WTI $59.33 +68c, Brent $62.74 +59c, Diff -$3.41 -9c, NG $2.46 -5c, UKNG 48.7p +0.22p

Oil price

Oil rose after the IMF upped most international GDP figures which backed up the feeling that Opec+ brought from their recent meeting. The API stats showed a 2.6m draw in crude inventories but gasoline and distillates added.

PetroTal Corp

PTAL announces this morning its Q1 2021 operating update in which the company points to the upcoming drilling programme now getting underway, the Q1 4H workover successfully completed and the Q1 exit production rate on budget. The company has commenced its 2021 drilling program by spudding the first well (“7D”) on March 29, 2021, with expected completion the first week of May 2021. Also it has continued the installation of expanded production facilities (“CPF-2”) that have arrived at the field with start-up dates finalised.

Q1  2021 exit production was 8,275 barrels b/d  with Q1 2021 production averaging approximately 7,300 bopd and the water disposal wells are under way.

‘Total cash liquidity of approximately $76 million, inclusive of an unrestricted balance of $53 million ($23 million are restricted for acquisitions and commodity price hedging).  In addition, future Petroperu true-up payments of approximately $36 million to PetroTal are expected, significantly enhancing the 2021 cash flow profile compared to budget.

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

“We are excited to start our 2021 drilling campaign. Due to an unprecedented decrease in world commodity prices, the impact of COVID-19, and government related social issues, it has been over a year since our team was drilling for growth and we are very happy to be back doing what we do best for our stakeholders.  I am also very encouraged that considering the deferral of drilling, required maintenance activities, and natural field declines, our production levels remain strong as base oil production declines have performed as expected.  The successful workover of the 4H well was a valuable operational test that, as a result of the higher production levels and revised expected ultimate recovery, sets the stage for us to do the same in other oil wells, at the appropriate time. With our strong current liquidity position, approximately $36 million of unbudgeted true-up revenue coming in 2021, and a fully funded capital program, I anticipate an exciting growth trajectory for our Company over the coming years. 

PetroTal are in a very strong position right now and whilst the shares have had a good run there is more to look out for as drilling gets fully into its stride and upgrading of facilities delivers operational excellence. I will add more if necessary after this afternoon’s call but right now my 50p target is one I am more than happy with.

Jersey Oil & Gas

JOG has announced that it has now completed its acquisition of CIECO V&C (UK) Limited (“CIECO V&C”), owned by ITOCHU Corporation (“ITOCHU”) and Japan Oil, Gas and Metals National Corporation (“JOGMEC”). As previously announced on 26 November 2020, the consideration for the acquisition consists of a completion payment of £150,000 and two contingent payments based on the UK’s Oil & Gas Authority’s consent for a Field Development Plan and the potential future development and production of oil volumes from the Verbier discovery in the Upper Jurassic (J62-J64) Burns Sandstone reservoir located on Licence P2170 (Blocks 20/5b and 21/1d) (“Licence P2170”).

The Acquisition provides JOG with an opportunity to create significant value through potentially developing the Verbier discovery as part of its planned Greater Buchan Area (“GBA”) hub. Licence P2170 also benefits from multiple material exploration prospects that have high value potential through tie-backs to the proposed new GBA hub.

Andrew Benitz, CEO of Jersey Oil & Gas, commented:

“I am pleased to announce the completion of our acquisition of CIECO V&C, which adds the final component part of the GBA to our existing portfolio. This is an important acquisition for our recently launched farm-out process in respect of our GBA development project and increases JOG’s discovered resources, adds material value and exploration upside in addition to useful tax losses that accompany the corporate acquisition.”

It is always good to see these deals completed and in particular as JOG have now positioned themselves so well to move ahead with the GBA hub and the recently launched farm-out process will move this ahead substantially. There is now significant upside in JOG shares as they head for a busy period at Buchan.

IGas Energy

Full year results from IGas this morning, revenue was £21.6m (40.9), Adjusted EBITDA was £4.0m (13.8) giving a loss of £42.1m (49.8) with operating cash flow of £3.3m (14.3) and net debt of £12.2m (6.2) and cash of £2.4 (8.2). As usual there are hedges in crude and FX. Costs remain strictly controlled and have fallen sharply over the last year.

Net production averaged 1,907 boepd for the year  (2,325 boepd), within revised guidance, while operating costs for the year were c.$33/boe, in 2021, anticipated net production is between 2,150-2,350 boepd and operating costs of c.$32/boe.

