WTI $41.74 -8c, Brent $44.20 -14c, Diff -$2.46 -6c, NG $2.59 -12c
By Malcolm Graham-Wood
Oil looks like it will end up on the week, it has edged ahead today so barring anything big time occurring it should be at these levels as we head towards the Opec+ meetings, now only 10 days away. Nothing much has changed, we have the twin problems of more virus numbers leading to slower demand growth, as noted in the latest US jobs report and the increase in supply particularly from Libya.
Q3 results from PTAL where following social unrest production has been restricted to 5,000 b/d to ‘manage oil inventory’. On July 15, 2020, PetroTal recommenced oil field operations after the COVID-19 government‑imposed shut down on May 7, 2020, and production returned to 11,500 bopd shortly thereafter; ‘As a pre-emptive measure, the Bretana oil field was shut down on August 9, 2020 due to social unrest against the government outside the field camp that resulted in a violent confrontation between protestors (intending to occupy the Bretana facilities) and the police.
The social unrest was conducted by protestors seeking government assistance against the COVID-19 crisis; and, as a result of the indigenous communities and government bodies reaching an agreement that will see increased funding for the local communities, on September 28, 2020, PetroTal recommenced oil field operations, and production again was restored to the pre-shut down level of 11,500 bopd’.
On the financial front revenue decreased to $7.6 million ($35.56/bbl) compared to $9.8 million ($22.87/bbl) in Q2 2020, due to lower oil production as a result of social unrest in Q3 2020. However, this was in part, offset by higher oil prices, with the average Brent oil price increasing to $44.32/bbl from $29.19/bbl for Q2 2020, important across the board for PTAL.
Operating costs were $2.5 million ($11.64/bbl) compared to $2.4 million ($5.67/bbl) for Q2 2020, ‘reflecting consistent quarterly costs not directly impacted by lower production’ whilst transportation costs were $2.5 million ($11.90/bbl) compared to $4.5 million ($10.50/bbl) for Q2 2020, reflecting the variable cost nature associated with lower production. The Company had cash of $9.8 million at the end of Q3 2020 compared to $20.4 million at the end of Q2 2020.
Since the 3Q period end PetroTal recommenced oil field operations on September 28, 2020 and the wells were quickly brought into full operation at the pre shut-down level of 11,500 bopd. ‘The indigenous communities and government bodies have reached an agreement that will see increased funding for the local communities. Oil deliveries have commenced to the Iquitos refinery and, on a limited basis, to the Northern Oil Pipeline (“ONP”) until social issues affecting the ONP are fully resolved. In order to manage oil inventory levels, production is currently intentionally constrained to 5,000 bopd, until such time as the ONP is operational and the Company’s stringent COVID-19 protocols continue to ensure that the camp remains safe’.
It is interesting to note that PetroTal has been assessing other oil export options and has signed a contract with an international oil trader for a pilot shipment to export 120,000 barrels into the Atlantic region using the Amazon river through Brazil. The shipment will be sold FOB Bretana, priced at the forward month Brent ICE price, and paid within two weeks of loading at Bretana. There are no subsequent oil price adjustments and this process which if I remember rightly is part of previous, conscious discussions should be a positive step as well as a spread of risk and increased reward.
Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:
“Whilst the last few months have been challenging, from both a COVID-19 and a social unrest perspective, we believe we have now turned the corner. Although we continue to restrict current production to 5,000 bopd, in order to manage our inventory levels, we are confident that we can increase production back to 11,500 bopd once the ONP reopens.
We are pleased that the indigenous communities and government bodies have reached an agreement that will see increased funding for the local communities, and we look forward to continuing our strong working relationship with national, regional & local governments and the communities nearby Bretana as well as their indigenous leaders.
We are pleased to sign an agreement with an international oil trader for the pilot export sale of 120,000 barrels of oil into the Atlantic region, diversifying our oil export options. We also aim to secure a credit facility in due course, which has the potential to enhance the Company’s liquidity, so we can continue investment in the Bretana oil field for development growth. In closing, I would like to thank all our stakeholders for their continued support, during what has been a challenging period for the Company. We remain upbeat about the potential of the Bretana field and are firmly focused on delivering value for all those involved in the Company.”
