Oil price, Falcon, Zenith, RockRose And finally…
WTI $61.81 -$1.79, Brent $70.75 -$1.43, Diff -$8.94 -25c, NG $2.59 -3c
Oil remains under modest pressure led by WTI where rising US inventory levels have continued to worry investors. Add to that a Bloomberg report that suggested that Opec had increased production, albeit by a paltry 25/- b/d, to 30.3m b/d and traders head for the washroom.
Falcon Oil & Gas
Falcon has announced that its Environmental Management Plan (EMP) for the Kyalla 117 N2 exploration well has been accepted by the Northern Territories Department of Environment and Natural Resources. CEO Philip O’Quigley commented that it was ‘an exciting development as the JV prepares to re-commence drilling in the Beetaloo sub-basin in 2019’. Whilst this is a modest item I mention it as there are many readers who are followers of FOG and for whom news has been hard to find for a while and it is indeed encouraging that this exciting and potentially highly profitable venture is now moving forward.
Zenith has raised £401,369 at £0.028 for the purchase of the top drive system and additional equipment for the BD-260 drilling rig about to work on the C-37 operation. It has become a regular feature of Zenith management to raise money for the purchase of specific items and it is commendable that they are keen to save shareholders funds by owning, not hiring kit. Work in Azerbaijan is coming to a head and it will be an interesting time as the prize is not insubstantial in country.
A few words on RRE as the annual report was out this week and although the shares are suspended due to the Marathon deal going on (expected completion 2H 2019) that doesn’t mean that shareholders have been forgotten. With current pro-forma revenue (with Dyas deal) of $231m and net profit of $38.9m continuing the strong upward momentum this will be accelerated even more with the Marathon deal once completed.
The company had net cash in December of $121.3m of which $53.3m is restricted for decommissioning. This is most impressive as although EBITDA and FCF grew strongly the company paid a special dividend of 150p a share costing £23m and bought back £16.4m worth of shares being just under 20% of the company. Decommissioning dates keep moving to the right, ‘in line with the Government’s MER strategy’ and a key point from this statement is that the production life of the assets continues to be extended, adding significant value to deals done in RRE’s short life span.
Pro-forma production is now 11/- b/d and will be added to substantially assuming the Marathon deal goes ahead, the company is expecting another 10,500-12,000 boe/d in effect doubling the size of the company. As for reserves Marathon adds @35m boe of 2P which gives on completion a net position of in excess of 70m and 2P+2C of 86m boe. With these two transformational deals adding to the original ones RockRose is in a very strong position indeed and is clearly very much on the lookout for more of the same. (They offered 20p per share to the board of Independent Oil & Gas who turned it down and then raised money at 10p a share which takes some working out but primarily due to the scary debt position concerning London Oil & Gas and London Capital and Finance and its current administrators.)
Whilst it is disappointing for RRE shareholders to be temporarily frozen out of their shares it looks to me that it will be worthwhile in the end and that whatever the shares return at investors should find out that again they have been amply rewarded.
For horse-racing fans on the flat this weekend starts the summer classic season with the Guineas meeting at Newmarket. The usual Irish raiders are out in force but I am disappointed that a couple of live Gosden horses are not yet ready. Down south today it is wet and cold, not normally thoroughbred weather of choice so maybe there will be some surprises tomorrow and Sunday…
As befits a wet and windy day England are scheduled to play Ireland today in a one day match, so far its raining…they also play Pakistan in a T20 match on Sunday.
And in the footy, at the top City have to wait until Monday night when they host the Foxes, Liverpool are away at the Magpies on Sunday. In the chasing pack Spurs are at the Cherries, Chelski host the Hornets, the Red Devils are at the Terriers and the Gooners host the Seagulls who are desperate for the points as are the Bluebirds who host the Eagles.
In the rugby the standout fixture tomorrow is the Sarries v the Chiefs.