Posted by Malcolm Graham-Wood - Malcy's Blog
WTI $66.14 +63c, Brent $70.52 +10c, Diff -$4.38 -53c, NG $3.51 +6c
That was the good week that was, WTI continued to outperform Brent and was up $2.83 on the week vs +$1.91 bringing today's differential closer to $4 than $5. The rig count rose sharply, by 12 in oil to 759 which will worry the bulls as the US production numbers rise again, that and a modest rally in the greenback has pushed oil back down, Brent is back below $70 this morning. And no reason why not really, there are fewer reasons to go up than down right now although bulls are still running the show.
Jersey Oil & Gas
An operational update from JOG this morning which is very much what shareholders are looking for. The work programme and budget for 2018 has been agreed by the ‘co-venturers'. This will include an appraisal of the Verbier discovery and ‘contingent well planning including acquisition of a site survey to progress exploration activity on the licence area'.
Negotiations for a rig are ‘advanced' to drill one well and with the option for a side-track to be drilled in the summer of 2018. All this can be funded from the company's cash reserves which after the autumn raise leaves December 31 2017 cash of £25m, capex for this year is an estimated £9-11m so plenty of headroom and I hope that a modest production acquisition maybe on the cards.
With an exciting programme of events for this summer and a gross recoverable resources range of 25-130 mmboe as estimated by none other than Statoil, things are looking up for JOG in no uncertain way. Taking the estimated mean Statoil number of 69 mmboe and the oil price of $70 I still think that JOG has massive potential upside with a market cap of only £47m. The shares are surprisingly off 4% this morning but this may be a bit of profit taking after a 23% rise so far this month, stick with the shares, they won't be coming out of the bucket list…
A swift mention of President and the recent tax reforms that have come into place in Argentina. The corporate income tax rate has fallen for 2018 and 2019 from 35% to 30% and from 2020 to 25%. PPC is very well placed to take advantage of these as it has tax losses to offset against profits which will continue until 2019 and will fall straight through to the bottom line adding value to the company. Post 2020 the lower rate will increase cash flow and boost profitability.
A positive update from Serica this morning as is goes about closing the BP deal in which it acquired stakes in Bruce, Keith and Rhum assets, these had been hit by the Forties pipeline closure but are back up now. At Erskine there has been serious missing of guidance, production is 1,975 b/d against expected 2,200 b/d down to waxing problems which are expected to be cleared and production can increase.
The company has two wells to drill this year, the Rowallan exploration well in the second half and Rhum#3 recompletion/re-entry well in Q2/3 and if all goes well will tie in before the end of the year. Cash is $34m and debt is $3.9m, so assuming all the technical problems can be sorted, SQZ is looking reasonably well funded. I havent had an opportunity to meet with Mitch Flegg since he joined and have today put in another request, let's hope it can be fixed up before long.
The FA Cup weekend saw wins for the Noisy Neighbours, the Red Devils, Chelski and the Foxes, Spurs could only draw at Newport and the HubCap Stealers went out at home to the Baggies. Notable wins for the Sky Blues, the Latics, the Dons and the Owls.
England completed the one dayers down under, winning the last game and the series 4-1, just the T20's now….
And it was sad to see the founder of IKEA passing away at the weekend, his funeral is expected to be later this week or however long it takes to put his coffin together….
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