WTI $46.99 +42c, Brent $50.29 +32c, Diff -$3.30 -10c, NG $2.68 +9c

Oil price

Not a bad performance from crude oil yesterday, starting a good deal better it lost around a dollar before picking up to post the above gains. We had the Opec report which inevitably called down slightly the demand numbers and today’s IEA report is slightly downbeat but both are only downgrading 1Q demand which is not a surprise. The economic recovery in China is very strong and definitely ‘V’ shaped so when the rest of the world follows…

Retail gasoline numbers today as we run up to Christmas with a tiny gain of 0.02c w/w, slightly more of +4.7c m/m and of course the annual number is still down by some 37.8c.

Gulf Keystone Petroleum

An operational and corporate update from GKP this morning in which following on from the successful workover of the SH-12 well, the Company has progressed the previously announced low-cost, high-impact investments to further increase field production.

The SH-9 well, on which activity was suspended in March 2020 due to COVID-19, has now been successfully tied-in to PF-1 and is on production. PF-1 is now operating at its current maximum processing capacity of c.27,500 bopd. Debottlenecking activities at PF-1 remain on-track to further increase production capacity to over 30,000 bopd during Q1 2021.

Gross Shaikan production is currently at c.42,000 bopd, c.20% above the November 2020 average rate which is highly encouraging as is the average gross production for the year ‘is expected to be at, or slightly above, 36,000 bopd, the top end of the guidance range’. Longer term the plan for 55,000 b/d is expected ‘when circumstances permit’.

The Company remains on track to achieve targeted G&A and Opex savings of at least 20% compared to 2019 and 30% on a run-rate basis, with net capex at the top of guidance of around $48m. On the payments front the KRG are still paying monthly, hoping for more in the new year as the company has received a KRG proposal and the company has interestingly continued to hedge, making a low for 1H 2021 of $35/bbl…Finally the cash balance was $142m at 14 December 2020.

Jón Ferrier, Gulf Keystone’s Chief Executive Officer, said:

“We have made significant operational strides in recent months, ensuring we remain on-track to achieve our revised targets for the year. I am pleased to update stakeholders on further success in executing the previously reported, low-cost, high-impact investments that have so far increased gross production to 42,000 bopd, in excess of the initially targeted increase of 5,000 bopd.

 The Shaikan Field recently achieved an important milestone of cumulative production of 80 million stock tank barrels. This is a clear testament to not only the quality of the asset, from which there remains significant untapped potential, but also the professionalism and dedication of the team. We look forward to updating the market on further progress early in 2021.”

Serica Energy

An operations update from SQZ  today in which they report a ‘solid production performance delivering 26,300 boe/d total net production to Serica during the most recent three-month period’. With over 80% of production in gas the company points out that prices continue to strengthen.

‘In January, average Heren NBP day-ahead spot prices were around 28p/therm but then fell significantly during the early stages of the COVID lock down reaching below 10p/therm on several days. The average price to date this quarter has exceeded 38p/therm’.

In sundries, the Rhum Field R3 Intervention Project work continues following delays due to poor weather and equipment repairs whilst the company confirmed the formal award of four new blocks in the UK’s 32nd licensing round. Elsewhere, unsurprisingly the company has decided to withdraw from Namibia given its successful current growth in the UKCS.

Mitch Flegg, Chief Executive of Serica Energy, commented:

“We are pleased with the performance of our offshore production operations over the past three months, which have also benefited from the significant strengthening of gas prices during that period. The delays to the Rhum R3 Intervention Project are frustrating but do not affect its viability or long-term value. We are not prepared to take shortcuts, despite the slower than hoped progress, as we remain fully committed to a safe execution of the originally planned work scope. An update will be given once rig operations are complete.

Serica is committed to protecting and increasing shareholder value against the current backdrop of lower oil prices and slowing industry commitment to deep-water exploration. We have therefore decided that the expense of maintaining the Namibian licence will be better redirected to lower-risk, nearer-term opportunities to build on our North Sea portfolio where we are currently engaged in an exciting period of value-adding operations”.

Serica remains right at the top of the Bucket List and only surprises me that it hasn’t performed better since the Spring rise up to the 134p area. With solid production, very high gas prices and plenty of upside potential SQZ  is right at the top for selection in the upcoming list.

San Leon Energy

An Oza field, Nigeria update from SLE today where the parties are to extend the completion date to ‘early in the new year’ for Covid-19 reasons, as previously announced, worldwide restrictions put in place in response to the Covid-19 pandemic have slowed the logistical process in concluding the conditions precedent in the Subscription Agreement.

‘Nevertheless progress continues to be made and the trading subsidiary of a major oil company, which along with a local Nigerian bank, is to provide a five year term debt to Millennium Oil and Gas Company Limited, Decklar’s local partner, has provided a further written confirmation of its support of the transaction.  Given the proximity of the Christmas holiday period, the parties have decided to review the status of the outstanding conditions in the new year and assess at that time what remains outstanding’.

Block Energy

I don’t often write up NED appointments but today’s announcement by Block looks particularly interesting.

‘Charles (“Chuck”) Valceschini has been appointed as independent non-executive director with immediate effect. Mr Valceschini has worked in the oil and gas sector for nearly 40 years. As CEO and General Director of TechNefteGaz Consulting LLC, he currently specialises in the provision of technical and commercial advice to a wide range of upstream oil and gas companies. He was previously engaged in senior technical and leadership roles by a range of international upstream companies, including BP and TNK‑BP. During 2000 and 2001, he was CEO of American Energy Group Ltd.

Philip Dimmock, Chairman of the Board, commented:

“I am delighted to welcome Chuck, an experienced company director, to the Board of Block Energy plc.  In the shorter term, we look forward to Chuck bringing his vast expertise in the exploitation of onshore naturally fractured reservoirs, particularly in the Former Soviet Union, to bear on the Company’s expanded portfolio of assets in Georgia. In the longer term, we expect that his experience in the strategic development of oil and gas companies will add great value to the future of Block Energy.”