WTI $89.66 +30c, Brent $91.55 +77c, Diff -$1.89 +47c, NG $4.01 -24c, UKNG 182.15p +3.38p

Oil prices

A small rise for oil yesterday, it might have been more as the EIA inventory stats showed a big crude draw of 4.3m barrels along with a draw in both products but today sees US inflation which has just come in at a whopping 7.5% and bring with it sooner than expected rate rises which might strengthen the greenback

PetroTal Corp

PetroTal has announced the Company’s well 10H, which commenced production on January 30, 2022, has set a new internal daily production record with an average standalone 10 day production level of 10,050 bopd.

Well 10H on Production

• Well 10H has produced an average of 10,050 bopd over the last ten days ending February 9, 2022, with the latest reported rate at 10,122 bopd;
• The well’s final cost was $11.5 million, 17% under budget, and came onstream on schedule and has already paid out over 45% of its total well cost at $90/bbl Brent;
• 10H represents the longest horizontal well drilled to date in Peru;
• With the help of 10H and PetroTal’s robust well portfolio, the Company set a new daily record production level of 20,891 bopd on February 1, 2022 surpassing the mark set in mid December 2021 when 9H was brought onstream; and,
• With the Company’s central processing facility (“CPF-2”) fully commissioned, the Company is awaiting final ministry approval expected around February 15, 2022, to be able to operate to its maximum capacity of approximately 24,000 bopd to 26,000 bopd, from current constrained production of around 20,000 bopd.

Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented,
“We have set additional production records with 10H’s early production rates. We are extremely pleased from a technical standpoint at what this could mean for the future performance of PetroTal’s drilling inventory and are pleased to deliver a strong start to 2022 for shareholders.”

These numbers speak for themselves and I can easily see PTAL cruising past previous expectations as to its own capacity targets. Assuming ministry approval and thus achieving higher CPF-2 capacity I can see the 20,000 b/d target being achieved, and sooner and probably for longer than is in existing forecasts.

This not only applies to production but reserves and cash flow and accordingly my existing target price of 60p looks too conservative and based on what I expect the company to rubber stamp in the way of increased targets I am increasing that price expectation to 75p

Genel Energy

Genel notes that DNO ASA, as operator of the Tawke PSC (Genel 25% working interest), has today issued an update on licence activity.

As previously reported, gross production at the Tawke licence averaged 108,700 bopd in 2021. The Peshkabir field contributed 61,800 bopd, and the Tawke field 46,900 bopd.

Drilling at the Tawke field resumed in Q3 2021 after an 18-month pause, during which time production decline was partially offset by gas injection and workovers.

DNO expects the ramp up in drilling activities to maintain Tawke licence gross production at around 105,000 bopd during 2022.

In 2021, a total of 7.6 billion cubic feet (461,500 tonnes of CO2) of otherwise flared Peshkabir gas was captured and injected into the Tawke field in 2021.

Nothing much to add M’lud as the information is not outwith expectations and doesn’t change my perception about Genel at all which is that, as this update shows, has a very strong portfolio of assets throwing off cash which it returns to shareholders on a regular basis.

Jadestone Energy

Jadestone has provide its guidance outlook for 2022.

• 2022 production is expected to average 15,500-18,500 boe/d, a 36% increase on 2021, with the majority (c.95%) oil.  The range reflects planned maintenance shutdowns at Montara, Stag and the operated Peninsular Malaysia assets during the year. It also includes reduced production from the Montara field over a three to four-week period in early 2022, due to an engine failure in the gas reinjection compressor and the necessary works to restore production to full capacity.
• The Maari field is expected to average 4,500-4,700 bbls/d (gross) in 2022 but has been excluded from production guidance pending further clarity on the timing of closing the acquisition.
• The strength in crude premiums seen in late 2021 has continued into early 2022. The most recent liftings from Stag (December 2021) and Montara (January 2022) achieved premiums of US$12.70/bbl and US$3.80/bbl respectively.  
• Unit operating costs1 are expected to average US$23.00-28.00/boe in 2022, representing an c.10% reduction on 2021 levels, primarily due to higher average production expected in the year, partially offset by the planned major three-year maintenance programmes.
• Capital expenditure guidance is set at US$90-105 million, comprising mainly the Stag infill programme, which develops two million barrels of reserves, and the first phase of the Akatara gas project, which is expected to be sanctioned during H1 2022.  
• The cost of the Stag infill programme is immediately deductible under the current Australia tax incentive for qualifying investment, and is expected to reduce overall Australia corporate income tax paid in 2022.
• The Company is currently unhedged, although hedging will be contemplated in line with any debt funding arranged for the Akatara gas development.
• The Company is committed to pay a 2022 cash dividend, in keeping with the dividend policy, to maintain and grow dividends in line with underlying cashflow generation.

Paul Blakeley, President and CEO commented:
“Our strong balance sheet and unhedged exposure to rising oil prices will comfortably underpin our activity levels in 2022, which incorporates two infill wells at Stag and initial development activity at the Akatara gas project in Indonesia. We expect production to increase 36% in 2022 at the midpoint of the 15,500-18,500 boe/d guidance range, which excludes any contribution from Maari.  

We welcome the greater clarity that the revised New Zealand hydrocarbon legislation provides, and with Jadestone and OMV both committed to the Maari transaction, we are ready to work with the government to expedite the completion of this deal. However, given that the exact schedule to completion is dependent on the New Zealand upstream regulator’s implementation of the recent legislative changes, it feels prudent to exclude Maari from our production guidance at this point.  In the meantime, Jadestone continues to benefit from the project’s strong cash generation.

In Indonesia, we have continued to advance the Akatara project with pre-project activity moving ahead on schedule, while in Vietnam, we are continuing to engage with the government on the Nam Du/U Minh project.  We are also encouraged by the M&A pipeline in the Asia-Pacific region, and are currently assessing several opportunities, all subject to our strict investment criteria.

Maintaining a conservative balance sheet remains a priority, in order that we comfortably meet our capital commitments and retain funding flexibility for accretive growth opportunities. However, based on our spending forecasts, we expect to generate material incremental cash in 2022 at current oil prices and premiums, and as a result, an increase in shareholder returns, either through increased dividends and/or share buy-backs, may be considered later in the year.”

Jadestone remains a favourite and Bucket List member as whilst today’s announcement carried a few operational and political banana skins pretty much everything in the portfolio is doing well. Maari looks to be the only negative, waiting on regulators is always tiresome but wise to keep that asset out of the projections for the time being. Most other questions on the con call were around other shut-downs but nothing else is a long term problem and growth in the portfolio is on schedule. 

Good cash flow leading to a strong balance sheet gives the company scope to increase the shareholder returns and I like that there is no hedging except in the, probably likely, debt financing of an acquisition which I expect. The shares have drifted off, which might be the Maari effect but they were right at the top of the range for the year and I expect that long term rise to continue for Jadestone. 

KeyFacts Energy Industry Directory: Malcy's Blog