Oil price, PetroTal, Savannah, Echo, Lamprell. And finally…
WTI $61.67 -3c, Brent $65.37 +13c, Diff -$3.70 -5c, NG $2.88 -7c, UKNG 40.6p -0.35p
After racing out of the blocks Monday and Tuesday oil started well yesterday but came off the top with Wall Street’s jitters around Fed Chairman Powell’s speech. After hours the API stats were pretty mixed, generally worse than expected but at the moment the inventories are for the birds.
PetroTal Corp (AIM:PTAL)
PetroTal has announced the results of its 2020 year-end reserve evaluation by Netherland, Sewell & Associates, for the Bretaña oil field, operated 100% by PetroTal. (All currency amounts are in United States dollars and comparisons refer to December 31, 2019).
Proved 1P reserves increased by 4% to 22.3 million barrels from 21.5 mmbbl, Proved plus Probable 2P reserves increased by 7% to 51.0 mmbbl from 47.7 mmbbl and Proved plus Probable and Possible 3P reserves increased by 25% to 106.1 mmbbl from 84.8 mmbbl.
Relative to 2020 oil production of 2.1 mmbbl, reserve replacement was 38% in 1P reserves and 157% in 2P reserves; Bretaña’s reserve life index (“RLI”) for 1P and 2P reserves is now 6.4 years and 14.6 years, respectively. Original oil in place (“OOIP”) estimates for 1P, 2P, and 3P reserve categories were unchanged from 2019 at 235, 364, and 579 mmbbls, respectively.
NSAI attributes a corresponding 2P recovery factor of 15.0%, increased from 13.6% at year-end 2019 due to performance of the existing wells. Also, a 19% decrease in total 2P operating costs resulting in an undiscounted saving of $232 million driven by further calibration and optimization to the Company’s actual cost structure. This gives an NPV of $317 million ($14.21/bbl) for 1P reserves, $830 million ($16.27/bbl) for 2P reserves.
The 2021 development program combined with all future development and abandonment costs, represent total finding and development costs of $11.52/bbl for 1P reserves, $4.96/bbl for 2P reserves and $3.16/bbl for 3P reserves. On a 2P basis, this represents a recycle ratio of 4.7 times, based on the total $4.96/bbl finding and development cost relative to a netback of $23.40/bbl (assumed at $50.00/bbl Brent oil price).
Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:
Considering the challenging conditions 2020 presented, we are extremely happy with the 2020-year end reserve report. The recovery factor improvements in our 2P and 3P categories support our thesis of continued reservoir performance over time matching that of nearby analogous fields with higher recovery factors. With additional time and field data, we expect to see continual recovery improvements. We are also very proud of the hard working operations and commercial teams at PetroTal which were able to demonstrate and justify to our reserve evaluators, a decrease in 2P operating costs by 19%, equating to $232 million, in undiscounted savings over the remaining reserve life. We will continue to run operations prudently with attention to optimization, cost reductions and safety for the benefit of all our stakeholders.
I think that these 2020 numbers, which are net of the years production, show that there was a very decent, effective upwards revision of 2P reserves compared to last time. Indeed, NSI were encouraged enough by the well decline numbers and whilst the first months of this year don’t give enough evidence to give a substantial raise, come the half year it was likely to justify a more weighty raise in reserves.
Interestingly the recoverable reserves have increased by 10m+ since listing ( including production ) which is easy to be blasé about but is 10,000 bopd for 3 years, a somewhat better way of showing the success rate. With a fair wind and further operational success which I expect, PTAL can be relied upon to be able to deliver the scheduled increase in production at a most profitable rate and make the shares very cheap indeed.
Savannah Energy (AIM:SAVE)
On Savannah Energy, a press article came out yesterday, which said that the Niger Delta Power Holding Company (NDPHC) has entered into a bilateral agreement with the Republic of Togo to supply the country with 70 MW of electricity. The power will be generated from the Calabar power station, which accounts for the majority of Savannah’s Nigerian gas sales. NDPHC is also in discussions to potentially supply a further 100 MW to Paradise City in Calabar in due course.
In the Bucket list published on 16th December and in a number of written articles, interviews and podcasts I have pointed out the potential upside for SAVE from not only its existing power supply contracts which in themselves are long term and profitable but also from additional scope for growth. In the last quarter the shares have risen by nearly three times but there is much more upside from here.
