The Oil Man: Pantheon, Genel, Sound, Victoria
29th February 2016 13:26
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WTI $32.78 -29c, Brent $35.10 -19c, Diff $2.32 +10c, NG $1.79 +1c
Oil prices rose last week; WTI was up $1.03 and Brent $2.09, although it might have been more. With some delivery problems earlier in the week for Brent, Friday saw supply disruptions for both Nigerian and Iraqi crude out of Kurdistan due to terrorist action on the pipeline. At one stage on Friday, Brent was trading at $37 but, to prove that fundamentals are still awful, that was merely a selling opportunity.
The rig count was down again, overall minus 12 to 502 and, in oil, down 13 at 400-dead. It is a big week for economic data, particularly in the US, where manufacturing and purchasing managers numbers are followed by the jobs information on Friday. Is the economy slowing down? This week might tell us.
Genel
Not a good day for , as the Competent Persons Report is going to show a big fall in reserves and the company is reviewing its reservoir model at Taq Taq.
The conference call was mainly bad news, although Tony Hayward tried to lift the gloom at the end by saying that production at the field will continue for "decades to come" and that the company will look for opportunities to pull barrels forward.
The main culprit is the shallower Shiranish interval and it seems that the original fracture porosity was overstated. Either way, P50 has fallen from 365 million barrels to 172 million, having already produced 184 million barrels. There is "still significant uncertainty", although production guidance for this year remains unchanged.
Finally, there will be an impairment charge of $1billion (£722 million) in the 2016 accounts; the shares are off a third this morning and sit at 90p. Could this be the "straw that broke the camel's back" of my waning trust in Genel?
Sound Energy
Better news from who have signed a Memorandum of Understanding for the Badile exploration well, the company's largest and most strategic asset.
As one might expect, in current conditions, the well has got cheaper, here by another €0.5 million (£0.4 million); add to that the fact 23% of service charges will be in shares valued at €1 million and the economics continue to improve.
Badile will drill within four months of a signed contract - so on target for this year still. With activity in two Morocco venues and Nervesa ramping up production, it will be an exciting few months for Sound shareholders.
Pantheon Resources
I wrote in the bucket list edition on the 19th of this month that one of the two biggest risks regarding was being short. The shares that day were 85p; today, they are 123.25p as I write, after further good news from Texas regarding the VOS#1 well.
The company has declared the well commercial and it will be fracced, which is not uncommon in these wells; this action can triple-or-more flow rates, which are already 750 barrels per day. This well could indeed prove to be "exceptional".
After this well is completed, the plan in Tyler County is for a "significant" step out appraisal well over in Polk County, while the VOBM#1 well looks like coming onto production early in the second quarter, affording the company a seven month payback - which is incredibly efficient. Just imagine that, times a lot of wells.
This payback assumes $30 oil, $2 gas and all-in capital expenditure of $5 million, so the economics just get better and better. At Polk County, the plan is to drill much closer - and this will be a horizontal well, which should better the economics still further with the efficiencies this will provide (horizontal wells' ultimate recoveries can be between 200 and 300% greater than those of vertical wells).
Worries about funding have provided rich pickings for the bears lately, they should not worry their pretty little heads. My guess is that, if these two initial wells get into production as soon as is likely and the economics are as compelling as they seem to be, then the call on the London market may be of a relatively modest nature, if at all.
The company has said that it will make decisions on "multiple funding options" at the "appropriate time", which is eminently sensible; those punters waiting for a cheap issue of shares anytime soon may be waiting for a long time.
I am carrying a target of 200p, which I am not going to change until after I have seen the company this week.
On that note, Jay Cheatham has agreed to do another interview with me tomorrow morning to get the message over, which I am sure will be most interesting. These two wells have significantly de-risked the whole project and they have both exceeded original P50 estimates; it looks like Pantheon really has cracked the code.
Victoria Oil & Gas
is a bucket list stock, mainly as I perceive it to be a pool of value that will be unlocked one way or another. As - effectively - a gas utility, the company runs a "well-head to power station" operation which is proving highly efficient.
Today it has provided interim numbers, but as any company that changes its year end knows, confusion normally reigns. As expected, production is well up, as are revenues and earnings before interest, tax, depreciation and amortisation, and the company has cash of $6.3 million.
It stays on the list because of its underlying value and potential as a take-over candidate. I don't know if it plans to meet shareholders or analysts at all; the company likes to keep a low profile even though, to my knowledge, the CEO-in-waiting has yet to present to the market. Hardly ideal, but 'twas ever thus. My confidence here is beginning to get a bit shaky…
Savannah/New Age
has been suspended for some time now, as it is doing a reverse takeover, scheduled to be announced in April. I have said recently that the indications are that the other company concerned may be New Age African Global Energy, run by Steve Lowden.
New Age has operations in seven countries, mainly in sub-Saharan Africa, but not in Niger. Whilst there is no obvious reason for these two companies to merge, it has some attractions to both - although I would have thought that, with such high profile CEOs, pricing meetings might be fun.
New Age has a very serious list of shareholders, including Kerogen Capital, Och-Ziff, Vitol and HOPU, who may have exerted pressure to get a quote. Watch this space…
And finally…
Yesterday saw the Noisy Neighbours edge out the HubCap Stealers on pens to win the Clueless Cup.
In the Premiership, both the Foxes and Spurs won, putting pressure on the Gooners at the Theatre of Dreams.
"Cometh the hour, cometh the man" as new kid on the block for the Red Devils, Marcus Rashford, added two goals to those he scored mid-week to win three-two on the day.
Elsewhere, The Happy Hammers climbed with a win over big Sam, Chelski beat the Saints and the Baggies triumphed over the Eagles, whilst the Hornets and the Cherries played out a nil-nil draw.
In the Six Nations, Wales won a scrappy game against France, who had been two from two, the Scots came away with the win in Rome and England eventually saw off the Irish at Twickenham.
Finally the boxing went to form as Carl Frampton beat Scott Quigg fairly easily, despite it being a split decision.
This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.