WTI $23.63, Brent $31.87 -$1.18, Diff -$8.24 +$1.27, NG $1.85 +12c
By Malcolm Graham-Wood
Yesterday was all about the EIA who released their STEO that most professionals take most seriously from all three of the major reporting agencies. Not surprisingly they concentrated on the demolition of the demand numbers which we know about but they also tackled US domestic production and resultant move to the country becoming a net importer again, this year. Whilst they do averages, they are also catching me up in terms of US production destruction.
It is this number that the Opec+ meeting tomorrow will depend on, I’m sure. I can’t see the other members cutting anything like the numbers needed without some give from other members around the table, we shall see, will Opec+ be handing out the Maundy money?
Full year 2019 figures from Rockhopper this morning, these are all numbers that we have pretty much already seen but do provide a look at how a serious attack on costs and over some years into the bargain. Full year revenue was $10.3m with operating costs of$4.6m and cash operating costs of $9.9 per boe, G&A has fallen by 30% in the last three years.
Rockhopper has cash of $21.9m and the Sea Lion Phase 1 development has been validated and de-risked by the introduction of Navitas as a JV partner. The company divested their Egyptian assets which completed after the year end raising $16m and the Ombrina Mare arbitration is ongoing. With a continuation of the ongoing cost reduction programme and significant potential upside RKH is fighting fit.
Diversified Gas & Oil
DGO has signed a conditional SPA for an Appalachian upstream and midstream asset package from Carbon Energy Corp. The deal is subject to due diligence but should it complete it will cost DGO c.$110m, this falls within the company’s valuation criteria of less than 4x EBITDA and is capable of accretive returns. If successful, the Company intends to fund the cash purchase price, net of purchase price adjustments, with funds available on its existing revolving bank facility or similar financing.
DGO retains a strong balance sheet and this maintains leverage of below 2.4x net debt to adjusted EBITDA. Crucial to this deal are that notably, because DGO targets producing wells that generate significant positive cash flow and because the Company is always committed to maintaining a strong balance sheet, DGO will continue to allocate appropriate amounts to debt repayments alongside its stated commitment to the dividend.
This is an important point and shows why I have been so happy to recommend DGO to investors as the market has so far failed to understand the model that the company works on, it is no ordinary E&P company and my faith in that dividend is yet again supported today. The shares were ludicrously cheap at below 60p where they yielded 16%, after a decent run some semblance of order has been seen but even today at 90p the shares are still value at 90p. I expect more deals like this as the company takes advantage of current market disorder.
SDX has announced that the SD-12X the ‘Sobhi’ well in South Disouq, Egypt has come in as a discovery with 108′ of gas- bearing sands with a 20% porosity. Management best estimate is 24 bcfe of gas and condensate well above pre-drill expectations.
Wentworth has announced that its FY 19 results are delayed due to the FCA guidance on COVID-19. However the board has announced that the numbers will be in line with management expectations unaffected by COVID-19. They also expect that the dividend will be maintained.
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