WTI $58.08 -96c, Brent $64.20 -78c, Diff -$6.12 +18c, NG $2.18 -2c
Having had the geopolitical spike the market has settled down for its early year drift, bears are pointing to high Non-Opec production and indifferent global demand, not even any cold weather about in the US to rescue refining margins at the moment. I’m sure that at least one of the reporting agencies will this week go for further weakness, probably the IEA on Thursday but Opec itself will probably try and whip its own members in a bit as well. Signing of the US/Sino trade deal is lifting equity markets quite independently, the outlook for crude is dreary for the moment but the tinderbox that is the Middle East has not gone away.
A Kurdistan update from Genel this morning with news that the two Tawke licence fields climbed from 113,000 bopd in 2019 to 1224,000 in 2019. Production of 122,800 in Q4 2019 was up 3,000 bopd on the previous quarter. At Tawke 2019 production stood at 68,800 bopd with wells drilled last year contributing 13% of field production by the year end.
At Peshkabir 2019 production stood at 55,299 bopd with wells drilled in 2019 contributing 40% of field production at the year end. Finally the Peshkabir to Tawke gas injection project designed to increase oil recovery rates at Tawke, whilst eliminating flaring at Peshkabir will be completed in March 2020. Genel’s trading update will be on Thursday but this report shows the market that for Genel, it is business as usual.
Serica has released its corporate update this morning with a sparkling message buffed to within an inch of its life. Production from BKR and Erskine is right at the top of guidance at 30/- boe/d and is up some 13% on 2018. Operating costs have been reduced from $18 in 2018 to $13 last year which talks a good story and realised sales income was approximately $30/boe before hedging income of £3.9m.
Cash at the year end was £101.8m (£43.1m) and the company has no borrowings having paid off BP. The BKR cash flows increase according to the agreements and are now 60% rising to 100% after 20/21. The company are happy to be 80% gas for all the environmental reasons that that brings and have been reducing flaring into the bargain.
You will remember that they were awarded North and South Eigg prospects and are preparing to drill an exploration well targeting 360 bcf (P50) with a potential of 1 tcf of recoverable gas. With the Rhum R3 workover well and the development well at Columbus this year is going to be busy for Serica.
Serica is one of a small basket of really high quality UK plays that combine an almost perfect set of requirements for success in the oil industry. It has a strong production base, low decommissioning costs, a strong cash position and excellent management. Sometimes its disciplined approach makes me think it sacrifices growth but this is definitely not the case and it has meant that come the results this year Serica will join the dividend list, another reason for shareholders to rejoice.
It is worth noting that it is four years to the day that RockRose floated, at would you believe 50p. This morning the shares are 2150.50 and in the meantime shareholders have received dividends of 210p plus the benefits of a buy-back. Putting that all together makes a total return of nearly 50x money invested and especially when energy shares have been getting some stick in recent years how many other companies on the LSE might be able to compete with that….?
It’s FA Cup replay time tonight with Spurs hosting ‘Boro and now likely to be without Harry Kane all season, including possibly the Euros for England. the Magpies host Rochdale and interestingly both Bristol sides are in action, Rovers at the Sky Blues and City at cup specialists Shrewsbury.
Winning two La Liga titles and being at the top last night wasn’t enough for Ernesto Valverde at Barcelona who got the Spanish El Bow last night. Quique Setien from Real Betis takes over…