WTI $60.55 -$1.01, Brent $64.14 -84c, Diff -$3.59 +17c, NG $2.62 -3c, UKNG (May) 45.84p +1.04p
By Malcolm Graham-Wood
Today marks the last day of the month and the quarter and as is always the case it is a time for investors to do a bit of ‘window dressing’ in order to have a level book at the period end. But that does not normally happen when there is an Opec meeting the next day. On this occasion it looks like that Opec+ also want a quiet Maundy Thursday as so many leaks have come out ahead of the meeting it looks like a done deal, the cartel will roll over April production figures through May with some small tweaking.
So you can take the day off tomorrow with impunity, or can you……………………….?
In an oil sales and risk management update today PetroTal Corp has announced the second export of Bretana crude oil into the Atlantic region through Brazil and the execution of crude oil price derivative contracts.
The Company completed the second Bretana oil export through Brazil, selling 225,000 barrels of oil at $61/bbl less a quality differential and commercial fees, similar to the first Brazilian export completed in December 2020.
PetroTal has also completed the initial implementation of its oil price hedging program for 2021. Approximately 590,000 barrels have been hedged, (representing approximately 16% of forecast oil production covering April 1, 2021 to December 31, 2021), in a Put structure with a $60/bbl strike.
Also, physical sales from the 1.8 million barrels of oil in the Northern Oil Pipeline (“ONP”) have commenced, with 360,000 barrels to be sold by Petroperu in April for $62/bbl less a $2.06/bbl quality differential, further reinforcing the strong demand for Bretana oil. This will result in PetroTal receiving an incremental true-up payment of approximately $20/bbl over the revenue booked from the original sale, including differential adjustments.
Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:
“We are very pleased to be able to execute our second Brazil shipment, demonstrating this is a viable offtake option that can scale up with operational pace and cost efficiency, based on production activity and ONP availability. Having the Brazilian offtake option ensures healthy commercial competition amongst all oil sales options. The associated commercial terms on all our recent liftings are an indicator of the continued high demand of Bretana crude. We are also extremely happy to enter into the first phase of our 2021 hedging strategy, giving stakeholders greater confidence around our 2021 cash flow profile. We have an exciting operational program planned over the coming months and we look forward to updating our progress shortly.”
With a major update due in a few days for PetroTal this is an opportunity to show the markets that it is a significantly less risky investment with its scope for oil sales and a hedging strategy that keeps cash flow under control. I expect more good news to come, with higher production in the upcoming year or so and with revenues rising dramatically and the valuation of the company rising substantially.
Gulf Keystone Petroleum
Full year 2020 numbers from GKP this morning which are very much in the market but from an operational point of view things are clearly looking good and with crude at these levels the financials look solid. 2020 average gross production of 36,625 bopd, exceeding revised guidance and the highest annual average production rate to date from the field. For this year gross average production from the field is 43,190 bopd to date, in line with guidance of 40,000 – 44,000 bopd for the year.
An updated CPR was published with c.800 MMstb gross 2P+2C reserves and resources volumes, which was in line with the 2016 CPR, after adjusting for production over the period, supporting GKP’s view of the geological model.
Financially then, GKP achieved its 2020 cost reduction targets, reducing Opex and G&A by more than 20% compared to 2019 and delivering gross unit Opex of $2.6/bbl, below the low end of the guidance range and down over 30% versus 2019. Net Capex was $45.9 million net (FY 2019: $90.0 million) within the $40-48 million revised guidance range despite the addition of low-cost, high impact investments during the fourth quarter that contributed to record 2020 annual average production.
GKP reported a loss after tax of $47.3 million (FY 2019: $43.5 million profit) and reduced revenue of $108.4 million (FY 2019: $206.7 million) were driven by a decline in Brent oil prices that averaged $42/bbl in 2020 compared to $64/bbl in 2019. Whilst the company has received payments regularly in the last 11 months there is still the little fact of the arrears of $73.3m but under the repayment mechanism they are confident that at $65 it will flow back.
The company had a cash balance of $147.8 million at year end (FY 2019: $190.8 million) with a cash balance of $161.0 million at 30 March 2021. The Company has hedged c.60% of Q2 and Q3 2021 forecast net production at a floor price of $35/bbl and $40/bbl respectively, while retaining full upside exposure.
