WTI $36.81 +$1.02, Brent $38.97 +$1.03, Diff -$2.16 +1c, NG $3.24 -11c
By Malcolm Graham-Wood
A decent rally yesterday as despite significant uncertainty ahead of today’s US elections and still more COVID cases markets rallied. Equities moved up after Chinese economic data from its factory sector and the the US manufacturing numbers were massively better than forecast.
Weekly retail gasoline price data showed further falls in prices, a gallon in the US averages $2.112 which is down 3.1 cents w/w, 6c m/m and 49.3 cents y/y.
A trading and operations update this morning from Genel who announce that net production averaged 32,140 bopd in the first nine months of 2020, with net production in Q3 averaging 32,210 bopd (Q2 2020: 30,040 bopd). In addition, cash was $341 million at 30 September 2020 ($355 million at 30 June 2020), 2020 capital expenditure is expected to be ‘just over $100m’ in line with guidance with Q4 expenditure of c.$30m.
On operating costs, they are expected to be $3/bbl this year with opex guided down by $5 to c.$35m and further significant cuts in the G&A budget mean that this is expected to be down some 20% on previous guidance of $15m.
A number of operational features mean that Sarta remains on track for first oil in Q4 2020, an exceptional performance under current conditions and the company has lifted the Force Majeure at Qara Dagh. The carbon intensity of the portfolio has been reduced to 7kg CO2e/bbl of scope 1 and 2 emissions following material reduction in flaring at the Tawke PSC through completion and commissioning of the enhanced oil recovery project where the management expressed continued confidence with progress.
During the last quarter successful completion of the issuance of a new $300 million senior unsecured bond with maturity in October 2025 was announced.
Bill Higgs, Chief Executive of Genel, said:
“Genel continues to demonstrate its resilience and ability to be move quickly to navigate changing external conditions. Production has remained robust, increasing quarter on quarter, and first oil at Sarta is also now imminent. Once production from these initial wells has stabilised we expect it to increase our production by over 10%, with potentially far more to come as we appraise what could be the largest field in the Kurdistan Region of Iraq.
Following the successful completion of our recent refinancing, we have the liquidity to fund the rapid development of Sarta in the case of appraisal success in 2021. Genel’s financial strength and disciplined capital allocation means it is well placed to pursue opportunities for value accretive growth and provide returns to shareholders.”
A call with management was very upbeat and not surprisingly as Genel have much good news to report. The news from Sarta is good with a 3 well appraisal programme due in 2021 and the potential for the Jurassic has the makings of another Peshkabir with some 250m barrels being assessed. If all went well an investment decision on this project could come as soon as early 2022.
Genel’s model is firing on all cylinders, the company still expects payment from the KRG but is wisely remaining financially independent with regard to its upcoming and longer term investment decisions but the news from Sarta and potentially from Qara Dagh as well gives me significant confidence for Genel going forward.
IOG has announced that it has awarded the rig contract for its Core Project Phase 1 to a subsidiary of Noble Corporation. This follows a competitive selection process by IOG’s drilling and contracting teams, assisted by well management contractor Petrofac, involving extensive technical and commercial evaluation across several drilling contractors.
‘Noble’s Hans Deul jack-up rig has been selected to drill the five Phase 1 production wells, one each of which are planned at the Blythe and Elgood fields and three at the Southwark field. The fields all lie in 20-30 metre water depth in the UK Southern North Sea (“SNS”). The Hans Deul has a track record of successfully and safely executing wells in the SNS’.
The Phase 1 drilling campaign is scheduled to commence in Q1 2021 and, subject to actual well durations over the five wells, is expected to last into Q2 2022, with First Gas scheduled for Q3 2021. The contract also includes extension options to drill up to two further wells on favourable terms, at IOG’s election.
Andrew Hockey, CEO of IOG, commented:
“We are very pleased to have contracted the Noble Hans Deul rig for our Phase 1 drilling campaign. Noble is a highly experienced drilling contractor and the Noble Hans Deul is both technically and commercially a strong choice, with a safe and successful track record of delivering similar wells.
