Malcy’s Blog – Oil price, Victoria Oil & Gas, Far Limited & finally

WTI $59.16 -$1.39, Brent $63.54 -60c, Diff -$4.38 +79c, NG $2.61 -1c, UKNG 46.8p +0.86p

By Malcolm Graham-Wood

Oil price

Oil is ticking up slowly today ahead of the Opec+ meeting later. If Reuters and others are right there will be no change in output numbers for one or two months. This sits with the views from the technical committee yesterday which ticked down demand by 300,000 b/d until later in the year.

The EIA stats were pretty good, crude drew 876/- barrels, utilisation rates rose again sharply to 83.9% and there was an uptick on demand for gasoline as predicted here last week. Gasoline drew 1.7m barrels and distillates added 2.5m as one might expect at this time of the year.

Victoria Oil & Gas

Victoria Oil & Gas has provided a general corporate and operational update on key matters this morning including Cameroon operations and a general corporate.

Recent weekday production has been 5.5 to 6.0 MMscf/d gross gas, but with the usual daily and weekly fluctuations, with one customer returning having paid off aged debt, and one customer increasing its consumption for both power and thermal

In addition, Well La-108 was brought online on 15 February. The well was initially producing on its own and more recently in combination with another well to ensure that operations could be managed given contrasting wellhead pressures.  The well started producing significantly more water than the other wells, and above what might be expected as water of condensation. Analysis of this water suggests it is significantly fresher than formation water and thus likely composed of drilling and completions fluid lost from the drilling (which started in 2016), through to the attempted remediation in 2019 and then successful remediation in 2020.

The water-gas-ratio stabilised at around 50 bbls/MMscf, and has fallen below this in the last week. This level of water production (up to 200 bbl/d) is being managed well by the operations team.  We propose to produce a larger volume from the well and then carry out a pressure build-up test. Finding the water came as a surprise but the modest amount causes no operational problems and of course other wells have shown no sign of such liquids.

With regard to West Med the company say, ‘We have signed a non-binding term sheet with a potential buyer of VOG’s wholly owned subsidiary, ZAO SeverGas-Invest (SGI), which owns the West Medvezhye (West Med) licence. This buyer has instructed recognised third-party specialist advisors to conduct what we hope will be final, confirmatory due diligence on the asset. This potential buyer has a period of exclusivity which runs to 31 May 2021. The asset was fully impaired in VOG’s accounts in 2014’.

With regard to Kemerkol, ‘At the end of December 2020, VOG notified the Republic of Kazakhstan of its intention, failing an amicable settlement with the Government, to commence an investment arbitration under the Energy Charter Treaty. VOG has retained counsel and the arbitration is fully funded by specialist disputes funder Therium. The dispute arises out of a series of actions and omissions by the Government and its courts which ultimately deprived VOG of the value of its investment in the Kemerkol oil field located in Atyrau Oblast.  After investing over US$35 million into the Kemerkol Field, Kazakhstan invalidated VOG’s rights to the Kemerkol Field, seized assets on site, and VOG was forced to suspend oil production in June 2008.  In the event the Parties are unable to make concrete progress towards resolving their dispute amicably by the end of May 2021, VOG will commence proceedings. Kemerkol was fully impaired in VOG’s accounts in 2009′.

At Matanda, well planning, procurement of long lead items and rig selection are underway, and the farm-out process has been started with several parties registering interest. The Environmental and Social Impact Assessment (“ESIA”) has been delivered for the Ministry’s consideration and the company are clearly very happy with progress here and that well planning is underway.

With regard to New Age the LOI has expired and it is expected to ‘expedite discussions with SNH’ on the way forward in line with the Gas Code and Gas Master Plan. VOG will take offtake up to 25 MMscf/d from Etinde conditional on a number of points such as FID so it won’t be overnight, but over the longer term I imagine that the company could fill a substantial  amount of gas sales.

The RSM litigation continues to go through the courts and the first arbitration of the  hearing panel is due in the 3rd week of April and it may take 3-6 months to deliberate and give their ruling. VOG continues to ‘vigorously defend the claims’ but this will take some time yet.

Roy Kelly, Chief Executive of the Company, commented:

” We are very pleased at the significant progress that we have made as a company over the course of the past few months on a number of corporate and operational fronts. The company now has a well stock of four wells at Logbaba, albeit with very different production characteristics. The operations team have done a great job managing the different wellhead pressures during the multi-well operations, and the higher water production.

 In the Matanda license, we’re pleased with progress on the ranking of prospects and the start of the well planning phase. We have initial interest in the farm-out of Matanda but there is of course a long way to go in that process.

The interest shown in West Med has been very encouraging and we have for the first time entered into a short period of exclusivity with a potential buyer as they conduct serious due diligence using well-known specialists. Of course, we know this may not result in a binding bid or a sale but is nonetheless encouraging.”

I see VOG coming out of a long, difficult period in pretty good shape. From the above it can be seen that they have been very busy on a number of fronts and they will have to be sorted which I can see happening. The key parts of the company have a lot going for them, gas sales are up and continuing to rise and progress with ENEO would be a good way of taking the company forward even more. Messrs Kelly and Collins probably didn’t see it panning out quite like this but right now VOG shareholders have much to thank them for.

Far Limited

Far announce that the Lukoil proposal is not proceeding to a legally binding offer and the shareholder meeting on 15th April will consider the sale of its interest in the Senegal RSSD project to Woodside.

And finally…

A full card of the Prem over Easter, Saturday sees Chelski v the Baggies, Leeds host the Blades, the Noisy Neighbours go to the Foxes and Liverpool are at the Gooners. Sunday sees the Saints host Burnley, Spurs go to the Magpies, Villa host the Cottagers and the Seagulls go to the Theatre of Dreams. On Easter Monday the Toffees host the Eagles and Wolves entertain the Hammers.

And racing all over the country at the weekend!

(The opinions expressed here are those of the author, a columnist for Share Talk.)

Malcolm Graham-Wood

Source Link https://www.malcysblog.com/2021/04/oil-price-vog-far-and-finally/

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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