The Oil Man: SDX Energy, Genel Energy, Premier Oil, Hunting
25th August 2017 13:33
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WTI $47.43 -98c, Brent $52.04 -53c, Diff -$4.61 +45c, NG $2.95 +2c
With hurricane Harvey moving swiftly towards Texas and landfall expected overnight tonight, much of the oil industry has shut-in production both offshore and onshore.
Almost exactly 12 years ago it was Katrina that came through and, whilst Harvey isn't as powerful at that was, it is believed to be the biggest for some years.
Interestingly, the oil price hasn't reacted much. It is up about 40 cents today but with only 10% of offshore production out it is the refinery closures that have hit hardest and gasoline prices have ticked up more.
SDX Energy
Another cracking set of figures from , which produced revenue of $18 million (£14 million) and net profits of $26.5 million strongly supported by the acquisition.
Production was a pro-forma 3,812 and netbacks more than doubled to $21.50. Apart from the M&A stuff, SDX has had a great time operationally, in particular at South Disouq where 25.8 million standard cubic feet per day was "significantly better than expected" despite limited surface facilities. The company is excited about the deeper potential which they will soon target.
Financially SDX is in a very strong position. It has cash of $27.6 million and no debt, receivables are down and the CPR showed 2C of 47.13 billion standard cubic feet of gas and 2.29 million barrels of condensate.
More importantly for shareholders, the next few months are going to be very exciting. Drilling campaigns in Morocco start mid-September, with seven wells, and the development activity in Egypt in Q4.
However, CEO Paul Welsh told me that "in working the data in both Morocco and Egypt we have identified more opportunities within our acreage to expand these programs". There is definitely much more to come.
I have called this stock "cheap as chips" in the past and this has not changed. With such a programme starting very soon, new prospects identified, a substantial asset base and strongly financed, SDX looks increasingly attractive.
Genel Energy
has made an agreement with the Kurdistan Regional Government that means that it waives any entitlements to unpaid bills in exchange for 4.5% of Tawke gross revenues for five years from 1 August 2017. Genel will make no capacity building payments, which should be a net saving.
Expect a boost to cash generation and, although it still carries oil price risk, it should eliminate the historic problems of receivables the market so dislikes.
A lot is going right for Genel at the moment. Meeting with them earlier in the week the news from Peshkabir is very positive and it seems that there is a persistent buyer of the shares, which have been pushed to a year's high.
Premier Oil
Being north of the border for the last couple of days meant missing the results, which continue to show serious operational success in a number of areas.
Production is up to 82,100 barrels per day and, accordingly, guidance has been teased up from 75,00 barrels per day to 75-80,000, which still seems conservative. Catcher is about to sail away and will be on for first oil by the end of the year and, with successful drilling, will be better than previously expected.
During and after this period the company finished its long-running refinancing, with debt of $2.7 billion giving necessary visibility.
It also had success at Zama, in which PMO has a 25% paying interest, and so far is showing as 400-800 million barrels of oil equivalent discovery, which could be very valuable to either keep or use as an asset to sell and reduce debt.
Elsewhere M&A wise, it sold its Wytch Farm asset for $200 million and signed HOT with infrastructure partners for Tolmount, as widely predicted.
That just leaves Sea Lion, where it confirms it has a net 400 milion barrels and which "has the potential to be transformational for the company".
Good progress has been made on securing funding and commercial solutions for the project, which remains a "phased development solution" and capex to first oil has fallen from $1.8 billion to $1.5 billion.
Clearly PMO wants another partner for Sea Lion, but whatever they say about it the economics look better and it will be the firm's most important operated project over the next few years and should secure approval.
Hunting
Life for the UK-listed oilfield service companies has been very mixed in recent months but at the moment is showing a clean set of heels to them all, mainly due to its exposure to the US onshore drilling market.
With good news in perforating systems, where it sold more in the first half of 2017 than in the whole of 2016, leading to upping shift levels and premium connections also doing well in offshore and onshore markets things are looking up.
With most of the other quoteds having various difficulties at the moment, it is a pleasant surprise to be extolling Hunting as the poster boy of the sector. With Jim Johnson taking over from Dennis Proctor next month I wish them both well for the future.
And finally…
The second test between England and the West Indies started today at Headingley and, winning the toss and batting, England have had another poor start, 48-3 as I write.
Sunday sees the 40th anniversary of the British Motorcycle GP on the mainland after the removal of the TT from the World Championship and the 300th GP start for 38 year old Valentino Rossi.
As usual the weather could be a deciding factor, which will hopefully play to Brit Cal Crutchlow's strengths in what is turning out to be one of the closest championships for many years.
In the Premier League, the top three all have home fixtures, the Red Devils host the Foxes, the Terriers entertain the Saints whilst the Potters go to the Baggies... how thrilling that might be.
For most, though, the biggest fixtures will be on Sunday with the Gooners going to Anfield to face the HubCap Stealers, Chelski hosting the Toffees and Burnley going to Wembley to face the Spurs.
The F1 roadshow starts again, we are now in Belgium and Raikkonen is fastest in first practice.
York races have been exceptional this week and continue today with the Nunthorpe Stakes being the top of the bill.
Finally there is the small matter of the McGregor-Mayweather boxing match in the early hours of Sunday morning in Las Vegas. Should it not be a simple conclusion?
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.