This rig contract is another key step in ensuring efficient execution of Phase 1 of our SNS Core Project, with optionality for further drilling activity on favourable terms. It also reflects good ongoing collaboration between our drilling and contracting teams and Petrofac, who are the approved Well Operator. We look forward to spudding the first well in Q1 2021.
IOG continue to deliver the goods on their exciting Core Project in the Southern North Sea, news that despite all the COVID related difficulties the company are hitting targets. I’m looking forward to an interview with CEO Andrew Hockey which you will be able to see here shortly.
An operational update from Trinidad and Tobago and Suriname today, in the former they note a substantial increase in field activities, including an additional rig being deployed into the field to further expand workover capability/capacity. Results show that the production decline has been arrested and early signs of sustainable overall production increase are ‘consistent with strategy and plan; target baseline production rate of 500 bopd by the end of 2020, as previously announced, remains unchanged’.
The plans for the EOR projects have been submitted to the Trinidad and Tobago authorities following approval for the CO2 programme and the workovers are starting immediately.
The work programme for the appraisal of the Saffron discovery is under way and the plan is to drill Saffron#2 in 1Q 2021. Interestingly the company note that they have identified ‘multiple prospects across the SWP each which have +10MMbbls of recoverable resource potential, each equivalent in size to Saffron.
In Suriname the drill-plan, work programme and environmental studies for the EWT have been submitted to the authorities with a target date for drilling of 1Q 2021. Elsewhere all is motoring on with the plans for the Perseverance#1 well in the Bahamas as well as looking for a CPR to include Trinidad and Tobago and Suriname in mid-November 2020.
Commenting, Simon Potter, CEO of BPC, said:
“BPC combined its assets with those of Columbus in August 2020 to create a full cycle exploration, development and production business, with a balanced portfolio of assets representing the full maturity and risk/reward spectrum of our industry. Since assuming management of Columbus’ assets, we have sought to leverage our proven operating experience and skills, in pursuit of a simple short-term aim: to deliver cash flow from operations in Trinidad sufficient to cover the local operating costs, and thereafter to ultimately cover the overheads of the enlarged group as we build to material, profitable production.
In the relatively short period of time since assuming operational control, we have been extremely busy in taking the first steps to realising performance improvements in support of this aim. We have moved quickly to increase activity in the producing fields to a level not seen for a number of years, defined the drilling program for Saffron #2, and pulled the levers that we believe will deliver an increase to each of production, cashflow, and the existing resource and reserve base. It is an ongoing process, but we are pleased to be seeing the first green shoots of operational improvement, with arrested production decline and, albeit modest, production growth. Collectively, this gives us great optimism in being able to deliver on our value-creating strategy for the future.
In parallel, we continue to make rapid progress to the commencement of drilling the Perseverance #1 well in The Bahamas before the end of this year. A separate and distinct operational management and execution group remains entirely focused on the successful delivery of this core company objective.”
Clearly much is going on at BPC, I am adding my recent interview with the company in case it has been missed.
TXP has followed up yesterdays announcement in which they started the process of raising money for the drilling programme at Ortoire by confirming that they have raised some $30m (£23.1m) at a modest single figure discount to both the 5 and 10 day VWAP.
Paul R. Baay, President and Chief Executive Officer, commented:
“Following the significant exploration success at Ortoire, which has consistently exceeded our expectations, the Placing will allow us to continue our exploration and development activities we have planned for the Ortoire block, as we seek to bring our existing natural gas discoveries onto production and drill further prospective targets. We are delighted by the support we have received from new and existing investors. We continue to thank our shareholders for their ongoing support, and we look forward to continuing to update shareholders as the exploration program continues.“
Touchstone is now funded for an exciting future drilling up the Ortoire block, I am incredibly confident that money invested yesterday at 95p will be rewarded many times over.
Last night saw two more interesting results in the Prem, at the Cottage Fulham got into winning ways against what was and according to a true Baggies fan ‘an atrocious display’. And the Foxes went to Elland Road and beat Leeds 1-4…
Tonight it’s Champions League with the Noisy Neighbours are hosting Olympiakos whilst Liverpool visit Atalanta.
(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 publication.
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