WTI $54.19 -$1.40, Brent $60.69 -$1.35, Diff -$6.50 +5c, NG $1.89 -3c
Whilst the pictures on the news showing empty streets in China, the Lunar new Year cancelled and cities shut in and transport a thing of the past oil remains, like most markets extremely subdued.
Predator Oil & Gas/ Columbus Energy
Columbus as operator has this morning announced that CO2 has been successfully been injected at the Trinity Innis field, onshore Trinidad. This is incredibly good news for Predator, indeed one should call it a very important operational milestone for the company as, with the company already beginning the process of sequestrating the CO2, lays the foundation for developing a carbon credits strategy for the future.
As the first mover in this area in Trinidad it establishes Predator as the key player in CO2 EOR operations in country and as such will breathe new life into the mature oil fields currently being developed. More importantly, PRD will be differentiated from other peer companies in that it has already secured exclusivity over Trinidad’s entire supply of surplus CO2. Indeed the PRD management team initiated the CO2 EOR concept for the field, designed the CO2 delivery system, sources and imported the key equipment from the USA and designed and supervised the downhole web completions for CO2 injection. This included a number of regulatory and environmental approvals as well as technical subsurface analysis.
Importantly, PRD has with this success, has delivered its strategic objective of executing pilot CO2 EOR injection using its cash resources raised at IPO in May 2018 without the need to seek additional funding from the market by implementing rigorous cost control management. With valuable intellectual property rights for its CO2 EOR injection design and subsurface analysis PRD are in a strong position and they still have the exclusive cost-free option to acquire FRAM, operator of the field for less than $0.48 cents a barrel for high estimate recoverable resources, pending development by CO2 EOR of 8.9m barrels.
This success has serious implications for Predator going forward, having re-risked the CO2 process and injected into the target reservoir the company can justifiably see first revenues and indeed revenue growth, not just for the company but for the process in Trinidad. This will not have gone unnoticed at Heritage who have the largest inventory of mature fields onshore Trinidad and thus creates the opportunity to work together using the template established by Predator who have worked well with Columbus.
Finally on operational issues it should be noted that this success will immediately be flagged to ‘green’ investors as this is an alternative to businesses with poorer sustainability credentials, reduces CO2 emissions in line with ESG best practice in a world with ever increasing requirements.
Elsewhere PRD is in a strong financial position, the IPO raised £1.3m at £0.028 per share through the issue of 46,428,600 shares (of 100,137,150) and only 8,593,159 shares have been issued since then at an average price of £0.0565 per share, representing only 7.9% shareholder dilution. Also through the issue of these shares 32.3% of debt has been repaid whilst retaining £1.17m of cash in a bank guarantee for the Moroccan work programme which will be returned after drilling.
Morocco is an exciting prospect which I shall return to soon, but there Predator has a potentially transformational drilling campaign for significant quantities of gas intended to replace coal in Morocco’s power stations. A play-opening opportunity where Predator has an option on a currently ‘hot’ rig in the area, it is owned 75% at present giving PRD the option to trade equity or use other arrangements.
Overall Predator looks like a very interesting play indeed, rare enough in the energy sector to be able to play the ‘green’ card through its technically excellent CO2 EOR programme, ticking the ESG and sustainability boxes. The management is both highly experienced and aligned with shareholders interests, dilution is a dirty word and its success is part of its part of its response to climate change concerns voiced in the market place. Could this be the answer to a green fossil fuel conundrum?
Jersey Oil & Gas
A highly encouraging update from JOG this morning in which they have announced the acquiring of Equinor’s interest in licence P2170 for two milestone payments and a royalty depending on volumes produced from the Verbier discovery. Those payments are $3m on Verbier sanction, $5m on first oil and ‘certain royalty payments on the first 35 million barrels of oil produced from the Verbier Field calculated on the basis of a 70% working interest for on-block volumes’.
The deal increases 2C discovered resources over the GBA by 17.5 mmboe to 142 mmboe and adds exploration opportunities and simplifies ownership ahead of a potential farm-out. Money-wise it adds $506m post tax cash flow, taking GBA to $3.17bn net to JOG and increases estimated NPV of the GBA development project to $1.15bn.
In its operational review JOG talk of its highly experienced project team for the GBA development which is progressing to the development concept and the key project gate of concept selection by Q3 2020. At that stage the company will go ahead with the farm-out of the GBA which includes the Buchan, Verbier, J2 and Glenn oil discoveries plus exploration prospects. With year-end 2019 cash of £12m JOG is fully funded to Q2 2021 and JOG is working hard with the OGA to ensure that the GBA will introduce technologies that enable it to be at the forefront of the energy transition and of course modern hub thinking.
JOG is presenting a highly compelling story with $142m mmboe of recoverable oil resources, a huge potential hub and all this on the back of a company with a market cap of £30m and £12m in cash, a very exciting year beckons in a development with such excellent economics.
Diversified Oil & Gas
A short and sharp statement from DGO this morning just confirming that trading is in line with current market forecasts ahead of figures due on 9th March. They also point out that the Smarter Well Management Programme continues to maintain strong production from the company’s legacy assets. DGO continues to deliver operationally and 93.2p they are an incredibly attractive play with a huge supporting yield which is very hard to oppose.
I spoke to Doc Holiday of Total Market Solutions about the outlook for 2020, we talked about PMO,RKH, PRD,RRE,UOG, BLOE, ZEN, LBE, ECO, TLW.
In the FA Cup 4th round the shock was probably that Liverpool could only draw at Shrewsbury making them and the Red Devils only ones to take points off them all season. The Noisy Neighbours won with 4, Red Devils with 6 and the massive match up left Pompey beating the Barnsley Chops 4-2. Tonight its the Cherries v the Gooners, 5th round draw at 7.15.
Kobe Bryant and his thirteen year old daughter Gianna were killed yesterday in a helicopter crash in California along with seven others. Kobe played his whole career for the LA Lakers, winning 5 Championships and his death has shocked the sporting world. All NBA games played yesterday began with both teams taking 24 second shot clock violations to honour Kobe, who wore number 24. He will be remembered as the greatest Lakers and one of the best to ever play basketball.