PetroTal stock has had a difficult time in recent months as the perfect storm not only hit the oil price but the social unrest hit them as well. Whilst this is understandable I can’t help feeling that with production back on the mend and with interesting new distribution being trialled a market cap of below £50m for a potential production of 11,500 b/d is just too low.
Block has updated the market with regards to its acquisition of the Schlumberger Rustaveli Company that was announced on 26th March 2020. It announces that completion is due to occur on 23 November 2020, subject to certain conditions; On completion, Block is to take possession of approximately 29,000 bbls of crude oil inventory and Schlumberger will enter into a transition services agreement with Block, to assist with the handover.
‘Under the SPA, the cash proceeds from any sales of Oil Inventory were payable to Schlumberger, but the Deed transferred the Oil Inventory to Block. The Oil Inventory is a welcome boost to Block’s balance sheet and will support the Company in its integration of the assets and incremental production, into the Block portfolio. The technical assistance from Schlumberger post-closing will enable Block to ensure a full and detailed transfer of technical and corporate information and to seamlessly take over the SRCL oil and gas operations’.
Block Energy Chief Executive Officer, Paul Haywood, said:
“I am delighted to be able to inform shareholders about the amendments to the SPA and that the acquisition of Blocks XIB and IX is in near sight.
We look forward to 23 November, when we will commence ownership of these transformational assets. They will truly define our future as an oil and gas company in Georgia.”
At long last Block is beginning to really start to reap the rewards of the Schlumberger deal, which combined with strong direction from its leading shareholders in the summer has sharpened up the remaining management. Further proof will be needed that things are going well including the promised two new NED’s which also were also announced in September.
Pantheon has announced that it has raised some £23m at 31p in order to drill and test all four zones @ Talitha including drilling a horizontal section into the Shelf Margin Deltaic sequence. Directors took c. £156/- of the £23m and the discount seemed to be pretty high although CEO Jay Cheetham suggests in his comments below that this equity raise is ‘a no-brainer’ compared to a farm-out by which I assume that firstly talks to bring in a partner have not so far been a success and secondly they are prepared to risk everything they have on their own.
Jay Cheatham, CEO of Pantheon Resources, said:
“The equity raise is a great outcome for Pantheon. We are now funded for full testing of the Talitha-A well including a horizontal section into the Shelf Margin Deltaic, and can now continue to high grade our acreage position which could add significant value to our portfolio of assets. As I said at the opening, this equity raise was a “no brainer” versus a farm-out. Our recent technical work has progressed our understanding far beyond what we understood even just three months ago. This will strengthen us in all our current and future farm-out discussions.
We’ve made substantial progress over the past months in upgrading our resources and having two of these resources independently certified. This progress combined with the award of the two units by the State of Alaska has significantly increased our confidence in the Talitha project. A farm-out would have diluted our interest in Talitha and across most of our prospective leases significantly more than the 12% dilution of the entire issued share capital in this capital raise.”
As I have said before the upside for this is absolutely huge and this big and ‘significantly oversubscribed’ raise shows that shareholders are happy to fund it. Given the farm-out has not, apparently, had much success so far it is good to see the drilling programme start to get closer and many, many shareholders will become wealthy when the wells come in. The farm-out discussions appear to be still underway and should that find success the risk of the project will be substantially reduced.
Footy this weekend has fixtures tomorrow between the Magpies and Chelski, Villa host the Seagulls, the Baggies go to the Theatre of Dreams whilst the big game appears to be Spurs hosting the Noisy Neighbours. On Sunday the Toffees go to the Villa, the Blades host the Hammers, the Gooners go to Leeds and Liverpool host the Foxes.
Rugby goes on with the Autumn Nations Cup, somewhat debased now that Fiji are out cancelling next week’s fixture with Scotland leaving the pool somewhat short. This weekend England host Ireland, Wales entertain Georgia and France are at Murrayfield.
Good racing too with the Betfair Chase at Haydock and a card at Ascot as well.
(The opinions expressed here are those of the author, a columnist for Share Talk.)
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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