WTI $56.85 +62c, Brent $59.34 +50c, Diff -$2.49 -12c, NG $2.86 -7c, UKNG 51.9p +3.55p
At the risk of repetition the oil price is better again this morning with Brent trading above $60 in what looks like a year ago. But the story remains the same, the vaccine trade, stock draws and the forcing through of the Stimulus bill by the Biden regime has led to oil’s strength.
Where we go from here is the big question but to be honest expecting much more upward movement is probably asking too much, a correction may well be on the way even of a modest nature. The alternative is further tightness in the market perhaps caused by last year’s capex cuts which were, in my view of a generational nature and of course where some of the super majors ran for the politically correct cover of renewables. Nothing wrong with that per se but often the reduction in capex has repercussions, at $60 Brent even Sea Lion comes back into play…
Finally the Baker Hughes rig count, overall units were up by 8 to 392 with oil up just the 4 to 299. Last week WTI was up $4.65 or 8.9% and Brent rose $4.30 or 7.8%.
BPC has completed the Perseverance #1 drilling with the well encountering hydrocarbons thus successfully validating the structural model and the petroleum system but the oil discovered was not commercial. Validation of a seal, good reservoir quality, charge and the presence of oil ‘points to significant hydrocarbon potential remaining in various independent, untested play systems and structures within BPC’s extensive acreage’.
Drilling has now ceased, the well having reached a depth of approximately 3,900 meters without incident, and the well will now be permanently plugged and abandoned. From here the work goes back the the labs where all the technical data will be analysed and BPC will decide if there is room for another go, if so the farm-in process will start over again.
Simon Potter, CEO of BPC, said:
“I am proud to say that after many years of diligent effort we did what we said we would do: BPC drilled the Perseverance #1 well safely and without incident, testing for the presence of hydrocarbons in the Southern Seas of The Bahamas. This was the very specific objective of the well – not a scientific or geologic experiment, but to seek hydrocarbons in commercial quantities.
In a technical sense, the well successfully validated the existence of oil, seal and reservoir. Together, these factors verify the existence of a working Lower Cretaceous petroleum system and sequences of reservoir quality within the Aptian, pointing to the overall hydrocarbon potential of other untested prospects captured by BPC’s extensive acreage holding. However, at the Perseverance #1 location the volumes of oil encountered are not commercial.
Perseverance #1 is the first exploration well in The Bahamas for decades, and the data gathered from this well will prove invaluable in providing a modern analysis as to the regional potential of the petroleum system, which, in our view, reduces technical risk for any future/further exploration in this new frontier province. The Company will proceed to undertake a comprehensive evaluation of the data derived from the well, as we believe the results provide a sound technical basis for renewed farm-in discussions.
Personally, I have worked on the Bahamas project for over 15 years and, along with the Board members and a number of the management team, have spent the majority of the last 10 years working to bring about the drilling of Perseverance #1. We all take great professional pride in the fact that BPC has delivered the well safely, responsibly and without incident, notwithstanding the challenges presented by Covid-19, low oil prices and a challenging market environment. Great credit is due to the professionalism of our operating and commercial teams, to whom I owe a huge thanks.
Elsewhere in the portfolio, in Trinidad we have producing oil fields and, in combination with assets in Suriname, we have upcoming drilling programmes scheduled in 2021, such that the near-term operational activity focus will now shift toward those activities.
All of us at BPC are resolute in support of the diversification strategy embarked on during 2020, and we remain intent on delivering the potential that is latent across the entire portfolio.”
So where does BPC go from here? Firstly significant credit should go to the team for effectively doing what they said they would, fighting against the pandemic, getting financed, putting up with periods of low oil prices and even environmental obstruction in order to deliver P#1.
Whether or not the data makes a farm-out worth pursuing only time will tell but the work that has been done in recent months means that BPC is bigger than just P#1, something that couldnt have been said a year or so ago. A highly prospective portfolio in Trinidad comprising of production as well as exploration upside should mean the 2,500 bopd target should be a good starting point for a future in country.
