WTI $39.70 +$1.21, Brent $41.71 +69c, Diff -$2.01 -52c, NG $1.71 +16c

Oil price

Today is the last day of the month, quarter and half and yesterday had a modest rise and today the window dressing has WTI sitting on $39 and Brent on $41. Equity markets rose yesterday, they will be performing the same tricks today I suspect ensuring no big open positions are left tonight.

Nevertheless, retail gasoline prices remain strong with an average US price of $2.174 per gallon being up 4.5c w/w, up 20c m/m and down 53.9c y/y.

Predator Oil & Gas

A Morocco update from PRD this morning in which they say that the State of Emergency has been extended until July 10th but with some easing possible before then. The rig for Guercif drilling remains stacked in country and excitement regarding the first well is mounting as NuTech analysis has identified a new additional target for the first exploration well. The target is in the upper part of the interval between 1,386-1,413m TVD KB and will present an opportunity to evaluate the western edge of a newly interpreted Tertiary fan complex over 20-25km².

The company is also carrying out a significant gas market study to review the technical feasibility of transporting gas as CNG from Guercif to sites of industrial production. Potential market size and Indicative costs of CNG transportation will be related to the specific Moroccan infrastructure environment, which includes a railroad passing through Guercif linking Guercif to Morocco’s industrial and commercial centres.

This study will assess the potential for early monetisation of gas discovered at Guercif. Other options to develop an integrated gas business in Morocco are being assessed for regulatory, technical and commercial feasibility, including subsurface gas storage at Guercif in the context of security of energy supply and a Floating Storage and Regassification Unit (“FRSU”). Presence of gas infrastructure linking Morocco with Europe and the demand for both gas-to-power and to replace coal and oil to reduce carbon emissions is a scenario the Company is very familiar with in Ireland.

Paul Griffiths, Chief Executive of Predator, commented:
“Guercif is pivotal to the Company in terms of developing a gas business utilising the excellent infrastructure that exists in Morocco. We are ready to progress the drilling programme as soon as COVID-19 public health restrictions are eased to facilitate the recommencement of safe operations. We have used lockdown to define additional Guercif prospectivity and to review potential LNG markets suitable for FSRU penetration in those countries where management have a long history of experience and understanding. The business environment is changing, and we need to adapt to change and use this experience and understanding to maximise our business development opportunities. Post COVID-19 will require significant coordinated effort to re-build economies and natural gas will be an inevitable and pragmatic contributor to this evolutionary process, whilst providing jobs, government taxes and security of flexible energy supply necessary for inward investment.”

It strikes me that during the lockdown and as the management has had the opportunity to consider all options for Guercif they have looked at every possible scenario for marketing any gas that they might find. Although the first choice would be using the Maghreb pipeline, only 8 km away and a discovery using this route would indeed be a game changer.

It’s very unusual for a CEO of a company to back a project with such a high equity level in the Company, this should be noted, It is also very unusual for a CEO to have a strong geoscience background combined with commercial understanding and a track record in the area. It looks like being a very exciting time for PRD in Morocco in the next few months.

Trinity Exploration

Trinity has announced the sale of VAT bonds received from the Trinidad and Tobago Government for $2.8m in cash.

Gulf Marine Services

Yesterday saw a trading update from GMS which shows that all is going well post the end May actuals. The Order Book has ‘multi-year’ visibility with fleet utilisation of 82% in 2020 with 85% in 2H, 53% in 2021, and 37% contracted for 2022.

Cost reductions continue and annualised numbers have now increased from $13m to $16.5m reflecting further reduction in headcount, improved supply chain efficiencies and a smaller facilities footprint. This figure does not include savings to be realised from the recently signed Agreement with Zakher Marine International, where work has started, and the first contract tender is already underway.

As part of the ongoing cost reduction drive, GMS will relocate from the Musaffah base in 4Q 2020, home since 1982, splitting the yard facility and offices. This move will reduce the combined office & yard costs by 40% annually from 4Q2020 onwards. The office will remain in Abu Dhabi.

Clearly much has been happening since the recent corporate action and as such the Board reconfirms the previous 2020 guidance of $57-62 million EBITDA as it positions the company for the intended equity capital raise as it works to reduce net debt levels to its medium-term target of around 3.0x EBITDA. Finally, the company confirm that the necessary preparatory work has commenced with the intention of approaching the market later in the year, after which all bets will be off.

KeyFacts Energy Industry Directory: Malcy's Blog