Oil price, JOG, Genel, Predator, BPC, Echo. And finally…
WTI $65.63 -6c, Brent $68.96 +8c, Diff -$3.33 +14c, NG $2.94 -3c, UKNG 61.36p +1.86p
Nothing changes as oil continues to nudge forwards, the EIA inventory stats were fairly similar to the API, crude and distillates saw decent draws, only gasoline disappointed with a small build mainly as refinery runs increased by 1.1% w/w.
Jersey Oil & Gas
JOG has announced results for 2020 this morning and all is as expected, after all much has happened since the year end and the company is on the brink of significant progress on the GBA project. During the period they delivered 100% control across all of the GBA by acquiring interests from Equinor and CIECO. Also the 32nd Licensing Round Award has been completed at part-block 20/5e (within the GBA acreage)
Core GBA P50 Contingent Resources increased to 172 MMboe, from 124 MMboe in 2019, with four high graded, drill-ready exploration prospects at approximately 220 MMboe. Along with that, JOG has grown the GBA project team, expanding the size and capabilities of the Company commensurate with the requirements of operatorship of the GBA Development project.
Finally, Concept Select progressed during the period, focused on delivering detailed plans for a low-carbon development concept with highly attractive economics and an uplift in P50 Contingent Resources estimates for the core GBA to 172 MMboe in a three phase, low-carbon, conventional platform development. JOG has launched a farm-out process to seek an ‘aligned partner’ to join the project and provide material funding.
JOG views the GBA as one of the most exciting developments in the North Sea, with the potential to deliver significant value to shareholders from 4 operated licences, 5 oil discoveries, 4 drill-ready exploration prospects and project lifetime pre-tax free cash flow for the potential core GBA development is forecast to be circa US$6.4bn, with an estimated project value of approximately US$1.7bn pre-tax NPV (10%).
Year-end cash position is £5.1 million, with no debt and since then the company has raised £16.6m in an oversubscribed placing and offer for subscription. This was done with strong support from institutional investors and leaves the balance sheet significantly strengthened.
Andrew Benitz, CEO of Jersey Oil & Gas, commented:
“JOG is delivering on a strategy of focused growth, having successfully aggregated a significant portfolio of discovered resources in the GBA together with significant exploration upside. We have assembled an industry leading, multidisciplinary team of specialists who have delivered a significant upgrade in discovered and prospective resources and selected what we believe is the optimum development concept.
“I would like to express my thanks to all our team and everyone involved in our GBA project, who have worked tirelessly throughout the Covid-19 pandemic to ensure ongoing progress.
“The GBA project will be a major investment for the UK, create many jobs and ultimately produce a vital domestically sourced and low carbon supply of energy. Our shareholder support is continually appreciated, and it is only through their investment that we can achieve our plans.”
JOG is now in a key position for development of the GBA project and is well financed for that and it has built up a formidable team of experts to deliver it. Whilst one can never second guess timing of farm-out discussions the company can never have been better placed to show potential investors the progress that it has made and its ability to get GBA underway with the starting gun having been fired.
As for share price appreciation I see an imminent upward move now that the company is financed and a medium term target of 700p would not be out of the question. In the longer term I still believe that the company’s value based on developing the GBA would be substantially more than this and would not rule out a multiple of that target price.
Genel has an AGM statement today in which it announces production of 33,100 bopd, up 4% y/y in line with guidance with Sarta coming onstream and robust Tawke performance. Here, 12 wells are forecast on the licence in 2021, of which nine are at Tawke and three at Peshkabir. DNO has increased gross operated Tawke licence full-year 2021 production guidance to 110,000 bopd.
Sarta is producing at a mechanically constrained gross rate of c.8,500 bopd, pending ongoing surface facilities de-bottlenecking. These actions are expected to result in production once again reaching c.10,000 bopd in the near future, as a pilot project the short term is less important than ensuring that the drilling programme is right. So the fact that Sarta-5 and Sarta-1D wells are spudding next month with results at the end of 3Q and will be followed by Sarta-6.
