WTI $57.76 -$3.80, Brent $60.79 -$3.83, Diff -$3.03 -3c, NG $2.51 -7c, UKNG 47.08p +1.58p

Oil price

Another fall yesterday as the ongoing discussions over vaccines outweighed their long term advantages. Also weighing down the price was a report from Petro-logistics that confirmed what everyone has been saying recently that Iran is selling plenty of oil to China and likely India as well.

This morning there has been a recovery in the price by around $1.50 as the Suez canal has been blocked by a container ship the Evergreen Evergiven. 50 ships normally pass through the canal worth around 12% of total world trade and whilst this should be short lived it is causing a traffic jam from both ends of the canal.

Bahamas Petroleum

A high-impact exploration update from BPC this morning with regard to their assets in the Bahamas and Uruguay. Post the completion of P#1 the company has discussed with industry counter parties with regard to the farm-out of its licences in the Bahamas and is ‘working to formalise an entirely new farm-out process and so will renew the 4 southern licences into a 3rd 3 year drill or drop exploration period’.

The final Perseverance #1 drilling cost is expected to be approx. $45 million compared to pre-drill estimate of approx. $35 million; additional costs of approx. $10 million incurred as a result of heightened Covid-19 procedures (approx. $3 million) and side-tracking operations related to mechanical debris in the well (approx. $7 million).

Formal contract execution for Off-1 block in Uruguay expected 2Q 2021; independent technical work undertaken by Uruguayan national oil company ANCAP indicates a P50estimated ultimate recovery volume (EUR) of 1.34 billion barrels at the Lenteja prospect.

Cash on hand of approx. $13 million (as at 1 March 2021, including unconditionally committed convertible notes); anticipated additional capital requirement in 2021/22 across the business of $25 – $40 million, the Company expects to more than cover the difference from various potential funding sources.

BPC has covered its position here on the high-impact wells in the Bahamas and Uruguay, there is also much potential in the company in Trinidad where the onshore progress is already being made and where in the SW Peninsula there is much upside. In addition the company has been exploring its possibilities in Suriname which carries significant potential.

Echo Energy

Echo has announced new gas contracts for 2021-22 ‘significantly above the 2020 annual pricing and the current spot price’.

The Company confirms that, following a successful auction process for industrial clients, it has secured two new gas sales contracts at significant premiums to both prevailing spot market rates and 2020 contracted rates.
The Contracts have a term of 12 months, with gas  sales beginning in May 2021, and provide for a 126% increase over annual industrial contract pricing previously achieved by the Company in May 2020 and a 39% premium above current local spot price.

The Contracts provide gross 6.5 MMscf/d of committed production, 4.6 MMscf/d net to Echo, at an average price of $2.64 per mmbtu, with the Company able to elect to sell additional volumes of up to 1.9 MMscf/d net to Echo under the Contracts. This optionality, at the election of the Santa Cruz Sur partners, provides flexibility to respond to market conditions including rising spot prices.

As a result of the Contracts, a minimum of approximately 70% of gross daily gas production from Santa Cruz Sur allocated to industrial customers will now be committed under secured contracts until April 2022.

Martin Hull, Chief Executive Officer of Echo Energy, commented:
“We have previously commented on the improving market conditions for our business as commodity prices increase, and the Company’s ability to secure  these new contracts with industrial customers via a competitive auction process reflects the increasingly supportive commercial environment. It is encouraging to now go further and see the improved market conditions translate to tangible improvements in future revenue. We believe that as a result of these agreements, our contracted gas USD revenues for the year could be as much as 50 per cent higher when compared to May 2020 to April 2021, meaning they will deliver a material improvement in cashflow during 2021. We continue to pursue an innovative and flexible commercial strategy, enabling Echo to secure this type of premium pricing. These contracts also confirm that the Company is viewed as a reliable and attractive supplier to the Argentine industrial sector, and can achieve strong pricing for our output.”

KeyFacts Energy Industry Directory: Malcy's Blog