WTI $50.73 +70c, Brent $54.30 +70c, Diff -$3.67 n/c, NG $2.72 +1c
Another good day for oil yesterday as a follow up to the Saudi move at the Opec+ JMMC meeting and consequently will confirm stock draws in the 1st quarter maybe ahead of some scribblers expectations. Reuters swiftly followed by noting that the KSA has put price rises through for its February shipments. Interestingly G Sachs are trying to pour cold water on the deal suggesting that the KSA are doing this from a position of weakening demand signals, never mind, some people look further forward than others..
The EIA inventory stats showed an 8m barrel draw, better than expected and with refinery capacity utilisation up at 80.7% and an inevitably slower Christmas and New Year of driving led to increases in both gasoline and distillates. And just to prove that I havent forgotten about retail gasoline prices the figures on Monday showed a continued gentle rise in forecourt prices.
The trauma that occurred in Congress yesterday was appalling but has since been ended and the incoming President has been formally voted in led by Vice President Pence. Whilst on politics the Democrats won both outstanding Senate seats in Georgia yesterday and whilst this does technically give them a majority via the VP it won’t wave through anything and everything.
BPC has announced a portfolio operations and funding update this morning and clearly whilst the market concentrates on P#1, elsewhere at the company it is operationally doing very well. Firstly and in-line with forecasts during the CERP takeover, the company has achieved production target of 500 bopd by end of 2020 and the end 2021 target remains at 2,500 bopd.
The second key promise has been with the drill bit and BPC is on track to deliver ‘extensive’ 2021 drilling campaigns; commencing with Saffron #2 in Trinidad and Tobago, and Weg Naar Zee extended well test in Suriname. The company is clearly optimistic about reserves and resources, indeed it sees ‘delivered certified 2P reserves and 3C resources targets; seismic reprocessing and drilling to drive further restatement in Q2 2021‘.
Tucked away in the RNS is a mention of the 100% owned Perseverance #1 exploration well, targeting recoverable P50 prospective oil resources of 0.77 billion barrels and with an upside of 1.44 billion barrels, commenced on 20 December 2020 in The Bahamas, with drilling ongoing.
Finally on the financing front, ‘election to draw on first tranche of funding (£3m) under the Company’s convertible note funding facility now made; variation to the Funding Option Agreement entered into with the Investor in respect of the potential exercise of both the Put and Call’.
Simon Potter, CEO of BPC, said:
“BPC’s stated strategy has been to complement high-impact exploration activities with producing, and thus cash generative, assets. In this context, during 2020 we brought together an exciting portfolio of assets in multiple locations and laid out a strategy with clear operational objectives in support of delivering a significant financial goal by the end of 2021. I am pleased to report to shareholders that on leaving 2020, the initial key operational objectives were met and consequently we remain on track across the portfolio to deliver our goals.
Pleasingly, notwithstanding the obvious constraints of operating across all of our asset base during a global pandemic, we managed to increase production in Trinidad and Tobago to our targeted 500 bopd level by the end of 2020. The next challenge will be to sustain that production and grow it further so as to achieve our 2,500 bopd production target by the end of 2021.
As well as maintaining progress across the base production assets, delivering our goals will require timely execution of our 2021 drilling program in both Trinidad and Tobago and Suriname, and we are making great strides to be ready to kick-off those activities in the coming months.
Equally, in leading such a turnaround of activities in Trinidad and Tobago, we were not deflected from our primary goal of delivering on the long-awaited exploration well in The Bahamas. Perseverance #1 commenced drilling in late December 2020, and we look forward to being able to advise shareholders of the outcome at completion of the 45-60 day anticipated drilling and evaluation period.”
There is much going on at BPC and this announcement, whilst acknowledging the drilling of P#1, successfully gives investors a good idea of significant progress in all other parts of the company. A smart way of showing that BPC is no longer a one trick pony and has a meaningful and more importantly, sizeable asset base with production, development and exploration upside outwith of P#1.
PTAL has announced a Q4 2020 operations update in which they state that following the recommencement of operations of Petroperu’s Northern Oil Pipeline, oil production at the Bretana oil field is currently at 9,500 bopd and expected to reach 10,000 bopd in the next few days. Total oil production for 2020 was 2.08 million barrels (5,675 bopd), as compared to 1.5 million barrels (4,131 bopd) in 2019.
2020 production was significantly impacted by the Covid-19 virus and the social unrest that followed, indeed 59% of the year’s production was in the 4 months before the pandemic took hold. In December 2020, the Company successfully completed a 106,000 barrel FOB Bretana pilot oil export via Brazil, and is preparing for a second pilot of 200,000 barrels during February 2021 which should not be underestimated in terms of operational flexibility.
‘The successful initial Brazil export pilot, as well as the storage of produced oil in contracted barges, allowed the Company to produce 590,000 barrels in the fourth quarter of 2020, even with the ONP shut down during the entire quarter’.
With the ONP now fully operational, production from the Bretana oil field is currently 9,500 bopd and is expected to reach 10,000 bopd in the next few days and as a result of higher oil prices the Company’s contingent derivative liability was reduced to $2.7 million at December 31, 2020 which is not only extremely positive but also led to year-end 2020 cash resources of approximately $9.6 million.
Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:
“We are pleased to have returned to normalized Bretana oil field operations and reliable pipeline operations. We are also pleased that the initial Brazil export pilot was a success, and we are already preparing for a second pilot of 200,000 barrels during February 2021. This will ultimately benefit all parties and help to encourage continued investment in Peruvian oil field developments. On behalf of PetroTal, I would like to recognize the support of the indigenous communities, Petroperu and the Peruvian government, to ensure that a solid investment proposition exists in Peru and the ongoing investment that benefits Peru. Additionally, I would like to thank our shareholders for their continued support, along with the dedication of the PetroTal team.”
When you look at what a state PTAL was in last year, at no stage any of its own responsibility, the company has already shown a remarkable turnaround in fortunes. It seems no coincidence that Remus Petroleum has recently taken such a large stake in PetroTal, it offers much of what it says in its mission statement that it is ‘Focusing on producing assets with long term development potential’ and that it is clearly on offer in Peru. With PTAL’s industry best management you never know, maybe Remus will have an opportunity to invest a bit more in due course…
In an Argentinian commercial update yesterday the company confirmed that it has secured a further gas sales contract at a premium to prevailing spot market rates. ‘This new contract, for volumes which had previously been supplied to another party under a gas sales contract expiring in early January 2021, is with a key gas customer for four months until end April 2021 pursuant to which the Company will supply the customer with approximately 1.4 MMscf/d gross (1.0 MMscf/d net to Echo) of natural gas’.
In the absence of the new contract these volumes would have been sold to the spot market. The gas price under the contract is a flat $2.00 per mmbtu representing a significant 28% premium to the prevailing local spot price in the fourth quarter of 2020.
With no quote from the CEO the only strategic comment is that ‘The execution of this new contract is in line with the Company’s strategy to secure market leading pricing for its products in anticipation of increasing production pursuant to its future work programmes’.
The second Haribo Cup Semi-final last night saw the Noisy Neighbours cruise past the Red Devils 0-2, setting up a final with Spurs.