Coming up we have recently seen the company go back to its commitment to get back up to a gross production of some 55,000 b/d in Q1 2022 whilst it should be remembered that even higher numbers have previously been in the frame.
In the period the company reinstated the divvi which went in the dark days of last spring, $25m has been recommended to the June AGM and the company in the statement and also the conference call has expressed a desire to pay ‘further distributions’ this year. Also the CFO indicated that with the shares at these levels buy backs are a ‘strong tool’ and may be used to return excess cash and reward shareholders over time.
Jon Harris, Gulf Keystone’s Chief Executive Officer, said:
“Against the backdrop of extraordinary global challenges in 2020, GKP acted decisively to successfully manage the impact of COVID-19 on our staff, contractors and production operations. We achieved all of our cost reduction targets and annual average production of 36,625 bopd, 11% higher than 2019.
We have had a strong start to 2021. The updated independent Competent Person’s Report reaffirmed the significant upside production potential of the field with gross 2P reserves + 2C contingent resources of c.800 MMstb. Average gross production from Shaikan in 2021 to 29 March is 43,190 bopd, up c.13% from the corresponding period in 2020.
Recently, we resumed the 55,000 bopd investment programme and today we are pleased to be announcing the reinstatement of at least a $25 million annual dividend, in keeping with our commitment to balance investment in growth and returns to shareholders.”
GKP is looking in good form after last year’s slippage in the long term plan, 55/- b/d by 1Q 2022 is going to be ok with SH-13, SH-1 plus two ESP’s and a debottlenecking of PF-2 delivering. After that the Jurassic expansion and gas management should increase it to 75/- b/d and with the Triassic comes 85/- b/d with expansion there and the Cretaceous pilot 110/- b/d.
So there is no limit to expansion at GKP and within that there is scope to pay more dividends and ‘establish a track record’ of pay-outs in the long term. Let’s watch the situation and see how the new management team get on, so far no reason why it can’t work…
An operational update today from President, a new well LB-1002, Las Bases field, Rio Negro, Argentina is projected to spud later today in line with expectations and all previously announced drilling schedules in Rio Negro are on track.
The new oil treatment plant is due to start operations on schedule by end of June and is on budget. In Salta, Argentina, advanced discussions are in progress re commissioning the 3D seismic for Canada Grande and Puesto Guardian with green lighting projected by end April and the Salta drilling discussions and preparations are ongoing and still projected to commence work during H2 2021.
The Paraguay farm out discussions intensify and is on its last leg, with advanced discussions ongoing with the contemplated farminee on well locations, timing and logistics. Signing is now projected by both parties at or around the end of April.
Peter Levine, Chairman, commented
“I do not have a soapbox but given recent personal experience felt that the observations below are necessary. I trust that readers will appreciate the sincerity of the message I give.
“Covid-19 is a human tragedy the world over and I am aware that the UK has not been insulated from the troubles associated with it. The loss of life is tragic. However, with over 30 million vaccines now administered in the UK and the economy reopening problems that continue in other parts of the world can seem distant. In South America and beyond the fight is far from over.
“I have spent the last two months travelling around our operations in South America overseeing our exciting work programme and advancing a material investment in our Paraguay assets. During that time I have seen first hand the devastation wrought by the global pandemic and the significant sacrifices required to keep businesses operational during such difficult times. Having myself been hospitalised for two weeks, although thankfully now well on the way to recovery, I am grateful for the skill and dedication shown by the medical professionals in Paraguay and across the globe.
“I have never been one to sit behind a desk to manage my business and am willing to put myself in harm’s way for the benefit of our stakeholders so say none of this to gain sympathy. I make these observations so that people might understand the dedication shown by our hardworking employees in the face of such adversity. It is this dedication that has led to us delivering all of the progress noted in this and previous announcements. It is progress that seems to go unnoticed.
“Well, not to me. So, I take this opportunity to say a public “thank you” to each and every one of our people and contractors in the field and at home. Your sacrifices should not go unnoticed.
“I will end this stream of necessary consciousness on the positive note commensurate with our people’s commendable work. Day by day our Company gets stronger and we are ready to do all we can to grow President organically and by strategic initiative. I am confident that 2021 will be seen by its end as a year of progress”
President is in good hands and still significantly undervalued, IRMC.
