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Oil price, Savannah Petroleum, Coro Energy/Empyrean Energy – And finally…

Monday, 19th August 2019 13:39 - by Malcy

WTI $54.87 +40c, Brent $58.64 +41c, Diff -$3.77 +1c, NG $2.20 -3c

Oil price

With a modest rise on Friday the oil price gained on the week but it was close as WTI was up 37c and Brent 11c on the week. With the Opec report out and showing demand growth being ‘trimmed’ for this year and next, oil was dithering until Yemeni separatists attacked a Saudi oil facility pushing prices up by nearly a dollar. It was unenthusiastic so as I write oil is up about 20 cents. The rig count showed +1 overall to 935 and up 6 to 770 in oil.

Savannah Petroleum

Savannah has announced receipt of Ministerial Consent for the Seven Energy Transaction and that H.E. President Muhammudu Buhari has approved the asset transfer.  These assets include SEIL’s entire interest in Seven Uquo Gas Limited (i.e. Seven’s interest in the Uquo field), Universal Energy Resources Limited (Seven’s interest in the Stubb Creek field) and Accugas limited (the gas processing and distribution business).

This represents the satisfaction of a major milestone for the transaction and provides the impetus for legal completion which is expected in the near term. The significance of this support, from the highest political level no less, for Savannah and the transaction should not be underestimated. I can’t think of any other company that has been shown such strong and highly visible support since Buhari’s re-election and this validates the hard work and long hours put in by Savannah personnel.

CEO Andrew Knott quite rightly calls this a ‘significant milestone’ for the company which is an underestimation at this stage. This news unlocks everything else tied into the Seven acquisition including the assets in Niger which will now be back in the picture and which I expect will prove to add significant value for the company. This will include I imagine the Amdigh-1 well test which has been waiting on the blocks for transaction completion before getting started.

Whilst the market has been worried about this deal not closing it can now look up to the prospect of out performance as the company makes up for lost time. With the deal now closer to completion those long awaited rewards from the deal such as  significant and growing free cash flow and growth in Nigeria should start to become apparent. It should also be noted that this will prepare the way for freeing up cash to invest in its world class discoveries in Niger where proven success with the drill bit and an early production system already in the plans give even more potential upside. The farm-out discussions here would I imagine get back on process bringing all the extra value that might come from a new exploration campaign in Niger.

Whilst the whole process has taken longer than expected for various reasons I would expect things now to move fast and I expect news from the company to flow thick and fast, there is much to do and management are keen to get back into fully operational status. As for the share price I would expect a substantial rise, the one year high is 35p last October but with a great deal of positive news to filter through I will be setting my sights a good deal higher than that.

Coro Energy/Empyrean Energy

An update this morning from the Duyung PSC, West Natuna Basin offshore Indonesia as things are hotting up in the area. Coro and Empyrean have announced that well planning is complete and the Asian Endeavour 1 jackup rig has been contracted for the campaign. For Coro the nature of the farm-in is important, the deal gives them an interest in the field, the exploration adds cream on top and the farm-in capital is going into the ground not counterparties pockets, a smart deal, just what one might expect from industry expert James Menzies.

It will be a two well programme planned to 1) test the Tambak exploration prospect and appraise the central area of the Mako gas field (Tambak-1) and with a 45% chance of technical success and a gross mid-case prospective resources potential of @250 Bcf. 2) will be a large step-out (over 13km) to appraise the southern area of the Mako gas field (Tambak-2) and is primarily aiming to move 3C resources to the 2C category and push the 2C category into 1C.

With costs of $15.5m on a dry hole basis going up to $19m fully tested, Coro is fully funded for the programme which with the rig expecting to mobilise in late September makes for an exciting time for both sets of shareholders.

And finally…

Despite many hours being lost to rain the Lords test turned out to be exciting on many levels. Some brilliant hostile bowling by Archer on Saturday and Sunday meant that Smith didnt play yesterday and England took a small first innings lead. Yesterday morning had England collapsed it would have been 2-0 but Stokes scored an undefeated century to put the pressure on Australia but in the end they held on for a draw.

The football went roughly to form, the Noisy Neighbours drew 2-2 with Spurs but might have had a goal for 3-2 if it werent for VAR, elsewhere Liverpool beat the Saints, the Gooners beat Burnley whilst Chelski only drew 1-1 with the Foxes at the Bridge. Performance of the weekend however went to newly promoted Canaries who beat the Magpies 3-1 with a hatrick from Teemu Pukki, Pukki blinders one might say…

Wolves take on the Red Devils tonight full of confidence from last seasons drubbings…

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