Malcy’s Blog – Oil price, PetroTal, Echo, VOG, Hurricane, President, Cairn, Ascent & finally

WTI $41.29 +22c, Brent $43.34 +3c, Diff -$2.05 -19c, NG $1.81 +2c

By Malcolm Graham-Wood

Oil price

Nothing to add M’lud, its a bit same old, same old today. The virus is still virulent in the USA, Brazil and India to name but three kicking the demand pull further down the street. But oil remains solid, it is up a little today as it was last week, even the Baker Hughes rig count managed to eke out a rise of just one unit in oil to 181. Tropical Storm Hanna moves onshore Texas and will likely not cause oil industry damage although it is still causing havoc.

PetroTal Corp

A very efficient job from PTAL as it announces that the Bretana oilfield restarted on July 15th and production has returned to pre-shutdown levels of 11,500 bopd and exceeding 12,000 bopd when all seven wells are online.

Oil is already being delivered to the Iquitos refinery and deliveries to the ONP pipeline are expected to recommence in early August. Q2 production was 4,180 bopd, taking into account the shut-in since early May represents a rate of 11,500 bopd.

Manolo Zuniga, President and Chief Executive Officer, commented:

 “On behalf of PetroTal, I would like to thank the 30 person team that stayed at Bretana during the shut down and ensured all the facilities were properly maintained, which is reflected by how quickly the new 130 person team was able to re-open the oil wells, recommence construction support activities and again reach 12,000 bopd of production. “

Echo Energy

Echo has announced that it has issued 95m new shares at 0.5p per share with 1 for 1 warrants attached to subscribe for new shares at 1p. The money is for activities in Argentina and for general working capital requirements.

Victoria Oil & Gas

A Q2 operational update from VOG today, daily average sales of 4.6  mmscf/d of natural gas and gross 3,548 bbls of condensate resulting in net revenues of $6.8 million (Q1 20:$5.3 million).

Following the termination of the ENEO contract GDC have moved fast and already replaced over 30% of the lost volume and at a higher price margin from existing customers and at least two new customers expected to be tied in within the next three months. This already represents over 50% of the revenue lost by the termination of the ENEO contract.

Reserves at Logbaba have been reduced as there are no plans to drill further wells at present but it is worth noting that overall, large, in-place resource estimate remains unchanged, and the revised 1P Reserves, without additional drilling, still provide for several years of supply with or without the grid power demand.

Also, following an extensive prospect evaluation and de-risking of the Matanda Licence, management has materially increased its estimate of Prospective Resources for the Onshore part of the Licence, which is contiguous with Logbaba. I have for a long time tried to find a way of getting a decent valuation of Matanda into the VOG numbers, it seems like this may be not far away. Finally, the company declare that they are ‘encouraged’ by the unsolicited interest in the SGI asset.

The news from VOG is getting better and the arrival of new CEO Roy Kelly has coincided with realism and restructuring across the company. It has been a painful and unprofitable time for shareholders over the years and VOG has had more lives than your average mog. But the shares havent moved far from the year’s lows and the market cap leaves change from £10m, on that basis I would think that VOG should at least revisit levels previous levels, after all a 50% retracement from the August ’19 high does double the share price…

Hurricane Energy

Another Lancaster EPS today and the company states that ESP’s have been commissioned on both Lancaster wells, the 6 well has been returned to natural flow and the 7z well is continuing to use the ESP. Oil production has increased from c.15,000 bopd to c.17,000 bopd as oil and water production from the 205/21a-7z well has stabilised, the 17/-has stabilised with the 6 well producing 12/- b/d and the 7z well 5/- b/d with a 53% w/c.

Whilst there is still a way to go before the ongoing geological and technical review is completed and production guidance is reinstated, I remain confident that with its low break-even price and weighty production the share price at below 6p is clearly not in line with any sort of realism…

President Energy

President has announced that it is exporting oil for the first time with some help from Trafigura by the end of July will have exported some 18/- barrels of oil priced at Brent less $6, in line with current domestic prices.

President is currently projecting Group average production for H2 2020 in the range 3,000-3,400 boepd, an increase of approximately 30% over the same period last year. Of the Group’s average production in H2, it is currently anticipated that oil will compromise some 60% of the total.

President comments ‘having navigated regulatory mechanisms in relation to this first pathfinder export load, in the coming months further oil exports are expected to follow, always depending on demand factors, thus providing President with another string to its bow for sales of product to end markets’. Along with an interesting interview on Total Market Solutions recently there is continuing upbeat news from Peter Levine and President looks way too cheap at these levels.

Cairn Energy

Cairn has sold its 40% interest in the Sangomar Deep Contract area to LUKOIL for ‘up to $400m’ plus some reimbursement of development capital expenditure incurred since 1st January 2020 (Cairn’s net capex guidance for Sangomar in 2020 is $330m).

The company has said that they will return some $250m to shareholders via a special dividend which is ‘consistent with Cairn’s approach to capital allocation’. This sale has been a long drawn out process and whilst it is only ever correct to say that the price received is appropriate I wonder what might have been  a couple of years ago in different circumstances. However the company is right to point out that the sale means ‘a reduction in development risk, financing risk  and the need for significant capex over four years’.

Whatever the price achieved it is a tribute to Cairn and also Far who found and brought towards development what has rightly been called a ‘World Class’ development of which they can both be very proud.

Ascent Resources

Ascent has announced a number of board changes in anticipation of its initiation of Cuban operations and broader Special Situations strategy. Leonardo Salvadori moves from NED to become Technical Director leading the work on both Cuba and Slovenia. Some of you will have noted that I am joining the Company alongside Stephen Birrell as NED.  Stephen has extensive world-wide experience over 35 years in the industry with a deep focus on Central Eastern Europe and the Caribbean.

For my part, whilst this will stop me providing independent commentary on Ascent, I have been looking to make a move into an oil and gas stable for some time now and have received many offers but Ascent, with its long history, new experienced team and potential to unlock something new in Cuba, is the one.  I will be adding my own 40+ years of experience and connectivity to turn Ascent into both a success and a platform that private investors and my readership can be proud of.

And finally…

Briefly…So at the top in the Prem the Red Devils beating the Foxes ensuring 3rd place for them and Chelski taking the final Champions League spot. At the bottom it was nail biting stuff as by drawing at the Hammers the Villa took the final safety spot ensuring that the Hornets and the Cherries go down with the Canaries.

The cricket is still in the lap of the weather gods, with no play today England need to bowl the Windies out tomorrow to win the series.

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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