WTI $52.91 -30c, Brent $56.06 -52c, Diff -$3.15 -22c, NG $2.73 -3c, UKNG 68p -11.2p
By Malcolm Graham-Wood
Oil drifted yesterday, trees dont grow up to the sky and its been a good run. The dollar strengthened and the inventory stats had a good draw in crude but builds in products as the capacity rate jumped up to 82%
An operational update with production guidance for 2021 this morning from Wentworth where Mnazi Bay continues to remain fully operational with no material adverse impact on supply from the pandemic. 2020 full year production averaged 65.36 MMscf/day (gross), within the annual production guidance range of 60-70 MMscf/day (gross).
In addition, repairs to the MB-2 flowline were completed on 9 December 2020, increasing the capacity of the field to over 100MMscf/day, resulting in December 2020 production averaging 82.93 MMscf/day (gross), with five days reaching 103 MMscf/day (gross), and a record high of 103.36 MMscf/day achieved on 15 December 2020; demonstrating both the capabilities of the field and the potential for natural gas demand to dramatically increase during the hot, dry season.
Production guidance for full year 2021 has been set at 65-75 MMscf/day (gross) which takes note of the higher field capacity but also that the company can increase production in the hot, dry seasons to accommodate the competition from hydro in the rainy season.
Financially WEN are in a very strong position, they paid an interim dividend of $1.2m in October 2020 which was a healthy 20% increase on the previous year’s maiden payment. Calendar 2020 therefore, the company paid out $3.2m a healthy increase. The company is debt free and has net cash of $17.8m of cash at 31 December 2020.
The relationship with the TPDC continues to strengthen, proven by the fact that they continue to settle all gas sales invoices in full as they fall due and they remain fully current with payments. Discussions with TANESCO ‘are on-going to settle all remaining arrears, which currently stand at 15 months totalling approximately $1.3m net to Wentworth.
The JV Partners have agreed a 2021 firm work programme totalling approximately $4.4 million net to Wentworth and the management are determined to not only continue commitment to the field but also to create ‘sustainable and responsible growth’. This is intended to protect long-term shareholder returns which are very much a priority, but also 2020 was a very active period for the Company with a number of discussions initiated to support their growth ambitions and these remain on-going with key stakeholders in Tanzania.
The company make it clear that they are very much a key player in-country and that ‘Our commitment to further growth in Tanzania is underpinned by our long track record in-country and the increasing requirement for a reliable, affordable and low-carbon energy supply. Wentworth’s robust gas-to-power production platform is well-positioned to service this future demand growth, working hand-in-hand with low carbon technologies, such as hydropower’.
Katherine Roe, CEO, commented:
“We are pleased to announce that Mnazi Bay has remained fully operational since the start of the pandemic. Despite strong hydropower generation from a heavy rainy season during the first half of 2020 and a slowdown in industrial demand in Q2 2020 due to COVID-related restrictions, we saw this trend reverse swiftly following the lifting of those restrictions. In the second half of 2020, we saw demand increasing to levels that ensured we comfortably met our production guidance, with 2020 full year volumes of 65.36 MMscf/day, the middle of our guidance range of 60-70 MMscf/day (gross).
“The record volumes we enjoyed in December demonstrates the tangible increase in demand during the hot, dry season which, alongside the increasing industrialisation of Tanzania’s economy, provides a robust outlook for 2021 with production guidance set at 65-75MMscf/day (gross). This guidance reflects both historical demand profiles, Wentworth’s evolving understanding of the demand landscape, and the developing process of production allocation between suppliers. Reaching this target will be further supported through recent repairs to the MB-2 flowline during December, which has increased the capacity of the field to over 100MMscf/day.
“We continue to align our commitment to delivering a positive impact for Tanzania whilst delivering long-term, sustainable returns for our shareholders – we strongly believe these two commitments must go hand-in-hand. For our shareholders, we’re proud to have paid $3.2 million of dividend distributions during the 2020 calendar year and remain committed to an ongoing sustainable dividend policy going forward.
“The future demand outlook underpins our strategy for ambitious growth in Tanzania to transform the country by increasing low-carbon energy access to meet the universal access target set for 2030 set by the Government of Tanzania and aligned with the UN’s Sustainable Development Goals.”
