Oil price, Hurricane, Amerisur, Sound, Eco Atlantic, Ophir And finally…
WTI $70.37 +$1.12, Brent $79.74 +68c, Diff -$9.37 -44c, NG $2.83 n/c
Another good day on the bourse as oil ran up particularly WTI on the EIA inventory stats which showed a draw of 5.3m b’s of crude against the combined guesses of the scribblers of 1.6m. Products, as one might expect, especially in gasoline built with distillates smashing the forecast with an add of 6.16m b’s against expectations of 1.4m. To be honest at this time of the year I wouldnt be watching these too closely as the head for turnaround.
Other influences remained the same, Novak’s comments I mentioned yesterday gained more credence, Florence makes landfall tonight in Carolina but maybe easing a bit and the only interest oil market have is in the 3m b/d of products in the pipeline from the Gulf to New York. Will do a round up tomorrow, things should be clearer and all three agencies reports can be compared.
Hurricane has announced that the SURF installation at the Lancaster EPS is finished which marks the successful completion of the subsea facilities on site. The system is now complete and ready for the arrival of the Aoka Mizu FPSO where work in Dubai is in its final stages and about to commence sea trials. With those expected to be completed by the end of the month sailaway should follow’ shortly thereafter’. On arrival it will hook up and commissioning will commence, first oil is still on target for 1H 2019. With the recent announcement of the GWA farm-out bringing forward value creation on that area this should frank the value well above the current share price.
Amerisur’s interim results are very impressive as one might have expected. With revenue growth of 93% to $67.9m (35.1m) giving profits of $10.8m (loss) and EBITDA of $24.3m (7.6M) as a result of net realisations of over $64 a barrel. Net cash flow from operations went from $7.8m to $12.5m giving cash of $49.3m. Production was 5,959 b/d in the half, up 33% with 4,987 b/d through the more efficient OBA route which now has a capacity of 9,000 b/d following completion of the Chiritza pumping station in Ecuador.
This impressive set of numbers that give an incredibly solid financial backing to the company enable the funding of a continued large and varied exploration programme. Work has been continuing on Platanillo, PUT-8 and CPO-5, with the Pintadillo-1 well already spudded and the Indico-1 well expected to spud in October, PUT-8 has some operator delay at present. With seismic under way on blocks 12 and 9 where the Coendu prospect lies expected to complete soon and drilling is expected once licencing is complete. This seismic is important as it opens up both these blocks where there is significant scope. Since the period end AMER has signed up at very low cost, and value accretive, block 14 which also gives added opportunities in nearby acreage.
As a result of all this AMER has resources to announce that it will drill between 10 and 18 wells by Q3 2019 which should provide significant momentum, revenues and profits to add to today’s numbers and across a varying selection of asset types in the portfolio. I consider the market valuation of the company to be well below the opportunities presented by the model which delivers high realisations and margins especially to OBA crude. The argument for a significant rerating of the shares is compelling.
Figures also today from Sound where the company has spent the last 12 months behind the scenes working up the substantial opportunities following the gas discoveries in Eastern Morocco. The work at Tendrara is going well, since the year end the company has been awarded the production concession and heads of terms are signed for the FEED construction and financing of the pipeline and associated facilities under a BOOT structure.
Most importantly, approval of Environmental Impact Assessment for drilling the TE-9 and TE-10 wells at Tendrara means that ground works are underway at the former and the many months of hard work will hopefully be be paid off with the drillbit in the next few months.
Eco (Atlantic) Oil & Gas- Totally indecent haste…
Total announced last night that it had exercised its option to acquire a 25% working interest in the Orinduik Block offshore Guyana. The haste in doing this is very revealing, it had not even seen the final 3D seismic data which would have triggered a 120 day exercise window, talk about opening your Christmas presents early…
This is hugely advantageous for Eco and its highly successful development model. The exercise of the option leaves them in a ‘very strong financial position’, fully funded for ‘the next few years’ which includes several drilling campaigns. It also means that Eco recoups all their expenses on the recent expanded 3D campaign and therefore paying their way for the initial two wells will not be a problem. As I pointed out earlier in the week, the company is in an incredibly strong position, they size of the prize can only go up and they got in on the ground floor…
I always like a good strategic review, or in this case, update. Almost always following the unexpected departure of a CEO, operational difficulties and certainly following a long period of share price under-performance, in this case Ophir ticks every box. The review is usually done by a few members of the board led by the Chairman or an NED who moves, ‘temporarily’ into an executive role to oversee the process. Again Ophir ticks the box with Alan Booth who has taken this particular chalice but that is where the similarity stops, Alan, as he said in his opening remarks at the presentation this morning ‘is no nightwatchman’. One of the most highly respected individuals in the industry is known to most as Founder and CEO of EnCore Oil he sold a few years ago, Alan should be as good as any in turning round Ophir.
The plan is straightforward, the ‘strategic priorities’ have been elucidated, probably on a white board in Victoria Street. Keep a control on cash flow, minimise frontier exploration, consolidate the business, sort out the LNG situation, prolong the life of the assets, concentrate on SE Asia and cut costs. This creates value for investors and hopefully rejuvenate the business. Oh yes and find a new CEO….
So, to do the above you have to first take a huge write-off on the LNG business, in this case $310m which leaves it in the books at $300m, no particular reason for that number but it sounds good enough. Alan Booth was at pains to say, several times in the presentation that they havent given up on finding finance for Fortuna and that they are still talking to ‘credible partners’ but don’t stand on one leg waiting for it, as one analyst asked afterwards, why doesn’t a potential buyer wait until the licence runs out at the end of the year? Very perspicacious indeed young man…
So the company is to focus on South East Asia (hmm heard that somewhere recently…) and that means ‘downsizing’ the London office and setting up a new HQ in Asia, Singapore I think he said or maybe Jakarta. the new CEO and other senior execs will therefore ‘reside’ there as they continue their search, or rather Preng do. As it happens the Santos deal, ironically the last one done by Nick Cooper, is fast becoming the poster boy of New Ophir which has now reduced the payback to 30 months.
If anyone can turn round Ophir then Alan Booth can, and its primarily institutional shareholder base will probably like this and give him the time and the benefit of the doubt. The shares have been dire, after four years of being bearish I turned more positive at about 60p, now they are 38.25p and have halved already this year, shows what I know… To buy it here would be brave but not without some savvy, sort this one out, cut a deal on Fortuna and build on the Santos deal and the board might look smart beyond belief, especially if someone thinks that down here they are worth bidding for…
Very quiet but are Surrey closing in on the County Championship at New Road Worcester?