Today’s Oil & Gas Update –

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Oil & Gas Daily Flow

Non-Independent Research; Marketing & Sales Commentary – MiFID II exempt information – see disclaimer below

 

Market Update: Tuesday 9 February 2021

President Energy (AIM:PPC) 24MMboe 2P reserve base reported   

 

Energy Prices         

Brent Oil US$60.9/bbl vs US$60.2/bbl yesterday

WTI Oil US$58.2/bbl vs US$57.6/bbl yesterday

Natural Gas US$2.82/mmbtu vs US$3.03/mmbtu yesterday

 

Oil Price News 

  • Brent crude prices remain above US$60/bbl as stockpiles tighten and the demand outlook improves amid the global rollout of Covid-19 vaccines.
  • The revival is a significant boost for global energy companies and petro-states whose budgets were severely impacted last year.
  • Global stockpiles in onshore tanks and floating storage are estimated by the International Energy Agency to have shrunk by about 300MMbbls since OPEC and its allies made deep production cuts in May
  • Reduced supply and the vaccine-driven demand boost have entrenched Brent’s futures price curve in a bullish backwardation structure, which encourages the draining of more oil from tanks
  • China has clearly been a key driver of the market rebound
  • The number of tankers sailing toward the nation jumped to a six-month high last Friday
  • Shell’s CEO Ben van Beurden said last week that fuel sales in the nation are back into “significant growth mode.” Meanwhile, Indian demand is almost back to year-ago levels as consumption of cooking fuels and gasoline surged on the back of forced lifestyle changes due to the virus
  • The rally has been widespread across commodities and equity markets
  • However, risks remain as a new virus variant spreads in the US, while other European countries are still enforcing lockdowns
  • Traders Vitol and Gunvor have cautioned about the recent surge in prices and one technical indicator is showing that oil is overbought and due for a decline

 

Gas Price News

  • Natural gas attempted to move higher during the trading session yesterday but was met with selling pressure and settled the session only slightly in the black
  • The weather is expected to be much colder than normal through all of the US for the next two weeks
  • The ridge/ trough pattern could mean that the cold weather could remain in place for a considerable period
  • LNG exports continue to surge rising in November
  • The front-month Henry Hub contract for natural gas topped US$3 last week on very cold weather in the US
  • Indeed, most parts of the UK awoke to a blanket of snow this morning
  • According to the EIA, natural gas in storage was 2,689Bcf as of 29 January 2021
  • This represents a net decrease of 192Bcf from the previous week
  • Expectations were for a 172 Bcf draw in stockpiles according to survey provider Estimize Stocks were 41Bcf higher than last year at this time and 198Bcf above the five-year average of 2,491Bcf
  • At 2,689Bcf, total working gas is within the five-year historical range

 

Company News

President Energy (AIM:PPC) 24MMboe 2P reserve base reported   

Share Price: 2.2p, Market Cap: £44.7m

  • PPC has confirmed 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.
  • The Company’s net 2P Reserves of over 24MMboe are currently limited to current life remaining of concessions and therefore do not take 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.
  • At Rio Negro, PPC will exercise its entrenched legal rights to renew and extend its core Puesto Flores/Estancia Vieja concession currently due to expire in November 2027, for a further ten years until November 2037.
  • Concrete discussions with the Province of Rio Negro with regard to such extension are anticipated to take place later this year with a view to concluding the same before the year end. Such extension will have a positive effect on reserves as hydrocarbons during the prolonged period move from the contingent resources’ categories to the more definitive reserve categories.
  • 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 536MMbo undiscovered oil-in-place are in addition to the figures reported.

Our take: President benefits from a strong reserve/resource base that will only increase as the Company extends the life of its concessions. Following a challenging FY20, shareholders will be encouraged by Presidents prudent approach to capital discipline, achieving material cost savings and entering into several agreements with local partners. Operationally, it is encouraging that the LB-1001 gas well has been placed into production which is currently ahead of expectations. As no reserves had previously been logged at this interval it is positive news for the Company, more importantly it could be a sign there may be greater untapped resource potential at the field. It is further incremental improvement following similar news at EVN-x1, in the Estancia Vieja North structure where hydrocarbons have also been produced for the first time.

 

Research – Oil & Gas

Sam Wahab – 0203 470 0473 / 0784 385 5037

[email protected]

 

Sales

Richard Parlons – 020 3470 0472

Abigail Wayne – 020 3470 0534

Rob Rees – 020 3470 0535 

Grant Barker – 020 3470 0471  

 

SP Angel                                                            

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+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.

 

Sources of commodity prices

Oil Brent, WTI

– ICE

Natural Gas

– NYMEX

 

 

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Recommendations are based on a 12-month time horizon as follows:

 

Buy – Expected return >15%

Hold – Expected return range -15% to +15%

Sell – Expected return < 15%

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