Reserves and resources were upgraded in the DeGolyer & MacNaughton CPR as at 31 December 2020 – IGas net reserves and resources (MMboe) of 17.12mmboe of 2P with 2P reserves replacement ~ 250% (1P ~275%) giving 2P NPV10 of $204 million*.

So, IGas is in good nick with the core conventional plays giving very sensible returns at $60+ giving good ongoing cashflow. In Geothermal there have been some minor delays and in hydrogen sites are being assessed in South East England for planning submissions later this year.

Commenting today Stephen Bowler, Chief Executive Officer, said:

“2020 was an exceptionally difficult year for everyone.  Despite these highly challenging circumstances, the Company has continued to make progress in a number of key areas and continues to adapt its business to operate, both in the current environment, and to develop its business strategies to deliver a long-term and sustainable business.

We still retain a sharp focus on costs and conserving cash but as commodity prices improve we will continue to invest in our assets where appropriate and to move ahead purposefully with our geothermal and hydrogen projects.”

Pharos Energy

Full year results from Pharos this morning, as always a historic view and nothing new but more than most the company has much to look forward to in upcoming weeks. 2020 production was 11,373 boepd net (2019: 12,136 boepd) split between Egypt production of 5,270 bopd (2019: 5,055) and Vietnam of 6,103 boepd (2019: 7,081).

The 2021 forecast production range of 9,200 to 10,600 is split between Egypt  where  guidance  is 4,000-4,400 bopd, before any investment from a farm in partner and in Vietnam where guidance is 5,200-6,200 boepd.

Egypt will see Phase 1B of the Waterflood programme which  has commenced following the successful equity placing in January 2021 and the outcome of the ongoing formal farm-out process for the Company’s assets in Egypt, is expected to be announced Q2 2021 with completion planned for H2 2021. Indeed, on the call the quote I picked up was that the farm-out would ‘fast-track material production growth.

Vietnam will see the drilling of four development wells which will commence in Q3 2021 in the TGT Field and they are firstly fully funded and 4 of the 6 are approved by the JOC ‘in this budget cycle the rest will be in 2022’. Also the company note that they will deliver free cash flow by H1 2022. Finally with regards to blocks 156 & 126 preparation is underway for the 3D seismic survey planned over certain high graded leads in the northern part of Block 125.

Ed Story, President and Chief Executive Officer, commented:

“Despite the challenges of the past year there have been positives; group production was in line with guidance, we were granted an extension to our TGT and CNV licences in Vietnam; and the TGT Full Field Development Plan, where drilling will commence in Q3 2021, received final approvals. In order to preserve liquidity and the opportunities in our current portfolio during a turbulent 2020, we deferred discretionary capex, reduced our cost base, and took the difficult decision to suspend the dividend. Vietnam provides the lowest breakeven in our portfolio, investments here have quick paybacks, and the drilling programme is fully self-funded from the operating cash flows in country. We expect to reach post capex free cash flow in H1 2022. In Egypt, reserves have been significantly upgraded and the waterflood programme has commenced, supported by the equity placing completed in January 2021. We are well advanced in a process to select the right farm-out partner to make the investment needed to fast-track material production growth and, an agreement has been reached with EGPC on a change to the El Fayum licence terms which, once approved by the Egyptian Government, will enhance operating cash flows and profitability. Finally I want to thank our colleagues for all of the commitment and energy that has seen us through what has been a hugely difficult year.”

Phew and I never saw his lips move….

Last year was undoubtedly a tricky one for the company but right now as I mentioned at the top there is much to get excited about for the company. In Egypt it certainly sounds like a farm-out is imminent and given how tricky these can be at the moment one must feel positive and coming on the back of the improvement in commercial terms and those with EGPC gives a $6 per barrel +/- benefit they are better than I had been expecting.

Vietnam with its own extension should with the TGT drilling programme, deliver increased production and the cash flow should enable a return to dividend pay-outs in the medium term. This was discussed at the meeting and clearly there will be a growth v shareholders debate but paying a divvi is ‘in the company DNA’. I think there is still substantial upside for Pharos and I am pleased for what is a very high quality management in the sector.

And finally…

In the Champions League last night the Noisy Neighbours got a last minute winner to beat Borussia Dortmund 2-1 whilst Liverpool lost 3-1 at Real Madrid.