Today’s Oil & Gas Update – Westmount Energy and more…

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Oil & Gas Daily Flow

Non-Independent Research; Marketing & Sales Commentary – MiFID II exempt information – see disclaimer below

 

Market Update: Tuesday 9 March 2021

Cairn Energy (LON:CNE): Material acquisition in Egypt boosts 2P reserves by 113MMboe net

Westmount Energy (AIM:WTE): Jabillo-1 to commence drilling offshore Guyana tomorrow

Petroneft Resources (AIM:PTR): C-4 well flows at >240bopd, Cheremshanskoye field, Russia

 

Energy Prices         

Brent Oil US$68.7/bbl vs US$69.7/bbl yesterday

WTI Oil US$65.4/bbl vs US$66.5/bbl yesterday

Natural Gas US$2.66/mmbtu vs US$2.73/mmbtu yesterday

 

Oil Price News 

Please see SP Angel’s Oil Market outlook for 2021: https://youtu.be/T222JHGzokI

Crude oil prices extended higher yesterday after Saudi Arabia said a storage tank in the Ras Tanura export terminal was attacked by a drone

WTI jumped 1.6% to US$67.36/bbl, and Brent surged above the US$70.00/bbl threshold for the first time since January 2020

Although the attack exposed the vulnerability of Saudi Arabia’s most important oil facility, output appeared to be unaffected after the drones and missiles were intercepted

The knee-jerk reaction has somewhat abated today, bringing focus back to energy demand recovery and supply restraint

Oil prices were also boosted by the surprising move by the OPEC+ coalition to keep the current output level unchanged at a meeting last week, while many traders anticipated a production hike

Saudi Arabia, the de-facto leader, decided to extend its unilateral 1MMbopd production cut into April

The market and analysts were surprised by the OPEC+ decision last week, with experts saying that the coalition is looking to tighten the market, betting that US shale will not respond with surging production to elevated oil prices

Elsewhere the Senate approval of President Joe Biden’s large fiscal stimulus package further fuelled oil bulls, with more household spending and a faster pace of vaccine distribution potentially brightening the energy demand outlook

 

Gas Price News 

Natural gas futures fell during the trading session yesterday after initially trying to rally, on forecasts of warmer temperatures in the US

This will of course drive down demand and therefore it makes quite a bit of sense that we would see prices drop

After all, we had seen a significant amount of supply destruction recently, but now that the warmer temperatures have returned to the central part of the US, more supply of natural gas comes into play

Perhaps underpinning prices, at least over the short-term, was optimism over export demand

The calendar is now moving into the end of the withdrawal season, and prices will likely remain rangebound unless there is another disruption or a cold spell

 

Company News

Cairn Energy (LON:CNE): Material acquisition in Egypt boosts 2P reserves by 113MMboe net

Share price: 189p, Market Cap: £947m

Cairn, together with Cheiron (its consortium partner), has announced a proposed acquisition of a portfolio of upstream oil and gas production, development and exploration interests from Shell in the Western Desert, onshore Egypt.

The consideration has been set at US$646m (US$323m net to Cairn), with additional contingent consideration of up to US$280m (US$140m net to Cairn) if certain requirements are met.

Capricorn Egypt, a wholly owned subsidiary of Cairn, will acquire 50% of the assets, with the remaining 50% acquired by Cheiron.

The acquisition is in line with Cairn’s strategy of seeking to grow, diversify and extend its production base.

The portfolio offers low cost production, near-term development and exploration potential, provides immediate operating cashflow contribution and adjusts our overall hydrocarbon split towards gas.

On completion, the assets will boost Cairn’s 2P reserves by 113MMboe as at 31 December 2020.

In addition, the assets add low-cost 2021 forecast working interest production of between 33,000-38,000boepd with an opex/bbl of

Two-thirds of production from the assets is gas weighted, adjusting Cairn’s current hydrocarbon split towards gas.

Average cashflow from operations previous for the past three reported years (2017 – 2019) was ~US$140m net to the interests being acquired by Cairn.

