WTI $60.07 +89c, Brent $65.22 +$1.02, Diff -$5.15 +13c, NG $2.30 -3c
Oil company executives and those lending to them should be cheered by the oil price looking to end the year at very respectable levels and well above stress testing levels way below todays numbers. The ‘Phase One Trade Agreement’ looks better already with lower US tariffs and higher Chinese purchases of US agricultural products. Just a tiny step I agree but you know what they say about every journey…
After Far Ltd had announced a trading halt on Tuesday of last week that was followed by an announcement on Thursday confirming that it had completed an A$146m conditional placement to institutional and sophisticated investors at A$1.0425. This was a discount of 21.3% to Monday the 9th but a more realistic 12% to the 5 day VWAP. In today’s announcement the company say that they are very pleased with the response from existing shareholders including their largest holder who has increased their holding in the company ‘substantially’ in this raise. The company also announced an SPP to existing eligible shareholders for a further A$30m with formal documents for this out today in which the company’s directors are all taking up their full entitlements.
The reason for this raise is to fund development capex to first oil of the now named Sangomar Oil Field (SNE) along with already announced US$350m Senior debt facility and Junior debt facility of US$150m, Far’s share of costs of capex to first oil is US$492m as discussed in previous blogs in which a mixture of equity and bank debt was thought to be the best option.
The very fact that Far are involved in the development of Sangomar at its commencement is no small achievement to a company described by the Chairman as a ‘junior’. Blog readers know that I have huge respect for Far and its leading team of professionals bettered by few in the industry and that they fully deserve to be here after playing such an important part of its discovery. With the FID imminent, when the Presidential approval of the development and exploitation plan is given, works can ‘commence early in the New Year.’ If all goes to plan the first oil is expected to be expected in early 2023 and at 100,000 b/d will create fcf to Far of US$180m per annum.
I have followed Far for quite a while and think that it has done an outstanding job getting to where they are now and whilst shareholders have suffered modest dilution in the process of funding Senegal, they are approaching a massively important time as FID approaches which they fully deserve to be participating in. In the meantime Far have an exciting portfolio of prospects to drill in the next 18 months which they are as well placed as anyone to succeed.
More good news this morning from PetroTal who announce a Bretaña oil field update in which the 5H well has showed an initial 3 day rate of 8,250 b/d ‘exceeding management expectations’ and in addition the well is on time and some 20% ($3M) less than the $14.5m budget. The well was completed using new technology to maximise oil production successfully.
The company also announced that the Bretaña oil field has reached new record production of over 9,000 b/d with only two of the six wells on line. They are also close to completion of CPF-1 which see an increase in capacity to 15,000 b/d. 4th Quarter average production has been at least 7,500 b/d with exit rate of between 11-13/- b/d and with other wells able to be brought on line.
CPF-2 is planned for September 2020 with a capacity of 20,000 b/d and this will make the progress that the company has made since its appearance on the London market this year incredibly fast. With this good news, along with other recent announcements I am extremely confident in my 80p current target price.
The company has announced that its Cascadura-1 well on the Ortoire block onshore Trinidad is a ‘significant oil discovery’. With 1037 feet of oil pay in the Lower Cruse sands and the Upper, Middle and Lower Herrera thrust sheets in which the Lower Herrera was the only one expected in the company’s targeted drilling.
There is no doubt that this is indeed a significant milestone for Touchstone which ‘far exceeds’ any management pre-drill expectations and as they say themselves ‘a new development stage for onshore drilling in Trinidad’. A period of exhaustive testing of each zone will now commence to understand the economic potential which if successful will lead to ‘an expansive development drilling programme in the area’. It seems a while since Paul Baay, CEO took me through the original plans for drilling in the Ortoire block, it seems his optimism was well placed.
In the footy, wins for Liverpool, the Noisy Neighbours and Spurs whilst the Foxes got a draw as did the Red Devils against the resurgent Toffees. The Gooners lost and boy do they need a new manager.
The Sports Personality of the Year was good with Ben Stokes appropriately getting the big gong but it was also incredibly moving to see Doddie Weir getting his award from HRH. I have followed Doddie for years and treasure a picture I have with him and it is sad to see him deteriorating.