WTI $48.00 +38c, Brent $51.09 +23c, Diff -$3.09 +3c, NG $2.47 +16c

Oil price

Oil remains in good nick, as I say though in thin markets and with window dressing tomorrow which will determine the week, month, quarter and year end prices that will remain on the record books for ever. When we know those numbers we will see that 2020 was a poor year for crude oil but we end it on a positive note.

Today we have heard that the UK regulatory authorities have approved the Astra Zeneca/Oxford Covid vaccine and with an initial 100m doses it has given a boost to thoughts that by Easter next year there may be a realistic chance of the gloom lifting. With Easter being early next year we have April the 4th as an initial target date for the war against Covid and hence my own thoughts about some decent demand recovery.

Finally, it seems that money managers are also relatively bullish about oil, in the week to December 21st the traders have yet again raised their long positions in crude futures and options. With Mr Novak, whom I quoted yesterday suggesting that Opec+ expects as much as a 5/6m b/d addition to demand later next year.

PetroTal Corp

It doesn’t seem that long ago when I was in a meeting with Manolo and the team at PTAL at which time they were explaining to me the different methods of exporting oil from the Bretana field. So it is interesting that today they announce the first export of Bretana oil into the Atlantic region through Brazil.  This provides PetroTal with an additional option to monetise oil sales, beyond the Company’s existing important sales arrangements with Petroperu using the Northern Oil Pipeline (“ONP”), and to the Iquitos refinery. This will facilitate future oil production growth when the Company continues development of the Bretana oil field, targeting to reach 20,000 barrels of oil per day in Q1 2022.

This initial shipment of 106,000 barrels was arranged between PetroTal and Novum Energy Trading, a British Virgin Islands registered Corporation, to establish the viability of Bretana oil exports using the Amazon river through Brazil.  In early December 2020, a convoy of barges were loaded at Bretana and have now reached the terminal area near Manaus, Brazil for transfer into a tanker that will deliver the oil to the Atlantic region.

Crucially, the sale was completed FOB at the Bretana field, where the oil was loaded onto the barges, with the invoice based on the February 2021 ICE Brent oil price forecast, net of transportation costs and export-related fees associated with the Brazilian – Atlantic coast route.  The net proceeds of US$2.7 million have been received and are not subject to any further price adjustments when this oil is sold to the end user by Novum. This should be borne in mind when considering the more complicated and importantly much longer process which caused grief last year.

Based on the success of this initial export shipment, PetroTal and Novum have signed a letter of intent to establish long term sales through Brazil to complement the Company’s existing sales arrangements with Petroperu’s ONP and the Iquitos refinery.  Future export cargos through Brazil are expected to be at least 200,000 barrels and, with the volume efficiencies expected, will importantly result in a higher netback per barrel for PetroTal.

Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:

“We are pleased that all parties worked seamlessly together to manage the logistics associated with this pilot shipment.  This represents a milestone achievement for PetroTal, since having the ability to manage oil sales to both the Pacific and Atlantic coasts provides for maximum flexibility and pricing.  The ONP will continue to play an important role in the Company’s ongoing growth.”

The last two days have been good for PetroTal, yesterday they announced that they were starting to deliver crude into the Northern Oil Pipeline again and today they are monetising the ability to deliver into the Atlantic region via the Amazon River through Brazil. This should help the company with its target of production from the Bretana field of 20,000 b/d in Q1 2022. The shares look very interesting and at 13.5p are fundamentally very cheap and on the charts the breakthrough at 15p could then signal a doubling to the longer term high, at the very least.

United Oil & Gas

UOG this morning announce the completion of the ASH gas pipeline on the 27th of December which contributes an additional 5.45 MMscf/d (1,090 b/d equivalent of oil) gross.

The delivery of the Ash Gas pipeline has not only increased the environmental efficiency of the Abu Sennan Licence, but has also increased gas recovery rates across the licence and any gas produced from that well can now be monetised more efficiently.

United Chief Executive Officer, Brian Larkin commented:

“Since United entered the Abu Sennan licence, the joint venture partners have made excellent progress in increasing production, not just through drilling activity but also through low capital expenditure on infrastructure development.  We look forward to further progress in 2021 with the recommencement of drilling activities, starting with the ASH-3 development well.”

This is not ‘new’ news, it has been expected for some time but markets do like shares that deliver on promises and Brian Larkin has delivered here all right. For those that may not have seen my recent interview with the UOG CEO I have added it again here.

Core Finance CEO interview: Brian Larkin of United Oil and Gas

And finally…

Football continues, just, it was interesting to note that Big Sam after a 0-5 seeing to for the Baggies at home to Leeds called for an immediate circuit breaker…

For the time being the game goes on and other games last night saw the Gooners winning back-to-back matches for some time, nicking the away game against the Seagulls 0-1. Burnley beat the hapless Blades 1-0, the Saints drew 0-0 with the Hammers and with a late winner the Red Devils beat Wolves 1-0 to go top of the table.

And a natural disaster as the New Years Day fixture at Cheltenham has already been lost to waterlogging….