Oil price, Echo Energy, PetroTal, DGO, President Energy – And finally…
WTI $53.78 -15c, Brent $59.42 -49c, Diff -$5.64 -34c, NG $2.32 n/c
Nothing changes, the IMF have been reducing global GDP numbers again and the trade talks are supposed to be getting better. Opec really are cutting back so fundamentals are tight but inventories in the US had a bad week.
Echo has announced a proposed acquisition in Argentina with a subscription, debt facility and issue of warrants. It has entered into a binding SPA for the proposed acquisition of a 70%, initially non-operated WI in the Santa Cruz Sur package of five mature producing blocks in the Austral Basin from PGR adjacent to the company’s own Tapi Aike exploration permit.
The package adds material production and diversifies the portfolio and will produce ‘material cash flow’. Existing production is 3,761 bopd in 1H 2019 (2,633 boepd, including c.500 bbl of oil net production to a 70 per cent interest), underpinned by strong local Argentinian gas prices. 1P reserves of 4.3 mmboe +2P of 13.7 mmboe (net to a 70% interest). Certified 2P reserves are given a value of $44.5m, non-contingent consideration of $8.5m represents a discount of approximately 80% to this 2P reserve valuation.
There is significant potential to increase production through workovers and the up-coming Campo Limite exploration well which is expected to be part funded by the vendor. In the 12 months to December 2018 the assets generated unaudited revenues of $31.9m net to a 70% interest.
Echo is paying $7m cash and $1.5m in shares at 2.91p (a 6.6% premium) and there is provision for the payment of a further $1.5m if a CPR shows an increase in reserves. In this process the company has raised £9.17m of which £4.85m in equity at 2.5p and a €5m secured convertible debt facility entered into with Lombard Odier with associated warrants at 3p.
CEO Martin Hull said today that this is a significant milestone for Echo and demonstrates that the company are “delivering on our growth strategy and that the material cash flow gives an optionality in how we finance the business” and that “This value accretive transaction will create a new platform from which to grow Echo and adds many catalysts to our existing drilling programme at Tapi Aike.” This is a smart move from Echo which, by adding production, diversifies the portfolio ahead of the exciting drilling ahead at Tapi Aike.
A massively positive update from PTAL this morning with regard to their Bretaña oilfield in Peru. The company announce completion of the BN 95-4H horizontal well on time and under budget, indeed under budget by some $3m or 20% of the well costs. This was done by using new technology to maximise oil production and hence speed up the return on the well. The 4H initial four day production rate of 6,200 bopd exceeded management expectations and Bretaña reached a new record production rate of over 8,000 bopd with three of five wells online and is currently producing 7,800 bopd.
With updates to production facilities in the 3rd quarter increasing capacity to 7,500 bopd and commissioning of phase 1 of the CPF capacity will rise to over 10,000 bopd. Incremental implementation of phase 2 of the CPF is planned for July 2020 and by the year end production capacity will be 20,000 bopd.
Doing so well with the drill bit means that the directors have been given the OK to up the capex budget by another $19m for 2019 of which $14m is for the 5H well which was recently spudded and will target up-dip oil to the northern portion of the structure. The remaining $5m is for additional production facilities to the field by mid 2020 as an interim step to installing CPF 2 by the year end at which time PetroTal will be able to produce 20,000 bopd. PTAL is in a very strong financial position, management expect to fund the extra capital spending this year from existing working cap and cash flow from operations and as at September 30th the company had cash and equivalents of some $40m. With provisional 3Q production of 4,800 bopd and with the 4Q figure expected to be up 35% to above 6,500 bopd the company is very strongly positioned for now and for the future.
Ever since I took up coverage of PetroTal I have been more impressed every time they report to the market, consistently beating very challenging targets and increasingly looking like a high value operation, it is under watched at the moment but investors should look into this highly attractively priced company with excellent management.
Diversified Gas & Oil
DGO has announced that Sandy Stash has joined the board as an independent non-executive Director. With DGO working hard on upping its corporate Governance the board now consists of seven members, four of whom are deemed to be independent. With the company preparing for a move to the premium segment of the main market of the LSE, one can expect more such moves within the governance area.
President has acquired, subject to usual consents a 100% interest in the Angostura exploration contract in the Rio Negro Province in Argentina. The area produces oil and gas to the tune of net 500 boepd, the gas is compressed on site and sent by pipeline to President’s Las Bases facility and the oil by truck to join the rest of their oil.
The exploration contract expires in November 2019 but President can apparently request a second exploration period which one must assume is a bit of a wave through… The vendor, CGC, is also investing $1.825m in President as part of the deal. The deal looks like a typically smart Peter Levine one, increasing production by over 10%, using his own pipeline and making economies of scale in the process. Getting CGC on as a shareholder is a bonus…
Africa Oil Week
With the annual activities at AOW beginning to take shape I would like to mention to you that I’m delighted to say that I will be co-hosting what should be a very exciting event on the Monday 4th at 5:30pm at the Maresol. I will be doing an early evening of video blogs live from the VSA, Yellow Jersey, Moshe Capital, WFW and Comarco Ports reception so do please drop by, you can be interviewed… Interviews will be up on my web site as well as all the other host companies…
So, England and Wales go through to the RWC semi finals to play the All Blacks and the Springboks respectively.
Expecting a rugby score of goals by Liverpool turned out to be wrong as it finished 1-1 although some suggested that VAR was wrong…