WTI (Sept) $94.34 +$2.41, Brent (Oct) $99.60 +$2.20, Diff -$5.26 -2c.
USNG (Sept) $8.20 u/c, UKNG (Sept) 394.0p -8.25p, TTF (Sept) €204.765 -€7.41.
Oil will likely be up on the week as the agencies report differing views, not often that the IEA are more positive than Opec but they are restating their numbers.
Jadestone has provided the following update on Montara operations as well as a general corporate overview ahead of its H1 2022 results, which will be released on 20 September 2022.
Montara Operations Update
Further to the announcement in June 2022 reporting a small leak of oil from a crude oil tank on the Montara Venture FPSO, followed by an interim repair and subsequent restart of production from Montara, the Company has been working to complete a permanent repair to tank 2C. During preparations for this repair, an additional internal defect in water ballast tank 4S was detected and this will also be included in the workscope of repairs. There has also been a focus on the remaining scheduled inspection and repair activities to the FPSO crude oil tanks and production facilities which, as previously announced, have been delayed by limitations on available personnel during the COVID-19 pandemic.
Over the past several weeks, the permanent repair to tank 2C has been developed, though delayed due to weather, manpower and logistics issues, further complicated while the facility remains in production operations. This has resulted in an inability to simultaneously accommodate the increased number of inspection and repair crews alongside production operations.
As a result, the Company has taken the decision to temporarily shut-in production from Montara and reorganise offshore manpower on the FPSO enabling priority and focus on maintenance and inspection crews. This is the most practical and efficient way to complete tank repairs whilst progressing ongoing inspection and remediation to other tanks in the FPSO and to complete key remaining scheduled inspection and repair activities planned for this year.
It is currently anticipated that these inspection and repair activities will result in production being shut-in during the remainder of August and potentially through September 2022. It is currently anticipated that prioritising the activity referenced above will result in incremental costs of US$2-4 million.
Production Guidance and Share Buyback Programme
As a result of the Montara shut-in referred to above, and the performance of the wider production portfolio year-to-date, the Company now expects that 2022 production will average between 13,000 and 14,000 boe/d. This compares to the announcement on 20 June 2022, which signalled that 2022 production would likely be around 15,500 boe/d, being the lower end of the previous guidance range. The revised 2022 production guidance reflects the Company’s assumption that production from its non-operated assets offshore Peninsular Malaysia will now remain shut in for the remainder of 2022, due to ongoing delays in reinstating operations.
The Company is confident that by taking this approach at Montara, the necessary work required to deliver long-term asset integrity can be safely and efficiently completed. The impact is short-term and there is no reduction in reserves. As a result, and given its strong balance sheet, the Company intends to continue the share buy-back programme announced on 2 August 2022.
H1 2022 trading Update
The Company provides the following operational and financial metrics ahead of its first-half 2022 results, which are scheduled for release on 20 September 2022. This information has not been audited and may be subject to further review.
· H1 2022 production of 15,008 boe/d, with a preliminary breakdown as follows
¡ Australia: 9,565 bbls/d
¡ Peninsular Malaysia: 5,443 boe/d
· Liftings: 2.0 mmbbl of oil and 0.9 bcf of gas
· Realised prices:
¡ Oil: US$109.52/bbl
¡ Gas: US$2.17/mscf
· Total H1 2022 revenues: US$225.6 million
· End H1 2022 cash balance: US$161.1 million
Paul Blakeley, President and CEO commented:
“Safety to personnel and facility integrity are key foundational principles at the heart of our operating philosophy, and after experiencing ongoing delays to the permanent repair on tank 2C, and to the wider inspection and repair programme on the Montara Venture FPSO, we believe we had to approach this work scope in a different way.
A temporary shut-in of Montara production, in order to replace production crews with maintenance and inspection teams, is the most practical solution which will allow us to apply the necessary additional manpower to accelerate key maintenance and repair activities and restore facility integrity. There can be no shortcuts, and while we have made very significant progress in restoring the FPSO to the standard which we expect, the limited FPSO accommodation, as well as other factors such as COVID-19, have been impeding our progress. Our decision will reverse this trend. This represents production deferred, rather than barrels lost, and we are working hard to restore Montara production as soon as possible.”
It looked a bit too good when the original leak at Montara appeared to have been fixed very quickly in the storage tank on the FPSO. Having said that when more work was needed I am not surprised that the management made this decision. I think that actually it is a positive move by them especially when you bear in mind the limited accommodation on the FPSO when a big team would be descending on the tank.
Having said that the market hasn’t been quite so respectful, even I wasn’t expecting that and is due to the reduction in production guidance which is not only down to Montara but the the ‘performance of the wider production portfolio year-to-date’, so there are a few misses elsewhere in the portfolio albeit pretty modest.
