

The opinions expressed here are those of the author

Malcolm Graham-Wood

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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


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