WTI $45.34 -19c, Brent $47.59 -59c, Diff -$2.25 -40c, NG $2.88 +4c
By Malcolm Graham-Wood
The Opec+ Ministerial meeting scheduled for this morning appears to have been pushed back to Thursday after yesterday’s meetings unearthed a few problems from various sources somewhat as expected. The Opec meeting yesterday continues today as they iron out their own, internal numbers. Having said that the gossip is that a deal to delay the 2m b/d for the first quarter is likely after the Opec President said that ‘market concerns are likely to continue through the first quarter’.
Oil is up very modestly this morning as the decision has been put on hold for a couple of days. The US retail gasoline figures showed that an average gallon cost $2.120 last week, up 1.8c w/w, down 0.8c m/m and lower by 45.5c y/y.
Genel announce that payments received from the KRG for October oil sales were a net $2.2m from Taq Taq and $8.1m from Tawke. This makes 8 months of consecutive payments under the KRG payment mechanism.
Gulf Keystone Petroleum
On the same tack GKP have received a $7.5m net payment from the KRG for Shaikan oil sales in October 2020.
A Trinidad & Tobago and Suriname strategy update from BPC this morning, the grass is certainly not growing under their feet as they put their promises into action from the CERP bid. Together with the Suriname strategy they have defined a programme to deliver by the end of 2021.
This envisages a revenue run-rate of >$35 million per annum and an operating cashflow run-rate of >$15 million per annum. This is based upon achieving, or exceeding, a production target of 2,500 bopd, current oil prices, and an extraction cost of <$20 per barrel again as forecast in the bid.
‘A comprehensive 2021 work program has been developed to deliver this strategy, with planned activity across BPC’s portfolio of assets in Trinidad and Tobago, and Suriname’, to comprise a base program of 2 appraisal wells, up to 13 production wells, and up to 2 exploration wells (all subject to permitting). Production and potential development could be further accelerated by adding up to an extra 11 production wells and 1 extra exploration well.
This will initially include the drilling of Saffron #2 appraisal well commencing in February 2021, which, subject to results, would rapidly see BPC seek approvals for a Saffron field development, and with up to 7 production wells to follow through 2021. Also there would be the drilling of appraisal well and an Extended Well Test (EWT) in the Weg Naar Zee Block in Suriname in February 2021, and subject to results, rapidly moving into a wider field development, with up to 6 production wells to follow through 2021.
In addition there is expected to be completion of reprocessing of the entire 3D seismic grid over the highly prospective South West Peninsula (SWP) of Trinidad, high-grading Saffron lookalike prospects for drilling, with up to 2 initial exploration wells by the end of 2021.
So, as promised the team that has moved into CERP has acted quickly, depending on technical outcomes, speed of permitting approvals, and rig and funding availability, an accelerated 2021 work program could include: ‘Up to a further 8 Saffron production wells in Trinidad and Tobago, Up to a further 3 Weg naar Zee production wells in Suriname, and a further 1 exploration well in the SWP’.
Obviously there will need to be funding for all this and BPC suggest a base work programme of up to $20m going up to nearer $35m if everything went ahead at full speed. The strategy will be announced ‘in coming months’ and will cover all potential outcomes.
With regard to the CPR, for BPC’s currently producing assets it indicates that ‘certified net 2P reserves across BPC’s portfolio of production assets in Trinidad and Tobago of 1.29 MMbbl – exceeding BPC’s target for end of 2020 by 30% (BPC calculates this represents in excess of US$50m of undiscounted gross future cashflow at $40/bbl oil), and certified net 2C contingent resources of 7.46 MMbbl across BPC’s portfolio of production assets in Trinidad and Tobago and in Suriname, providing clear direction as to where to apply work and capital during 2021.
Simon Potter, CEO of BPC, said:
“BPC’s stated strategy has been to complement high-impact exploration activities with producing and thus cash generative assets. In this context we are pleased to advise of our upcoming work program for 2021 in Trinidad and Tobago and Suriname, which will see us execute an aggressive program of new wells – exploration, appraisal and production – across the portfolio, evidencing our commitment to operations in those countries.
Our 2021 work program is targeting the addition of entirely new productive capacity, rather than having to expend capital to simply produce existing reserves. Thus, this work is directly in pursuit of our stated production goal, to achieve and potentially exceed a production level of 2,500 bopd by the end of 2021. The program as a whole represents a material increase to that previously undertaken prior to BPC assuming control of these assets.
Systematic maturation of our resources into reserves through technical application and prioritised capital deployment is a core part of our business strategy. The CPR just received is firmly in line with that strategy. In confirming 2P reserves that are 30% in excess of what we had prognosed at the time of acquisition, the CPR provides confidence that our target baseline production is underpinned for a number of years to come, whilst also providing a roadmap by which this number could be grown further.
Our focus for continued resource and reserves growth now turns to the South West Peninsula of Trinidad, where in addition to appraisal of the Saffron discovery we have identified 9 other prospects of roughly equivalent size to Saffron. The Saffron #2 well, targeting a thicker downdip reservoir section, will mature the BPC technical understanding of the Saffron field, and further inform our development plans. We have already awarded a contract for initial 3D seismic reprocessing of the dataset that covers the SWP as a whole, which will underpin maturation and prioritisation of prospects for exploration drilling later in 2021. These activities, once completed, are expected to result in a material contribution to growth of our 2P reserves and 2C resources, with a CPR update targeted for Q2 2021 to incorporate the outcomes of these workstreams, and to inform ongoing work in pursuit of our production target of 2,500 bopd by the end of 2021.”
Late yesterday Providence announced an agreed farm-out of a 50% WI in Barryroe to SpotOn Energy who will fund 100% of the early Development Programme (EDP) including 4 wells and floating production facilities which will have a target start date of late 2022.