The assets present a number of near-term growth opportunities with 2C contingent resources working interest of 49MMboe as at 31 December 2020 to Cairn and significant exploration potential remaining.

Cairn, together with Cheiron, plans to finance the acquisition with a new joint acquisition reserve-based lending facility of up to US$350m, joint junior debt facility of US$100m and existing cash.

The economic effective date of the acquisition is 1 January 2020.

Production for the assets being acquired averaged 83,000 boepd (Cairn working interest of 41,500boepd) in 2020.

Our take: We remain of the view that independents will take advantage of the European majors’ transition towards greener energy through the acquisition of material but non-core assets over the coming years and today’s proposed deal supports that view. On completion, Cairn will have successfully expanded and diversified it producing asset base at an attractive opex/bbl of

 

Westmount Energy (AIM:WTE): Jabillo-1 to commence drilling offshore Guyana tomorrow

Share Price: 13.5p, Market Cap: £19.5m

Westmount has noted the announcement by the Maritime Administration Department, Guyana, that the Stena Carron drillship will commence drilling operations at the Jabillo-1 wellsite on the Canje Block, offshore Guyana, tomorrow.

Jabillo-1 is the second of three exploration wells scheduled for drilling the Canje block in 2021.

Previously published information indicates that Jabillo-1 is a circa 1Bnbbl oil prospect targeting a Late Cretaceous, Liza-age equivalent, basin floor fan.

Westmount holds an indirect interest in the Canje Block as a result of its circa 7.7% interest in JHI Associates.

Following a 2018 farm-out to Total, JHI is carried for the drilling of the Jabillo-1 well and is funded for the drilling of additional wells.

The Canje Block is currently operated by an ExxonMobil (35%), with Total (35%), JHI (17.5%) and Mid-Atlantic Oil & Gas (12.5%) as partners.

Our take: The Jabillo-1 well is the second to be spudded on the ultradeep Canje Block, and the Operator will have the supporting dataset from the recently drilled Bulletwood-1 well on the same Block. Exxon boasts an 80% exploration success record in Guyana with 18 discoveries on the Stabroek Block. Underlining offshore Guyana as a prolific hydrocarbon province, output from Stabroek started in December 2019 and is running around 120,000bopd and is projected to reach 750,000bopd by 2026.

 

Petroneft Resources (AIM:PTR): C-4 well flows at >240bopd, Cheremshanskoye field, Russia

Share Price: 3.4p, Market Cap: £27m

Petroneft has confirmed that production has commenced from the C-4 well on the Cheremshanskoye field, Russia.

The well has been flowing naturally with production building as the choke size has been gradually increased from 2mm to 8mm with a current flow rate of 243bopd.

The forward plan is to closely monitor reservoir performance and at an appropriate time install a pump to maximise production and further increase revenue.

The C-4 well, which is located on the northern margin of the Cheremshanskoye field, was drilled during 2018 and tested oil at a combined 179bopd from Upper Jurassic J1-1 and J1-3 clastic reservoirs from 2,630.8m-2,633m and 2,644m-2,655m.

The well was re-entered in Q1 2020 to perform an extended well test.

During this test, the well flowed at various choke sizes from the same Upper Jurassic J1-1 & J1-3 clastic reservoirs and flowed naturally at up to a maximum 476bopd on a 10mm choke size.

The Cheremshanskoye field reserves are 19.26MMbbls C1+C2 which were approved by GKZ (Russian State Reserves Committee) January 2019.

The Company recently increased its interest in Licence 67 from 50% to 90%.

Our take: A positive update from Petroneft particularly as it closely follows the recent increase in the Company’s equity stake to 90% in the Cheremshanskoye Licence. Early results from the initial well suggest that this well will perform at or above expectations.

 

Research – Oil & Gas

Sam Wahab – 0203 470 0473 / 0784 385 5037

[email protected]

 

Sales

Richard Parlons – 020 3470 0472

Abigail Wayne – 020 3470 0534

Rob Rees – 020 3470 0535 

Grant Barker – 020 3470 0471  

 

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+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.

 

Sources of commodity prices

 

Oil Brent, WTI

ICE

Natural Gas

NYMEX

 

 

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