Malcy’s Blog – Oil price, IGas Energy, Lamprell & finally

WTI $41.90 -2c, Brent $44.29 -3c, Diff -$2.39 -1c, NG $1.68 +1c

By Malcolm Graham-Wood

Oil price
Most so-called experts in the sector are just guessing as was proved yesterday when the inventory stats came out, they were a different sign than forecast by the teenage scribblers. Expecting a draw of 2.1m barrels the actual number was a build of 4.9m not dissimilar to the sign on the API numbers the night before.

Perhaps more importantly, the gasoline number was a draw of 1.8m barrels on a lower refining capacity utilisation of 77.9%. With a slight imbalance between gasoline production and demand, 9.1m b/d plays 8.6m b/d, there will inevitably be a build in gasoline stocks if driving slows down due to the virus.

Many other ‘gurus’ on the sector are also regularly wide of the mark often going for headline numbers. One really good guy is Ed Morse at Citi, who gave a great interview on CNBC a few days ago. Finally the ongoing weakness in the greenback, partly due to the EU handouts and of course partly due to states like Texas appearing to back Biden, see my recent piece on ‘Turkeys voting for Thanksgiving’….

IGas Energy
IGas has announced a Waterflood projects update ‘despite considerable challenges related to the Covid-19 pandemic’ and that they have commenced water injection at their Scampton North C-site on schedule and on budget.

‘As well as increasing oil production, the in-field pipeline and a new Separation facility at the Scampton North C-Site will provide greater efficiency and environmental improvements by reducing venting, the need to truck water to the Welton Gathering Centre, as well as increasing the amount of gas available for power generation.

D&M give the company 180 Mbbl of incremental 2P reserves and the Company’s mid case economics for the project have an IRR of over 40% and an NPV of £2.5m at a l/t $55 pb. There is also more to come at the Welton field late summer 2020 where the company’s estimated base-case project economics have an IRR of over 100% and a NPV10 of c.£7.0 million again at $55.

CEO Steve Bowler commented ‘This is an excellent operational achievement by the team against a difficult backdrop and is a material advancement in developing our 2P reserves. Projects such as these provide strong economic returns even at these low oil prices, with environmental benefits, and continue to demonstrate the value of our producing and development assets’.

What’s this good news from the east? A trading update from Lamps where ‘ a strong operational performance’ is announced with EBITDA H1 breakeven, net cash of $71.4m as at end June, a backlog of $580m (was $470m at end Dec) and a bid pipeline of $5.5bn at the end of June.

The success is put down to the company’s 3rd offshore wind project, digital aspirations have been advanced with partner Injazat and they have submitted a number of proposals for Saudi Aramco’s LTA during the period.

Lamprell is a peculiar beast that I have watched for many years, in a nutshell it is a fine company with top notch facilities and a great workforce available at the drop of a hat. My rule of thumb is that I have rarely seen such a cyclical play in the services sector which itself is famed for cyclicality and it looks like this is just the time to reappraise Lamprell…

And finally…
Last night in the Prem the Red Devils could only draw 1-1 with the happy Hammers and with Chelski losing 5-3 at Fortress Anfield the Champions League places will be hard fought on Sunday.

A shortened Major League Baseball season begins this evening as the Yankees take on the reigning champ Washington Nationals and the Giants face the Dodgers. The season has been reduced from 162 games to 60 and the postseason should go ahead as usual through October. As they are not allowed in the stadiums, baseball fans across the country will have to settle for booing the Houston Astros from the comfort of their own homes.

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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