Tower has announced an update regarding planned operations on the Thali license in Cameroon, and the NJOM-3 well. The Government of the Republic of Cameroon has notified the company that the President of the Republic has approved a further extension of the First Exploration Period of the PSC, and the Company is now awaiting a formal confirmation from the Minister of Mines, Industry and Technological Development of the details of the extension. As previously announced, the Company declared Force Majeure in March 2020 in respect of the First Exploration Period of the PSC, in light of the restrictions required to combat the Covid-19 pandemic.
The logistics involved in coordinating personnel and equipment from multiple service providers and locations (as required for an appraisal well with extensive testing) remain challenging, but the Company has a plan to complete drilling of the NJOM-3 well safely in the present circumstances. The Company intends to finalise a schedule with the multiple service companies involved, although this still depends on pandemic developments and the individual service companies’ circumstances. But a formal extension of the First Exploration Period is an important element of finalising a schedule as it reduces the uncertainty associated with relying on the current state of Force Majeure, as well as underscoring the support of the Republic of Cameroon for the Thali project.
The Company also reminds investors that it will be reviewing the payment of director fees for the second quarter after the market close today, as usual at the end of a calendar quarter, and will also be reviewing long term incentive (share option) awards for 2021 at the same time.
Jeremy Asher, Chairman and Chief Executive Officer, commented:
“We are grateful to the Republic of Cameroon for their continued support of the Thali project, and in particular to the President of the Republic, the Secretary General of the Office of the Presidency, and the Prime Minister for taking a direct interest in our activity, as well as the Minister of Mines, Industry and Technological Development and his staff and all the staff at the Societé Nationale de Hydrocarbures who have supported us during this First Exploration Period. We are looking forward to seeing the NJOM-3 well drilled as soon as possible, and we will notify investors when we have more material developments.”
It is encouraging for those patient Tower shareholders that Chairman Jeremy Asher has maintained his commitment both operationally and more importantly financially to the NJOM-3 well in Cameroon. It looks like at long last and with no fault to the company that it will now not be long before it is drilled. While it is understandable that the share price is yet to take this on board, it seems to me that it is now time to get Tower on the investment radar screen at the very least.
Touchstone has provided an update regarding exploration operations on the Ortoire block, onshore Trinidad and Tobago. It has completed and tested the third interval at Chinook-1 ‘encountering 35 degree API gravity crude oil; further evaluation is required to determine commerciality’.
All three Herrera thrust sheets in Chinook-1 encountered light oil indicating the structure is predominantly oil charged and that Chinook-1 will be placed on pump for an extended production test to evaluate the reservoir and guide future development. The service rig is on location at Cascadura Deep-1 to complete the lowermost gas zone in the Herrera overthrust sheet, which is scheduled to be perforated within a few days.
Paul Baay, President and Chief Executive Officer, commented:
“This light oil discovery on the Ortoire property provides another level of opportunity for the Company and is in line with our original Chinook exploration model which indicated the target was oil charged. While some shareholders may be disappointed with oil findings, it is worth highlighting that our view towards gas only evolved following our prolific gas discovery at Cascadura, which is 1.5 kilometres to the north and in a separate geological structure. The test results at Chinook are a reminder that while these are independent exploration targets, the Herrera sands have the potential for gas, light oil, or a combination of hydrocarbons. We don’t believe these results have any correlation to the upcoming Royston well given the target is a separate structure and in a different geological position.“
I can see why the TXP share price has taken such a knock but whilst this is no doubt a disappointment it should in my view be taken with the fact that the Ortoire block is huge with significant exploration to come. The market may need to see the whites of the eyes of the next well or even one afterwards but I have no doubt that there is now, at these levels another opportunity to buy stock.
There is a debutant on the market this morning and it is one I shall be watching with some interest. Accordingly I am quoting its RNS in toto so that investors can take a look at what it contains.
