Posted by Malcolm Graham-Wood - Malcy's Blog
WTI $56.25 +56c, Brent $66.12 +65c, Diff -$9.87 +9c, NG $4.84 +74c
A modest rally in crude yesterday but at one stage it was way better, a two dollar rise was eaten into and although today is better again there is little trust in the commodity at the moment. Having said that, word coming out of Opec+ sources suggests that the cuts might be nearer to 1.4m b/d at the Dec 6 meeting, at this rate even that might not be enough. The IEA also gave a small fillip to matters leaving global demand growth for next year unchanged at +1.4m b/d in their monthly. EIA inventory figures are today after the Monday holiday for Veterans day, expect around +3m bbls if estimates are accurate…
I mentioned natural gas the other day and it now deserves another call out, yesterday it almost reached 5 bucks intra day and is up 50% or nearly two dollars in no time. This is for two reasons, the first cold snap of the year in the US has arrived and weather forecasts for the next fortnight are for more cold conditions. Readers may also note that I noticed that the summer injection season was a bit light, that means that if they start drawing before the end of November the warning signs are there. For those who watch the weekly gas inventory stats (like me, dreadful habit) today's number and for the next few weeks will be more interesting than usual…
Sound announced yesterday that the TE-9 well has arrived at TD of 2925m where the wireline logging suite will be acquired over the TAGI and Palaeozoic targets and shareholders will be informed as soon as appropriate.
Echo has announced an operational update from Argentina, following the successful wells at ELM 1004 and EMS 1001 the promised stimulation programme is scheduled to start in the next 3-4 weeks. This is good news and is high value marginal barrels accretive to shareholders. The company has announced a production update with stabilised production of 876 boe/d and has also identified a number of additional candidates for well interventions expected to start 1Q 2019.
On the gas side the company is continuing to evaluate the potential within Fracción D with a view to monetising its existing undeveloped 2C resources. Finally, with regard to the jewel in the crown, Tapi Aike, seismic work is scheduled to start in December 2018 and an exploration programme of four wells is expected in the second half of 2019 targeting ‘multi TCF potential'. All in all the report card for a very busy first year in Argentina is going to look very good, with a lot of ground work done, better results than might have been expected and a highly promising outlook.
Zenith interims are pretty basic but moving in the right direction. Revenue was up 12.8% and was a record for the company and production from Azerbaijan was 45,000 barrels. This is a crucial quarter for Zenith as new kit and new personnel are established in country to develop the substantial asset base.
Faroe Petroleum/Cairn Energy
The Agar/Plantain well (Cairn 50% wider licence 25%, Faroe 25%, 12.5%) has come in as a success with recoverable resources in Agar expected to be 15-50 mmboe gross. The reservoir encountered 20m of gross hydrocarbon-bearing section with excellent reservoir quality and high net to gross ratio. The advantages to both are that the discovery is near to infrastructure with at least two export options and for Faroe are high value barrels due to their UK tax losses. Cairn also tucked into their announcement a dry hole at the Ekland prospect and a farm-out at Chimera.
Today's update from Premier was very much more of the same, an excellent operational performance, despite a couple of irritating unplanned shut downs production is 78.4 kboepd up from 76.2 in the first half and the guidance for the year of 80 will be hit. Catcher remains a real star, over 70/- b/d is not unusual and contractual production rate is going up to 66/-b/d. Elsewhere Tolmount is going ahead fast with the rig construction due to start in Italy very soon and the Tolmount East appraisal well is scheduled for next year.
A rig has been signed for the Zama appraisal well and this should spud before the end of this month, Mexico will remain in appraisal mode for the time being giving Prems the optionality so many people like. Elsewhere there is seismic activity around the world coming up in Indonesia, at Tolmount, in Brazil and Mexico so the pipeline remains very positive. As for Sea Lion, activity continues, whilst the LOI's are converted to contracts and many reports are written on a number of technical and environmental subjects there is still the matter of Governmental assistance and as can be imagined they are quite busy at the moment. However there is no divergence from the plans for Sea Lion despite the rather laborious nature of the process.
Debt is falling, the target of $300-400m is only dependent of timings of cargoes sold and the year end target of $2.4bn is perfectly achievable. (Think $400m at $80 oil, nearer $270m at $65) With the company generating decent free cash flow and with production solidly increasing the opportunities at Catcher,Tolmount and in Mexico give some room for further upside. Sea Lion is crucial to this company in the next decade and even at $65 is a surefire winner so must be pursued at rapidly as possible. Company opex stays at $17-18 and F/Y capex is down to $365 from a planned $380m also helping the numbers including of course significant debt reduction.
A corporate and trading update from WEN today (note the change from WRL…), approval to delist from Oslo has been approved. Payments from Mnazi Bay in October were $3.78m from both TPDC and TANESCO for the month's gas sales. Production was down in the month due to several maintenance activities and averaged 82 MMscf/d but we are assured that it will return to 90 in 2H November.
As a holding statement this is fine, all the paperwork has to be done and Mnazi Bay continues as usual, however 2019 will be when we hear what Eskil Jersing and his new team have in store for us, doing nothing is not an option so it should be an exciting ride.
For Enteq this is a very positive set of figures, with revenue showing ‘steady improvement' and progressive growth in adjusted EBITDA the company are almost buoyant but as always keeping the powder dry. There has been significant investment in technology and the rental fleet of MWD systems from existing cash reserves which will hopefully increase market share. It still leaves the company with $11.6m of cash ($15.3m) and whilst obviously North America is the key area international opportunities are always being addressed. Enteq is a good company, it deserves a greater coverage and CEO Martin Perry has impeccable qualifications to grow the business after what was an almost impossible start.
England had every opportunity to take a first innings lead against Sri Lanka but didn't as the spin bowling was horribly inconsistent. They seem to think that they can offer a gift every over and only the occasional ripper so they go in at 0-0 in the second innings 46 runs behind.
International friendly weeks drive me bonkers especially when two of the matches are Germany v Russia and Poland v Czech Republic… England, including Rooney for some peculiar reason, take on the USA where Rooney now plies his trade and it's The ROI v NI which again can't always be described as a friendly especially during Brexit.
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