WTI $37.12 +86c, Brent $39.72 +99c, Diff -$2.60 +13c, NG $1.67 -6c
Oil rallied yesterday ahead of the Opec+ Joint Technical Committee tomorrow and the JMMC meeting on Thursday. Word is that compliance, particularly from Iraq is getting better as reiterated by the IEA this morning.
Its retail gasoline day and a gallon of gas in the US general costs $2.098 which is up 6.2c w/w, 22c m/m but still down 57.2c y/y.
Today’s 2019 results have been somewhat overtaken by events, its recent raise and restructuring of the contractual liabilities have taken centre stage. Having said that these figures show what a good year 2019 was for PetroTal with excellent growth through operational excellence.
Production rose 431% to exit the year at 13,300 bopd and a hugely successful drilling programme was completed and of course the new CPF and oil storage tank were completed on time and ahead of budget. The company earned net income of $18.2 million ($0.03 per share basic) compared to a net loss of $2.2 million in Q4 2018 with a higher operating net back of $28.6 million compared to $2.3 million in Q4 2018.
For Q4 2019 the Company recognized funds flow generated of $22.2 million, as compared to utilisation of negative $1.9 million in Q4 2018 and achieved a record quarterly oil production of 7,767 bopd, an increase of 670% over Q4 2018 (1,158 bopd), and an increase of 63% over Q3 2019 (4,760 bopd). Finally, Q4 2019 sales volumes averaged 9,509 bopd compared to 1,199 bopd in Q4 2018 on capital expenditures of $26.9 million in Q4 2019 compared to $4.4 million in Q4 2018.
As I said at the top, current management is concentrating on the liability situation but with the raise and expression of market confidence and restructured financing I believe that a recovery in the share price is on the cards.
Union Jack/Reabold Resources
The Carbon Intensity Study at West Newton rates the project as AA, the best possible, for carbon intensity for its potential oil production and incidentally are significantly lower than the UK average and even other onshore analogues. This analysis, by Gaffney Cline & Associates is very important in terms of the UK’s determination to focus on low-carbon efficient energy sources and shows how important West Newton is going to be, both these companies are incredibly undervalued.
Yesterday Touchstone announced final testing data and analysis which confirms the ‘tremendous’ potential of Cascadura-1ST1 discovery. The low drawdown at the surface along with high reservoir pressure ‘suggest a sizeable reservoir with excellent production potential’.
We can expect an independent reserves evaluation in July when the company is expected to drill the Chinook prospect, a separate structure but on the same geological trend. I happen to think that the market is yet to appreciate the full potential of this discovery and that the current £65m market cap could be dwarfed by success here and certainly if Chinook was to come in.
Finally this morning the company announced that, that having satisfied conditions precedent, it was using the recent US $20m Republic Bank loan and withdrawing US15m to satisfy obligations relating to prepaying the Company’s former C$15m of the $20m credit facility. Touchstone has the option to withdraw the remaining US$5m available balance prior to June 15 2021.
This C$ loan has always been one of the few problems I ever had with Touchstone, it is good to see it being repaid and should the company have more success with the drill bit they might be paying it off rather than drawing down the remainder.
Gulf Marine Services
GMS announced a couple of days ago that it had completed its debt restructuring ahead of schedule and also confirms that it will be doing an equity issue of ‘at least $75m’ before the year-end to strengthen the balance sheet. The details are, renewed existing term loan facilities totaling US$391 million with an extended maturity to 30 June 2025.
The renewed facilities have a re-phased amortization profile, resulting in c. US$136 million reduction in fixed amortisation payments through 2022. The cash interest margin is consistent with the prior facilities and is indexed to the net leverage of the Company enhanced liquidity through a new US$50 million working capital facility that will replace the existing working capital facilities. The term of this facility has also been extended to 30 June 2025;
Tim Summers, Executive Chairman of GMS sums the situation up very well “GMS is moving from strength to strength. Today’s announcement, ahead of schedule, of a revised debt structure, provides the platform for GMS to sustain its upward trajectory and take advantage of opportunities as oil and gas markets stabilize. Our organization is gaining in confidence, with substantial operational progress and material cost synergies delivered to date in 2020. We are now focused on rewarding the trust our shareholders have placed in the Board and management team.”
To add confusion Seafox, who appear to have at least 26.41% of GMS equity have approached GMS for a two seat representation on their board and been knocked back for technical reasons. Seafox has paid 20p for some of its shares I think having publicly stated it wasnt going to bid again now is unable to do so for another six months. The Seafox behaviour during this whole situation is slightly odd but probably inconsistent is the best way of describing it, if you combine the chances of them returning along with the operational success from the GMS team there must be very decent upside from here.
I started to look at GMS a long time ago and didn’t follow up when they didn’t arrange an analyst visit when a number of us were next door, I can now understand why. More recently I was contacted by Tim Summers and I was very impressed by him indeed. At that time I needed a better showing from the EBITDA outlook, a box that is now pretty surely ticked and of course to get away the equity issue, another box one would expect to be ticked. I get the feeling that Tim Summers is a man with a plan and he and GMS are probably going places…
Today sees the start of Royal Ascot, behind closed doors of course but better that than nothing at all. It is a fantastic card as one would expect but not quite the same…