WTI $63.22 +$1.55, Brent $67.04 +$1.67, Diff -$3.82 +12c, NG $2.85 -2c, UKNG 41.18p +0.58p

Oil price

The weakness didn’t last long as oil roared back and Brent is now above $67 making budgets look pleasant reading for companies after a year of cost cutting and capex reductions. The weak dollar is helping and the advance news ahead of next week’s Opec+ meetings are fairly positive.

Any production increases, and not until April, will be ‘modest’ while the Saudis will take back their 1m b/d ‘gradually are the whispers from the camp. With demand for Opec crude come the 2nd quarter increasingly strong the market is looking quite tight as expected.

As predicted the inventory stats were pretty meaningless, there was a crude build against forecasts of a decent draw but with the production outage in Texas last week and refining showing only a rate of 68.6% anything was possible.

Eco (Atlantic) Oil & Gas

Eco has today announced its results for the three and nine months ended 31 December 2020, alongside a corporate and operational update.

Financially it is unfortunately very predictable, Eco has cash in the bank of $16.4m and no debt which makes it fully funded for its share of the two exploration wells in Guyana whenever they may come. Costs have been slashed by more than the industry norm, by over 50% in the 9 months to December so without doubt when the time comes Eco is extremely well placed to do well.

Operationally is where the waiting game is being played, ‘multiple light sweet oil drilling prospects on the Orinduik block are currently being reviewed by the Company and its licence partners’, with high-graded candidates being considered for the next drilling programme.

The intention is to provide further definition to the upper and lower Cretaceous interpretation and target selection for drilling. Whilst this is all very well, having made two discoveries on the block already it is high time they drilled again and but for the traumas that Tullow have got themselves into they would have done by now. I can’t add to previous comments about the licence partners except to say that they must have incredible patience with Tullow…

The good thing for Eco is that they, together with their strategic alliance partner Africa Oil Corp., continues to evaluate additional asset opportunities in both West Africa and South America. In Namibia where I have always rated their acreage particularly relative to their own size, they have successfully negotiated the reissuance of its four licenses in Namibia’s Walvis Basin for 10 years, which received final Government confirmation on 5 February 2021.

Another string to Eco’s bow is that they recently set up a JV to ‘source, acquire and develop an exclusive pipeline of potential high yield solar projects’ which is now called Solear Ltd. Eco agreed to provide a secured loan of up to $6 million to Solear, as a result of which the Company holds a 70% shareholding in Solear, with Nepcoe holding the remaining 30%. The Loan, which carries a 2% annual interest, is expected to be repayable from the proceeds of either a public or private financing, through operating cash flow, and/or a project monetization event.

In January 2021, Solear completed its first acquisition of a fully contracted, permitted, and build ready project in Greece, known as the Kozani Project. Solear is continuing to build its exclusive portfolio in Spain, Italy, and Greece and is targeting a further financing event in the form of a private finance and/or IPO later this year.

The key to this all is, apart from the obvious risk diversity is that it looks very much like this will be a vehicle to do a deal to enhance its value. Whether that will be an IPO of Solear or a standalone fund raise, either of which would likely make the value of the business look substantial and clearly please the market and revalue ECO.

Gil Holzman, President and Chief Executive Officer of Eco Atlantic, commented:
“We have made significant progress in recent months across a number of aspects of the business. We have demonstrated our commitment to our core business strategy of achieving near-term exploration success in Guyana and Namibia, through maturing and upgrading the drilling targets’ inventory in Guyana and the successful reissuance of our licences in Namibia, as well as adding a highly relevant and attractive asset to our portfolio through the formation of Solear Ltd., a majority held renewable energy company.

“Successfully renegotiating our four licences offshore Namibia, which we see as being an increasingly active exploration jurisdiction, was an important milestone for the Company and gives us a considerable footprint in country from which we will seek create significant shareholder value.

“In Guyana, we continue to work with our partners in the Orinduik block to finalise drilling selection, and look forward to recommencing drilling activity in the coming months. We remain very confident in Guyana’s prospectivity as a hydrocarbon basin and the upside potential it offers. The recent increase in oil prices makes our existing discoveries in Guyana and drilling prospects inventory ever more attractive.

“Our recent strategic investment into Solear Ltd. demonstrates our drive and determination to use our cash reserves wisely alongside high impact exploration drilling.  We are very excited about both the near-term opportunities that Solear brings, as well as the long-term benefits that come with broadening our asset portfolio. Solear has a highly attractive pipeline of low cost, high yield solar PV projects, that have the potential to generate high IRR returns for our shareholders. As ever, we look forward to keeping the market updated on our progress over the coming months.”

Shareholders in Eco have had to be a patient bunch, in any other time the highly prospective Guyana acreage would have been drilled again and more than likely runs would be on the board. In addition the pace of activity in Namibia has been slow but that it countered by the reissuance of the licences and of course with near neighbours in super major category there must be chances with the drill bit or in the corporate world. Add the Solear beta and value will out somehow or other, Eco stays in the Bucket list for certain and patient shareholders will be substantially rewarded in due course.

KeyFacts Energy Industry Directory: Malcy's Blog