WTI $24.49 +48c, Brent $27.39 +24c, Diff -$2.90 -$24c, NG $1.66 +1c
A modest rally by crude oil yesterday, with the Senate albeit reluctantly passing the 2tn Stimulus Bill it now goes to the House. It turns out that Secretary Mike Pompeo spoke with MbS on Tuesday to ‘maintain stability in global energy markets’ ie now we need your help…
The EIA inventory numbers were slightly better than expected but that won’t last for long, crude built by 1.6m barrels lower than the estimate of 2.8m with a refinery rate of 82.3%. Gasoline drew by 1.5m b’s and distillates by 0.7m b’s, all this will change in upcoming weeks especially as US gasoline demand fell by 859/- barrels last week to 8.8m b/d that’s down 9%. You can forget about today’s jobs number too, that will be the most irrelevant stat you’ve seen for a while…
Unable to publish results under FCA dictat RRE has given an ops update this morning showing just how strong a position the company is in. The balance sheet is strong with no debt and cash as of last night of £287m (£248 unrestricted) or £21.89 per share. ( Currently 706p, up 20%)
RRE listed when oil was below $30 per barrel and is still focused on operating in a low price environment, unit operating costs for example are c. $30 /pb for 2020. The company is strongly hedged with 455/- barrels of oil at $65.70 in Q1 and 63m therms of gas at €0.53 (49p) for 2020, further ahead an additional 54m therms has been hedged in each of 2021 and 2022 at €41 and €44 (38p and 42p) respectively.
Capex guidance for 2020 was previously guided to c. $200m much earmarked for the development of the Shell operated Arran gas and condensate field but other, discretionary, capex is being reviewed and it is anticipated that some $50m will be deferred, ‘a drop of 25% and in line with other businesses’.
With regard to the dividend the company’s stated policy is ‘Based on the strength of the Company’s cash position, the hedging it has in place, and the flexibility of its capital expenditure commitments, the Board of Directors still expects to recommend the payment of a final dividend of 25p per share, bringing the total for 2019 to 85p’.
Executive Chairman Andrew Austin said in the statement ” RockRose remains well placed to navigate the current economic situation, with the business underpinned by a strong balance sheet, hedging, and management’s ability to reduce capital expenditure this year and next, if required.” RRE remains at the top of the Bucket list stocks for its strength and significant power to deliver in markets such as these. In case you missed it, the link to my recent interview with Andrew Austin is here.
iog announce final results this morning, obviously in this fast moving market they are for the record only but if you look at the company now (see yesterday’s blog for detailed analysis) then much is changing. They are in a massively positive situation given the trauma they suffered for some of the time they are reporting on and with the Core Project farmed-out, funded and very much underway the outlook from here is very exciting.
The farm-out to CalEnergy Resources has provided a carry of £125m, split 60/65m over Phases 1 and 2 and with a €100m bond issue and equity raise of some £18.9m iog is fully funded to first gas in Q3 2021. They have development works in all key areas such as platforms, subsea, drilling and onshore facilities and pretty much all being done at very low prices, a rare advantage of the current situation.
CEO Andrew Hockey said in the statement “With a strengthened team and a robust low-cost portfolio benefiting from very low carbon intensity, we are well placed not just to survive but to thrive by investing through this cycle. With our balance sheet strength, commitment to the project and CER partnership, we are well positioned to reduce costs in the current low commodity price environment.”
I concur with these comments and with the very low carbon intensity, which will surely in due course stand for a lot in investors eyes consider iog worth watching very closely through 2020 and beyond.
Sometimes, just sometimes, things fall into your hands and although these are dark times for the oil industry in general Block appears to have taken a significant step somewhat out of the ‘blue’ as it were…
Block is to buy from SLB a couple of assets in Georgia, the big blue has 3 PSC’s in-country, producing block XI, (Georgia’s most productive block) exploration block IX and block X which it is to relinquish. The deal gives 2P reserves of 64m boe and production of 245 b/d of oil plus 600bcf of GIIP following recent drilling in the Lower Eocene and Upper Cretaceous and increases 2C contingent resources by 29 million boe and offers significant upside potential of 245 million boe of prospective resources.
Unsurprisingly, as befits companies like SLB who once they have decided to desert a province, just go, Block have picked up a load of stuff for free, this includes materials and a CPF with 36/- barrels of oil storage, a workshop, a laboratory, and a compound with an office and warehouse.
CEO Paul Haywood said with this deal ‘The Acquisition is transformational for Block Energy, providing the Company scale and increased production, reserves and resources. A critical component of this transaction is that it will be completed with no cash consideration, using options on our own share capital’
I am delighted that in a geography that I have historically liked Block has had a chance to massively increase its position, should they take advantage of this, and there can be fewer gifts offered in the sector than this, then this is indeed truly transformational, full marks.
Falcon Oil & Gas
Falcon has announced that the Northern Territories in Australia has had to comply with COVID-19 restrictions and thus the Kyalla site has been ‘paused’ which puts back work for a likely few months.