WTI $63.83 +$2.55, Brent $66.74 +$2.67, Diff -$2.91 +12c, NG $2.75 -7c, UKNG 39.94 +0.94p

Oil price

On a day when Jerome Powell spooked the markets with his usual bizarre inflation rhetoric, just think what his view on Opec+ is,  and markets fell, Opec+ managed to beat the whisper.

I’m glad that I didn’t wait yesterday but when the Opec+ announcement did come they caught the market short and rolled over current production levels through April. Russia and Kazakhstan get a modest appeasement totalling 150/- b/d but the KSA keeps its 1m b/d off the market. Remember when MbS told punters not to bet against them, you should do.

To sum the week up, in the US retail gasoline rose sharply, some 8c on the week, 30c on the month as the bad weather took its toll. The stock numbers were as expected, all over the place with huge crude builds and equally large product draws. And then, as if to prove that we are out of virus alley, Governor Greg Abbott took Texas out of the Covid reckoning opening up the State and taking away mandatory mask wearing. As I write Connecticut and Massachusetts have also started the process of winding down the rules.

Rockhopper Exploration

Rockhopper has announced that, following discussions between the joint venture partners, Harbour Energy and the Falkland Islands Government (“FIG”), FIG has agreed to extend each of the Company’s North Falkland Basin Petroleum Licences, including the Sea Lion Discovery Area, until 1 November 2022, with no additional licence commitments. The Licences were previously due to expire on 1 May 2021.

Samuel Moody, Chief Executive Officer, commented:
“The Company is grateful to the Falkland Islands Government for the extension of its North Falkland Basin licence interests and continued support of the Sea Lion project.

The proposed merger of Premier Oil and Chrysaor to create Harbour Energy brings a financially stronger operator to the project. This, combined with the proposed entry of Navitas Petroleum to Sea Lion, creates a solid operational and financial foundation giving the project the strongest possible chance of progressing.”

Not much to add to this except the b obvious, with the oil price as it is today and with huge amounts of wiggle room the Sea Lion prospect has now entered into the no-brainer department. We don’t yet know how Harbour is going to evaluate Sea Lion but whether it is to them or to another via farm-out it is surely now in the significant added value territory.

Touchstone Exploration

Touchstone has announced 2020 Year-end Reserves Report Highlights, the details are as follows. 

Increased 3P net reserves by 236% to 100,150 Mboe, increased 2P net reserves by 194% to 64,947 Mboe and increased 1P net reserves by 189% to 34,238 Mboe from the prior year. In comparison to 2019, 10% discounted net present value of future net revenues (“NPV10”) on a before tax 3P basis increased by 90% to $1,002.8 million and after tax 3P NPV10 increased by 108% to $419.4 million.

Achieved a before tax 2P NPV10 of $683.1 million, representing an increase of 72% from $397.9 million reported in 2019 and realized an annual after tax 2P NPV10 increase of 88% to $289.2 million, in addition they realised before tax 1P NPV10 of $362.9 million, representing an increase of $160.7 million or 79% from the prior year and increased after tax 1P NPV10 by 95% from year-end 2019 to $163.0 million.

Realised 1P F&D costs of $1.26 per boe, resulting in a recycle ratio 11.3 times using our unaudited annual estimated 2020 operating netback of $14.29 per boe. Touchstone’s low F&D costs are primarily attributed to our meaningful 2020 reserves growth from our Cascadura-1ST1 well discovery.

Recognised 2P F&D costs of $0.71 per boe, resulting in a 2P recycle ratio of 20.3 times, demonstrating Touchstone’s capital efficient operations in the Ortoire block. FDC associated with only a portion of our internally identified drilling location inventory and low-risk recompletion projects totalled $55.9 million for 1P reserves and $83.9 million for both 2P and 3P reserves.

The Cascadura assessment area was assigned gross working interest 1P reserves of 23,622 Mboe and gross working interest 2P reserves of 45,030 Mboe with an estimated before tax 2P NPV10 of $411.8 million, finally the Reserves Report excluded any potential reserves from the Company’s Chinook-1 and Cascadura Deep-1 wells drilled in the fourth quarter of 2020.

Paul Baay, President and Chief Executive Officer, commented:
“Our year-end 2020 reserves evaluation provides further independent confirmation of the significant opportunities that the Company has in place from our Trinidad assets. Our 1P reserves are now significantly higher than our 3P reserves at the same time last year, providing greater operational and financial certainty for investors, and exclude any potential reserves from the recently drilled Chinook-1 well or Cascadura Deep-1 wells. We have a lot to be excited about as we focus on converting our world class reserves to production during 2021 as well as expanding opportunities through additional drilling at Ortoire.”

Touchstone has had a brilliant performance with the drill bit in the last year or so and this report shows just how big these Trinidad assets really are. The shares have suffered from the usual post success market syndrome as investors have a combination of a desire to take a very decent profit and a worry that the best of the rise is now in the price.

Whilst the former is understandable, it and the latter have by no means taken account of just quite how much Touchstone have found and been given in this report by GLJ. On a short term basis the shares are 20% off the 178p peak and whilst the 1 year numbers still show a huge rise the value of the company remains vastly above the current 150p. TXP is still a monster buy on any long term valuation.

SDX Energy

SDX, has announced that it has received final approval from the Egyptian authorities to extend the Production Services Agreements governing its producing Meseda and Rabul oil fields in its West Gharib concession in Egypt until 9 November 2031.  

Mark Reid, CEO of SDX, commented:
“We are very pleased to have secured this ten-year extension to the Production Services Agreement which we estimate increases SDX’s share of reserves in our core West Gharib oil asset, certified at 2.2 million barrels in our 31 December 2019 CPR, by 60%.  With a breakeven price of approximately US$20 Brent and to take advantage of the current strong oil price, we plan to commence in Q2 of this year, a drilling programme of up to twelve wells over the next three years with the goal of growing gross production back to around 3,000bbl/d.  This drilling programme is in line with the capex guidance provided to the Market in our 26th January 2021 update.

We would like to thank our partners The General Petroleum Company, a wholly owned subsidiary of the Egyptian General Petroleum Corporation, and Dublin Petroleum Limited for their valuable co-operation in agreeing this extension.” 

KeyFacts Energy Industry Directory: Malcy's Blog