WTI $48.37 +64c, Brent $51.33 +58c, Diff -$2.96 -6c, NG $3.10 +4c
A welcome bounce for oil producers yesterday and carried on this morning in early trading. The usual irony of Libyan production and exports was to be seen, as within 24 hours they had shipped a full tanker of crude and then, after terrorist activity, shut-in 252/- b/d of crude oil.
Adding to the news was the Iranian minister who said that he was in favour of extending the initiative, but then he would, wouldn’t he? Even Azerbaijan has suggested deeper cuts as Ministers look carefully at their balance sheets. The API inventory stats were a bit mixed, the build was bigger than expected at only 1.9m barrels but yet again products drew, gasoline by 1.1m and distillates by 2m barrels. Let’s see what the EIA number looks like tonight.
An operational update from PPC this morning from Puesto Guardian where the company announce the successful working over of the 2nd previous producing well the DP1001. The Puerto Guardian concession is already producing 750 b/d which will drop a little to 600-650 b/d after initial flush production but is already very encouraging. The programme continues next week, delayed slightly by heavy rains in the area and the three well frac programme is next, I am confident that yet more barrels will be added to production.
It is worth taking a further look into the value of PPC as a recent upgrade in its reserve position in Argentina appears to have had little impact on the share price. With 1P oil reserves up 9% to 12 mmboe and 2P reserves up 10% to 19.9 mmboe (and mostly oil) the group when you add in Louisiana exceeds 20m barrels of 2P oil equivalent and is valued at a fraction of that. As Peter Levine points out, this reserve position ‘is comparable to companies whose market cap is a multiple of President’s’ and also in my view, the market has yet to catch up with this value inconsistency. The 2017 workover programme that is delivering success after success is indeed a key factor to increasing the important production to reserves ratio, when that is understood by the market the shares will surely rebase in an upwards direction.
Gulf Keystone Petroleum
I met with Jón Ferrier and Sami Zouari round at GKP the other day, my first invitation for some time and certainly since the refinancing…The winds they are a changin around at New Fetter Lane but the main asset, Shaikan is certainly not, it is still a high quality asset with significant growth potential. The reserves which are 622 mmbbl of 2P give current stable production of 40/- b/d and with investment that figure could and should grow to a much higher number. At present Shaikan crude is back to being trucked to Turkey on a temporary basis’ at the behest of the MNR who are paying for all transport costs.
Effectively under new management and after last year’s refinancing with a balance sheet that actually has net cash GKP is in a stronger position, albeit having wiped out most of the equity holders which they would be minded to remember. KRG payments for their oil have been regular and adequate and means that in due course they will be able to contemplate further investment to increase production, but this time they will do things in the right order one hopes. As they build up cash resources and continue to work closely with the MNR the next stage of 55/- b/d is achievable if not imminent, in the meantime focus is the watchword across the board, JF’s office is not only small (four was a crowd) but now away from the finance function and next to the production and operations team. I have a poor record on GKP in recent years as I am regularly reminded, and know that this is a new base and new shareholders but apart from that there are grounds for guarded optimism if you hung on in there.
Impact Oil and Gas
I don’t often write about private companies but Impact is a rare beast, privately owned and run by the exemplary Mike Doherty it is getting a reputation for doing good deals and building a cracking portfolio. I mention this because today’s deal does both those things, it has farmed-out to CNOOC part of their holding in the PSC on the AGC Profond block which is in the Joint Offshore Development Zone between Senegal and Guinea Bissau and added another major to its list of partners.
Those who read my last week’s and yesterdays piece on Far Limited will know that I believe that this area is slowly getting very warm and scheduled to be hot before long. With BP farming-in with Kosmos in Mauritania/Senegal and Far in The Gambia this latest deal starts to link up the deals, I can guarantee that this is only the beginning and there is much more to come. The good news is that investors can play this a number of ways but our old friend FAR Limited is the obvious route, yesterdays deal in the Gambia was not the last I suspect and other majors are all over the area like a cheap suit, opportunities will keep on coming.
International break time so journos turn to transfer gossip, likely ones at the moment are for Hazard to quit Chelski and Eric Dier to move to the Theatre of Dreams which at least will rile one Rob Davies, Guardian scribbler and huge Spurs fan…