Oil price, Trinity, Premier, Petro Matad – And finally…
WTI $53.36 +55c, Brent $59.42 +68c, Diff -$6.06 +13c, NG $2.30 -4c
An up day for crude but only temporary, it’s back down today after the API stats showed a 10.45m barrel build in stocks. Plus points are that Opec still talks about cuts if necessary albeit probably not until the meeting on 5/6 December.
Trinity Exploration & Production
A 3rd quarter operational update from Trinity this morning which shows a return to drilling, four new wells in the period including the first High Angle Well which was in line with expectations. Of these two came on production in the quarter, one just after and one is imminent. Two further wells are to be spudded in the programme this quarter. The 3rd Q showed some modest production issues such as weather related electrical supply disruption as well as bottle necks occurring due to rig certification which has now been cleared. Accordingly the base production at the year end is expected to be some 3,400 bopd.
The company described the new pilot SCADA system in some detail at the recent results presentation, its technology looks to be groundbreaking and TRIN say that they have seen a ‘material production increase’ and a more extensive roll out of the programme is being planned for the coming months. Also the technical and commercial discussions relating to Galeota are continuing with various energy related ministries and Heritage and technical partners.
TRIN has cash of $15.6m in the balance sheet, down slightly due to drilling capex but I expect the company to be free cash flow generating for the longer term. A further hedge was put in place when oil prices spiked after the drone attack on Saudi Arabia which seems eminently sensible and which partially mitigates the effect of SPT. Trinity remains in a very strong position, Chairman Bruce Dingwall says ‘we continue to focus on increasing our low-cost high margin production including using new technologies to maximise returns and move forward as a free cash flow generating business with significant upside potential.’ With the share price offering change from 10p a share, the value in this business is incredible and the discount to my target price is simply ludicrous, one way or another investors must realise that Bruce Dingwall has experience in delivering value for shareholders and I for one would not bet against him doing it again with Trinity.
Another incredibly cheap share at present is Premier who not only continue to deliver first class operational performance but the company is laden with upside. This morning they announce another discovery, this time at Tolmount East, the development that just keeps on giving. 241′ of gas bearing sands was penetrated with a net to gross ratio of 71%, porosity of 16% and gas saturation of 82%. These were at the upper end of expectations for quality and thickness of reservoir sands and no gas water contact was penetrated. A successful core and a full set of data has been taken ahead of further testing.
The target here was 220 BCF of P50 gross resource and being only 4km from Tolmount Main the infrastructure is on the doorstep and could be a tie-back to Tolmount or probably more likely a stand alone platform. This decision may be influenced by what might be even more gas as the prospect to the east, known as Tolmount Far East has the potential to add to the field and of course the tax beaks. These points show just how valuable this discovery is for Premier and as yet not rewarded by a decent rise in the share price.
Premier are updating again on November 14th when we can expect more from Tolmount but probably not from Zama where the data room has been bulging with potential farminees nor from Sea Lion where the UK Government, unsurprisingly have had their eyes slightly off the ball lately. All this means that there is considerable upside within Premier for the patient investor.
The Gazelle-1 well result is at best highly inconclusive, the Lower Tsagaantsav is dry and the upper reservoir had ‘good wet gas shows recorded’ as well as 3m of net oil in good quality sandstones defined on the logs. From here any success will now be defined by further testing probably after the Heron works which are ongoing. Finally the company has postponed plans to drill in Block V this year, interestingly you may remember that I noticed way back in the spring that MATD had dropped Block V from this year’s plans so I’m not quite sure what that is about. Until I get to speak to Mike Buck there isnt much more I can add.
Its very quiet until the weekend but worth noting that England have dropped George Ford for Saturdays RWC game, Henry Slade comes in at centre and Farrell moves to No 10.