WTI $40.55 +93c, Brent $43.24 +89c, Diff -$2.69 -4c, NG $1.80 +3c

Oil price

Oil is steady around these levels but this morning prices have drifted a touch as ahead of the two day Opec+ JMMC meeting where some analysts expect a loosening of supply quotas. Whilst this is possible as the formal agreement was only pushed back a month and there is in the plan a pull back from 9.6m b/d cuts it may be judged to be a bit early.

A further significant increase in the virus numbers in the US is a drag on demand numbers and although the IEA report was pretty bullish any loosening might be taking on a risk that seems an unnecessary one way bet and that doesn’t include any production from Libya. Expect a plan for loosening but not the full 1.9m b/d quite yet.

President Energy

A drilling and workover update ‘activity commences’ from President in Rio Negro this morning. The drilling programme consists of two workovers starting at the end of August 2020 at the Estancia Vieja field targeting 3.5 Mmscft/d and 50 bopd at a total cost of c.$750,000 for both wells which are currently not producing.

Starting in September 2020 sees Las Bases LB-1001 development well with the EVN-x1 following on. These wells are targeting total initial production of 5.6 MMscf/d and 188 bopd and have a 75% CoS and a cost of $4.4m in aggregate. Success at the EVN-x1 well would open up the possibility of some 6 follow-on wells of which 5 would target gas and 1 oil.

After this work the company will review the results and re-commence drilling in Q1 2021 including 2 wells in the Rio Negro one development and one exploration well. This exploration well, Vinderman ex-VI-x1 has a more than 50% CoS on an undrilled structure which could contain 4-12 mmbbls of oil-in-place.

In a success case for the above wells, the beneficial uplift impact on the level of proven hydrocarbon reserves and according net present value therefor will be material in the context of the Group’s current independent audited reserves in Argentina of 15 MMboe proven (1P) and 25.9 MMboe proven plus probable (2P).

President reminds us that all the above work costs are projected to be paid from President’s own resources and cash flow without the requirement for additional borrowing beyond current levels. This is encouraging and shows that not only are all the costs under control but the upside is very substantial and coming from wells with  high chances of success.

Eco (Atlantic) Oil & Gas

Results today from Eco to 31/3, all old news and all you really need to know is that the Company had cash of $26.5m, no debt and is fully funded for its share of further appraisal and exploration drilling costs at the Orinduik Block offshore Guyana of $$120m (gross).

Further work continues in Guyana assessing well data and reprocessing 3D seismic and the company expects ‘at least’ two wells in 2021. Gil Holzman, President and CEO says ‘We are keen to resume drilling activity on the Orinduik licence as soon as is practically possible and we look forward to updating the market as we finalise our plans for next year’.

It should not be forgotten that Eco has a ‘strategic position’ in Namibia which it reminds us is core to its investment case and the company is monitoring increasing interest in the country. I have been expecting some farm-in/out activity in the country for a while but there is plenty yet to come. Back to Gil Holzman, “In Namibia, we continue to make progress with our workstreams and remain poised to benefit from the uptick in activity planned for the region over the coming 12 months.  We have a strategic acreage position in Namibia, which we believe will be highly valuable for us and for potential future partners as near-term further drilling activity in the region takes place.

Eco continues to do well, it is in a very strong position in both geographies and although would have liked better markets and less flaky partners but there are few companies in the sector with as much upside when the time comes…

KeyFacts Energy Industry Directory: Malcy's Blog