Oil price, Trinity, President, SOCO, Sound And finally…
WTI $61.42 -$1.71, Brent $70.99 -$1.19, Diff -$9.57 +38c, NG $2.54 -7c
It is beginning to emerge quite why Opec+ is so determined to maintain the quotas and keep supply tight until the end of the year, continued stock building, most notably in the US has yet to be affected by lower production from the cartel and its friends.
So, yesterday’s inventory stats showed another build, this time of 4.7m barrels when a modest draw had been forecast leaving US stocks 4% above the 5 year average. Worst of all it was down to a fall in refinery runs to 89.9% and gasoline also built by 3.7m barrels. Now I know that you all know this but Monday is Memorial Day in the US which signals the start of the driving season and even with the gasoline price way up here those Chevvies etc aren’t going to drive themselves around the country. I also know that there are a few Prius’s and Tesla’s about but they haven’t impacted much yet.
The figures in the next few weeks will be important as will the end of June and early July, with the G20 meeting in Osaka on 28/29th the Opec Ministerial meeting has now been pushed in July when the supply decision is still likely to remain unchanged. The next six weeks will therefore be of some significance to the oil price.
Trinity Exploration & Production
Trinity is in a pretty good place right now, it exited 2018 with 3/- b/d, cash and working capital of $18m and growing revenues, reserves, EBITDA and strong margins, what’s not to like. The evolution from Petrotrin to Heritage seems to be working for Trinity as they are negotiating new licence models and focusing on several potential JV opportunities.
Trinity will update on its 2019 drilling programme of ‘up to 8 wells’ early in the 2nd half which will include the company’s first high-angled well which is potentially a game-changer for both production rates and returns. Indeed when I spoke to Chairman Bruce Dingwall recently he was more than excited about their potential. With the offshore opportunity at TGAL being worked up at the moment and where also the company is testing innovative work plans and utilising new technologies one can expect more good news across the board from Trinity.
Finals for 2018 and an update from PPC today and after a record year shareholders are entitled to ask why the shares have not risen substantially, this must be one of the cheapest, high delivering plays in the market and the figures show that in spades. Chairman Peter Levine announces a record year on all kpi’s with very impressive growth in turnover, adjusted EBITDA, profits and to nail the performance a free cash generation up by 500% to $21.7m.
2018 ended with net production of 3,300 boepd (1,900) with the average for the year up 103% at 2,279 boepd. With a production target at the end of this year of 4,900 boepd after a fully funded $50m 2019/20 work programme which includes 15 new wells, 20 workovers and pipeline and infrastructure investment designed to deliver a 50% increase in year on year exit production the future looks incredibly solid. The company are even putting a date on the drilling in Paraguay of late 4Q 2019 or early 1Q 2020 and are clearly excited by Jefferson Island in Louisiana which is deemed to be ‘very interesting’.
The report shows significant progress at the Puesto Prado oilfield and treatment plant as well as planning to increase gas production from Estancia Vieja and expansion at the substantial Las Bases gas plant in the ‘drive for material gas production’. Indeed, third party gas is already generating some $200,000 p.a. and is expected to increase. It also shows the net 1P reserves in Argentina rising by 6% to 15.4 mmboe with the higher value Rio Negro assets increasing by 83% to 8.1 mmboe.
There is no doubt that Peter Levine and with an incredibly strong team in Argentina is doing is quite incredible, not only building an asset base but putting together all the necessary blocks in a number of work streams. After all, from workovers to drilling, procurement particularly of long lead items and planning substantial jobs such as electrification, substantial gas plants and a huge amount of pipeline permitting and construction they are constructing real profitable and high margin assets. Whatever the market thinks of it at the moment and it has clearly not got the perception yet, a connected business is being built here for the future and it making a lot of money.
Another day, another AGM, the season is in full swing and companies are updating the markets even if a recent update is fresh in the memory. Soco are another company with good news to impart so they can’t have too many bites at the cherry. In Vietnam production is in line with guidance at 7,025 boed whilst the newly arrived Egypt assets are firing on all cylinders and the company guide to a year end rate of 6,500 boed with a target of 15,000 by 2023.
With cash of $87m, a divvi to be approved today of 5.5p and capex in Vietnam of $33m and in Egypt, where a second rig has been contracted, of $39m Soco is in a strong position. Soco has one of the strongest managements in the sector backed up with financial strength and a desire to grow exponentially, who says it can’t revisit the share price of over 100p?
A busy week at Sound where former Chairman Simon Davies has returned to the role after a short break. Richard Liddell remains on the board but in a non-executive capacity only in order to devote time to his other businesses. This may just be an apposite time for him to step back up and he does still have decent skin in the game.
The nearest thing to sport this morning is that I was a guest last night at the famous Guild of the 19 Lubricators pre the Cricket World Cup dinner. A fine charity raising money for needy causes had a good night and many generous donations were made. Thank you to Jonathan Gregory, a leading light in the private equity industry who led the charge on our table.