Wentworth are in a very strong position indeed, a stable source of income in a country where demand for power is only going one way and with significant scope for growth in-country, that is already being considered. Having paid off all its debt, its financial situation is strong as it gets and it is clear that much work is going on behind the scenes to facilitate upside. Management is first rate and up with shareholder requirements, accordingly it is to publishing its inaugural Sustainability Report this year. There is nothing not to like about Wentworth and the shares are way to cheap on any metrics.
A State 16-2 well update this morning, drilling & data acquisition has been completed ahead of schedule with 113 feet of continuous core and open hole logs secured and initial indications suggest presence of hydrocarbons across multiple reservoir intervals with data evaluation efforts now underway.
Zephyr’s primary objective was to drill and set casing at 6,437 feet measured depth in order to provide a host wellbore for a future horizontal side track. The Company achieved this goal within 13 days from spud – and subsequently reached TD within 19 days of spud, a marked improvement over historical drilling efforts in this part of the Paradox Basin. The reduction in drilling time represents a major operational success, and demonstrates that the cost of future development wells can be significantly reduced from earlier estimates, thereby improving the overall potential value of the Paradox project for Shareholders.
Zephyr’s secondary objective was to acquire new data to improve the understanding of its Paradox acreage position, this has been achieved with considerable success. Zephyr’s data acquisition programme successfully secured approximately 113 feet of continuous whole core across the historically productive Cane Creek reservoir interval with rotary side wall cores in seven shallower exploration targets. The 113 feet of Cane Creek core, believed to be the first whole core ever retrieved in the northern part of the Paradox Basin, has been shipped from the well site to a laboratory where detailed analysis will now commence.
Initial indications show similar log responses to offset wells, suggesting the presence of hydrocarbons in multiple reservoir intervals. The Company will now begin the work to integrate all log and core data to fully explore the initial findings in these complex reservoirs. The analyses will then be combined with Zephyr’s existing 3D seismic data, and Shareholders will be updated with detailed results as they become available over the coming weeks.
Colin Harrington, Zephyr’s Chief Executive, said “This is a fantastic result – we delivered on our two major objectives by successfully drilling to our target depth ahead of forecast, and by collecting significant amounts of reservoir data across multiple zones that suggest hydrocarbon presence.
“Our drilling team and contractors worked diligently to deliver a safe and effective operation – one which reached our Cane Creek target within 19 days from spud. When compared to all historical wells in the vicinity, this was a 50% reduction in time versus the previous record holder, and a 58% reduction in time versus the average of those historical wells. In addition to the rapid drilling results, hole conditions and well stability remained excellent throughout the operations.
“The ability to reduce drilling time is important in many ways. Most significantly, it demonstrates that with a modern drilling rig, advanced tools and an experienced operations team, development of our leasehold may be executed more quickly and at a lower cost than previous estimates, which therefore increases our already bullish view of future project economics and value.
“The securing of the continuous core is also significant. Our State 16-2 drilling operation successfully acquired the first substantive rock samples from the Cane Creek reservoir in this northern part of the Paradox play. In addition, our sidewall coring collected the first rock capable of measurement from seven additional overlying reservoirs. We also gained high quality log data across the majority of the Paradox Formation. The analysis and interpretation of this data has now commenced and will serve to substantially improve our understanding of the geology, the potential upside – and, when integrated with our existing 3D seismic, how best to target and test the natural fractures that exist in the play.
“It’s important to bear in mind the relatively untested potential of the Paradox Basin. The Cane Creek reservoir has produced over 10 million barrels of oil to date. However, the US Geologic Survey estimates a basin-wide, mean potential 1.2 billion barrels of oil equivalent in the Cane Creek reservoir alone*, indicating a substantial potential yet to be targeted. Further prospectivity also exists in other overlying reservoirs from which we secured data, and these additional reservoirs also appear to hold the presence of hydrocarbons. The data acquired from the State 16-2, when integrated using modern tools and the resources of our world class academic and industry partners, is a massive step forward in our pursuit to unlock the value which we believe is inherent in our Paradox project and across this Basin.
