Malcy’s Blog – Oil price, Genel, Sound, Pharos, Hurricane & finally

WTI $37.30 -75c, Brent $40.06 -73c, Diff -$2.76 +2c, NG $2.32 -8c

By Malcolm Graham-Wood

Oil price

Oil continues to fall, partly due to the virus and demand worries but inventory stats didn’t help much yesterday. The headline crude build of 2m barrels was to an extent offset by the product draws, 3m in gasoline and 1.7m in distillates partly as some refineries are still shut, hence the capacity utilisation number of 71.8%, down 4.9%

Genel Energy

Genel has announced that it may raise a new five-year bond of up to $300m to replace its existing one that matures in December 2022. the company comments that it had cash in excess of $350 million at 30 August 2020, and net cash of $55 million. It maintains ‘a positive outlook, a strategy of maintaining a robust balance sheet through cycles, and is proactively managing its liquidity runway and debt maturity profile’.

For me this is a very wise move, after all it is a very good to be able to be thinking about this now, and provides comfort to shareholders. It’s a sensible testing of the water while in a position of strength, providing Genel with the financial certainty to deliver what to be fair are exciting growth plans for years to come, hopefully with a reduced coupon. What’s not to like…?

Sound Energy

Following on from recent announcements Sound has issued its six month report in which it shows a reduction of 57% on admin expenses on H1 ’19 and cash at 30th June of £4.2m plus the £3.2m proceeds from the raise in August.

Sound continues to focus on disciplined cost and cash management and Exec Chairman Graham Lyon says ‘ the first half of 2020 was an active and productive period for the Company as it reset its strategy to transition towards becoming a cash generating Company with significant exploration potentia’.

Pharos Energy

Pharos has confirmed that it has received Prime Ministerial approval for the TGT Full Field development plan with drilling to start in Q4 2021 targeting increasing production from 15/- b/d to 20/- b/d.

Hurricane Energy- The kitchen sink and then some…

Interims and a technical update from Hurricane today in which the interim management team have decided to take no risks, ensure that previous management and indeed the Competent  Persons that advised them were working on over optimistic numbers.

First the figures, revenue in the 6 months was $18.9m, operating cash flow was $21.9m and costs were $18.20/bbl down from $24 this time last year. The loss was £307.7m includes a whopping impairment charge of $238.9m for the Lancaster field and a credit of $34m in relation to the fair value of the convertible. Net free cash of $102.6m and net debt of $123.8m.

Lancaster EPS production for September to December 2020 is expected to average 12,000-14,000 bopd, based on production from the 205/21a-6 well on natural flow, expected decline rates and 95% FPSO uptime. This is based on 14,600 bopd in H1 and 12,800-14,000 in H2, break-even is $35..

Here’s the bit I was referring to above ‘Reflecting these new technical interpretations, the Company’s unaudited estimate of 2C contingent resources in the Lancaster field has been reduced to 58 MMbbls remaining from 486 MMbbls in the 2017 CPR’.

It gets worse ‘Accordingly, the Company’s unaudited estimate of 2C contingent resources for the basement alone in the Lincoln field has been reduced to 45 MMbbls gross, compared to 565 MMbbls gross in the 2017 WoS CPR’.

The good news is that there is an ESG report coming out in April which should address a number of key investor questions.

Antony Maris, Chief Executive Officer Designate of Hurricane, commented:

Our near-term priority is further technical work to refine an activity plan for Lancaster, which we expect to be finalised by the end of this year and executed in 2021, with an overarching focus on capital discipline. We will be engaging with all our key stakeholders regarding our forward work programme and financing arrangements and updating the market on these efforts in due course.”

This is obviously even worse than the market and myself were expecting, whether or not the write downs have been overdone, or the possible good news of ‘material upside potential’ in the Mesozoic sandstones at Lancaster or even Lincoln being a success even the prospect of 15/- odd b/d at $40+ seems to be forgotten.

And finally…

The first of the England v Australia ODI’s has just started, batting first the Aussies are 29-1 as I write.

For followers of racing tomorrow is the final classic of the flat season at Doncaster.

And of course the Premier League is back, Liverpool host Leeds but the Noisy Neighbours and the Red Devils are excused due to European cup commitments at the end of last season.

And its F1 time again, this time the caravan has moved to Tuscany and the Mugella circuit, home to Ferrari, lets see

(The opinions expressed here are those of the author, a columnist for Share Talk.)

Malcolm Graham-Wood

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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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