WTI $48.52 +12c, Brent $51.80 +17c, Diff -$3.28 +5c, NG $2.54 +12c

Oil price

Lots to mention this morning as crude oil starts the year on a positive note with WTI at $49 and Brent at $52.55. Despite this the y/y prices for WTI were down $12.54 and for Brent -$14.20 some 25 and 30% respectively. Today’s positive note is probably down to the Opec+ meetings, yesterday for the Joint Technical Committee and today the JMMC. The market is expecting a rollover until at least February with the new policy of monthly meetings being able to judge supply and demand more accurately.

Elsewhere the UK has started its programme of distributing the Astra Zeneca vaccine today and whilst other countries are somewhat behind they will surely catch up, they all need to get the jabs in. Ironically the US is now considering half doses of the Moderna vaccine even though when it was mooted in the UK was criticised by the good Dr F….

Finally it is of course nearly time for the elections in the USA….Tomorrow sees the reruns of two Senate votes in Georgia are too close to call but the perennially wrong polling companies are calling both to the Democrats this morning, more interestingly the betting is for the democrats…

Jersey Oil & Gas

JOG announce a TGS Dispute Settlement Payment this morning as an agreement has been reached whereby the company has negotiated a settlement payment to TGS of $850,000, below the original claim of over $1.05m and as a ‘one off and isolated dispute’.

This is a modest and welcome settlement and leaves JOG with cash of some £5m, which is £3m ahead of the end 2020 budgeted cash balance and is good to have behind them. This is particularly important as Jersey are looking forward with increasing confidence to this year with its development plans for the GBA and of course launching the planned farm-out process.

IGas Energy

In an RBL update this morning IGas announces that it has completed the RBL redetermination exercise and confirmed $31.7m of debt capacity and current headroom of $11.7m. As at 30th November 2020 IGas had cash  of $2.8m and net debt of $17.2m and has hedged some 370/- barrels for 2021 at ‘an average floor price of $44bbl.

IGas also commented that On 14 December 2020, the UK Government published the long anticipated Energy White Paper, setting out how the UK will clean up its energy system and reach net zero emissions by 2050. In particular, it welcomed the statement that “The UK’s domestic oil and gas industry has a critical role in maintaining the country’s energy security and is a major contributor to the economy” and that “The projections for demand for oil and gas though much reduced is forecast to continue for decades to come.”

In addition, it is worth noting  that IGas has already taken steps to diversify into renewables technologies, so that it is well placed to benefit from the energy transition, through its acquisition of GT Energy in September 2020 and its partnership in hydrogen.

Commenting, CEO Stephen Bowler said:
“In spite of the continued pressures on the business, as a result of COVID-19, average net production for the year to 31 December 2020 is within the 1,850 – 2,050 boepd range. Having completed a review of I Gas’s assets, I am excited about the various energy transition opportunities that we have identified. Our partnership with BayoTech will allow us to advance hydrogen production opportunities, increasing the value of the gas we produce whilst pioneering the use of small scale steam methane reformation equipment in the UK. Our land portfolio is well suited to the development of renewable and hybrid flexible power generation and our assets have the potential for carbon storage at scale in locations close to emitters.

The Government’s recently published Energy White Paper makes a commitment to repurposing: 
“We will provide opportunities for oil and gas companies to repurpose their operations away from unabated fossil fuels to abatement technologies such as carbon capture, utilisation and storage (CCUS) or clean energy production such as renewables and hydrogen”.

The British Geological Survey recently estimated that geothermal energy resources in the UK are sufficient to deliver about 100 years of heat supply for the entire UK. The publication of the UK Government’s Ten Point Plan and Energy White Paper provides for significant opportunity for our geothermal business in the decarbonisation of large-scale heat and we look forward to responding to the Green Heat Network Fund consultation. We look forward to advancing these and other opportunities which will allow IGas to make material contributions to the Green Energy Revolution.”

Zephyr Energy

Zephyr updates on the 16-2 well, business development and the outlook for 2021 with the former operating around the clock and the company has received the third tranche of grant funds of $600,000. The well remains the priority but ZPHR are looking to establish production and positive cash flow either organically or by acquisition.

Criteria for such decisions which meet the Company’s strategic profile such as; ‘Oil and gas interests located in the greater Rocky Mountain region of the U.S.; Current or near-term production potential, in order to balance the significant long-term upside potential  provided by the Company’s Paradox project; Low-risk, low-entry cost assets located in core areas of established, historically prolific basins; Ability to generate near-term value from the Company’s existing $15 million tax loss asset; and Proprietary acquisition angles (via land strategy, relationship, or unique view on upside opportunity)’.

With the future in mind the company are continuing to monitor progress in the McCoy lease in the DJ Basin on Colorado and whilst it meets ‘most’ of the criteria, the timeline for development has been delayed by the current operator of the project. Accordingly Zephyr will continue to monitor progress on the project and will make an investment decision on whether to proceed once a firm development schedule is established. In the meantime the period to close the transaction has been extended until June 30th 2021.

Colin Harrington, Zephyr’s Chief Executive, said:
“I’d like to wish our Shareholders and partners a very happy New Year – in particular, I’d like to thank our crew on site at the State 16-2 well for their exceptional and tireless work in extremely cold conditions through the entirety of the Christmas and New Year’s holidays.  We greatly appreciate their efforts and we are very pleased with progress made to date.  I’d also like to thank our partners at the DOE and the University of Utah’s Energy and Geosciences Institute for their continued support throughout the development.

2021 promises to be a very exciting year for the Company, both from the continued development of our Paradox project and with an acceleration of our efforts in the broader acquisition market. Any acquisitions made will have to conform to our strict search criteria, most notably the ability to accelerate production and cash flows to the Company.  We continue to be excited about the potential McCoy acquisition, particularly as we now have the option to delay an investment decision until the point of development when we can properly assess the financial and economic drivers of the project.

The goal for Zephyr over the next twelve months is straightforward – we want to transform the Company into a well-capitalised producer of oil and natural gas, with strong positive cash flow and significant growth potential in its asset portfolio, and one which has developed its assets in an environmentally responsible way.  The first step on that journey begins with the safe and successful completion the State 16-2 well”.

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