WTI $43.35 +73c, Brent $45.86 +73c, Diff -$2.51 n/c, NG $2.49 -2c
Oil remains at its highs since March 6th and while Marco has slipped away Laura is now a hurricane expected to hit the coast of Texas overnight tonight. Over 1.5m b/d of production is now shut-in and the best part of 3m b/d of refining capacity has been halted.
Union Jack/Egdon Resources
Egdon as operator state that settlement proceeds have been received from Humber Oil & Gas and that the joint parties to PEDL253 have ‘therefore resolved the dispute arising under the JOA and look forward to co-operating in the future in the development of the licence’.
As with most E&P companies the 2020 interims are of limited help to investors but in this case they do show that the company moved fast and efficiently to reduce expenditure and ‘weather the lower oil price environment’.
Production was in line with guidance at 12,093 boepd net, split Vietnam 6,114 boepd net and Egypt 5,979 bopd and guidance for 2020 remains at 5,500-6500 boepd net for Vietnam and 5,000-6,000 bopd for Egypt.
Break-even is <$26/bbl in Vietnam with a FY operating cost estimated of c.$12 boe and in Egypt between $38-42/bbl with FY operating cost estimated at c.$11/bbl. Group expenditure reduction for the year is reduced by 25% as with the remuneration of the board and obviously no bonuses this year. G&A is down a healthy 35% and of course the famous SOCO divvi is for another day.
Long term prospects for Pharos are excellent including the TGT field where a two year extension has been granted by the Ministry in Vietnam. This means that the 6 new well drilling campaign starting in Q4 2021 targeting gross production of 20,000 boepd gives scope for further profitable growth.
As for Egypt this is a more shall we say, flexible feast, with capital is not being targeted until early 2021 with rigs stacked and heads definitely down this year. However as we discovered when visiting the country in February there are undoubted opportunities in Egypt and can be picked up at the drop of a hat.
There is an extensive new presentation on the website and the conference call went on for so long that even I missed the end some time later. What it does do is show investors the upside at Pharos which is there for all to see and I didn’t even mention Israel where the company has an exciting East Mediterranean gas play with guess who…Cairn, who would have guessed eh?
An operational and corporate update from President today where the company say that the workover programme previously announced has now ‘commenced’. The programme now comprises 6 wells of which two target generating an additional 100,000 m³/day of gas. Of the next three, one is the pulling of a defective pump, one is replacing a beam pump with a more efficient ESP and one is to repair a leaking packer.
The first well in the drilling sequence is the Las Bases 1001 development well targeting 6 bcf of recoverable attic gas in the Las Bases structure with a high chance of success. P50 well rate is 100,000 m³/day (605 boepd), target depth is 1,700 metres and estimated costs completed are some US$1.9 million.
The second well in the sequence is the Estancia Vieja EVN-1 exploration well. This well will target a new structure with potential for both gas and oil reservoirs to the north of the producing Estancia Vieja field, with the P50 case oil production of 40 m³/day (252 bopd) and 60,000 m³/day of gas (350 boepd) and a target depth of 2,000 metres. The chance of success is estimated at over 50% and estimated costs of the well completed are US$2.5 million. In a success case, the whole of the Estancia Vieja north structure is opened up with a potential follow-on drilling programme of an additional 6 wells targeting up to 14 mmbbls and 26 Bcf.
In Paraguay the company had previously announced that ‘substantive discussions’ had recommenced with a NOC before being suspended due to the Covid-19 crisis. Those discussions have recommenced and whilst no certainty of success is guaranteed, if they do proceed positively they should be concluded this year and lead to commencement of drilling in 2021. ‘In the Concession as a whole, President after detailed further sub-surface work has identified over 500 mmboe of prospective resources’.
Finally President is looking at Alternative Energy and is currently considering investments in that country in the field of renewable energy and related technology businesses which have no material oil or gas component.
Put all this together and it looks like being an exciting end of 2020 for President, the shares are undoubtedly extraordinarily good value and given the above should be given the benefit of the doubt.
After recent announcements I managed to get an interview with Savannah Energy CEO Andrew Knott this morning. Yesterday he announced substantial share purchases along with other board members backing his and my view that the shares are very good value. The link is here: