WTI $80.86 +$3.05, Brent $81.99 -$2.73, Diff -$1.13 +32c, NG $5.67 +13c, UKNG 193.1p +5.11p
By Malcolm Graham-Wood
Opec+ must have thought that their many prayers had been answered when yesterday the EIA put out a bearish set of inventory stats, more than likely to be a one-off, that will in hindsight have given a green light for the oil cartel’s ongoing strategy.
With a crude build of 3.3m roughly in line with the API, the refinery runs of 86.3% were up 1.2% and saw a 1.5m draw in gasoline stocks itself a surprise but it was the distillate build of 2.2m barrels that surprised for this time of year.
This gives Opec+ the chance to nod through the monthly +400/- b/d and hope that the inventory situation sees demand pick up and rally the oil price again. With BP saying yesterday that they see demand back over 100m b/d I think that The White House may be grumbling about the gasoline price again before the next monthly Opec+ get together.
A 3rd quarter and 9 month trading and operational update from Genel this morning, they reported $187m of cash proceeds received in the first nine months of 2021 ($142m in the first nine months of 2020) and free cash flow before investment in growth was $99m in the first nine months of 2021 ($36m in first nine months of 2020) despite the expected industry-wide reversion to payments three months in arrears by the Kurdistan Regional Government (‘KRG’) meaning seven payments have been received in the nine-month period.
Total capital expenditure of $106m, with $71m spent in the first nine months of 2021 on progressing Sarta and Qara Dagh. Free cash flow of $33m in the first nine months of 2021 (outflow of $5m in the first nine months of 2020). Cash of $277m at 30 September 2021 ($266m at 30 June 2021) and net cash of $8m at 30 September 2021 (net debt of $2m at 30 June 2021)
Interim dividend of 6¢ per share (2020: 5¢ per share), a distribution of c.$18m, to be paid to shareholders on the register as of 12 November 2021.
Net production averaged 32,005 bopd in the first nine months of 2021, with net production in Q3 averaging 30,520 bopd (Q2 2021: 32,475 bopd). By field the numbers are as follows for Gross production Q3 and Net production Q3
Tawke 45,260, 11,310, Peshkabir 59,920, 14,980, Sarta 5,960, 1,790, Taq Taq 5,530, 2,430, making totals of 116,670 and 30,520 respectively.
Following the strength of the oil price, Genel expects to generate free cash flow in 2021 despite material investment in growth, at a Brent oil price of $85/bbl, those barrels generate $28/bbl of cash flow, sufficient to deliver
a material surplus after funding growth expenditure, corporate costs, and interest.
$132m is still outstanding from the KRG for oil sales from November 2019 to February 2020 and the suspended override from March to December 2020 but the inclusion of Sarta production in receivable recovery payments is a positive step and increases the pace of recovery of monies owed.
Following the production performance of Sarta in 2021 being below expectations, and delays in drilling at Tawke, Genel now expects production in the year to be slightly below the 2020 average of 31,980 bopd. 2021 capital expenditure expected to be c.$165m (guidance $150m to $200m), following delays in approvals from the KRG and ongoing supply chain challenges caused by COVID19 leading to some planned activity moving to Q1 2022.
Payments from the KRG continue to be received consistently. Ongoing constructive engagement with the MNR regarding oil operations, coupled with their recent communication urging the industry to increase production, means that we hope to see increased speed of approvals for all operators, facilitating more efficient operations and supporting production rises in the near future.
Bill Higgs, Chief Executive of Genel, said:
“Genel’s low-cost and high-margin production continues to generate material positive cash flow which, coupled with our confidence in predictable payments going forward, allows us to further invest in our growth assets with sufficient surplus to support our competitive and progressive dividend, with the interim dividend increased by 20%.
I am pleased that drilling is back underway at Tawke, and drilling operations at Peshkabir, Sarta, and Qara Dagh are ongoing. We continue to work hard to deliver results from the appraisal programmes at Sarta and Qara Dagh, and remain excited about their potential, although disappointed that the testing programme will be later than we had forecast due to a combination of geological and operational challenges, supply chain issues, and well approval delays.”
Genel is still ticking all the necessary boxes in particular that of serious cash generation which funds growth and shareholder distributions. Operationally there are a couple of what can only be described as irritants, well tests are slightly delayed as the new Oil Minister reviews emissions and other sundry bottlenecks.
Drilling at Sarta and Qara Dagh are also slightly behind as mentioned by the CEO but overall the business is ticking over with Bina Bawi and Miran PSC’s being challenged after MNR action. As has been the case since the oil price picked up Genel is in an extremely strong position as it generates cash, pays ‘sustainable and progressive’ dividends and remains on track for significant long term growth.
Wentworth has announced the appointment of Mr Aaron LeBlanc as Chief Operating Officer of the Company, with immediate effect. Mr LeBlanc is a Canadian national based in London, UK and holds a Bachelor of Science, Geology from the University of Calgary. Mr LeBlanc has 19 years’ experience in the oil & gas sector during which time he has accumulated a wealth of technical and managerial experience as well as a strong track record in Tanzania.
Katherine Roe, CEO, commented:
“We are delighted to welcome Aaron to the team to support our ambition to be a leading, domestic natural gas producer in Tanzania.
Alongside his regional expertise, Aaron has an excellent track record in guiding companies and teams through operational growth and success. I am confident that he will be incredibly valuable to the Company as we continue to focus on the right growth opportunities within our existing asset and across Tanzania.”
Aaron LeBlanc, COO, commented:
“Joining Wentworth at a time when the Company is in the most financially and operationally robust position in its corporate history is a very exciting prospect and I look forward to working with the entire team to strengthen this position even further.
I’ve watched Wentworth transform over the years and I’m looking forward to bringing a complementary skillset, including an in-depth knowledge of Tanzania, to the management team to help maximise the value of Mnazi Bay and to drive new growth in Tanzania.”
Wentworth is in a strong position at the moment having continued to be highly successful at Mnazi Bay in Tanzania and with a strong cash position with no debt is well placed to grow the business from here. Whilst there is no pressure to grow anyway other than organically, the addition of Mr LeBlanc brings another string to Wentworth’s bow and the company remains excellent value.
Cairn plans to change its company name from Cairn Energy PLC to Capricorn Energy PLC, effective from 13 December 2021. The LSE stock ticker will remain as CNE.
This follows an agreement at the time of the Cairn India IPO that the name would ultimately be changed.
Given the recent legislative change in India and our participation in the related tax refund process, we are now putting in place the planned name change.
The new name reflects continuity and evolution: the majority of Cairn’s subsidiaries have been known as Capricorn for some time. It is an established and respected name across our global operations, maintaining stakeholder confidence in our long-standing reputation for responsibility, relationships and respect.
Last night in the Champions League the Noisy Neighbours beat Club Bruges 4-1 and Liverpool beat Athletico Madrid 2-0. Tonight in the Boropa Cup the Hammers go to KRC Genk and the Foxes host Spartak Moscow whist Brondby host Rangers and Celtic go to Ferencvárosi TC.
In the T20 World Cup this morning the Aussies smashed the Bangas and right now its tight between The Windies and Sri Lanka, New Zealand beat Scotland and India beat Afghanistan yesterday.
The opinions expressed here are those of the author
Malcolm Graham-WoodRead More
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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