Genel are forecasting ending 2021 with a ‘material cash position’ and a strong balance sheet as the beginning of catch-up payments from the KRG get underway whilst continuing to invest in growth and of course paying a material dividend. ‘This financial strength supports the paying of a material dividend, as we continue to offer investors a compelling mix of growth and returns. Pending approval of our final dividend of 10¢ per share at today’s AGM, the ex-dividend date is 13 May, with payment on 14 June 2021’.
Bill Higgs, Chief Executive of Genel, said:
“The addition of production at Sarta and the robust performance of Tawke year-to-date has increased year-on-year production in line with guidance. With a strong balance sheet, our high-potential appraisal drilling campaign is now underway following the spud of the QD-2 well at Qara Dagh. With the increase in oil price and beginning of catch up payments from the KRG, despite our investment in growth and payment of a material dividend, we expect to end 2021 with a material cash position.”
Another good set of results from Genel where every period seems to bring more potential for upside and the upcoming six months are no exception. There appears to be much more upside in the share price if one looks at these drilling programmes allied with the beginning of the KRG repayment programme.
Predator Oil & Gas
Predator has announced that the MOU-1 well remains on schedule to commence drilling during June 2021 in the area of the Guercif Petroleum Agreement, comprising the Permits I, II, III and IV, located in the Guercif Basin in northern Morocco. The MOU-1 well location is approximately 250 km due east of and on trend with the Rharb Basin, where shallow commercial gas production has been established for several years.
Well spud during June is dependent upon the completion of drilling operations for three wells for another operator SDX Energy in the Rharb Basin after which the Star Valley Rig 101 will be mobilised to Predator for the Guercif drilling. Drilling at MOU-1 is expected to take up to 20 days. Subject to the results of wireline logging the well will be completed for rigless testing.
As previously guided, results from MOU-1 may potentially de-risk up to 1,823 BCF of prospective High Estimate gross recoverable gas resources in the Tertiary and in the MOU-4 Prospect to provide the basis for a further drilling programme, including appraisal and exploration wells, when the Star Valley rig becomes available again later in 2021.
I have included the table that Predator has provided this morning, it gives an idea of just how substantial that it is and with such recovery rates.
The Company intends to release its Financial Statements for the period to 31 December 2020 prior to the commencement of the MOU-1 drilling operations together with an updated business development plan for Morocco. This plan will focus on building on the successful planning and imminent execution of the MOU-1 drilling programme as a means of leverage to assess additional value-accretive opportunities that we have identified.
Paul Griffiths, CEO of Predator Oil & Gas Holdings PLC commented:
“This is an exciting and exceptionally busy time operationally for the Company dominated by making preparations on the ground in Morocco for the imminent drilling of the MOU-1 well. Completion of the well will establish Predator as an operator in Morocco and opens up the potential not only for further drilling on a licence covering 7,269 km² and containing multiple prospects, but also to assess additional opportunities where a proven operator can add value. There are a range of development options for gas in Morocco and results from MOU-1 will potentially determine which of these options can be progressed in the near-term and which parties may be the most appropriate candidate partners for a gas development.”
After a number of false starts it looks like the drilling programme for Predator in Morocco is now imminent with all the excitement that it brings with it. Although the shares have performed very well in the year to date the scale of the Morocco campaign would dwarf recent performance should the well come in…
BPC has provided an update on the upcoming drilling of the Saffron #2 well in Trinidad and Tobago. Rig mobilisation to the field will commence on 9th May 2021, targeting commencement of Saffron-2 drilling on or around 23 May 2021. All equipment (including various re-usable items from Perseverance-1) have been mobilised to Trinidad, along with necessary contractor personnel.