Guidance is reduced to 13-14/- boe/d from 15.5/- + but as Paul Blakeley says it is deferred production and not lost and stays in my valuation of the company. Given that I am expecting further M&A activity and that the company is still soundly financed and the buy-back will continue, I would suggest that the 10% fall to 90p is probably enough and the shares are cheap around here albeit not without a lesson learnt.
Eco (Atlantic) Oil & Gas
Eco has confirmed that the Island Innovator rig, owned by Island Drilling Company AS, was released and mobilised today.
The rig is now under contract to Eco and its JV partners and will move on to the Gazania-1 well on Block 2B, 25km offshore the Northern Cape in Orange Basin South Africa. The rig is expected to arrive and spud by the end of September 2022, subject to weather conditions. The Gazania-1 prospect is targeting a 300 million barrels light oil resource. The well will take approximately 25 days to drill, and the JV partners plan to seal and plug the well after the test, with no equipment being left on the sea floor. The partners have also approved the option to drill a sidetrack well contingent on a discovery in the main target.
The JV partnership in respect of Block 2B comprises Eco Atlantic (50% WI and Operator), Africa Energy Corp (27.5% WI), Panoro 2B Limited, a subsidiary of Panoro Energy ASA (12.5% WI), and Crown Energy AB (10% WI).
Update on Namibia
The Company is also pleased to announce that it has signed Joint Operating Agreements (“JOA’s”) with NAMCOR, the National Petroleum Corporation of Namibia, with regard to the Company’s four operated offshore Petroleum Licence (“PEL”) interests in Namibia, being PEL 97 (Cooper), PEL 98 (Sharon), PEL 99 (Guy), and PEL 100 (Tamar).
An updated version of the corporate presentation is also available on the Company’s website: https://www.ecooilandgas.com/investors/reports-presentations/
Colin Kinley, Co-founder and Chief Operating Officer of Eco Atlantic, commented:
“We are excited to get underway with our drilling campaign at Block 2B in the Orange Basin offshore South Africa. A successful outcome at the Gazania-1 well has the potential to be transformational for Eco and our JV partners.
“We are also pleased to have signed JOA’s with NAMCOR in relation to the PEL’s we operate offshore Namibia. With all of the recent operational success we have seen recently in Namibia, we are excited to be one of the largest offshore licence holders in the region and look forward to working with NAMCOR to generate value for the benefit of all.”
This is very exciting for Eco and its shareholders as I believe that any of these wells could easily be a company maker for Messrs Holzman and Kinley, indeed a target of some 300 mmboe is huge. The fact that this post code has come up before Guyana tells you that the action has been offshore South Africa and of course Namibia where today Eco announce the JOA’s having been signed with NAMCOR and there is so much upside to think about.
Also I note from the tradepress yesterday that Chevron is strongly rumoured to have farmed-in to one of the most coveted licences at Block 2813B directly to the north of the multi billion barrel Venus discovery. Rumours suggest that Chevron has paid an upfront fee of some $100m for the deal in which Tullow exited just before Venus-1 came in, nuff said…..!
President has announced key highlights from the independently reviewed results from the first six months of the year to 30 June 2022 in Argentina in accordance with Argentine reporting rules.
H1 Argentina Financial Results
Pursuant to the Mini-Bond issued last year and announced in November 2021 and extended earlier this year, President’s Argentina subsidiary, President Petroleum S.A (“PPSA”) as stated in the Company’s announcement on 13 May 2022, the Company is obliged to file auditor reviewed results in Argentina for each calendar quarter.
The results of PPSA for H1 have been reviewed by Crowe, the President Group auditors and are today filed with the relevant Argentine authorities. The results have been determined under Argentine GAAP rules. Such filing does not relate to President Group as a whole, only PPSA. The difference in accounting standards will produce anomalies in the various versions of the accounts.
The H1 Argentina Financial Report, converted from Argentine Peso’s into United States Dollars shows inter alia:
· Turnover in excess of US$18 million. President is currently projecting turnover in Argentina for the full year in excess of US$40 million
· The results do not include any beneficial impact from the successful new wells in Salta. These are expected to positively impact results in H2 2022
· Profit before tax* for H1 of US$8.1 million
· During H1 the average oil reference price in Rio Negro for domestic sales was US$58.89 per barrel
· Currently the reference price for domestic sales in Argentina is US$65 per barrel
· During H1 President exported part of its production on three occasions and partial export of production has continued into Q3 2022.
The full half year accounts according to UK standards is expected to be announced before the end of September.
Peter Levine, Chair, commented:
“These results in Argentina achieved with the majority of oil sold at domestic prices demonstrate the health and robust nature of President’s operations.