Elsewhere there is work to be done in Suriname and of course the opportunity in Uruguay mean that shareholders will still be exposed to drilling and prospect analysis for some years. Along with this there is the inevitable ‘strategic review’ of the business and I’m sure that some of the senior management will decide that the last 10+ years have taken its toll making way for new brooms…Disappointing obviously but there is plenty for the company, its management and shareholders to look forward to in coming months.
The company announces its updated reserves and contingent resources to 31st December 2020. Argentina reserves and contingent resources have been independently certified according to Argentina law with Louisiana reserves internally assessed
Group net 2P Reserves of over 24 MMboe limited to current life remaining of concessions taking no account of the anticipated early extension of such contracts as well as significant contingent resources in producing areas awaiting conversion to reserves after contract terms are prolonged.
The Company expects to drill record number of new wells this year in drive to produce more reserves whilst in Paraguay exploration PMean internally estimated at in excess of 536 MMbo undiscovered oil-in-place are in addition to the figures reported today.
Peter Levine, Chairman, commented
“The robust Group reserves and contingent resources of President assessed as at the end of last year, combined with the enshrined legal right to extend our all our Argentine licences, underlines our production potential for years to come in a country with long term hydrocarbon needs.
“It is important to note that the reserves as at 31 December 2020 do not represent the total of what is present and/or recoverable in the respective fields but only rather what are present and/or recoverable over the term of President’s current licenses as at the audit date. In practise, the Company intends to exercise its legal right to extend its Rio Negro licenses beyond their current terms and therefore as is discussed the total present and/or recoverable reserves in the ground are materially higher.
“We look forward to delivering on that potential in 2021, with a record actual and contingent work programme announced on 20 January, including a prospective return to drilling in Puesto Guardian. This year’s work is supported by more stable realisation prices in the markets we serve combined with both federal government and provincial investment incentives in Argentina”.
Block has provided an update regarding operations at its West Rustavi field. Production from the WR-38Z and WR-16aZ wells has recommenced. The Wells have been brought back online safely, with oil and gas flowing through Block’s new in-field flowline to its Early Production Facility, which is located in the West Rustavi field at the WR-16aZ wellsite. In the EPF, gas is separated from the crude oil before entering the gas sales pipeline, which is owned by Bago LLC (“Bago”).
Bago has carried out the final testing of its facilities using gas provided by Block and is now completing the final steps required to tie back into the main gas pipeline, which is owned by the Georgia Oil and Gas Corporation. Gas sales will commence within a day of the tie back being completed and Block will provide an update to the market once sales have begun.
Block Energy PLC’s Chief Executive Officer, Paul Haywood, said:
“I am pleased to announce recommencement of production from our West Rustavi field, with the expected revenue from both our oil and gas production providing a welcome boost to Block’s cashflow position, further strengthened by the current higher oil price. Production from the Wells remains stable and consistent with the production rates achieved before they were shut-in in April 2020. We continue to make regular sales of our crude oil inventory to local buyers and I look forward to providing a further update about the commencement of gas sales to the market shortly.”
Following recent activity at PetroTal I managed to sit down with CEO Manolo Zuniga who had much to report around the bond issue, export routes and of course the plans for significant expansion of the company over the next two years. The link to the interview is here.
Core Finance CEO interview: Manolo Zuniga, PetroTal
Trinity Exploration & Production
Trinity has provided a full year trading update for 2020, guidance for 2021 and an update on growth plans and opportunities for 2021 and beyond. This is in advance of a Q1 update in April 2021 and the Group’s audited financial results for 2020 which are expected to be released in May 2021.
Most figures for 2020 has already been published but average daily production is up a very creditable 7% to 3,226 bopd (FY 2019: 3,007 bopd). Operating break-even was down 23% to US$20.5/bbl (FY 2019: US$26.4/bbl) another creditable performance.
