WTI $56.92 +83c, Brent $67.08 +63c, Diff -$10.16 -20c, NG $2.64 -2c
Another up day for crude, markets were all pretty buoyant and news from the Fed kept the kettle boiling. Comments from the Saudis that they expected that with such excellent participation the world oil market would be in balance ‘by April’ helped as well. Some people are also remembering that some of the Russian cut backs are only just kicking in, for purely technical reasons.
Inventories will be interesting, a key time of year but last night’s API numbers were encouraging, crude only built by 1.3m barrels and the fall in gasoline stocks was much bigger than expected. The EIA stats tonight, delayed due to Presidents Day will be key.
An update from the Greater Mediterranean this morning from Rockhopper, Abu Sennan is now producing 4,100 b/d, 915 net to RKH up 10% on last year and the ASZ-1X discovery is awaiting development lease approval. The company say that they have an ‘active’ drilling programme including 1 exploration well, 2 in-fill oil producer wells and a second water injector well on the Al Jahraa field.
Elsewhere the Ombrina Mare arbitration continues with the outcome expected late 3Q or early 4Q 2019. Finally, I can’t be the only one who noticed the Upstream Online article yesterday which quoted Premier Oil Senior Development Manager David Hartell as saying that he expected the FID on Sea Lion to be announced ‘by the end of 2019’. With the arbitration and the Sea Lion FID potentially towards the end of the year, 2019 could end up being something special for RKH.
United Oil & Gas
UOG has announced that ERCE in its latest CPR has upgraded the Company’s Jamaican Gross Unrisked Mean Oil Prospective Resources from 219 MMstb to 229 MMstb. At the same time the ERCE upgraded the COS from 16% to 20%. I am due a meeting with CEO Brian Larkin but i’m not sure that a date has yet been agreed with Tullow for drilling the prospect, either way with this and other recent good news UOG is looking in pretty good shape.
I recently had the chance to sit down with Sachin Oza and Stephen Williams, co CEO’s of Reabold Resources. I have admired their business model since they came to the market and whilst they are relatively new they have managed to fit a lot into their time on the market. That model expects low drilling risk, a clear exit strategy, a de-risked project with local production and fast cycle size-ability and with non-operator status.
2019 will see a number of RBD investments really show how good the management team are at selecting prospects, with the disappointment of Wick behind them (it was never representative of their typical appraisal target) and California already up and running. In the USA they have already tasted success at Brentwood twice with wells VG-3 and VG-4 and production is already under way. Investors are keen to see what the Monroe Swell prospect might be like, bad weather has so far hindered the drilling programme but I am led to believe that a well spud is now imminent. Expect at least two more wells in California, probably on Monroe Swell 2 and Grizzly Island but this may change depending on results. In terms of return the US investment is already showing incredible success and looks set to continue that this spring.
At the moment the market is most excited about the Colter well currently drilling an appraisal well offshore Dorset, through its 32.9% interest in Corallian Energy who have 49% interest. This appraisal well of an existing 1986 discovery lies adjacent to the Wytch Farm oil field which has already produced over 400m barrels of oil. Success here, which should be announced by the end of this month, would result in ‘highly attractive economics with low cost and fast payback even at low oil prices’.
In Western Romania RBD has a 29% interest in Danube Petroleum which has an interest in the Parta licence where a two well drilling programme is expected to start later in the half, aiming to test 49.9 BCF of prospective and contingent resource. With proven reservoirs RBD is again offering low risk appraisal and fast track potential cash flow.
Finally back in the UK where through its 37.08% stake in Rathlin Energy it is exposed to that company’s 66.67% of the West Newton A-1 onshore gas discovery. Again drilling is expected in Q1 2019 to appraise the Kirkham Abbey Formation gas discovery which has an estimated 72% chance of success and an NPV of $247m. There is also a chance to test a deeper Cadeby Formation reef flank oil prospect, considered by Rathlin to have an NPV of $850m and an estimated 24% chance of success.
Reabold does offer a unique investment opportunity as you might expect from two former energy investment managers. The portfolio is well spread and the model gives investors regular exposure to projects with market beating economics, and whilst as Wick showed they dont all work, the others carry significantly lower beta. The project has been delayed slightly, twas ever thus, but I would expect with a number of the above projects coming in the co CEO’s will have the chance to go to phase two and bulk up the business which will reward shareholders.
This week’s Podcast a bit late due to company meetings this week.
Last night in the Champions League the Noisy Neighbours went to Schalke and won 2-3, not without an unnecessary suspension but won’t cause any grief in the return I would have thought.
Tonight the Gooners face BATE Borisov, Chelski host Malmö and Celtic are at Valencia, none of which are easy ties.