WTI $62.67 -76, Brent $66.57 -48c, Diff -$3.90 +23c, NG $2.73 -2c, UKNG 52.82p +0.82p

Oil price

The oil price continues to vacillate mildly, yesterday it fell and again today on further bad virus numbers mainly from India where Modi is very close to another lockdown.

On the flipside there are not surprisingly more problems in Libya, the full throttle supply was never going to last, the Port of Hariga has closed.

Finally the API stats after the close were mixed, crude added 436/- barrels but gasoline drew 1.6m proving what I wrote the other day about Americans driving a fair bit more right now.

And for those who treasure dates, today is the anniversary of WTI trading at -$40.32 at the close…

Wentworth Resources

Full year 2020 numbers today from Wentworth where the highlight was undoubtedly the 1p dividend making 1.5p for the year and a total distribution of $3.8m up 27% and giving a 6.7% annual yield. Still one of only a handful of oil sector dividend payers the company is correctly proud of the pay-out which is encompassed in the company ethos and shows the financial strength.

Another key to the financial strength is that with reduced costs, stable opex and G&A discipline the company has no debt and cash of $17.8m. As to production, 2020 averaged 65.5 MMscf/day (2019: 70.3), lower due to fluctuating demand but in line with guidance of 60-70 MMscf/day. WRL are keeping their conservative guidance of 65-75/- in place for this year ahead of the rainy season but having knocked out 102/- in March and a peak of 111/- there is no problem with capacity.

These numbers gave revenue of $18.9m, EBITDAX of $9.7m underpinned by long-term fixed gas price contracts whilst Wentworth’s share of Gross 2P Reserves as at 31 December 2020 estimated by RPS to be 90.8 Bcf with a post-tax NPV10 of $116.6 million.

As with most energy companies ESG strategy remains a core priority, with Wentworth focusing on measurement and mitigation strategies for climate-related impacts in 2021 and very much leading the sector in its approach to sustainability.  This is witnessed by its published inaugural Sustainability Report for 2020 which addresses how they manage the impacts of our business by upholding relevant international standards and how they take  responsibility to stakeholders, society and the environment seriously.

The company enjoy considerable support from the Tanzanian Government as a partner and who have a vested interest in delivering significant increases in natural gas supply for growing industrial demand and for universal energy access by 2030.

Katherine Roe, CEO, commented:
“2020 challenged the status quo for every community in every society around the world. Despite a challenging macro-economic and industry backdrop, Wentworth has proven itself to be resilient. 

“The corporate transformation that has been underway has made our fundamentals stronger – with no debt, fixed price contracts, a simplified corporate structure and ongoing cash generation. Having returned $3.0 million to shareholders in 2019, I’m delighted that despite facing the greatest post-war crisis history has ever seen, we are set to increase our returns for 2020 by distributing a further $3.8 million.

“This positive trend looks set to continue into 2021 with record production during Q1 due in large part to industrial demand growth, reaffirming our view that asset production is dictated more by demand constraints than by field limitations. However, we remain responsible in our approach to guidance which is unchanged for now as we await the effects of the resumption of supply following maintenance at the Songo Songo gas field and clarity on hydropower capacity after the current rainy season. 

“The resilience of the Tanzanian economy in 2020, the ambitions of the Tanzanian government to attract further foreign investment and the strengthening demand from industrial customers underscores our confidence in the future demand growth in the country. We look forward to working with our partners, including TPDC, to fulfil the Government and the UN’s ambitions to deliver universal energy access by 2030.

“I would like to pay tribute to Bob McBean as he ends his 11 year leadership of Wentworth. He leaves the Board with the Company in great health to pursue his ongoing vision of Wentworth as a champion in the East African gas sector.” 

This has been an important milestone for Wentworth who have today firmed up its financial strength as shown by the dividend commitment. With potential upside capacity and in-country demand across industry and domestic use easily covered by the financial and operational strength the upside for Wentworth is significant and is not yet mirrored in the share price. In this respect I think that a target price for the company at present should be of the order of 50p.

Kistos 

Today saw the restoration of the listing for Kistos with the placing having been priced at 155p. My first reaction is that the price moved to 170p but my immediate thought is that there should be significant rise from these levels pretty shortly as I am convinced that there is upside in the detail of the Admission Document.

As this runs to 619 pages I will excuse people not having read it all but there are some devils in the detail. The raise was £10m more than expected at £52.5m right at the top of the range and was more than twice oversubscribed. That means that those in PrimaryBid got some 40% of what they asked for as did the institutional subscribers. Look in the small print and see top quality blue chip investors and Schroders appear with over 9%, Fidelity 5.5% amongst others such as Canacord and Chelverton.

The home team of Andrew Austin and colleagues yet again found their wallets and added another big commitment of a short £3m. Obviously Tulip have also kept a 10.55% stake which shows even more confidence in the upside.

Overall I think that Kistos is  looking in a very strong position, it has secured a potentially very exciting deal with Tulip, I recently spoke to Leo Koot of Tulip who thinks it is a good package of assets with room for growth, right up AA’s street.