In return for warrants for 60m PVR shares, to be granted to PVR at €0.17 per share when the first commercial oil production is lifted from the field SpotOn will finance Barryroe. Providence via Exola will have 40% and Lansdowne 10% throughout the process.
Speaking today, Alan Linn Chief Executive of Providence said:
“The development of the Barryroe field is an exciting opportunity for the people of Ireland and the Barryroe partnership and, as production builds following the implementation of the Early Development Programme (EDP), we will begin to produce indigenous energy and petrochemical feedstocks for the Irish market. Indigenous production will support Irish energy security; encourage the progress of renewable technologies and deliver raw materials used in the production of many of the essential items we take for granted in our daily lives.
Over the coming months, we will be working with the SpotOn Team to complete the transaction; finalise the project schedule; progress the government approvals and develop the detailed drilling and facilities work programmes. I think Ireland and the Cork area will benefit economically from the field development and subsequent production for many years to come.”
San Leon announced this morning that it retains a 4.5% Net Profit Interest over the Barryroe field, ‘one of the largest undeveloped discoveries in Western Europe, with independently audited 2C resources of 346 MMboe and significant further resource potential in additional reservoirs’.
Oisin Fanning, CEO of San Leon Energy, commented:
“The Farm-out Agreement reached by Providence Resources and Lansdowne Oil & Gas with SpotOn Energy and its consortium of international service providers is excellent news for San Leon. The farm-in partners are of the highest calibre and have all the requisite skills to bring a project of the scale of Barryroe into production.
“San Leon stands to benefit from every barrel of oil produced from Barryroe. Given the focus of the upcoming Early Development Programme is on expediting and growing initial production, the proposed programme should prove highly beneficial to San Leon.
“I look forward to drilling operations commencing in 2022 as outlined and wish all parties the best of luck.
An update from Echo today, daily production and operations in the field at Santa Cruz Sur continue with the delivery of produced gas to customers without interruption. Production levels remain, and are expected to remain, ‘in line with the Company’s expectations with average daily production (net to Echo’s 70% interest) from Santa Cruz Sur for the period from 1 January to 17 November 2020 of 1,990 boepd (including 10.3 MMscf of gas) per day’. Total cumulative production from Santa Cruz Sur over the same period net to Echo was 640,606 boe (including 3,329 MMscf of gas).
Since end July 2020, net daily oil production has increased by 109% with cumulative net oil production from this date of 17,859 bbls. As of 17 November 2020, net stock of liquids at the export terminal was 7,963 bbls and net stock in the field was 7,776 bbls.
As of 17 November 2020 total cash held on deposit in the UK and Argentina was approximately US$ 655,000 (unaudited).
With regard to the debt refinancing the company say ‘Following constructive discussions with the holders of the Company’s debt, the Company is delighted to announce that it has entered into an agreement with Lombard Odier Asset Management Limited to conditionally restructure the Company’s EUR 5.0m 8.0% secured convertible debt facility.
‘The terms of the Debt Facility (as previously amended) were announced by the Company on 21 October 2019 and 14 May 2020 respectively and the Debt Facility restructuring will, conditionally: Extend the maturity by 3 years such that the Debt Facility will mature on the last business day of April 2025 (the “Maturity Date”).
Result in no further cash interest payments prior to the Maturity Date, with interest to be rolled up and added to the then outstanding Debt Facility principal at maturity subject to the Lender having the option, from September 2021, to receive interest value in new Ordinary Shares in the Company issued at a 10% discount to the then prevailing share price at the time of the quarterly interest calculation and/or at the Maturity Date.
See the principal of the Debt Facility repayable in five quarterly instalments of EUR 600,000 commencing in March 2024 and the balance repayable on the Maturity Date.
Cancel 74.2 million warrants to subscribe for new Ordinary Shares granted to the Lender on entry of the Debt Facility, replaced by 74.2 million new warrants to subscribe for new Ordinary Shares (the “New Warrants”) to effect a reduction in the exercise price of the New Warrants to 0.3 pence per new Ordinary Share. The New Warrants will vest on the date falling 3 months from Admission and expire on the Maturity Date’.
The Company also announces the successful completion of a fundraise to raise gross proceeds of £0.7 million through the issue of 233,333,333 new ordinary shares at 0.3 pence per share to new and existing investors pursuant to a direct subscription with the Company, conditional on admission of the Subscription Shares to trading on AIM.
The net proceeds of the Subscription of approximately £0.66 million will add to the Company’s working capital resources and be applied towards a range of near term E&P growth projects within the existing portfolio designed to deliver production uplift which will serve as a platform for cash generation to underpin future growth, both strengthening the Company’s balance sheet and also providing support for Echo to pursue value accretive transactions.
Martin Hull, CEO of Echo Energy, commented:
“2020 has presented many challenges, both for Echo Energy and the industry at large. We have taken the opportunity to restructure our balance sheet to provide the platform and breathing space to access the very real opportunities our portfolio holds to deliver meaningful value to our investors. I am very pleased with the progress that we have made in the debt restructuring process and with the positive and constructive discussions we have had with our other major debt holders, who continue to show support.
We are focused on delivering production, cashflow and value growth for all stakeholders and this debt restructuring alongside the introduction of new capital marks a critical milestone on our journey.”
Lewis has tested positive for COVID 19 and wont make the Bahrain GP on Sunday, who might take his seat?
Tonight in the Champions League the Noisy Neighbours are at Porto whilst Liverpool host Ajax.
The Hammers are mourning the loss of favourite Papa Bouba Diop, AKA The Wardrobe’ who has died aged only 42, RIP.
(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
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