Malcy’s Blog – Oil price, JOG, Savannah, Eco, Getech, SDX & finally

WTI $52.77 +50c, Brent $55.88 +47c, Diff -$3.11 -3c, NG $2.60 +16c, UKNG 54.53p -7.97p

By Malcolm Graham-Wood

Oil price

Spare a thought for all those business leaders, politicians and all round advisors who are missing out on their week of freebie wining, dining and ‘networking’ in the finest hotels that Dav-oh can muster. For them Covid has only just come home to roost as they suffered the ignominy of listening to Greta Thunberg via virtual link yesterday on the first day of the WEF. No cocktail parties, pressing the flesh with the great and the good or brown nosing enough to get interviewed on CNBC…

Nope, business as usual for everyone this week as oil rallied yesterday after Petro-Logistics said that Opec+ compliance is around 85% with more on the way after Iraq and other countries held back and followed the lead of the KSA.

Finally, retail gasoline price data is out, a gallon of Exxon’s finest will rush you an average of $2.392 which is up just 0.013 cents w/w, 14.9c m/m but still down y/y but now only by 11.4c.

Jersey Oil & Gas

JOG announce a significant uplift in the Buchan oil field contingent resource estimates this morning. Dynamic reservoir modelling has recently been completed, using Schlumberger’s proprietary INTERSECT* high resolution reservoir simulator.  Such new and comprehensive dynamic models provide a robust forecast for the P50 case for the Buchan oil field, having fully incorporated all available subsurface information and successfully history matched 36 years of production data.  This project workstream has now been independently peer reviewed as part of a wider scope reviewing the development concept by Vysus Group, a global engineering and technical consultancy.

This is extremely significant, previous numbers, such as at the 2019 CMD CPR were based on decline curve analysis, but now the company has the advantage of dynamic modelling using SLB state of the art reservoir simulators.

Subsurface highlights from the work show a genuinely game-changing situation for JOG as it concludes its concept selection report which itself completes all the work done over the last year or so including economic modelling ahead of the all important farm-out still scheduled for Q1 2020 and for submission to the OGA with the aim of commencing FEED in Q3 2021

Dynamic reservoir modelling has determined that the P50 estimate of the technically recoverable resources for the Buchan oil field is 126 million stock tank barrels, representing an increase of over 50% on previous estimates derived from decline curve analysis.

The new dynamic model used inputs from the high resolution 2018 PGS 3D seismic survey data, together with the static and dynamic well data and field production history which show that the Buchan sandstone reservoir is a well-connected, dual porosity and permeability system.

Buchan oil quality is light sweet crude at 33.5° API and the expected ultimate recovery factor is 54% of original oil in place, with historic field production having recovered 29% of the P50 STOIIP estimate. Planned future production will be achieved using optimally located deviated wells placed high in the structure with water injection.

This leaves JOG in a very strong position with regard to development of the GBA project, primarily as a result of this increase, the GBA core volume, including the Buchan oil field and volumes from the J2 and Verbier oil discoveries, is now forecast to have 2C contingent resources of 162 MMstb or 172 million barrels of oil equivalent  including associated gas.

Preliminary economics for the GBA core development, which includes Buchan, J2 and Verbier are very encouraging – higher volumes serve to reduce unit costs and drive economic efficiencies and are significantly better than previous market expectations. Meanwhile, the Company continues to advance its technical and economic evaluation work in respect of electrifying the GBA in order to make it a low carbon emissions project.

Andrew Benitz, CEO of JOG, commented:

“I am delighted with the results of dynamic modelling which result in an increase in the estimated contingent resource volumes of light sweet crude in the proven, conventional reservoir at Buchan by over 50%.  These compelling results demonstrate the substantial inherent value of the Buchan field and the wider GBA development.

“We recognised the potential of Buchan at an early stage and have maintained our strategic focus on this area in the heart of the Central North Sea with the benefit of aggregation of high value assets becoming self-evident.  The GBA development project presents a very compelling investment case that we believe will have wide industry appeal.  We look forward to formally engaging with industry in due course and attracting the right industry partnership aligned and committed to the GBA’s future success.”

Those who have maintained the faith with JOG have been rewarded with a more than doubled share price since the April oil price fall and this news today is more than encouraging.  JOG has moved at pace from the days of early exploration into a successful strategic aggregation of assets to build a material area hub development that is now forecast to have 2C contingent resources of 162 MMstb or 172 million barrels of oil equivalent including associated gas for the Buchan oil field, J2 and Verbier oil discoveries, in addition to significant exploration upside all within the GBA.

JOG has done a great job in getting to this important stage in the GBA development and with imminent concept select and launch of the Farm-out the next few months are going to be very watchable. Investors can rest assured that this is just the beginning of this particular journey.

