WTI $40.29 +19c, Brent $42.90 +18c, Diff -$2.61 -1c, NG $1.75 +1c
By Malcolm Graham-Wood
It is the second day of the Opec+ JMMC meeting after which we may get an idea of how the tapering of the quotas will be enacted and over what period. I have heard everything from staying at the 9.7m b/d cut for another month (probably too likely to push oil prices up) to taking it back to 7m b/d or more (probably too likely to panic the market downwards).
More likely to see a gradual decline with a special accent on those existing cheats taking some more strain and in-line with the Opec report filling in the expected rise in demand later in the year and in 2021.
The Opec report was quite bullish really although some would be commentators were prepared to go for the headlines saying that 97.7m b/d in 2021 was still awful or a car crash. Sure it’s below the old world 100m+ b/d but the world has changed (it’s put down to efficiency and remote working) and so has Opec+ but leaves demand for Opec crude of 29.8m b/d up 6m b/d.
2Q 2020 demand wasn’t quite as bad as expected at 90.72m b/d global demand but still down 8.95m b/d putting into context the Opec+ cuts since May of 10m b/d. Non-Opec supply will fall by 3.26m b/d this year and seemingly rises by only 0.92m b/d in 2021.
The API inventory report came out after the close and would normally have pushed prices up more than the 40 or so cents that it has traded up this morning due to the overhanging meeting. With a crude draw of 8.3m barrels four times what was expected and gasoline also beating the market with a draw of 3.6m b’s if the Opec+ news is anything positive prices have the scope to rise dependent on the results of the meeting.
A trading and operational update this morning from Prems, as usual it shows a pretty good operational performance with targets hit and costs down but as usual that is never the full story….
Production was 67.3 kboepd to end June against full year guidance of 65-70 kboepd which is reiterated at this stage. Solan P3 has been successfully drilled and is due onstream in September at c.10 kbopd for the fourth quarter and first gas from Tolmount is still on track for Q2 2021 following recent revision and adds 20-25 kboepd.
Costs are as expected being cut, 2020 capex of $340m, opex of $12/boe and and lease costs of $6boe gives $240m of savings. The BP acquisition is still pending, it needs refinancing terms and an equity issue so no problem there then…discussions with creditors regarding a long term extension to the Group’s credit maturities are also underway still to go to the full lender group.
Finally net debt is $1.97bn as at the end of June, financial covenants have been waived through to the end of September, the company is forecast to be free cash flow positive for full year 2020 at current forward curve which is exceptional in these circumstances.
Premier continues to deliver the operational goods very well and despite the obstacles that have been placed in its path in recent months, looks set fair to get the BP deal done at a reduced rate and with an equity raise in tricky markets.
As Tony Durrant, CEO says
‘The continued underlying performance of our core assets along with the decisive action we have taken to reduce our expenditure during the first half has resulted in our net debt remaining broadly flat despite significantly weaker commodity prices during the period. This, together with the expected agreement on the amendments to our credit facilities and the completion of the value-accretive BP acquisitions, positions us well to benefit from a recovering oil price’.
Last night in the Prem, Chelski beat relegated Canaries 1-0 keeping chances of Champions League football next season alive.
Tonight sees the Clarets host Wolves, the Cherries visit the Noisy Neighbours, the Magpies entertain Spurs and the Gooners welcome the Champions.
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