I add the link to the article below and it is worth noting that FinnCap, brokers to Savannah have published an updated research note this morning updating its price target by 6% to 55p per share.
Echo Energy (AIM:ECHO)
The company has announced a facilities upgrade ‘to enable increased short and long-term production at Santa Cruz, Argentina.
‘Following continued improvements in market conditions the Company has agreed, together with the Santa Cruz Sur partners, to capital expenditure to upgrade and debottleneck the existing liquids pipelines in the Santa Cruz Sur assets to accelerate the return to full oil production and to bring the remaining volumes previously shut in in Q2 2020 back online. The pipeline upgrades will also provide additional capacity for future production enhancement projects that have been identified in the Company’s opportunity portfolio at Santa Cruz Sur.
Capital expenditure net to Echo’s 70% working interest of around US$ 275,000 will be injected by the Company to replace and upgrade parts of the infrastructure primarily in the Chorillos, Campo Molino and Cerro Convento fields with installation expected to take approximately 45 days from conclusion of successful procurement. Ten individual upgrade projects will be completed to enable the upgrade of around 23 km of pipeline.
It is anticipated that once the pipelines are fully operational, gross daily liquids production will be restored to levels of between 480 bopd – 600 bopd (336 – 420 bopd net Echo). The actual level of production resumed will be dependent on reservoir behaviour and pressure build up since this element of production was shut in in April 2020. In light of current attractive market conditions this infrastructure project is considered an attractive investment with the ability to result in strong cashflow generation and a short payback period of months’.
Daily operations in the field at Santa Cruz Sur continue with the delivery of produced gas to customers as expected. Production levels remained in line with the Company’s expectations with average daily production, net to Echo’s 70% interest, from Santa Cruz Sur throughout 2020 of 1,966 boepd (including 10.2 MMscf/d of gas). Total cumulative production from Santa Cruz Sur during 2020 net to Echo was 720,000 boe (including 3,750 MMscf of gas) and 2021 production remains strong. Gross cumulative production from Santa Cruz Sur for the period 1 January 2021 to 14 February 2021 was 116,040 boe (net 81,230 boe).
Given the indications of an improving macro-economic outlook and, specifically, the increase in oil prices from the start of 2021, there has been an increased demand for Santa Cruz Sur oil, resulting in improved pricing and, as a result, more frequent oil sales. Oil sales to date in 2021 have totalled 17,600 bbls net to Echo’.
Martin Hull, Echo’s Chief Executive Officer, commented:
“We are very pleased to be making continued progress across the portfolio as market conditions continue to improve. The Company’s investment in improved and renewed infrastructure at Santa Cruz Sur is both consistent with Echo’s commitment to HSE in the field and provides additional capacity for the opportunities the portfolio holds to increase production and revenue. With stable production and several growth opportunities to pursue, we feel positive about the Company’s prospects for 2021, especially having announced earlier this week, pending noteholder approval, progress in the restructuring of the Company’s balance sheet. With a firmer financial footing and material operational upside which we are actively pursuing, I look forward to updating shareholders with further good news in due course.”
Lamprell has announced that it has been awarded an EPCI contract by Saudi Aramco, as part of the long-term agreement programme worth some $51-150m and consists of two offshore production deck modules and associated pipeline and subsea cables in Saudi Aramco’s Marjan field.
Christopher McDonald, CEO, Lamprell, said:
“We are delighted to have received our first LTA contract award since joining the programme in 2018. Our team has been working closely with Saudi Aramco over the past few months and we look forward to strengthening our partnership through this project. Marjan is a strategic asset of global significance and we are honoured to play a role in its development. The award reinforces our commitment to our strategy and we look forward to working on further opportunities in the region.”
The cricket got under way this morning with a pink ball in the day night test at the new, 142,000 capacity stadium in Ahmedabad. Within a blink of the eye England were all out for 112…
Last night in the Champions League Chelski went to Athletico Madrid and won 0-1. Tonight the Noisy neighbours are at Borussia Mönchengladbach.
And no surprise that Neil Lennon has quit as Manager of Celtic today, quite why it took him so long who knows??
And sad to see that Tiger Woods has been treated after a high speed car accident which he had to be cut out of.