WTI $63.38 +25c, Brent $67.05 +28c, Diff -$3.67 +3c, NG $2.75 +7c, UKNG 52p n/c
Not much to add I’m afraid, the same factors are influencing the oil price today and Brent is almost $68 as I write. Given that the only new news as such is that India has suffered a record rise in infections and now totals some 15m + cases it is quite surprising.
In the US retail gasoline is virtually unchanged on the week or the month but I am seeing some noticeable signs of a pick-up in the demand for gas from the market ahead of the driving season.
PTAL this morning provides a Risk Management Update in which the remaining 1.4m barrels of oil in the ONP are now hedged by Petroperu and an additional 622,000 bbls which are hedged by PetroTal. PetroTal also maintains ‘low cash flow exposure from Peruvian currency fluctuations’.
In more detail, the remaining 1.4 million barrels of oil in the North Peruvian Pipeline have now been hedged by Petroperu, thereby securing future total true-up revenue payments of approximately USD$31 million for the original 1.8 million barrels.
At the corporate level, over 1.2 million barrels in total are now hedged, representing 32% of forecast oil production for April 2021 to December 2021. PetroTal completed a second layer of its oil hedging program for 2021. Approximately 338,000 barrels have been hedged (representing 9% of forecast oil production covering August 2021 to December 2021) in a Put structure with a $60/bbl strike. In addition, 284,000 barrels have been hedged (representing 8% of forecast oil production covering May 2021 to July 2021), in a synthetic Put structure with a swap price of $62.15/bbl and a call strike of $66.00/bbl.
To address the recent volatility of the Peruvian Sol, the Company has maintained low cash flow exposure to the currency, with Peruvian Sol accounting for an estimated 8% of operating costs, 60% of Peruvian general and administrative (“G&A”) costs, and 8% of capital expenditures.
Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:
“Over the past month we have been working closely with Petroperu to finalize hedging arrangements for the remaining barrels in the ONP. Working with their risk management team has been seamless and we have an efficient working process to execute further derivative strategies together for future oil deliveries through the ONP. The total true-up revenue of around USD$31 million will be a welcome addition to our 2021 liquidity.
Furthermore, we are now in a position of strength to potentially layer on additional opportunistic hedges with approximately 32% of our volumes currently price protected. We are naturally hedged from a currency standpoint from fluctuations in the Peruvian Sol, which has experienced increased volatility recently.
Internally, financial and technical fundamentals have never been stronger, and our management team have many years of experience operating in different environments that transition politically. Peru has attracted material external global capital and we believe it will continue to remain an attractive jurisdiction for investment, following the results of the upcoming Peruvian elections.”
Ahead of the results and given the huge amount of change that has happened at PTAL in recent months I think that the shares are significantly undervalued and with so much further news yet to come the prospects are extremely good, for the time being I think the price target of 50p per share is not unrealistic.
Union Jack Oil/Reabold Resources
An operations update and details of the forward well testing programme in respect of the West Newton B-12 conventional appraisal well is announced by the two quoted partners today. UJO have 16.665% and RBD 56% of the project.
So far, the Cased Hole Logging Programme and Vertical Seismic Profiling operations on the WNB-1Z well have been completed and the CHLP results confirmed the presence of a good cement bond of the production liner and well bore integrity.
The Data from the VSP is currently in Romania being processed. Initial indications are that the data is of good quality, the VSP data will be used to refine the 3D seismic interpretation, primarily to be used in volumetric calculations towards reserve/resource figures for the West Newton field and for the identification of future well locations.
The next phase of operations will be conducted utilising a service rig and will be comprised of perforation and stimulation of the Kirkham Abbey formation and subsequent flow testing of the well , this phase of well testing operations is expected to commence in May 2021. Operations will take approximately four weeks to complete and following completion of operations on WNB-1Z, the testing of the WNA-2 well will commence.
Perhaps more interestingly, various thin section images taken from core plugs obtained from the West Newton B-1Z well show porosity throughout the core with the better samples exhibiting porosities of between 12% and 15%.
Executive Chairman of Union Jack Oil commented:
“We are delighted to report that mobilisation in respect of well testing, initially on the West Newton B-1Z well, is expected to commence in May 2021.
“Initial results from the recently completed Cased Hole Logging Programme and Vertical Seismic Profiling, coupled with historical well log results and measurements taken whilst drilling, have all been highly encouraging to date and the Joint Venture participants hold high expectations for a successful flow test.
“We await with great interest the testing results over the coming months from both WNB-1Z and WNA-2 and look forward to updating shareholders as further progress is made.”
Stephen Williams, Co-CEO of Reabold, commented:
“With well testing operations ongoing, the first flow test expected in May, and the subsequent testing of the WNA-2 well to commence thereafter, we look forward to a busy period of activity at West Newton. Results so far have been progressing in line with our expectations, despite the impact COVID-19 has had on supply chains.
“We look forward to the next phase of operations beginning shortly and to updating shareholders as further progress is made.”
Overall it is good to see so much progress being made at West Newton, a project I believe to be significantly bigger than many in the market place are still yet to recognise. The testing in May will be the next material landmark and although neither shares have taken on board the potential upside I’m sure it will happen once testing etc is completed.
A slightly holding piece on PFC ahead of the conference call later this morning, any changes or additions will be made later or tomorrow. The highlights of the figures are, protected margins and conserved cash in challenging market conditions with achieved cost savings of US$140 million, ahead of target.
Business performance net profit of US$48 million, and a reported net loss of US$180 million post impairments and separately disclosed items. New order intake of US$1.6 billion; 22% of awards in new energies and net debt of US$116 million and liquidity of US$1.1 billion.
Sami Iskander, Petrofac’s Group Chief Executive, commented:
“Since joining Petrofac at the beginning of November, I have spent a lot of time listening to our people, our clients and our stakeholders. These discussions have confirmed the fundamental strengths that have made Petrofac one of the leading service providers to the energy industry over many years. They have also clarified what we need to do better to restore confidence and set the business on a course to grow with existing and new clients. This period has also been challenging following the SFO’s announcement in early January. However, I am reassured by our uncompromising approach to compliance and ethics that is consistent with international best practice, independently audited, and critical to our future success.
“Our 2020 results demonstrate it has been a difficult year for Petrofac and the industry. The way the business has adapted to new ways of working to deliver for our clients – whilst reducing costs and conserving cash – is testament to the hard work, agility and resilience of our people.
“We look to the future with a clear plan and refreshed strategy focused on consistent best-in-class execution, returning to growth and delivering superior returns. This means reshaping our business to rebuild our backlog by capitalising on the recovery in addressable markets, diversifying into new geographies and accelerating our pivot to new energies. In parallel, we will deliver on our ESG commitments and continue to improve our cost-competitiveness. I am confident that we will recover to deliver sustainable value for all our stakeholders over the medium term.”
Last night in the Prem Leeds and Liverpool drew 1-1 which meant that the latter stay out of the top 4 and Chelski who play the Seagulls tonight are now able to overtake the Hammers. However given that neither Liverpool or Chelski are likely to be in the Prem next season it is of limited significance.
The European Super League still appears to be hanging on but given that these clubs are already amongst the wealthiest in the world it would seem that the whole process is down to greed and I hope they get their come-uppance should this go ahead.