Malcy’s Blog – Oil price, IOG, Premier, Reabold, Tower, BPC, President, VOG, Pharos, SDX & finally

WTI $31.50 -$1.48, Brent $33.22 -$2.57, Diff -$1.72 -$1.09, NG $1.84 -4c

By Malcolm Graham-Wood

Oil price

Not much to add really, there is no sign that the MbS v Putin show of strength is going to stop anytime soon although if it goes on for any length of time the ship owners will be the winners (Aramco already contracting in the markets) and US producers particularly in the Permian etc the big losers. Don’t even contemplate thinking about when, or if this will end…

IOG

Patience will likely prove a virtue with iog as they get under way with the serious bits of the Core Project, at present they are fully funded, not producing and investing at a time when their spending  power is most useful. Today they announce a project and corporate update where all work-streams are proceeding according to plan.

In an upbeat statement, at odds with some of the panic displayed in the last few days, iog accept that the world is a bit ‘mad’ but they are in a strong position to move forward with the infrastructure for their project including ongoing detailed platform designs and are ready for pipe-laying in the summer. At Bacton, Worley are  preparing the FEED studies, an experienced wellhead management team has been hired to support the iog in-house team for the 5 well phase 1 drilling programme scheduled for next year and agreement has been reached to buy two subsea wellheads, trees and associated equipment.

With strong progress having been made on the environmental front the EIA should be forthcoming in April and followed almost immediately by OGA approval of the FDP. The company has not lost faith in Harvey and Redwell despite the fact that partners CalEnergy did not take up their option and much work is being done with iog still having faith in the area. After all it would be relatively low risk incremental value that they could deliver here and the well data is proving most instructive I understand.

Finally, with average carbon intensity in the project of a predicted 0.2 kgCO2/boe (the North Sea average is 21 kg) they will genuinely be leading the way in terms of carbon footprint. All this and much more is in a new presentation on the company’s website today, in the meantime iog is extremely well placed in the market due to its timing and that gas is quite possibly going to be higher in a couple of years time than now.

Premier Oil

Premier joins the rest giving current and short term guidance. Production now is above the top end with 30% hedged at $60 and the company retains ‘significant liquidity’ with unrestricted cash of $135m as at the end of February and undrawn facilities of $330m.

Like all companies reporting this week they can find capex cuts, in Premier’s case around $100m is easily identified and at $35 the company suggest be broadly cash flow neutral in 2020 before any positives from the recently announced UK acquisitions or any disposal proceeds of which until recently they would have been confident.

Premier has been hit harder than most in the last week, undoubtedly due to its debt pile and enemy action.  I find it easy to feel some considerable sympathy with Tony Durrant and Richard Rose, for after incredible recent operational success in order to manage and control the borrowing the company was not far away from the light at the end of the tunnel. I believe that they will be able to retrieve this situation although maybe need to take some tips from Alex Salmond who will be in the adjacent court in Edinburgh next week for entirely different reasons…

Reabold Resources

Up next is Reabold who remind readers that they are an investing company although being in resources means they keep that Monika and they have also fallen a short 50% this week. The company are protected though as they say, they participate in projects with low development and operating costs thereby reducing sensitivity to the oil price, just the 50% then which shows how insensitive markets can be.

California is up first where cash operating costs are some $13/boe which makes it profitable and free cash flow positive. RBD also believe that its projects in the UK, Romania and further drilling in California ‘remain highly economic even at current prices’.

Reabold has cash enough to be fully funded for its current work programme and some more, it should be treated as a much more defensive company than it has been in recent days which the market may or may not appreciate in coming weeks.

Tower Resources

Back to West Africa where Tower are preparing to drill an appraisal well in Cameroon and today announce an updated reserves report which whilst not containing new technical information compared with the previous report but the 2020 Reserves Report reflects updated prices and costs reflecting the changes in the market over the intervening 16 months or so.

The bottom line is that as the company says ‘the actual Brent Forward Curve at close of business on 10th March 2020, which is the primary focus of this 2020 Reserves Report, to illustrate the impact of the recent fall in oil prices, and to confirm the economic viability of the contingent resources in the current lower price environment.’ Essentially the report looks at the implications of the lower cost environment with updated schedule and costs and compared with the 2018 report, the NPVs are EMV are a little lower, but according to Chairman Jeremy Asher ‘still very attractive’.

