Posted by Malcolm Graham-Wood - Malcy's Blog
As the market quiets down ahead of the holiday a couple of bullish factors emerge, on the geopolitical front the stakes are rising in the Yemen as yesterday the KSA said that they had intercepted a ballistic missile from there near Riyadh.
After the close the API stats came out and provided another boost for the market, crude stocks fell by 5.2m barrels against the whisper of -3.8 whilst gasoline rose 2m b's in line and distillates drew 2.9m way above estimates of 870/-.
Victoria Oil & Gas
VOG have announced the La-108 well result as being ‘ahead of expectations'. Initial gas flow rates of up to 15 MMscfd just from the Lower Logbaba (La-107 did 4) were good and it is now suspended ahead of testing the Upper Logbaba sands which may be used for production in the peak season. Releasing the rig signals the end of the major capital spend and the company can move to the production process, this will include reservoir management to ensure maximisation of reserves. Finally, satisfying the incredible demand from power operators and companies in Douala can step up and highly profitable sales can be made.
Sound has announced that the preliminary results of the RPS certification have validated the company's previous mid-case estimate of GOIP in TE-5 Horst alone of 0.65 TCF with a 2C midcase recoverable contingent resource of 377 BCF. Further results are expected early next year and the company remain confident following comments made at their last presentation.
After the leak comes the deal, Cabot are acquiring H2P UK for $8.7m which gives them another 25% of the Canadian acreage and a 25% option valued at $4m. Alongside this they have raised $16.5m through a subscription, placing and Open Offer at 5p which places them on a solid footing. This acreage has proved highly successful and this raise will further add to the scale previously impossible and the partners are top notch.
The rebuilding of the former NP has been in my view pretty impressive, at the start, the slow build up of production in Canada was painfully slow but necessarily so. Patience has been required but this deal will go a long way to recreating a company worthy of a very good management team that has got them back to here. I have only one concern, the company's house broker in a note out this morning is suggesting that some of the proceeds might be used to ‘advance' the Italian asset base, nothing wrong with that at all but I personally prefer to see most of it heading towards Canada, at least for the time being. So far for Keith Bush and team this has been a good job, well executed and should reward investors.
Yesterday's comment on Hurricane contained a slight faux pas, as it were. Confusing the Buoy and the FPSO is a schoolboy error, the former needs to be on site West of Shetlands by end 2Q 2018 whereas the latter has a planned sail away from Dubai by 3Q 2018. I still feel as per yesterday's note that for choice things could be ahead of schedule if that doesnt confuse any more!
Just as I am going to press there is an update from SAVP with regard to the placing and Seven Energy transaction. It seems that ‘following significant support from the SSNs, discussions have taken place with key stakeholders including certain holders of SSNs' there are some alterations to the makeup of the financing.
The equity raise will now be reduced to $125m whilst changes have been made to the cash and shares amount previously announced. Consideration of $42.5 million in cash (previously $87.5 million) and $109.5 million in new Ordinary Shares (previously $52.5 million) will now be paid to the holders of the SSNs whilst the lender of the second bilateral facility will receive consideration of $3.5 million in cash (previously $7.3 million) and $9.2 million in new Ordinary Shares (previously $4.4 million). Finally, the S$20m new capital contribution from the SSNs will be exchanged for a new $26.7m Savannah share issuance (previously $25m). Bookbuilding is continuing today as the new details have obviously changed the process somewhat including the price. The ASMA investment is still on the table but not included in the $125m raise.
The new indicated price is 35p which will mean the market cap would be around £313m and placees will receive 0.5 of an unlisted, untradeable warrant with each placing share subscribed for. The only other change is that the use of proceeds changes slightly and three wells will be drilled in Niger and no further 3D seismic will be acquired. This deal is highly complicated by the very nature of the acquisition but should this go ahead then the advantages of Seven and the Niger programme leave plenty of room for upside.
BPC has announced the results of the external technical audit carried out by Moyes and Co. They calculate ‘aggregate mean volumetrics assessed for the key structures in BPC's southern licences is a STOIIP of 8.3 billion barrels, with an upside of up to 28 billion barrels STOIIP'. In addition they give a POS of 25-35% which is extremely positive. Applying their recovery factor of 20-40% they get a EUR of 1.66-3.3bn mean and up to 11bn barrels of upside.
BPC has been a poor performer for a long time, this year the peak was 2.25p and the low 0.5p, so today's 40%+ rise in the shares to 0.975p is good but some way from the best expected by the long-suffering shareholders. This news ticks one almighty box, although people like me have never really doubted the huge size of the structures in the area, more the ability to deliver such a potentially massive project with its mandatory green requirements. Armed with this report from Moyes and Co there is now no longer any excuse for non delivery of a partner, funding, and action, if and when that happens the upside will surely be the reward shareholders have been waiting for, after all current market cap is £15m….
Wentworth has announced this morning that it has received payments from both the TPDC and Tanesco for $2.5m net worth of gas sales during the year. The company express confidence that they will receive paid invoices on a monthly basis evidence provided by today's news. Probably more important is the news that gas delivery has started to Kinyerezi-2 for the commissioning of the first two (of 6) gas turbines which in due course will see demand of up to 36 MMscfd when it becomes fully operational. 2018 looks like being a most interesting year for WRL highlighted in my note from AOW in October and very much one for the watch list.
On SDX Energy, I notice that Paul Welch has put a message up on his website which confirms my optimism for next year after what has been a cracking 2017. Worth a glance at http://www.sdxenergy.com/
Genel has announced that the refinancing of its Genel01 bonds and accordingly ‘With the approved proposal, the Company will reduce the outstanding bond debt from $421.8 million to $300 million by way of an early redemption of a notional amount of $121.8 million and extend maturity through amending and restating terms to a new 5 year tenor'. In quotation marks as I could wrap it up any better but things are looking up for Genel at the moment, I saw the team last week, including Bill Higgs now he is on board and I will be keeping my eyes on them…
In the Haribo Cup last night the Gooners beat the Hammers 1-0 and the Noisy Neighbours edged through against the Foxes after a penalty shoot out. Tonight it's Chelski hosting the Cherries at the Bridge whilst the Red Devils travel to Ashton Gate to play in-form Bristol City.
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