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Today's Oil & Gas Update - Gulf Keystone Petroleum: Predator Oil & Gas and more...

Published: 09:39 11 Jun 2021 BST

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Oil & Gas Daily Flow

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

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Market Update: Friday 11 June 2021

Gulf Keystone Petroleum (LON:GKP): Encouraging operations update

Predator Oil & Gas (LON:PRD): Construction and civil works completed, MOU-1, Morocco

 

Energy Prices         

Brent Oil US$72.6/bbl vs US$72.3/bbl yesterday

WTI Oil US$70.3/bbl vs US$69.9/bbl yesterday

Natural Gas US$3.25/mmbtu vs US$3.17/mmbtu yesterday

 

Oil Price News 

Oil prices continue to tick up with WTI now over US$70/bbl

Despite the COVID crisis in India, global oil demand remained higher than supply in May, which extended the global inventory drawdown of crude and fuels, although the withdrawal is estimated by the EIA at 1.2MMbopd last month, compared with average monthly withdrawals of 2.1MMboopd since June 2020

EIA’s latest price outlook is close or slightly below current levels and “incorporates the recent price increases and our forecast of mostly balanced oil markets in the coming months,”

Global production is set to increase more rapidly in the second half of this year to catch up with rising demand, according to the EIA

Earlier this week, the API reported a draw in crude oil inventories of 2.1MMbbls yesterday for the week ending 4 June

Last week, the API reported a draw in oil inventories of 5.4MMbbls after analysts had predicted a draw half that size of 2.1MMbbls

Crude oil inventories have fallen by more than 14MMbbls since the start of this year, according to API data, but are still up 43MMbbls barrels since January 2020

While crude oil inventories fell yet again this week, US oil production fell to an average of 10.8MMbopd for the week ending 28 May, according to the latest data from the Energy Information Administration

This is down 200,000bopd from the week before

The API reported a build in gasoline inventories of 2.405MMbbls for the week ending 4 June, on top of the previous week's 2.51MMbbl build

Distillate stocks saw an increase in inventories this week of 3.752MMbbls for the week, on top of last week's 1.585MMbbl increase

Cushing inventories fell this week by 420,000bbls

 

Gas Price News 

Natural gas futures are trading higher as forecasts calling for intensifying heat in the US continue to underpin prices, while offsetting estimates predicting a relatively large storage build

In other news, spot gas prices are mixed, while liquefied natural gas (LNG) feed gas demand have been below average due to ongoing maintenance

Currently, there are no tropical cyclones expected to form in the Atlantic for the next 48-hours, according to NOAA

Natural gas production was also flat week on week

 

Company News

Gulf Keystone Petroleum (LON:GKN): Encouraging operations update

Share Price: 190p, Market Cap: £407m

GKP has provided a timely operational and corporate update, outlining that the Company has restarted drilling activities, with commencement of SH-13 completion ahead of the previously announced schedule of Q3 2021.

After SH-13, SH-I will be drilled and electric submersible pumps will be installed in two existing wells.

Gross production is now expected to increase towards 55,000bopd in Q4 2021, versus previous guidance of Q1 2022.

In terms of financials, GKP received US$100.8m (US$78.9m net) from the Kurdistan Regional Government in 2021 to date for payments of crude oil sales and recovery of outstanding arrears. 

As previously announced, the Company is proposing a US$25m annual dividend and US$25m special dividend, both for approval at next week’s Annual General Meeting.

The Company retains a robust balance sheet, with a cash balance of US$195m as at 10 June 2021.

GKP expects 2021 average gross production guidance to be towards the upper end of the 40,000 to 44,000bopd guidance range following early resumption of drilling activities.

2021 guidance of US$55-US$65m net capex and US$2.5 to US$2.9/bbl gross unit Opex remains unchanged.

In addition, GKP continues to progress the preparation of the Field Development Plan, including the Gas Management Plan, through engagement with the Ministry of Natural Resources and other stakeholders.

Our take: Another positive update from GKP confirming gross average YTD production of c.43,600bopd, representing a 20% uplift from 2020 annual average gross production. With operations ramping up to complete SH-13, marking the resumption of drilling activities ahead of schedule. As a result, the Company expects to increase gross production towards 55,000bopd in Q4 2021 and to be at the upper end of 2021 guidance (40,000-44,000bopd).

 

Predator Oil & Gas (LON:PRD): Construction and civil works completed, MOU-1, Morocco

Share Price: 16.8p, Market Cap: £41.3m

Predator has confirmed that the MOU-1 site construction and civil works have been completed.

A further update on the mobilisation of the Star Valley Rig 101 to Guercif is expected next week.

Our take: The preparation of the MOU-1 drilling location is an important milestone paving the way for the drilling operations to start imminently. The well represents another important valuation catalyst for the Predator, and in a success case, could potentially de-risk up to 1,823Bcf of prospective High Estimate gross recoverable gas resources in the Tertiary and in the MOU-4 Prospect to provide the basis for a further drilling programme, including appraisal and exploration wells. Whilst the shares are up almost 3x YTD, we believe there remains further running room in the stock to come ahead of an active drilling campaign this year.

 

Research – Oil & Gas

Sam Wahab - 0203 470 0473 / 0784 385 5037

sam.wahab@spangel.co.uk

 

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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