Bahamas Petroleum

I wrote the other day about BPC and that for the first time in many years almost all of the boxes have been ticked for the company to drill a well, today’s announcement manages to lay the blame for a two month delay on the Coronavirus. ‘As a result of the rapidly unfolding impact Covid-19 is having on operations, the commencement of drilling is now anticipated to be in late May/early June 2020 (vs prior estimate of April 2020)’. Shareholders will be pleased to know that farm-out discussions are continuing…

President Energy

President also tucked in with a market update in which it declared that the Argentine Government have placed restrictions on the import of crude oil and products introduced to promote in the domestic hydrocarbon industry as a key building block for the economy.

The company also notes that there is a pressure building to re-introduce a fixed price for oil where in order to provide a solid and less volatile platform for the industry and the economy as a whole, the domestic oil price benchmark was fixed as it was under in similar manner to that which existed under the Presidency of Christina Kirchner, the current Vice-President.

The President statement also states that bank debt has fallen and the remainder is owed to significant shareholders such as Peter Levine and Trafigura and that capex is under review but that President is nevertheless continuing the planning for drilling wells in its value added areas. Peter Levine concludes by saying “As such the recent Government initiative is well timed, appropriate and welcomed.”

Victoria Oil & Gas

VOG has announced that Roy Kelly has been appointed as CEO, he replaces Ahmet Dik in that position and that Roger Kennedy moves back to Non-Executive Chairman. I have known Roy Kelly for a long time and have the highest respect for him and look forward to hearing his views about sorting out the company.

Having said that I have seen the potential upside in Cameroon for many years too and through a number of management changes a number of false starts with respect of VOG. My blog and Twitter inbox stopped being funny years ago after I continued to back the company which I always felt could be sorted and never was.

When I visited the country I could see a monopoly when I saw one, even with the competition from Hydro electric VOG should have been making out like the proverbial bandits but a combination of high costs and bad debts seemed to stifle the chances of profitability. Accordingly I am genuinely confident that Roy Kelly will deliver the goods but I know he won’t mind if I don’t stand on one foot waiting for the evidence.

Pharos Energy

I wrote recently, following the visit to Egypt last month that I would wait until the results came out as I thought that absent an updated presentation the view would remain unclear from Pharos about the situation there. Having seen the results it turns out that was a wise call as the 2019 results on Wednesday had cautious threads running through it , as one might expect under these circumstances.

In the results the company claimed to have low gearing, low commitments and low oil price break-evens for Vietnam as well as ‘flexibility’ offered by deferring some largely discretionary investments in Egypt. Production for the year was for Vietnam 7,081 boepd and Egypt 5,055 making 12,136, however guidance previously issued for Egypt of 6,500-7,500 boepd has been suspended and the scale of the programme there is ‘under review’.

Guidance for Vietnam remains at 5,500-6,500 and whilst the company will pay the 2.75p already declared any further returns are postponed. This is not what the market expected, even under current conditions. Just going back to the visit to Egypt analysts, including myself were wondering just how the most bullish growth estimates might come from, right now it looks like the acquisition route if one is to bulk-up the business and whilst that is perfectly possible on the ground it looked like it needed some proper clout.

SDX Energy

With apologies to SDX, results out on an already crowded birthday didnt go unnoticed but with no blog since have had to wait but I must admit I thought they deserved to go up on the back of it. The Rabul-3 development well came in, as expected but with what looks like better than forecast results. It encountered 116 ft of oil pay in the Yusr and Baker formations with excellent reservoir quality with an average porosity of 21%. This will be connected to the CPR at Meseda and should produce c. 300 bopd, better than expected.

And finally…

This may be the last and finally for a while, today has seen all professional football in England postponed until at least April 3rd Scotland maybe later. The Champions League and Boropa Cup are also suspended.   The test series in Sri Lanka is also cancelled and the IPL start has been delayed by at least a fortnight and Wales v Scotland in the Six Nations rugby is off as well. The F1 GP in Australia has been red lighted and there is no international golf after the Players Championship, the Valero Texas Open and The Masters were all called off.

Cheltenham this afternoon may be the last live sport with an audience you see for a while.

By Malcolm Graham-Wood

Source Link www.malcysblog.com/2020/03/oil-price-iog-premier-reabold-tower-bpc-president-vog-pharos-sdx-and-finally/

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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