Savannah Energy

After yesterday’s trading update I have managed to get an interview with CEO Andrew Knott, here is the link.

Core Finance CEO interview: Andrew Knott, Savannah Energy

Eco (Atlantic) Oil & Gas- Here comes the sun…

Eco has announced that it has formed a new company “Eco Atlantic Renewables” with Nepcoe Capital Partners Ltd. (“Nepcoe”), a renewable energy developer and investment company, to source, acquire and develop an exclusive pipeline of potential high yield solar projects.  Eco owns 70% of Eco Atlantic Renewables and the remaining 30% is owned by Nepcoe.

Eco Atlantic Renewables has been formed to source, acquire, and develop exclusive renewable energy projects and to create value through low cost, high yield, solar power development. Investment into renewables, alongside its principal oil and gas exploration business, will see Eco Atlantic becoming a diversified, growth oriented energy company.

Eco Atlantic Renewables has been established to capture opportunities in the shifting energy market and subsequent attractive economics driving global solar photovoltaic (“PV”) energy demand growth. Eco Atlantic is providing a shareholder loan of up to $6m for its 70% stake in Eco Atlantic Renewables.  It is anticipated that the Loan will be repaid in full upon a monetisation of the solar PV assets, from future third party investment into Eco Atlantic Renewables or from future project cash flows.  Eco will maintain its majority interest following repayment of the Loan.

Through the joint venture with Nepcoe, Eco Atlantic Renewables has secured exclusivity to a potential pipeline of more than 2 Gigawatts (“2 GW”) of prospective PV projects, mainly in Southern Europe’s high solar hours’ sunbelt. First acquisition of a fully licensed and permitted ready-to-build project for an aggregate consideration of c.€1.1m paid by Eco Atlantic Renewables using funds available from the loan completed on 25 January 2021.  The acquired 10.57 MW Kozani project in Greece has a secured feed in tariff and management estimates an internal rate of return (“IRR”), once built, of c.9% unlevered and c.13% levered.

Subject, inter alia, to the availability of follow on project finance, Eco Atlantic Renewables is targeting the development and construction of c.100 MW of operating grid connected projects, in addition to securing the rights for an additional c.800 MW currently in development, in its first full year of operation. Eco Atlantic Renewables will have Executive Board oversight by Eco Atlantic and is planned to be independent in terms of operating management, governance, and future equity and customary project debt finance funding needs.

As part of the wider financing strategy for Eco Atlantic Renewables, Eco Atlantic will assess the potential for its shareholders to participate directly in the growth of Eco Atlantic Renewables.

Probably of more significance, Eco Atlantic will maintain its focus on oil and gas exploration as it continues to see considerable upside in its prospective hydrocarbon assets, offshore Guyana and Namibia, and is committed to explore and deliver value from these exploration assets as soon as possible. However it is still dependent on Tullow and once the Orinduik Block Offshore Guyana partners (Tullow Oil and Total) finalise drilling targets selection in Q2 2021 things will look clearer. Having said that, and we may know more after the upcoming Tullow statement, unless the partners issue Tullow with an ultimatum the sun may be the only bright spot for Eco this summer…

Gil Holzman, Co-Founder and Chief Executive Officer of Eco Atlantic, commented: 

 “We are not a management team that likes to sit and wait for outcomes.  Following several months of extensive strategic work and identification of multiple projects by the management team and Board of Directors, this exciting opportunity has crystallised.  Our decision to form this new majority held renewable energy company was partly driven by a lack of oil and gas acquisition opportunities that are as good and as prospective as the ones we already hold. 

 While we remain focused and fully committed to achieving near term exploration success in Guyana and Namibia, we are fully aware of the global energy transition that is firmly underway. The creation of Eco Atlantic Renewables is a clear demonstration that Eco Atlantic is responding to the changing marketplace.  We have structured the new venture in such a way that our oil and gas assets in Guyana and Namibia remain the core of our business, we have retained adequate near term financing and both of our regions continue to demonstrate significant potential for our shareholders. 

 The creation of Eco Atlantic Renewables is very exciting, and the recent shift in energy market dynamics presents compelling, near term opportunities and the potential to grow yet another ground-breaking independent energy company.  Eco Atlantic’s skill set is diverse, and we are leveraging our capacities, knowledge and experience of integrated project management, land and lease management, offtake agreement negotiations, and contractual negotiations and financial structuring within the public and private financial sector.

 Combined with our highly prospective exploration acreage and our discoveries in Guyana, Eco Atlantic has added a highly relevant and attractive asset to its portfolio.” 