Trying to put a target price on Kistos is not easy, it is further down the track already than RockRose was but then markets have changed somewhat and now it is all about energy transition. I can see very decent upside from here and without anything changing I have settled on 300p which would not overvalue the package or management’s skills at developing it.

Kistos is all about sector leading attraction and without doubt it has the potential to be first in the sector to have zero scope emissions which is what I think could promote such a rerating to the TP above, it is really aiming to set the bar very high indeed.

Stand by for an upcoming interview with Andrew Austin when I can try and expand on this deal and his ongoing plans for Kistos.

President

In what seems like the daily RNS from President there is another operational update today, Following the workover of well LB-1001 in the Las Bases field, this well has now been placed on stream. Initial production results demonstrate a better than expected level of gas production with no associated water and good pressure. This gives President confidence that levels in excess of the previously stated 61,000 m3/d of gas (2.1 MMsft/d or circa 350 boepd) can be achieved with careful well management.

Gas prices in Argentina are now showing marked signs of increase now that the summer months are coming to an end. In expectation of robust production of gas from the company’s Rio Negro fields as a result of the current drilling campaign, President has within the last month effectively hedged part of its production to effect a baseline of steady income with the Company having the flexibility to sell the balance either at spot or at opportunistic rates should they arise.

Current realised domestic oil prices are running at approx. US$51.5 in Rio Negro and US$49 in Salta. The realisable prices for export after relative tax are estimated to be US$55. Average production for H1 2021 will be provided at the time of the publication of the half year results.

With regard Paraguay final draft documentation is nearing conclusion and President is working on logistics and availability of signing authorities. Given the ongoing pandemic affecting Paraguay, whilst working towards the target signing date of at or around the end of this month, it may that the finalisation of agreements extends until early May. Nevertheless, President remains confident that there will indeed be a successful conclusion.

President is solely focussed on delivering a farm out package that provides appropriate financial support for drilling the exploration well in the first half of 2022. President repeats once again that under the contemplated arrangements it will remain operator and looks forward to the conclusion of these negotiations which have been underway for over 18 months.

Peter Levine, Chairman, commented:
“So far the results of LB-1001 are both pleasing and encouraging and we are moving on to the next stage of managing the well with confidence. “As to gas prices and our export of oil in May, one can only say every little helps.

“Finally, we turn to focus on the logistics of the farm out and look forward to finalising the transaction in the coming weeks”.

Hunting

Hunting has  issued a Trading Update for Q1 2021, ahead of its Annual General Meeting today.

Industry sentiment has clearly continued to improve throughout the quarter, as WTI oil prices have strengthened from $49 per barrel at the start of the year to $63 per barrel currently, an increase of 29%.

The Board is closely monitoring industry participants and commentators, which include activity and capital spending projections, and is encouraged that strong upgrades to expectations have been published in recent weeks for Q2 2021 and beyond. It is on this basis that management believes that 2021 will be an improving year for the Company as stability returns to the global oil and gas market.

Trading in Q1 2021 has been broadly in line with management expectations, with a small EBITDA loss being recorded, predominantly driven by subdued offshore drilling activity throughout H2 2020 and into 2021. Activity at the Group’s facilities in Texas was also impacted for a week in February 2021, due to the severe weather across the state.

Revenue within Hunting Titan has reported improvement in Q1 2021 compared to Q4 2020, as US onshore activity continues its return to growth. It is interesting to note that Hunting Titan’s March 2021 result was also its best performance since April 2020, when global lockdown measures were implemented.

Revenue within the Group’s other operating segments has also stabilised as the WTI oil price has improved. As previously indicated, management believes that most of the Group’s segments will see a stronger performance from late Q2 2021 onwards.

The Group’s Balance Sheet remains robust with good liquidity, including undrawn core bank borrowing facilities of $160.0 million committed until December 2022, and a cash at bank position of c.$96.1 million at 31 March 2021, compared to $101.7 million at 31 December 2020. Inventory levels continue to reduce and were approximately c.$274.3 million at the end of Q1 2021, compared to $288.4 million at the 2020 year-end.

Commenting on Q1 2021 trading and the market outlook, Hunting’s Chief Executive, Jim Johnson said:
“As anticipated, whilst Q1 trading has remained subdued, our Hunting Titan segment reports quarter-on-quarter revenue growth alongside the stabilisation of revenue within our other operating segments. Green shoots of growth across most of our product lines are visible and this, combined with evidence that expectations for industry activity and capital spending continue to be upgraded, supports management’s view that Hunting is well positioned for a return to growth in 2021.”

“Management actions in 2020 have reduced the Group’s cost base, with annualised cost savings of $86.0 million being realised. Our global footprint and strong balance sheet leave the Group well positioned to benefit from the recovery that is expected to continue throughout the balance of the year.”

It is no surprise that Hunting has already travelled so well in the exact year since WTI traded at minus $40.32 and as its premium service and operational skills have been rewarded. Financially very sound with strong balance sheet and carefully monitored inventory management makes the company the outright favourite in a very diverse sector.

KeyFacts Energy Industry Directory: Malcy's Blog