WTI $15.06 +$2.72, Brent $22.54 +$2.08, Diff -$7.48 -64c, NG $1.87 -8c
By Malcolm Graham-Wood
Well that was all a very nasty dream wasn’t it, with WTI up $2.40 and Brent +$2.81 this morning as I write it looks like Shell rang the bell when they cut the divvi. Mind you they might not be the biggest fools in all this, just say that they, like all the other majors, been thinking that however good or bad everything is the dividends across the sector are at an uncomfortable, inflexible rate then this is a good time to make a break. Seeing BP increase the payment on Tuesday, a very unwise decision in my view at the time, finally pushed them over the top and they may have just unwittingly taken the higher ground. I wouldnt mind being a fly on the wall in the boardrooms of the other super-majors in coming weeks.
So, last day of April thank the lord and at least May can’t have the 80 days that this month seems to have had, Opec+ production officially starts declining tomorrow so it’s Mayday, Mayday for the bears, or is it? One or two countries have already started their cuts and yesterday Norway joined in with its 134,000 b/d just to show willing but it’s still a long haul. WTI physical is now a shadow of its former self after punters caught a cold at the last expiry and with USO and others now vacating the front month space things are getting back to normal.
Finally whilst I continue to believe that the inventory figures are pretty meaningless in these markets yesterday’s numbers from the EIA showed a couple of interesting features. One was the significant draw in gasoline stocks (3.7m bbls) within the stock build and also the rise in oil demand of 1.7m b/d w/w, showing that although the lock down is still on there is a growing movement of cars and trucks.
A trading update to go with this morning’s AGM from RockRose tells us little more than in recent announcements. Production at 20,800 boepd is in line with expectations but cost cutting has continued apace with a capex fall of 40% since mid-March with total expenditure in 2020 now expected to be over $100 million lower than originally budgeted. Net cash is $339m, at the end of the first quarter, using end-2019 exchange rates, the figure would have been $351 million.
The Cotton acquisition has been completed, technically recoverable resources are estimated to be up to 16 MMboe adding to the resource profile. RockRose will undertake a detailed subsurface evaluation of the asset before deciding in the first half of 2021 whether or not to proceed with the development.
At West Brae two wells have been drilled, the first the WPGZ well was brought onstream in March with current production of approximately 4,000 bopd, 1,600 net to RRE. The second well encountered the target horizon deeper than prognosed and it is water wet at this location. After interpreting the data from the well and in view of the current low commodity price environment, the partnership elected not to drill a horizontal section to a secondary target location and the well has been suspended. Whilst there is a further target to assess it seems sensible in current conditions to suspend the well, release the rig and save the costs of recovering potential hydrocarbons until a more precipitous time is appropriate.
This update proves that RockRose remains amongst the strongest companies in the sector, with its cash holdings and aggressive approach to asset accumulation its management has already demonstrated that, as when it floated on the market it has a very robust and flexible model rarely seen in the sector.
An update on Cuba this morning as well as the raising of £212,500 at a nil discount to fund the initial technical work. The company has signed a binding MOU with the Cuban National Oil & Gas company (CUPET) for exclusive rights to negotiate PSC terms on three additional onshore licences granting exclusive rights for six months to negotiate multiple PSC’s over the onshore Blocks 9a, 12 and 15. This is in addition to the MOU on Block 9b recently secured via the recent purchase of Energetical Limited.
The portfolio accumulated provides a blend of existing production for low risk redevelopment with significant upside potential for both appraisal and exploration. The portfolio is consistent with the Company’s strategy of counter cyclical acquisitive growth with a focus on low cost production, manageable initial capital commitments and near term high inflection growth potential.
Ascent has raised gross proceeds of £212,500 through the issue of 7,727,272 shares in the Company at 2.75 pence per new share, being a nil discount to the closing bid price of the Company’s shares prior to this announcement. CEO Andrew Dennan said “This is good news that builds additional strategic momentum further to our recently announced MOU on Block 9b in Cuba, and we look forward to rapidly establishing and broadening our portfolio in-country, counter cyclically”. He also said that the company were to ‘shortly’ reveal a revised policy in Slovenia where the board has been assessing the alternatives to unlocking ‘near term value in this core asset’.
The Q1 report from Far confirms that whilst all Sangomar activities continue, the debt finance did not proceed due to the COVID-19 impact on oil prices. ‘Progressing a sell down of FAR’s working interest in Senegal or arranging alternative financing for FAR’s share of the development and at the same time preserving cash and shareholder value in our assets remain clear objectives of the Board at this time’.
For Far, cost cutting continues and in The Gambia activities have been suspended as they have no access to their shore base, accordingly costs have been significantly reduced and efforts continue to work for a farm-out before the start of drilling operations.
Far were hit by the perfect storm of the virus and activity by Saudi Arabia and Russia in the oil market. Sangomar is still a world class asset and unless one has a view about the world and its future demand for hydrocarbons that is contrary to most expectations, an efficient market should mean that someone feels it appropriate to farm-in here. The company has built up an enviable portfolio of acreage in recent years and deserves the opportunity to continue to develop it.
Final results from Aminex this morning, the company confirms the Mtwara licence extension for another year as recently announced. Cost reductions continue, 25% already on top of 2019 savings and make 50% of 2018 levels so the company is lean and ready to move ahead.
The good work done in recent months and ground work in-country means that the company is well positioned for organic and inorganic growth and Aminex, given its substantial free carry is well placed to take advantage of huge opportunities in Tanzania and across Pan-Africa.
RKH has announced that the HOT with Navitas, despite the current oil price weakness, all parties remain committed to the finalisation of the definitive Navitas farm-in agreement. Sam Moody, Chief Executive, commented: ‘We are pleased to have made significant progress on the farm in, and that all parties have reinforced their commitment to its completion, despite the volatile market conditions. Sea Lion remains a highly exciting project and the farm in will underpin our ongoing efforts to move it towards sanction. We look forward to updating shareholders further.’
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