Whilst I can’t argue with the above I don’t think that the market are going to ascribe much to its darling exploration play going into solar power, however attractive it looks. With $55 oil and a fair wind, shareholders should be expecting Guyana action this summer followed by some franking in the value of its Namibian portfolio as the big players start the drill bit turning there. Time for Eco and Total to start playing hard ball methinks…

Getech

Getech has announced the signing of two exclusive strategic partnerships, which together position Getech at the forefront of work to establish a national network of hydrogen generation, storage and retail hubs.

An exclusive strategic partnership has been signed with H2 Green Ltd which is focused on establishing a network of large-scale hydrogen generation, storage and refuelling hubs to support public and commercial transport fleets. Getech will leverage its expertise through the application of complex geospatial analytics to help H2 Green locate and build a network of hydrogen hubs.

The partnership is strongly aligned with Getech’s strategy to deliver sustainable, diversified growth, by utilising its core skills and technologies to advance the energy transition. The strategic partnership includes an exclusive option for Getech to acquire H2 Green for total consideration of up to £1 million, with payment terms structured around commercial and financial performance milestones and with a material equity component to align H2 Green management with Getech shareholders.

Getech and H2 Green to also collaborate on new product ideas and optimisation services to help customers commence their transition to net zero. Stuart Paton (Getech Chairman) and Jonathan Copus (Getech CEO) appointed to the Board of H2 Green as Chairman and Non-Executive Director respectively to further strengthen the relationship and provide strategic input.

Jonathan Copus, Chief Executive Officer of Getech commented:

“The hydrogen economy is an exciting growth area where we see material potential to apply Getech’s geoscience and geospatial expertise in work for existing and new energy customers.

 We are therefore delighted to be using our core skills to support the creation of a national hydrogen infrastructure. The signature of an exclusive strategic agreement with SGN stands as testament to the success of our collaboration with H2 Green.

 The opportunities for our skills and technologies to generate revenue whilst supporting the decarbonisation of the transport sector are significant. Getech’s option to purchase H2 Green is illustrative of the ambition, scope and materiality of the Group’s zero-carbon business development activities. This option provides Getech shareholders with a potential path to capturing transformative asset value, and this is a commercial model that Getech is exploring in other areas of its energy transition work.

 This work also demonstrates Getech’s adaptability and our focus on the broader hydrogen economy including the potential to apply our geoscience expertise to challenges associated with carbon capture and seasonal hydrogen storage.

 Our products, skills and technologies are ready to be deployed in other parts of the energy transition, and we look forward to updating shareholders on further developments in due course.”

SDX Energy

SDX has announced guidance for 2021 with production expected of 5,620 – 5,920 boe/d which is 1–6% lower than 2020 production, excluding the assets divested in 2020 due to expected production downtime from the planned Central Processing Facility maintenance deferred from 2020, together with compression installation and well workovers. This is partially offset by the incremental contribution of 100% of the working interest production from the recently connected SD-12X well. At West Gharib, development drilling is expected to slow natural decline and in Morocco production volumes are expected to increase as recovery from the 2020 COVID-19 close downs continues.

2021 capex guidance range of $25.0 – 26.5m  predominantly relates to one exploration and one development well in South Disouq together with workovers and the installation of an inlet compressor. Up to five new wells and workovers are planned in Morocco and up to four new wells and facilities upgrades at West Gharib.

Mark Reid, CEO of SDX, commented:

“I am pleased to provide our production and capex guidance for 2021, where after a very solid year of production in 2020, we continue on a similar profile, albeit with some contingency worked in for maintenance in Egypt. Partially offsetting this, I am very pleased to report that Moroccan production has returned to the levels seen before last year’s COVID-19 close down. This year’s expected operating cashflows, together with our existing cash of approximately US$10 million, will provide ample liquidity to carry out a busy drilling campaign of nine to eleven wells targeting exploration and development opportunities in Egypt and Morocco, including the potentially transformational gross 139bcf Hanut-1X well in South Disouq in Egypt and the testing of our newly discovered Top Nappe play in Morocco. Furthermore, we expect that our EBRD credit facility will soon return to US$10 million of availability and thus provide us with additional liquidity if required.”

And finally…

In last night’s FA Cup fixture Spurs waited till late to put the burners on but eventually saw off Wycombe Wanderers 1-4 and have earned a fixture against the Toffees at Goodison on 10th Feb.

Tonight in the Prem the Hammers go to the Eagles, the Magpies host Leeds, the Noisy Neighbours go to the Baggies whilst the Gooners have another go at beating the Saints at their place

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

Malcolm Graham-Wood

Source Link https://www.malcysblog.com/2021/01/oil-price-jog-savannah-eco-getech-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 blog


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