WTI (Nov) $84.21 -$5.02, Brent (Dec) $85.81 -$5.11, Diff -$1.60 -9c
USNG (Nov) $2.96 +1c, UKNG (Nov) 93.46p -1.54p, TTF (Nov) €38.345 -€0.86

Oil price

Oil took a bit of a bashing yesterday after the demand side of the equation was hit by a series of poor economic data from the EU, where economies were sen to be contracting and in the US where the jobs data missed the whisper by a mile. 

With the EIA inventory stats being mixed, crude drew by 2.224m barrels which was ok but gasoline built by a big 6.481m b’s, partly due to the end of the driving season but also as demand was seen to be down by around 1m b/d, more than it should be at this time of the year. But Cushing is still worrying, at 22m barrels stocks are running at 27% of capacity and at a 12 year low.  

Diversified Energy Company

Diversified Energy Company  today notes the recent decline in its share price and confirms it is unaware of any operational or Company specific reason for this share price movement.

By way of a general update, the Company refers to our recent Announcement of the Interim Results for the Six Months Ended 30 June 2023, which were released to the market on 1 September 2023, along with the Announcement of the Increase in Borrowing Base, which was announced on 26 September 2023. Further to these announcements, Diversified confirms there has been no material change in its financial or operational condition.

The Company is pleased to provide an update to the market on its most recent Third Quarter 2023 production results, which are anticipated to be in the range of 805 MMcfepd (134 Mboepd)- 830 MMcfepd (138 Mboepd), in line with expectations, and reflects the  sale of our non-operated assets completed during the second quarter of 2023.

Additionally, given the current equity market dynamics, the Company is no longer pursuing its previously communicated desire to list shares in the US.  The Company will continue to execute share repurchases under its previously announced share repurchase program. 

This is interesting timing, yesterday I had noticed a number of inbound messages regarding DEC and all asking if I knew any reason for the fall in the share price. I answered all of them to the tune of that I not only didn’t understand it but that in every metric I think that the company is in very good shape.

There have been questions about the recent departure of the CFO but they are really nothing, this is just the evolution of a company growing like DEC is and it was an amicable parting. Also the recent announcement of the increase in the borrowing base was nothing to worry about, indeed showed that the company is in good financial order.

As for production the company have updated the current numbers with a range of 134 Mboepd-138 Mboepd which is ex the 3 Mboepd following the sale of non-operated assets recently. Finally the company has said that it is no longer planning a US listing which whilst small beer does take away any feint worries of a raise over there. 

So where does that leave us, and I can’t really add to the comments I have been making in the last 24 hours on social media in that nothing has changed, DEC is run by an exceptionally good management team, the model they work from is immaculate and without exploration risk. They also have excellent control over costs and are amongst the best operators in the hedging market.

The company is trading well, operationally and financially sound and has an excellent distribution policy for shareholders. This includes a progressive dividend payment and gives the company a yield of around 20%, in anybodies book that has to be of significant worth and of course don’t forget the buy-back programme which adds value through increased NAV and lesser dividend payments. My Target Price of 175p doesn’t change and with income and capital growth on offer makes DEC a must have investment in the market.

Predator Oil & Gas

Predator has announced an update for the Guercif Compressed Natural Gas (“CNG”) project.

The Company has opened exploratory discussions with a group focussed on the downstream energy business to potentially sell its share of gas produced at the well head subject to an approved CNG development plan.

In order to accelerate the timing of substantive negotiations for the sale of its share of gas, subject to an approved Declaration of Commerciality, the Company has decided to amend its rigless testing programme. MOU-3 will now be the first well to be tested. This will establish the potential to maximise gas flow rates for the purpose of setting commercial parameters for the sale of the Company’s share of potential gas produced to the present and future CNG industrial market irrespective of pre-drill production profile constraints imposed by its initial “Proof of CNG Concept” strategy.

The Company has been waiting for over three weeks for an in-country wireline logging unit. A perforating depth control (PDC) log is required to depth correlate the perforating points with a similar log run before the casing was set during well completion. Critically this ensures that perforations are aligned with the reservoir sand intervals to be tested. 

As a result of this delay in the provision of a third party service the current slot for using Sandjet as the means of perforating has passed and therefore this phase of the testing programme is now being re-scheduled.

In order not to delay further it has been decided to test MOU-3 and MOU-1 using conventional perforating guns.

The Company is confident that the testing programme will deliver the results necessary to progress commercial negotiations for the offtake of its share of future potential CNG gas from the well head.

Rigless testing MOU-3 using conventional perforating guns is currently forecast to begin on or before 16 October 2023, assuming that the wireline logging unit is released from its present contract on or before 10 October 2023. The Company will provide an update if there is any change to this date.

A follow-up Sandjet testing programme will take place later to test other reservoir intervals that are likely to respond better to the Sandjet perforating technique compared to conventional perforating guns.

The Company is also in discussion with several parties regarding the financing of the CNG development. Upon achieving acceptable financial terms funds set aside in the Company’s strong balance sheet would be re-purposed for follow-up appraisal drilling.  

Paul Griffiths, Executive Chairman of Predator, commented:
“Following the completion of drilling and prior to the execution of the rigless testing programme the Company has had a period of time to integrate the results from its MOU-1, MOU-2, MOU-3 and MOU-4 wells and mature its understanding of the structures holding possible gas accumulations. On this basis the MOU-3 well and structure is now defined as the focal point for a potential CNG development hub. As a result this well has been promoted to the first well in the rigless testing programme.

Good progress has been made on opening discussions for the offtake of gas on a larger scale than was previously envisaged by the “Proof of CNG Pilot Concept” strategy.

Financing options are being crystallised which will allow funds to be re-purposed for further appraisal drilling activity and value accretion through drilling success.”

Plenty of operational detail here from Predator as they update on progress at Guercif and it is indeed looking promising. Despite the delay whilst waiting for an in-country wireline logging unit, meaning a re-phasing of that part of the schedule they are moving ahead elsewhere.

I like the fact that they are opening discussions on the gas offtake as the larger scale seems to be encouraging, the very fact that this will be a CNG concept should be very rewarding. Also I think that the selection of MOU-3 as the first well in the rigless testing programme indicates confidence in the selection process. 

I haven’t seen Chairman Paul Griffiths for a long time and I am hoping that I will do so in a few weeks time when I go to Morocco for the Oil Summit in Marrakesh. I’m hoping he will give me some time, as other leading figures in the industry have promised!

KeyFacts Energy Industry Directory: Malcy's Blog