“With the impact of the increased production in Salta we are now engaged to optimized results in the second period of this year as well as the other activities of President and its evolving nature of the Group as previously announced including its 28% interest in Atome, its new Alternative Energy subgroup Green House Capital and the steps towards Lithium previously announced.”
These numbers are out because they have to be but they do show how well President are doing there. A better chance to take a look at what’s going on in the group will be when the group results come out.
Hurricane has provided an update on Lancaster field operations and net free cash balances as of 31 July 2022 following the lifting of the July cargo.
Lancaster Field Operations Update
The following table details production volumes, water cut and minimum flowing bottom hole pressure for the 205/21a-6 (“P6”) well during July 2022.
July 2022 Lancaster Field Data
Oil produced during the month (Mbbls)
Average oil rate (bopd)
Water produced during the month (Mbbls)
Average water cut(2)
Well gauge pressure (psia)(3)
1. The 205/21a-7z (“P7z”) well was not on production during July 2022
2.Expressed as total water produced divided by total fluid (oil and water) production
3.Pressure reported is the monthly minimum from well downhole gauges.
As of 9 August 2022, Lancaster was producing c.8,400 bopd from the P6 well alone with an associated water cut of c.47%.
The 30th cargo of Lancaster oil, totalling approximately 534 Mbbls, was lifted on 24 July 2022. This cargo was priced by reference to the average of the last five days of July’s Dated Brent quotes, being $111/bbl, resulting in net revenue of $60 million.
The Company will be carrying out its planned annual shutdown during September with the next cargo anticipated to be lifted in October 2022.
As previously reported, during July 2022 the Company repaid in full its outstanding $78,515,000 7.50 per cent Convertible Bonds plus $1.5 million of accrued interest and is now debt free. As of 31 July 2022, the Company had net free cash(4) of $89 million.
4.Unrestricted cash and cash equivalents, plus current financial trade and other receivables, current oil price derivatives, less current financial trade and other payables.
These continuing monthly numbers make a bit of a mockery of the share price as the cash stacks up in the balance sheet. My confidence in oil industry management is waning as no one, including the Hurricane team seems to have had any bright ideas about what to do with all the cash…
Prospex was yesterday, pleased to note an announcement made by Po Valley Energy Limited released on the ASX earlier today and provides an update on the costs and schedule to first gas at the Podere Maiar gas field located in the Po Valley onshore in northern Italy, which lies within the Selva Malvezzi production concession. The Company holds a 37% working interest in the Podere Maiar licence with the Operator holding the remaining 63%.
· Po Valley has signed a construction contract with Italian engineering firm TESI Srl (‘TESI’) to install the gas plant and pipeline for the Podere Maiar gas field in Italy
· A 4-inch pipeline will connect Podere Maiar to Italy’s gas grid
· The TESI contract secures development costs and timing at the Podere Maiar field, with construction costs €130,000 (£110,000) less than previously forecast
· Construction is scheduled for completion in the first quarter of 2023 and Podere Maiar is now on track for first gas at the start of Q2 CY2023
· Subject to costs and first production timing remaining on this revised schedule, the Company expects to be able to fund its share of capex from existing resources
· The decree approving the Production Concession at Selva was issued by Italy’s Ministry of Ecological Transition on 28 July 2022
Mark Routh, Prospex’s CEO, commented:
“We are extremely pleased that the Operator has signed the construction contract with TESI on behalf of the Joint Venture. Signing the TESI contract is an important step for the Joint Venture, as it secures both the costs and the schedule to first gas which is now expected by the start of the second quarter of 2023, some three months ahead of previous schedule estimates.
“Field development work is expected to commence mid-September with all construction and essential procurement contracts now in place.”
So, first gas in Q2 2023, mark your diaries as it’s ahead of schedule…Also the company can fund its own corner from existing resources s no more raises from Prospex anytime soon…
Sunday Roast Podcast
I did a Sunday Roast Podcast recently in which a few industry faces chatted about the Oil industry, here is the link.
There is a full set of football fixtures tomorrow, they say it’s nuts to hold the World Cup in Qatar but those who do well over here might prove to be a shoe-in for Christmas in Doha…
Tomorrow in the Prem Villa host the Toffees, the Foxes are at the Gooners, the Seagulls entertain the Magpies, the Cherries go to the Emptihad, the Saints host Leeds, the Cottagers go to Wolves and the Bees have an easy three against the Red Devils.
On Sunday Forest host the Hammers and the first London derby is at Stamford Bridge where League leaders Spurs are the visitors.
Not much racing but lots of Hundred games on both days.
Finally don’t miss the Springboks v The All Blacks, after a 26-10 loss last week the New Zealanders will want to get their mojo back, 16.05 UK time and The Pumas host the Wallabies at 2010.