Cash balance was up 46% to $20.2 million at 31 December 2020 (31 December 2019:$13.8 million) with net cash up 27% to $17.5 million (FY 2019:$13.8 million) and total liquidity of $22.5 million (net cash + CIBC working capital facility).
Guidance for 2020 is, production of 2,900 – 3,100 bopd (before drilling of new wells), capital expenditure guidance of $6.0 – $8.0 million (before drilling of new wells) with hedging in place for c.50% of 2021 average production levels to protect against oil price declines. Finally, there remains a focus on maintaining production, preserving cash flow and investing to establish an energy business of scale.
Bruce Dingwall, CBE, Executive Chairman of Trinity, commented:
“2020 was a successful year for Trinity, notwithstanding the challenging circumstances, as we continued to consistently deliver on our operational and financial targets. We not only met our production targets safely but also delivered the fifth consecutive year of operating break-even below US$30.00/bbl. To put this in context, over the past five years, despite a 6% fall in average oil price realisations, Trinity has increased production by 27% whilst simultaneously reducing the operating break-even by 30%, resulting in a business with a robust production base and a strong margin. Our success in delivering these results, despite the unprecedented backdrop, reflects the quality of our assets, the strength of our team, and our unrelenting focus on operational efficiencies and innovation. This is complemented by maintaining a strong balance sheet, which is essential as we develop strategic options to meaningfully scale the business.
“Looking at the growth initiatives in front of us, we see opportunity in two areas. Firstly, in advancing current developments both onshore and offshore, and secondly, via the strategic partnerships we have recently entered into. This strategy is aimed at pursuing further low-cost appraisal and exploration targets along-side the development of transitional energy projects such as micro LNG, wind and solar power.
“We proved the strength of our model during the most difficult of circumstances in 2020 and have ambitious plans to build on this during the current year and beyond.”
I have just listened into the Trinity call and whilst always optimistic Bruce and Jeremy were on good, optimistic form and even the dividend word was not ruled out but actively under consideration.
The rugby 6 Nations got under way with France beating Italy 10-50 in Rome and did look pretty sharp. After that it was England 6-11 Scotland at Twickenham which bodes well for the Scots in the tournament. Finally Wales were leading Ireland 21-16 as Ireland had a penalty to simply put in the corner and with potential to score a winning try, unfortunately the kick for touch went long and with it any Irish chances…
Lewis Hamilton has signed a 1 year contract with Mercedes for 2021 in the new regime of cost savings.
The cricket is exciting, England set India 420 to win who were 39-1 at the close, it looks pretty even money…
And in the Prem on Saturday Villa beat the Gooners 1-0, Burnley 1-1 with the Seagulls, the Magpies beat the Saints 3-2, the Cottagers and the Hammers ended 0-0 and the Red Devils and the Toffees drew 3-3. On Sunday Spurs beat the Baggies 2-0, the Wolves and the Foxes drew 0-0, Chelski went to the Blades and won 1-2 and of course the big game ended with the Noisy Neighbours going to fortress Anfield and winning 1-4. Tonight it’s Leeds v the Eagles.
The Tampa Bay Buccaneers are the 2021 Super Bowl Champions after a dominant performance totally shut down the Chiefs in Florida last night. Tom Brady led the Buccs offence with calm authority with touchdowns from Rob Gronkowski, Leonard Fournette and Antonio Brown but it was the Buccs outstanding defence which arguably won them the game after they kept Mahomes and the Chiefs to nine points and zero touchdowns. Tom Brady now has seven rings, more than any franchise in the NFL, and has now surely confirmed his GOAT status in the sport. “Bet against 97 year old Tom Brady at your peril” was written in the blog before the Buccaneers went to Lambeau Field and beat the Packers in the Championship game. It certainly rings true once again this morning. Possibly the most haunting moment of the night for NFL fans was during his MVP speech when he confirmed that they will all be back next year to do it again.