Design of the Saffron-2 well includes a production completion, allowing for immediate oil production and sales on a successful well, with anticipated rates of 200 – 300 bopd, which it is estimated would provide more than US$1.8 million per annum of cashflow to the Company. Based on these pre-drill estimates, Saffron-2 would have a payback of 12-18 months and an ROI of in in excess of 200 per cent.
Following a successful Saffron-2 well, a further five to nine production wells are currently planned to be drilled in H2 2021 as part of an overall field development of up to 30 wells, these further five to nine wells are projected to deliver average daily production of up to 1,000 – 1,500 bopd, which it is estimated would provide US$8 million – $12 million of annual cashflows going forward (based on a US$60 / bbl oil price).
Eytan Uliel, CEO Designate of BPC, commented:
“I am pleased to advise that rig mobilisation has been confirmed for the drilling of the Saffron-2 well, all major contractors and suppliers are in place, and we are operationally ready such that drilling activity can commence around 23 May 2021.”
“A successful Saffron-2 well will be a profitable well in and of itself, but more importantly will further our understanding of the Saffron field and enable us to plan for additional field evaluation and appraisal work, as well as to assess the optimal full-field development plan. In a success case, this well can be quickly brought into production, potentially adding 200-300 bopd of oil sales and $1.8 million or more of annual cashflow. A full-field Saffron development could see peak production of 4,000 bopd and around $25 million of annual cashflow – a material project by any measure, and one we are thus eager to get after.”
As BPC moves on to Trinidad the opportunities that exist there now come into view which make this well and those following it equally important. As CEO Designate Eytan Uliel says, this could be a material project with very decent cashflow going forward, the fact that he makes the comment says a lot for BPC.
Echo has announced its audited results for the financial year ended 31 December 2020 which include a fourfold increase in revenue to US $11.1 million (2019: US $2.6 million).
‘Favourable fiscal environment have led to the receipt of certain VAT payments, improving business cashflow’. Santa Cruz Sur net daily production in 2020 totalled 1,966 boepd, 10.2 mmscf/d of natural gas and 259 bbls/d of oil and condensate. In 2020, Echo’s net cumulative production was 0.72 MMboe, 3,750 mmscf of natural gas and 94,693 bbls oil and condensate.
Company estimated reserves and resources as at 31 December 2020 net to Echo’s 70% interest: 1P (Proved): 3.13 MMBoe, 2P (Proved & Probable): 4.06 MMboe and Contingent Resources (High estimate): 7.20 MMboe (Best estimate 6.51 MMboe)
Martin Hull, Echo’s Chief Executive, commented:
“Echo’s resilience during a very challenging year has ensured that we have been able to continue our operations efficiently and build firm foundations commercially and operationally despite the difficult external conditions. Not only have we made significant cost-saving efforts across the Company and rebalanced our financial position to provide increased flexibility, but we have also achieved tremendous operational progress across our SCS assets where we currently benefit from a favourable fiscal environment and attractive gas sales agreements with key customers. Moving forward, we are excited by the continuing expansion opportunities at our SCS assets, where we aim to maximise production potential, and we are also encouraged by the potential for new hydrocarbon and/or renewable energy prospects in neighbouring Bolivia and elsewhere in the Region. The framework for 2021 and beyond has now been set in place, and we look forward to capitalising on our various growth catalysts.”
Last night Chelski beat Real Madrid 2-0 going through to play the Noisy Neighbours in the final on 29th May. In the Boropa Cup tonight the Red Devils visit Roma with a 6-2 advantage from the first leg, the Gooners host Villareal and are 1-2 down from the first match.
The British Lions squad has been named today and unsurprisingly Alun Wyn Jones is the captain. Surprised not to make the trip will be Jonny Sexton, Billy Vunipola, Henry Slade, , Kyle Sinckler and James Ryan whilst in the squad are Sam Simmonds, Jonny Hill, Courtney Lawes, Jack Conan, Chris Harris and Bundee Aki.