“I’d like to conclude with a note of gratitude for our team, our partners and our contractors. This well was drilled around the clock in challenging conditions, through snow storms and sub-zero temperatures, and the work kept twenty-two dedicated people away from their families over the holidays. Their collective performance was exemplary, as was their adherence to our COVID-19 protocols. I’d like to thank them all, once again, for their hard work, resilience and professionalism.”
The progress that the Zephyr management has made across all fronts which have led to this well being funded and successfully delivered in such a short space of time do the team credit. The single digit increase in the share price can only be put down to few enough people knowing this story as I’m sure that when I interview Colin Harrington on Monday he will tell a really exciting story. For choice I would still say that this could be a ten-bagger, currently cunningly disguised enough to fool the sophisticated operatives in the market, I would suggest it won’t last for long…
A trading an operational update from HUR today, September-December production was 12,500 bopd at the low end of guidance but the recent increase in Brent price will nicely drop through to revenues. Currently it is 12,100 bopd.
Antony Maris, Chief Executive Officer of Hurricane, commented:
“Production in line with expectations, a December lifting from Lancaster, and higher oil prices combined to deliver a $19 million increase in net free cash at year-end compared to end November 2020. A continued recovery in oil prices would further enhance the significant value we see in our West of Shetland portfolio. As previously reported, we are currently engaging with our stakeholders on a proposed development plan for Lancaster and its associated funding, in order to maximise the potential value of our assets.”
A strategic organisation and trading update from Lamprell today who say that the improving financial performance and trading continues to be in line with the Board’s expectations. With 2020 revenue expected to be $340 million ($260.4 million), net cash increased to $112 million from $71.4 million at 30 June 2020 and the bid pipeline has increased to $6 billion (30 June 2020 $5.5 billion)
In addition, the strategic reorganisation breaks the company into three new business units: Renewables, Digital and Oil & Gas ‘positioning Lamprell for the energy transition’ as they say.
Christopher McDonald, CEO, Lamprell, said:
“In the four years since I joined Lamprell we have been reimagining the business for the future. Today we set out the shape of Lamprell as it looks forward, taking its long and proud history of providing services to the energy industry and accelerating its focus on renewables and digital technologies. This evolved structure will provide the business with greater focus as we seek to take full advantage of the many opportunities we see across our end markets.
As the Group emerges from what we hope is the worst of the COVID-19 pandemic in good shape, the time is right for us to be positioning the Group for the next phase of its growth. I am very proud of the way our people have managed the challenges of 2020, and the Group’s improving financial performance is thanks to their discipline, dedication and hard work. Lamprell has an exciting future and we have a great platform on which to build.”
Readers will remember that over the years I have been a big fan of Lamprell and it is one of the finest in its space, made better recently by high quality management who have upgraded the business. Now that is not the first time I have written that and over the years the most important call for the company is to call when the cycle has overtaken it.
Given that the shares are almost a ten bagger for the year (7.02p-64.9p since May) history would normally be advising us to think carefully about when to take some money off the table, after all rule 1 is that you date Lamprell, not marry it. However, with wind farm projects being a success, renewables fabrication being efficiently constructed with capacity planned and 2 IMI Jack-ups ‘well under way’ for the Sharjah National Oil Company. Finally, rig refurbishments are having completed 16 projects in 2020 with others on the way making it OK, just to stick with Lamps for a while yet..
Pantheon has spudded the Talitha #A appraisal well (89.2% WI) targeting ‘in the region of a billion barrels of recoverable oil’. The shares have done very well and leave no room for error but since this is an appraisal of a billion barrels then it is a risk free ride, now what don’t I get about this, it is surely huge but the market hasnt booked a billion barrels yet.
Tower has raised £1.25m at 0.325p plus one warrant offered at 0.65p. The money is to pay off the Shard Merchant Cap facility. I wish Jeremy Asher all the very best, his patience is, as they say, a virtue…
Last night the Noisy Neighbours beat the Seagulls 1-0 and cruised to 3rd in the Prem. Spurs drew 1-1 with the Cottagers, a creditable result especially as Scottie Parker had every right to a night off as Spurs were carded to play Villa last night…
England’s cricketers are in Sri Lanka for two tests in the Moose Cup, they got off to a good start bowling the home team out for 135 and were 127-2 at the close, Dom Bess gets a fifer in 10 overs.
(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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