Oil price, Trinity, President - And Finally.....

Tuesday, 16th July 2019 10:22 - by Malcy

WTI $59.58 -63c, Brent $66.48 -24c, Diff -$6.90 +39c, NG $2.41 -5c

Oil price

Oil is slightly in the Doldrums at the moment, with the departure of Tropical Storm Barry things are getting back to normal, offshore workers are returning to rigs in the Gulf of Mexico and the 1.4m b/d shut in will be back in no time. Onshore the refineries that closed will also soon be open again but all these factors should be built in to the inventory stats for at least a fortnight.

China has produced a mixed bag of economic stats, with Fiscal spend up and oil throughput also at a record level of 13.07m b/d after two new refineries came on stream, one might have got more positive but economists at their gloomy best pointed to GDP of only 6.2%, enough of a cloud to see off any blue sky thinking. This morning oil prices are little changed although the continued backwardation in the Brent market bodes slightly better than for WTI at the moment.

Trinity Exploration & Production

Good progress from Trinity at the halfway stage but its all about the second half for the company where it is poised for dynamic, profitable growth. So to the 2Q update where production was successfully maintained at an average of 2,996 bopd in line with expectations but expected to rise with the resumption of onshore drilling in the second half. Guidance for 2019 remains at 3,000-3,300 bopd which seems a modest but wise target,

I say that because all the conditions are in place for substantial success in the next few months and drilling of the first new infill well of the 2019 campaign is expected to spud on the WD-2 asset on 18th of July. This campaign will also include up to 8 new wells and will see the first High Angle Well (HAW) FR 996, itself a more than interesting concept which although not commonly used onshore Trinidad.This is industry standard around the world and the company is confident that it can yield initial production rates and reserves of more than twice those achieved from conventional vertical wells.

As always with Trinity costs are tightly under control and cash is now $17.8m up from $12.3m at the end of March 2018. Some hedging has been put in place to mitigate the company from the SPT and protects a portion of Group cash flows between $50-55 whilst retaining upside exposure to higher oil prices.

The company says that it is ‘well placed to provide significant upside to shareholders both in terms of production and returns’ and I concur. Trinity is in a very strong position indeed with solid production and plenty of upside from drilling in the second half including the exciting HAW programme and the shares are way too cheap given all this most positive news.

President Energy

An update on fraccing operations at the Puesto Flores field in the Rio Negro Province onshore Argentina from PPC this morning. As previously announced the company have fracced the Precuyo formation well PFO-16 which was selected as it is tighter than the Punta Rosada and producing at a much lower rate of 50 b/d. It also has a lack of proximity to substantial water bearing zones.

The company report that the job has been successful and is flowing at the high end of initial expectations with a 95% oil cut and daily test production is 175 b/d more than three times the previous rate. The well which is still being cleaned up, will be monitored for a month which is more prolonged than usual in order to collect further reservoir data. But unless there is something which doesn’t work well I would expect the company to do this elsewhere in the portfolio, indeed they have already ‘commenced planning’ for such a campaign which, subject to kit availability, should be this year.

President is still trading at a significant discount to any metric I can think of, the delivery that this company has put in over the last year or more and what is expected over the next two years is by any means exceptional and should be taken into account by the market.

And finally…

It really is after the Lord Mayor’s Show, cricketers being entertained at Downing Street reminds me of 2005 without the flowerbed-gate although New Zealand coach Gary Stead has said that the Cup should be shared as it is unfair to have such a ‘hollow, hollow feeling after 50 overs’. Oh dear…..

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.