Malcy’s Blog – Oil price, Harbour Energy & finally

WTI $72.85 -27c, Brent $74.81 -9c, Diff -$1.96 +72c, NG $3.26 +7c, UKNG 75.68p +2.68p

By Malcolm Graham-Wood

Oil price

With the July WTI contract expiring it left Brent to hog the limelight and it suitably narrowed the gap. Most news remains good, the API stats showed a 7.2m barrel draw in crude and modest builds in products and the Fed has played down the threat of inflation.

This morning saw excellent economic data from Germany and even France is showing signs of a pick-up. Finally watch out for gas prices, Henry Hub is up at $3.26 whilst in the UK the price is approaching 80p again, gas based companies will appreciate that.

Harbour Energy

Harbour Energy has provided a Trading and Operations Update for the five months to 31 May 2021. This is issued ahead of the Company’s Annual General Meeting, which is being held today at 15.00 BST. Investors will remember that the all share merger between Chrysaor Holdings Ltd and Premier Oil plc successfully completed on 31 March to create Harbour Energy plc; ‘integration progressing as planned’.

Proforma / reported production of 197 kboepd / 162 kboepd, reflecting planned maintenance and inspection programmes deferred from 2020 to 2021 and unplanned outages during the period, 2021 proforma / reported production is now expected to be at the low end of 200-215 kboepd / 185-200 kboepd guidance. Tolmount final commissioning underway with production start-up expected around the end of July, adding 20-25 kboepd (net, Harbour 50 per cent)

Operating costs for the period were $15.7/boe due to lower production volumes, forecast full year operating costs are now $15-$16/boe whilst total capex (including decommissioning spend) for the period of around $330m, full year forecast of $1.1bn unchanged as rig activity increases.

Net debt reduced to $2.7bn (31 March 2021: $2.9bn) with available liquidity of around $1bn, somewhat more comfortable than Premier shareholders were accustomed to and a successful annual redetermination of the Group’s Reserve Based Lending (RBL) facility was completed in June with availability set at $3.3bn until the end of June 2022.

 Linda Z Cook, Chief Executive Officer, commented:

“Since completion of the merger, integration continues apace and we remain excited by the significant cash generation potential of the combined portfolios.

Despite the impact of maintenance programmes and some unplanned outages, our financial performance has been robust, underlining the resilient cash-generative nature of our business. This, together with our strong balance sheet, provides financial flexibility to fund reinvestment in our portfolio, growth and shareholder returns.

With the majority of this year’s planned maintenance shutdowns nearing completion, drilling activity ramping up and Tolmount first gas expected shortly, we look forward to production increasing over the remainder of 2021.”

It is time to look carefully at Harbour and I hope that opportunities to meet the senior management will be presented before long. Indeed a CEO interview sounds like something that the market might like…

Today’s statement is pretty positive, we will have to learn to judge the measure of the comments from the company but the fact that the board remains ‘excited’ about the significant cash generation of the combined portfolios does it for me. The company are starting at the low end of guidance after planned and unplanned outages which may not be a bad thing, from here the only way is up…

There looks to be a decent drilling programme across the portfolio which in itself is a great geographical spread covering many of the world’s most exciting basins. On that note they say that at Sea Lion ‘ a thorough review is underway’ ahead of a decision regarding re-start of the project. At $75 Brent the project must be hugely profitable and if one had to question anything about the Harbour portfolio it would be a lack of genuine growth, Sea Lion would do that in one go, after all at Premier it was always the place where mid-decade onwards growth would be  satisfied.

Harbour looks to me to be an incredible store of value, obviously that is subject to getting to know the management which I need to do, but it certainly looks very cheap and perhaps more important given the current oil price, very lucky…

And finally…

Last  night saw both the final games in Group D and it saw England beating the Czech Republic 1-0 whilst Scotland lost 1-3 to Croatia. None of them know who they will play but for England it will be from the Group of Death…

(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 blog

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