Oil price, Sound, PetroTal, Falcon – and finally…

Monday, 13th January 2020 13:17 - by Malcy

WTI $59.04 -52c, Brent $64.98 -39c, Diff -$5.94 +13c, NG $2.20 +4c

Oil price

Oil ended down last week as suspected, with little further reaction likely after Iran had to admit liability for shooting down a civilian plane it had plenty to worry about domestically. But for those who think that the worst is over around the Gulf I suspect that is just optimistic thinking. Trigger happy terrorists are on every street corner so we could wake up to hear anything has happened and most probably will.

Having said that it is of course now the technically weakest quarter for oil and with all the agencies reporting this week, they could be bearish as could the inventory stats. As for the rig count it was down 15 overall to 781, in oil down 11 to 659.

Sound Energy

Sound has received EIA approval to build and operate a 120km 20 inch gas pipeline connecting the CPF to the GME pipeline. The EIA process for the CPF is progressing well, the initial Ministerial Meeting to review this was on the 10th October and the second meeting to further consider and hopefully approve is scheduled for 28th January.

Work on the corridor rights for the pipeline are progressing to plan whilst the GSA has been extended to 31/3. Meanwhile the company continues to work on a Build-Own-Operate-Transfer funding solution for the infrastructure at the Tendrara Concession in parallel with progressing the previously announced proposed sale of a substantial stake in the Company’s Eastern Morocco Portfolio.

These are all important milestones for the company as they move to the FID on the concession.

PetroTal Corp

PetroTal continues to beat the whispers and today announces that 2019 year end production of 13,300 bopd from the Bretana oil field, the first 11 days of this month have averaged 12,500 bopd. Average production from the field in the 4th quarter was 7,757 bopd a  77% increase on the 3rd quarter and in 2019, PetroTal produced just over 1.5 million barrels of oil, representing average oil production of 4,131 bopd, an increase of over 330% from the average production of 958 bopd realized in 2018. The 5H well is still beating guidance of 6/- b/d and is now nearer 6,500 b/d.

Commissioning of the of the CPF commenced 22nd December with the successful hydrostatic test of the new 20,000 bbl storage tank and will continue for another 30 days whilst components are flow tested, during this period oil production is naturally expected to fluctuate.

Year end cash was $21m of , inclusive of US$15 million received for oil delivered to the ONP pipeline from December 1 to 15 through the previously announced oil sales contract with PetroPeru which will work its way through the system. In future under the contract these payments will be monthly. Within a week, the Company intends to announce its 2020 capital budget, which aims at replicating last year’s success by more than tripling annual production and achieving a 2020 exit rate of 20,000 bopd.  PetroTal plans to achieve this by accelerating commissioning of the next phase of facilities to late August this year instead of year-end 2020, another significant achievement.

PetroTal has come on leaps and bounds since arriving in London and indeed virtually since I started covering it. Totally worthy of an interim allocation of a space in the bucket list this company has one of the best executive management’s I know of in the sector with a solid Non-exec team as proven when the CFO job changed hands. My current target of 80p is one I am very happy with knowing that things will continue to improve and that the team always have something up their sleeve.

Falcon Oil & Gas

Falcon has announced that the Kyalla 117  N2-1H well has encountered some technical problems after some 700m when it lost the ability to complete the well. I’m told that it was a combination of dealing with a larger than expected natural fracture system and maintaining well bore stability. Operator Origin is extremely confident that not only will the necessary sidetrack be completed efficiently and that the increase in natural fractures should bodes very well for a corresponding increase in permeability.

All this means a modest time delay and of course some small increase in costs but I remain increasingly confident that this will in due course be another highly successful well for Origin and Falcon.

And finally…

There was little exciting news in English football this weekend compared with its US rival. Sure, Liverpool beat Spurs, the Noisy Neighbours stuck half a dozen on Villa, the Saints had the win of the season, beating the Foxes 1-2 having conceded 9 in the reverse fixture and the Red Devils frightened the Canaries but over the pond…

The Kansas City Chiefs were 24-0 down before coming back to beat the Houston Texans 51-31 and will now play the Tennessee Titans. The Green Bay Packers beat the Seattle Seahawks 28-23 and now have the joy of playing the San Francisco 49ers next up.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.