Malcy’s Blog – Oil price, JOG, Echo, SDX & President Energy

WTI $31.96 +31c, Brent $34.65 -16c, Diff -$2.69 -30c, NG $1.83 +5c

By Malcolm Graham-Wood

Oil price

Would you believe it, WTI expired with a whimper not a bang, few injuries were reported as the market was left to the professionals rather than the cowboys. At these prices it is probably fair to expect the market to take a breather before some more concrete stats, maybe the EIA numbers this afternoon may help.

The API numbers after the close seemed better than I had expected especially in crude where the draw was unexpected in particular at Cushing, as for gasoline it drew slightly less than the whisper but this weekend, containing the Memorial Day holiday as it does will be much more important and relevant.

Jersey Oil & Gas

JOG has announced the completion of the acquisition of the operatorship and 70% WI in licence P2170 for two milestone payments and a royalty based on volumes produced from the Verbier oil discovery but there are no upfront payments. This is incredibly good value to JOG as this will be developed as part of the huge Greater Buchan Area which also benefits from ‘multiple material exploration prospects’ that have high value potential through tie-backs to the new GBA hub.

JOG CEO Andrew Benitz commented “I am pleased that JOG has completed this important step to acquire an additional interest and operatorship in the Verbier discovery together with material exploration upside to facilitate our plan to develop Verbier as part of our GBA development.” 

JOG shares have just started to outperform and for good reason, while it remains funded through 2021 and with so much upside potential it only takes one partner to see the same upside to join in with. Don’t forget, this company has a market cap of only £20m, any realistic long term valuation of its acreage would dwarf that number.

SDX Energy

SDX has announced Q1 production of 8,061 boe/d which is at or exceeds guidance. South Disouq was ahead of expectations where of course two wells were drilled, one of which was extremely successful and will be tied in next year, the other a duster. A good call was to drill the successful well 100%…

In Morocco the company has drilled 7/9 of the current programme with one remaining to be tested and the final two wells won’t be drilled. Also in Morocco the three clients who fell away due to COVID-19 have returned to the fold.

Echo Energy 

An Argentina update today from Echo where they state that daily production and operations in the field have continued uninterrupted delivering gas to customers. Production levels are in-line with expectations and ytd output is 310,474 boe @ 2,250 boe/d.

The company is assessing  the positive impact of the price support measures including the prospect of increasing oil production from their shut-in wells. The company confirms that it has secured extensions or volume increases to existing contracts with two key gas customers. As a result the weighted average contracted gas sales price for these months, of US$3.56 per mmbtu (where applicable, calculated with the official exchange rate of the Government of Argentina), is expected to be 41% higher than the weighted average contracted price achieved in April and calculated on the same basis.

With the change in VAT status of the subsidiary which holds a 25% interest in the Santa Cruz Sur assets, with effect from 1 April 2020, now means that ‘VAT retention on domestic sales revenues has  been reduced to 10.5%, boosting revenue recovery for Echo Energy TA Op Limited on all domestic sales by 10.5%. A further change in the registration status is in progress so that the subsidiary will no longer be required to pay VAT retentions on invoiced domestic income, as is now the case for Eco Energy CDL Op Ltd as announced on 25 March 2020.’

Both these factors are really helpful to Echo and as Martin Hull, Echo CEO states ‘ The extension of contracts with two key customers, at a premium to the April price, highlights the demand for our produced gas and provides a considerable boost to near term revenues.
We have been working closely with the local tax authorities for a number of months to secure the change to the VAT status for our Eco Energy TA Op Limited subsidiary and this will positively impact cash flow.’

President Energy, this was in yesterday’s blog at the last minute, it was tagged but not in the header.

President waited until the shares were up 25% this morning before confirming press reports that in Argentina the Government has announced a fixed oil price of $45pb, it is clearly important not to pre-judge such press reports. This clearly has an important and positive impact on PPC and importantly following a period of lock-down that the country is emerging from.

The key for President is clearly demand without which any fix of the oil price would be negated and the country does appear to be exiting the COVID-19 lock-down well with many industries now back at work in many provinces, road traffic materially increasing and demand for hydrocarbons showing increases. With a market cap of only £24m these shares are still massively undervalued, as I have said for some time Peter Levine is building a substantial business the market has yet to understand.

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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