WTI $41.04 +84c, Brent $43.32 +87c, Diff -$2.28 +3c, NG $2.64 -22c
This morning oil has lost yesterdays gains although during working hours there wasn’t much to shout about and the API stats came in better than expected after hours. They showed a crude draw of 5.4m b’s which was more than forecast and with gasoline drawing 1.5m and distillates a much better 3.9m tonight’s EIA numbers will be difficult to read, made more tricky after hurricane Delta.
Generally markets are falling sharply, virus numbers, particularly in Europe are rising fast, in France they have moved to a full curfew from 9pm to 6am. In the US the stimulus talks failed again, making people think that there is now little chance of anything before the election but rule nothing out.
Russian and UAE Ministers both said yesterday that the Opec+ increase due January 1st is still in place and despite some gloomier demand projections stocks should be falling enough by then but we will see…
Jersey Oil & Gas
I get to see and even make, many videos about the oil industry but I have just watched the video made by JOG about the Buchan field, its history and potential. This one, released today, is a perfect way of showing quite how substantial the GBA is likely to be and how much of a hub development is planned there.
Much has been going on at Providence Resources since the new CEO, Alan Linn was appointed in January, and I was fortunate to catch up with him earlier in the week. The company is now totally focused upon economically developing the Barryroe Oil and Gas Field in the North Celtic Sea, offshore County Cork. In addition it is assessing the potential for developing Carbon Capture and Storage (CCS) in the North Celtic Sea linked with the Barryroe field, to produce an integrated, sustainable, hydrocarbon development.
PVR has clearly changed, not only is the focus changed but the model is different as well. Working with SpotOn Energy who, along with a very experienced group of around 6 service companies fully fund development of the field in return for an equity stake, they use their Norwegian base to source export credit and fiscal advantages. These oil service companies can get life of field contracts and are paid from field production and then a royalty stream based on a risk adjusted share of net cash flow defined by SpotOn.
Thus the funding of such a development is changed completely, indeed top-up funding might be provided by bonds issued by the companies who will stand behind them and underwrite them thus increasing the efficiency. Moreover this is not necessarily restricted to Barryroe, if it proves to be successful this model might be rolled out elsewhere.
So, PVR is now all about Barryroe and the North Celtic Sea which will now be linked to develop the CCS and with a gas pipeline running through the licence gives scope for significant CO2 storage which could feed the 2X500 MW power stations onshore Cork. Finally on this it is easy to see how the whole process adds significantly to the companies ESG credentials.
I have much more to talk about from my meeting notes but I wanted to make a few points about Providence ahead of their presentation at Proactive this evening. Alan Linn has got many plans and he is highly realistic about fossil fuels, or as he calls them ‘naturally occurring hydrocarbons’ and Barryroe’s 43° API crude with no sulphur that gets a premium to Brent does that.
So the plan is, phased Development of the Barryroe Gas and Oil resources with partners capable of funding the development work programme, as per the above. They will establish early production and cashflow and
minimise overall development risk and provide a phased Oil and Gas Development.
It is high on the list to achieve a sustainable, carbon neutral development with significant upside under existing medium term drilling plans, within the Barryroe field. In addition a number of these exciting developments PVR has the ability to make the field a hub for such as Helvick and Dunmore.
Providence is a changed animal, all the rest of the portfolio is being submitted as relinquishments and the new PVR is, in my opinion very exciting. I have only had one interview with ‘new’ CEO Alan Linn and he is very impressive, I hope that my comments here are accurate, if not I’m sure that I will be following with much interest. Next stop is to get to grips with SpotOn and the other members of the consortium all of whom are industry gold standard names, the ‘new’ Providence is definitely one for the radar screen, watch tonight if you can.
Trinity Exploration & Production
A Q3 operational update from Trinity this morning, production was 3,135 bopd in the period and with 3,232 ytd guidance remaining unchanged with average net production for 2020 still expected to be in the range of 3,100 – 3,300 bopd. (2019: 3,007 bopd)
The company has strong cash generation, leading to cash balances of $22.2m at the end of September up from the end June number of $19.7m. This financial strength ‘means that Trinity is well placed to take advantage of commercial opportunities as and when they arise as asset acquisitions and partnerships offer the potential to increase scale, share risk and drive economies’.
The company also say that ‘Memoranda of Understanding have been signed with both a large international operator and two large international contractors on new business initiatives as well as EOI’s submitted, in conjunction with these consortium partners, on two E&P opportunities of scale.
Trinity has a solid reserve base and an excellent production profile, ‘ an extensive development pipeline’ as it describes it and it should be remembered that this very solid production has been achieved without any new wells being drilled.
Bruce Dingwall CBE, Executive Chairman of Trinity, commented:
“Continuing to sustain production levels and further strengthen our balance sheet through strong cash generation under the current exceptional circumstances, and in the absence of new drilling activity, is a commendable achievement. To maintain higher production levels with very limited financial investment and the added restrictions of COVID-19-secure practices is a testament to the strength of the business and – ultimately – the intense efforts of the team.”
“The announcement in the 2020 budget on 5 October 2020 of reforms to the Petroleum Act and, in particular, the proposed re-setting of SPT to commence at US$75/bbl rather than US$50/bbl, for an initial two year period from 1 January 2021, is an extremely positive development for the Company. When enacted, this will substantially strengthen the investment case, to the benefit of all stakeholders in the business.”
Last night England lost 0-1 to Denmark and Northern Ireland by the same score in Norway. Scotland however, beat the Czech Republic 1-0 and Wales won by the same score on Bulgaria.