WTI $53.21 +96c, Brent $56.58 +92c, Diff -$3.37 -4c, NG $2.75 +1c, UKNG 79.19p +6.6p
Another solid day for crude which is feeling the squeeze with stocks falling and an imminent production cut from Saudi Arabia. With the attempted impeachment of President Trump ahead of next week’s ceremony anything is still possible.
Gulf Keystone Petroleum
An operational and corporate update today from GKP in which they say that they have ‘effectively managed to minimise the impact of COVID-19 on our staff and contractors and ongoing production operations’. Over 2020 average gross production at Shaikan was 36,625 bopd, exceeding the top end of the guidance range and the highest annual average production rate to date from the field.
Importantly, as in my view the upside for GKP is totally dependent on Shaikan expansion, they have announced that the PF-1 plant debottlenecking work has delivered production capacity in excess of 30,000 bopd. This is consistent with Shaikan Field production increasing, it is currently running at c.44,000 bopd and guidance for 2021 is 40-44,000 bopd.
Perhaps more importantly, the longer term rating for GKP takes this growth one stage more, the famous 55,000 bopd figure has not been reiterated here but ‘when conditions allow’ with regard to well workovers and the drilling programme restarting will be restated. This needs to be actioned as soon as is practible as there seems to be little alternative signs of growth via acquisition at present.
Total cash received from the KRG during 2020 for payments of crude oil sales was $129 million ($101 million net) and as a result of increased production and the recent improvement in the oil price, the December 2020 crude oil sales invoice submitted to the KRG was $18.0 million ($14.1 million net), up 65% from the previous month. The company are still owed arrears from the KRG of some $73..3m (net) and the company are ‘engaging’ with the state, with Brent at $57 today they must be feeling more confident but are not able to press too much. As at 12 January GKP had cash of $147m and promise a return to a ‘balance of growth focussed field development investments and shareholder distributions’ obviously whilst maintaining its strong financial position.
Jón Ferrier, Gulf Keystone’s Chief Executive Officer, said:
“I am pleased to report that throughout 2020, Gulf Keystone successfully managed the challenging operating environment delivering record annual average production of over 36,600 bopd and in December, record monthly average production of over 43,000 bopd. Planned debottlenecking works have increased PF-1 production capacity to more than 30,000 bopd and the Company expects to deliver average gross production in 2021 of 40,000 to 44,000 bopd. We look forward to updating guidance once conditions allow resumption of the 55,000 bopd expansion.
I would like to thank the team at GKP for their dedication and professionalism in what has been a challenging year for the E&P sector. I look forward to working closely with my successor, Jon Harris, to effect a smooth handover of responsibilities and I am confident of the continuing success of the Company.”
A trading and operations update from PHAR this morning, all seems to be well and there is also a potential reserve upgrade in Egypt as well as a farm-down process underway.
Group working interest 2020 production was 11,373 boepd net, in line with production guidance divided Egypt 5,270 bopd and Vietnam production 6,103 boepd net. The Egypt 2P reserves are expected to be upgraded by approx.40% with an upgrade of approx.40% in the proven and probable (2P) reserves is expected in the El Fayum concession. Egyptian revenues for the year were circa $30m and the average realised oil price per barrel from Egypt achieved was approx. $37/bbl, representing a discount to Brent of circa $4/bbl.
Elsewhere, the TGT drilling programme start date has been brought forward from Q4 to Q3 2021 and two year field licence extensions for TGT and CNV have been formally granted by the Ministry of Industry and Trade in Vietnam. Vietnam revenues for the year were c. $87m and the average realised oil price per barrel from Vietnam was just under $45/bbl, representing a premium to Brent of just over $3/bbl.
Cash balances as at 31 December 2020 were approx. $24m; net debt $33m with Group revenue for 2020 of c.$140m, including the benefit of hedges of $23m. The company continued to cut costs with cash cost savings on total group expenditure for the year of c.23% against the budget. Group reduction of G&A costs was 35% and the scheduled half-yearly redetermination of the Reserve Based Lending Facility (RBL) over the Group’s producing assets in Vietnam was completed at the end of 2020. A repayment of $0.9m has now been made in accordance with the redetermination and, the Borrowing Base amount currently stands at $56m.
No statement from CEO but it seems that Pharos is looking in good shape with further news to come from Egypt.
In the Prem last night the Red Devils went to Burnley and won 0-1 which took them to the top of the table, it may not last long as the Reds go to fortress Anfield at the weekend. Elsewhere rare points for the Blades as they beat the Magpies 1-0 whilst the Toffees won 1-2 at Wolves.
Tonight the Noisy Neighbours host the Seagulls and in a London derby Spurs host the Cottagers.