Malcy’s Blog – Oil price, Petro Matad, Block Energy

Oil price: Just a short word following yesterday’s price movement, initially I thought that the froth would come off as is normally the case but after dropping back to around $65 Brent rallied again, closing at $69.02 up the best part of 15% on the day.

I know there are some very smart punters out there with friends in low places who think that there is so much stock around that oil will fall sharply from these levels but I’m not so sure, the likelihood of a serious retaliation must be very high and I think the risk of shorting crude from here is pretty high, let’s see how things settle down.

Petro Matad

Petro Matad will never go down in history as the luckiest company around and the fact that the Red Deer-1 well has come in dry rather proves that. However, the market has already forgotten the success of last week and that Red Deer was always a much higher risk prospect.

Over at Heron-1 the casing is completed and the well is temporarily suspended awaiting the testing kit to arrive. This looks like being in the next fortnight and testing is scheduled to begin in early October and completed within the month. Meanwhile the rig has moved to the Gazelle-1 well site and will spud before the end of September.

MATD has fallen over 25% this morning back to the recent lows although still well above those of January. Although Red Deer is a disappointment CEO Mike Buck is right to remind investors that it was a higher risk play and I would add that if all goes well at Heron the company could arguably be selling their own crude early next year, now that would be something to write home about…

Block Energy

Block has announced that they have appointed William McAvock as CFO and importantly a member of the board. He has plenty of experience and enjoyed senior positions at Gulf Keystone which would give anyone the experience for Georgia. Appointing an experienced CFO to what is a good quality board is a wise move and hopefully he will be able to add much in the important coming months.

I met with Block CEO last week as I hadn’t seen him for a while and like others had been confused by some of the recent announcements. The 16a well at West Rustavi in Georgia came in with exceptional test rates earlier in the year and was shut-in due to a shortage of storage locally which has since been sorted by leasing at a facility owned by the GOGC. As I understand it the well will prudently ramped up whilst enjoying excellent net backs of some $35 pb at $65 Brent and whilst achieving production rates such as were found on the exceptional test is unlikely, time will tell on the correct rate.

More recently the company announced that a rig had been mobilised to the site of the well 38Z still on the West Rustavi field where a horizontal sidetrack is planned. This well is updip to the 16a well but both are targeting the Middle Eocene formation and will be followed by three other wells across the field. As previously announced the company are in the process of acquiring a 3D seismic survey to accurately establish the optimal locations for production.

It would be fair to say that recent communications with shareholders and potential investors has been somewhat patchy and the company are determined to get back any lost ground. Today’s RNS starts that process and it is worth noting a new IR comp on the ticket, other plans such as hiring high quality industry specialist consultants is also in progress. Finally, Wi th it’s placing above the current price the company are determined to do anything necessary to regain confidence in the company the share price, I will give it the benefit of the doubt due to its high quality assets.


By Malcolm Graham-Wood

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