Posted by Malcolm Graham-Wood - Malcy's Blog
Mixed fortunes yesterday, Brent rallied when the Nigerian strike was announced and even when it appeared to be off, still gained on the day. I expect more strike action into the new year with elections in January ensuring political grief.
Range has returned from a long suspension and whilst the inevitable selling by investors who had been waiting for this opportunity to happen has occurred I think that when the story is told about ‘new Range' it will be quite interesting. At the moment there is a well drilling on Beach and I expect the waterflood to be delivering about a third of production going forward.
Expect plenty of news in the new year, a full update on the Indonesia asset should be forthcoming and of course a detailed update on the Trinidad work programme. Along with how the drilling company is going to fit in and create value for Range, complete with a corporate update and an analyst visit 1Q there will be much to hear from the company.
Zenith has released an operational update on wells Z-28 and Z-21 in the Zardab field in Azerbaijan. This where I recently visited and despite having some continued technical problems the prize is now definitely in reach. Having cleaned out to 3,574m it can now be cleaned to TD of 3,944m which is a ‘major accomplishment' and they are ready to run a CTU to TD. They have encountered a leak from the wellhead which is unfortunate but repairable, with the holidays coming up it may be January before the resin compounds are able to be sourced and installed. With the well showing very strong prospective pressure there is a serious incentive to achieve success in the well and it looks like once the repair is completed this may happen.
At Z-21 the civil works are complete and with the wellhead pressure up to 4,115 psi and the workover rig being mobilised right now this also looks very promising. Sorting these historic problems isn't easy but are potentially very rewarding and the company remains a very attractive play with its low cost model with serious upside.
After the company raised well over $500m in the summer the shares were bound to mark time as indigestion set in and newsflow seemed a bit scarce. In recent days however there has been plenty for investors to get their teeth into with the better than expected CPR followed by news from the visit to Dubai by shareholders and analysts.
The visit was extensive and we had full access to the Aoka Mizu in Drydocks World in Dubai where the transformation is taking place. With extensive presentations on the whole of the West of Shetlands portfolio reminding us of the potential upside and technical evaluations showing how the EPS at Lancaster is on track for 1H 2019 we were ready to see the FPSO.
The advantage of having visited a number of shipyards around the world is one of comparison, in this case Drydocks World came out with flying colours on all fronts. Boxes that need ticking in my view include good quality and plentiful workforce at all levels, above average spec kit, including some of the biggest cranes anywhere and an air of efficiency by the Hurricane operations team. Now, the company line is that the Aoka Mizu needs to sail away by 2Q 2018 in order to be on site ahead of the weather window closing and whilst I dont expect any change of schedule from them, I would say that barring any unforeseen problems they are probably somewhat ahead of the game at the moment.
As we move towards the Lancaster EPS becoming more of a reality, I expect the Hurricane share price to start to reflect that and whilst I understand that with some, if not most of the potential partners keeping their powder dry it will not fully discount that although speculation should rise in due course. It needs only one potential early mover to change the basis and that should be priced into the shares, accordingly I remain convinced that at below 30p the shares are extraordinarily good value.
Yesterday I had a long chat with Andrew Scott of Proactive Investors. We touched on a number of companies including Echo Energy, Hurricane post my visit, SDX Energy, Savannah Petroleum, President Energy, VOG and Reabold Resources in a wide-ranging discussion about the sector. The link is below…
Tonight it's the Haribo Cup where the Hammers go to the Gooners and the Noisy Neighbours are at the Foxes, will the junior cup provide the chance to end the unbeaten run?
And drug cheat Justin Gatlin is ‘shocked' over doping allegations regarding his coach in today's papers, funny that Gatling being in a drug story….
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