‘Advance Energy (AIM:ADV), an energy company seeking growth through acquisition or farm-in to non-operated interests in discovered upstream projects, is pleased to announce that, further to the subscription agreement with Timor-Leste Petroleum Pty Ltd (the “Buffalo Subscription Agreement”), as announced on 17 December 2020, the Company has now published an admission document dated 31 March 2021 (the “Admission Document”), incorporating a formal Notice of Extraordinary General Meeting, in relation to, inter alia, the conditional acquisition of a 50 per cent. equity interest in Carnarvon Petroleum Timor Unipessoal Lda (“Carnarvon Petroleum Timor”) (the “Acquisition”) and an associated conditional placing for New Ordinary Shares (as defined below) to raise, in aggregate, gross proceeds of £21,842,600 (the “Placing”)’.
The Acquisition provides Advance Energy with an indirect beneficial interest in a proven oil field with material existing resources.
– The Buffalo Oil Field contains independently certified 2C oil resources of 34.3 MMstb.
– Previous operators (BHP and Nexen Petroleum Australia Pty Ltd) produced 21 MMstb from the Buffalo Oil Field, over five years, with no material decrease in reservoir pressure.
• Partnering with an established operator in the Carnarvon Petroleum group companies which operate the Buffalo Oil Field.
– Carnarvon Petroleum is a highly capable operator with an experienced in-house E&P team.
• Exposure to material upside potential in 2021 with limited risk.
– B-10 Appraisal Well is expected to be drilled in H2 2021 and is intended to convert the 2C resources to 2P (proved and probable) reserves following re-certification.
– Buffalo PSC has the potential, subject to completion of the Placing and FDP approval, to deliver production of 40,000 bopd within three years of the B-10 Appraisal Well depending on the degree of success of the B-10 Appraisal Well.
• Highly experienced Advance Energy Board and management team, with significant combined regional, technical and capital markets experience.
– Subject to the Acquisition completing, it is proposed that Stephen Whyte and Larry Bottomley will join the Board as independent Non-executive directors.
– The proposed Board will therefore consist of six directors comprising Mark Rollins as Non-Executive Chairman, Leslie Peterkin as Chief Executive Officer, Stephen West as Chief Financial Officer and three Non-Executive directors.
The Company has conditionally raised £21,842,600 million (before expenses) (approximately US$30.03 million) via the proposed issue of 840,100,000 New Ordinary Shares (the “Placing Shares”) at a price of 2.6 pence per New Ordinary Share (the “Placing Price”).
– The net proceeds of the Placing are estimated at £20,008,873 (approximately US$27.51 million). The net proceeds will be used to fund the subscription by Advance Energy TL Limited (“AETL”, a wholly owned subsidiary of Advance Energy) for equity in Carnarvon Petroleum Timor, which will be applied by Carnarvon Petroleum Timor to funding the drilling of the B-10 Appraisal Well and certain Buffalo PSC related costs and for the Company’s general working capital needs.
– The Company’s Chairman, Mark Rollins, and Chief Executive Officer, Leslie Peterkin, have subscribed for, in aggregate, £0.43m of New Ordinary Shares pursuant to the Placing.
Leslie Peterkin, Chief Executive Officer of Advance Energy, commented:
“We’re delighted to have completed this Placing, and we thank our new and existing shareholders for their belief in the Company and the investment opportunity we presented to them. The fundraise enables the completion of the transformative transaction with Carnarvon Petroleum and we can now look forward with confidence to the exciting B-10 appraisal well later this year which represents a material value catalyst for Advance Energy and its shareholders.
“The Buffalo PSC has the potential to deliver significant production and associated cash flow, with exceptional rates of return. The Board considers this project to be the ideal launchpad for our longer-term strategy, which focuses on achieving scale and generating shareholder returns.
“On behalf of the Board, I would like to welcome Stephen and Larry to Advance Energy, and we look forward to benefitting from their experience and insights going forward.
“The Company has a big year ahead and we look forward to updating the market as we deliver operational and corporate milestones.”
After the recent raise I took the opportunity to catch up with Colin Harrington, CEO of Zephyr who told me just how exciting things are looking like at the company. With part of the money to finance the lateral well at Paradox that goes ahead hopefully in July and the rest to buy a production asset in the Bakken which should finance the company is well set.
Last night in the World Cup qualis Wales had a great 1-0 win over the Czech Republic, a massive boost for their chances.
Tonight Northern Ireland play Bulgaria, Scotland host the Faroe Islands and Poland are welcomed at Wembley by England.
(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 blog
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