KEYFACT Energy
WTI $63.60 -31c, Brent $72.79 -1c, Diff $9.19 +30c, NG $2.62 +4c
Oil price
A bit of a mixed bag for oil yesterday, WTI was weak for choice particularly after the EIA inventory stats which showed a high for domestic production coupled with a rise in imports leading to a build of 9.93m barrels. For Brent life was a bit better as gossip from Opec+ indicated that the production cuts would stay in place after the June meeting, the Coup in Venezuela has so far been unsuccessful and the dollar strengthened after the Fed meeting didn’t indicate any fall in rates.
Echo Energy
Results from Echo this morning which as expected show a loss in year one but maiden Latin American revenues of $8.8m are to be applauded giving year end cash of $15.6m. Since the year end the company has started an extensive 3D seismic operation on Tapi Aike, the jewel in the crown and is now being analysed. All being well the seismic will show up exciting leads and opportunities and with the company planning a four well exploration programme at the end of 2019 or early 2020 things at Echo are set to get a whole lot more exciting. On Wednesday I was fortunate to interview Echo MD and CFO Martin Hull and the link is below.
Core Finance interview: Martin Hull of Echo Energy
Predator Oil & Gas
Yet more good news from Predator where today we get news of the updated CPR from Ram Head, LO 16/30 offshore Ireland. The report suggests that a conceptual gas field development is feasible with a minimum of ten wells to be completed over three gas zones. The 49/19-1 well drilled by Marathon in 1984/5 shows a gross interval of 270 feet with 80 feet of potentially productive sand and a potential gross gas column of 400 feet.
The independently validated new reservoir quality information facilitated the commissioning of a Conceptual Ram Head P50 Gas Field Development Study, based on new information, better analysis of reservoir quality and new technology meaning that this information had never been found before. It is expected that the gas will most likely be produced by a depletion drive mechanism with an Ultimate Technical Gas Recovery of 96% based on a gross GIIP volume of 1,834 BCF. With this in place the CPR envisages that the initial plateau gas production rate with the ten wells as mentioned above would be an estimated 400 mm cfgpd.
The report suggests that this approach is technically feasible and at a total cost of $20.2m using the re-entry of the old well rather than by drilling a new appraisal can be achieved. Whilst this is clearly an entirely new presentation of facts with regard to developing this prospect it looks at first glance to have a more than realistic chance of success. It it were to go then there is a strong indigenous gas market in Ireland and also potential to export to the UK would guaranty high levels of sales at extremely competitive prices. Accordingly it must be worth the ‘further evaluation’ discussed by CEO Paul Griffiths and ‘an intensified effort to attract drilling partners’ to take this a stage further.
Sound Energy
Yesterday Sound put out a most interesting update with regard to their negotiations on a GSA for the company’s gas reserves in the Tendrara Production Concession in Eastern Morocco. They are continue to negotiate the terms of such a GSA and say that as part of these ongoing negotiations it has received a letter setting out a non-binding offer from the Ministry of Energy and Mines, Kingdom of Morocco.
The offer envisages that all gas production from the Tendrara production concession will be sold under a GSA to Morocco’s state power company ONEE. The agreement is expected to have a variable element linked to the Brent oil price with a fixed element to fully cover transportation of the gas through the the Tendrara Gas Export Pipeline. This would indicate, at a $70-75 Brent oil price a total gas sales price, variable and fixed, of $8.50-9.00 mmBTU assuming a $1/mmBTU pipeline fee.
This proves that the market in Morocco is strong and makes the existing and potential for Sound in the region to be of considerable value, the next few weeks will be potentially very rewarding to the company.
Premier Oil
Yesterday I was fortunate to lure Premier Oil CEO, Tony Durrant into the studio for an extensive run through of what is happening at the company. With an excellent operational performance yet again, the company keeps beating production guidance across the portfolio. With Tolmount in all its guises coming through strongly first gas will probably be the end of next year and Tolmount East will add to the mid section.
In Mexico the early drilling has only served to make the prospect more attractive and with the third well drilling at the moment it all looks like having significant potential. We also discussed Sea Lion where they and Rockhopper are putting in a serious shift ahead of final Project Information Memorandum which will hopefully be ready to send quarter. It is clear that Tony Durrant strongly believes that Sea Lion has the ability to make a significant difference and works very well at current economics, as clearly it will be a game changer for RKH.
With a good run through of the exploration potential for Premier, as well as looking at what might be in the market this was a very useful chat and the link below is well worth watching.