Posted by Malcolm Graham-Wood - Malcy's Blog
WTI $63.42 +$1.36, Brent $68.65 +$1.54, Diff -$5.23 +18c, NG $2.69 -1c
It's a bit of a see-saw life in the oil market at the moment with traders having to be on their toes even more than usual. Yesterday crude oil rallied sharply as it was tariff war off and Syria war back on which switched attention back to geopolitical problems in the Middle East. This morning that trend is continuing with both grades up nearly a dollar and Brent knocking on the $70 door again.
The final results for HUR are relatively meaningless but they hide a truly transformative year for the company as Lancaster moved into project execution phase. They also delivered two CPR's that gave them 2.6bn barrels of 2P reserves,(a first) and 2C contingent resources (up 450%). They also raised $547m which was no mean feat under the circumstances (in joke) and are moving fast with procurement of very large bits of kit which are coming along nicely. Cash is $381m which keeps them in a very strong position to develop Lancaster. First oil is on target for 1H 2019 which will only increase the company's strength in terms of cash flow and I remain convinced that this world class development has still not been appreciated in terms of sheer size but also as a significant milestone in the history of hydrocarbon exploration in the UKCS. Target price is still in excess of 100p.
Faroe announce the result of the Fogelberg appraisal well this morning which confirms the reservoir sequence and lateral extent as well as proving better reservoir quality with a deeper gas-water contact. Next stop is a DST to confirm well and reservoir productivity. Fogelberg is only 18 km North of the Åsgard complex which like other recent discoveries provide efficient, convenient opportunities for hydrocarbon movement. As an aside the Norwegian Ministry has approved the development of the Fenja oil field which is 33 km South West of the Njord facility.
An operational update from Zenith this morning which is encouraging as it shows that the significant investment in new kit is starting to pay off and is already being rewarded by a record oil production revenue month in March. At the Z-21 workover in the Zardab field the new equipment and the workover rig is now on site and will shortly pull out the tubing string and cut the tubing before running in-hole with the drill bit and hopefully start production.
With this new, owned kit these operations are significantly more efficient and work is now performed by Zenith engineers and subcontractors are rarely needed. As I mentioned gross revenues in March were $490/- which is a good start to the ‘new' Zenith and in that sentiment the company has sensibly decided to shut in a number of uneconomic wells which had extremely high water cuts. This will leave 300 b/d of more efficient production and 31 less wells to service. Finally the ESP upgrade programme continues with 11 new pumps added since February. Zenith is turning round with strong management, a good operational team that I have met and slowly admittedly but surely is getting back in shape.
I have done a couple of interviews with Interactive Investor to which the links are below.
All you need to know is that it is the Noisy Neighbours v the HubCap Stealers part 2 tonight, anything might happen….
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