Posted by Malcolm Graham-Wood - Malcy's Blog
WTI $61.68 +34c, Brent $64.84 +51c, Diff -$3.16 +17c, NG $2.56 -2c
Last week WTI was up $2.48 and Brent +$2.05, it didnt feel that good but the heavyweights came in from Opec and Non-Opec and lifted the gloom. The final piece in the jigsaw was the Saudi Energy Minister stating that they would prefer to keep the market short than the other way around, marginal barrel and all that as we have discussed. If that means what is says, and the agreement stays in place for at least all this year then it is realistic to assume some degree of consistency in the oil price.
The overall rig count on Friday was unchanged at 975 with oil units up 7 at 798, the US cannot be a swing producer or even decide the price of the marginal barrel the last time I looked…
An operational update from Zenith this morning where the workover programme in the Zardab Field is what can best be described as challenging. The Z-21 workover has seen the coiled tubing intervention successful but there is more to do and this should complete in April after new kit arrives in country in March. At the Z-28 workover, again much work has been completed, leaks have been sealed and the well cleared down to 3583m, but with the aim being to clear to 3944m that will be completed after the Z-21 when that kit is available.
The company has been upgrading its A-80 workover rig to increase its capabilities and will be able to use it much more regularly, this coupled with the recent purchase of the A-100 truck mounted rig in January, which is being constructed nearby, should arrive in late April.
The ESP upgrade programme has increased from 11 to 13 wells of which 7 have already been installed, these pumps uplift production and reduce downtime but there is a delay on the delivery of the next six units, accordingly Zenith has arranged another supplier with delivery in May. With current production of 350 b/d and a higher than expected natural depletion rate having been exacerbated by loss of wellbores in some primary targets, (due to uncemented casing collapsing) when rehabilitation starts there should be significant upside in production levels. Accordingly the production target of 1,000 b/d is still intact but now is planned for by this year end.
I met with COO Mike Palmer when I visited Zenith recently and he is a first rate operations man, he and his team have clearly learned a lot from this process where the workovers were not ‘as historical information had led us to believe but our view of the quality of the geology and the opportunity presented by these wells remains unchanged'. With a good quality team and plenty of new kit, these recent problems should soon be behind them and are of ‘little material consequence when considering the longer term, very significant, prize at hand, and the broader picture of our profitable oil production activities in a field with vast, untapped oil reserves'. It is for these reserves that I believe will mean that Zenith should be able to deliver the goods in the coming months.
An update from EnQuest today that some people thought might not happen….The news is unsurprisingly getting better, production last year was 37,405 boe/d and with Kraken steaming ahead guidance for this year is 50-58,000 some 33-55% up. Kraken was 35/- bop/d in January and is on track for its 50/- bop/d target and producing much needed cash flow, even debt is starting to be paid down, net debt is now $1,989m.
After my mistake last week RockRose really has returned to the market today and has traded between 340-390p which is a very pleasing result for backers.
A very interesting move by Baron Oil who have taken an option to farm into the North Sea block that contains the very exciting Wick prospect. Drilling here is expected to be in September of this year at a cost of £4.2m, Baron are paying 20% of well costs plus £6,500 of back costs for a 15% interest in the licence.
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Here is a message from my lovely wife Netty who is for reasons best known to herself running the London Marathon, again in April. Any donations would be really appreciated and your previous years kindnesses are not taken for granted!
I am running the Virgin London Marathon on 22nd April 2018 in aid of the Lords Taverners, giving disabled and disadvantaged children a sporting chance.
The FA Cup provided few surprises at the weekend, Spurs only drew at Rochdale so a replay there and a tie with the Owls or the Swans who drew. Chelski and the Foxes both won on Friday and play each other next, the Red Devils beat the Terriers and now host the Seagulls who beat the Sky Blues. The Noisy Neighbours are at the latics tonight and the winner gets to play the Saints.
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