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Today's Oil and Gas Update - President Energy and Global Petroleum

Market Update: Tuesday 27 October 2020  President Energy (AIM:PPC): Positive results at the EVN-x1 exploration well, Argentina Global Petroleum (AIM:GBP): FY20 results, farm-out remains key

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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: Tuesday 27 October 2020 

President Energy (AIM:PPC): Positive results at the EVN-x1 exploration well, Argentina

Global Petroleum (AIM:GBP): FY20 results, farm-out remains key

 

Energy Prices         

Brent Oil US$40.8/bbl vs US$41.7/bbl yesterday

WTI Oil US$39.4/bbl vs US$39.4bbl yesterday

Natural Gas US$3.05/mmbtu vs US$2.99/mmbtu yesterday

 

Oil Price News

Oil markets retained strength over the past week following the OPEC+ JMMC meeting which had sent positive signals to the oil markets

CFTC data shows that money managers increased their net-length in WTI crude contracts by 38.431MMbbls to 332.26MMbbld, the highest in two months, while also increasing their net-length positions in Brent crude contracts by 20.022MMbbls to 140.130MMbbls in the week ending 20 October, the highest in seven weeks

A statement from the Russian President showed that Saudi Arabia and Russia are in agreement about the extension of the current cuts of 7.7MMbopd through 2021

This possibility has now become very likely as Libya continues to ramp up production, which currently stands at 525,000bopd

Another Important factor is the likelihood of lockdown measures being imposed in many of the bigger economies around the world including France, Spain, and the UK

Bearish forces in the markets include the rising concerns about lockdown measures in Europe, rising production from Libya, and rising gasoline stocks in the United States

Last week, a permanent ceasefire agreement was signed between the fighting parties, which is expected to boost the stability of oil production and export operations

As a result, Libyan oil production is expected to rise to 1MMbopd within the next four weeks

Elsewhere we are now seeing reduced US oil demand as we move into the winter season and weak transport fuel demand as a result of pandemic lockdowns continue to weigh on prices

Tropical storm Zeta made landfall in the Yucatan Peninsula on Monday and is expected to hit the northern part of the gulf coast this week

The storm is expected to impact oil production in the Southern US States from Wednesday

BP, Chevron, BHP, Shell and Equinor have all evacuated platforms and curtailed production as the storm moves towards the Gulf of Mexico

Energy producers have halted 16% (293,656bopd) of production and 6% of natural gas output (162.57MMcf/d) according to Reuters

 

Gas Price News

Tropical storm Zeta is now entering the Gulf of Mexico and is expected to be upgraded to a Hurricane

The storm is taking a similar track to Laura and is expected to hit Louisiana

Hedge funds have now added to long position and reduced short position in futures and options according to the latest commitment of trader’s report

According to the CFTC, managed money increased long position in futures and options by 4.7K contracts while reducing short positions in futures and options by 11.5K contracts

Managed money open interest that is long futures and options outnumbers open interest that is short by 2.2 to 1

 

Yesterday's Risers and Fallers

Top 10 Risers

Top 10 Fallers

Chariot Oil & Gas Ltd 15.9%

Lansdowne Oil & Gas PLC 15.4%

Ascent Resources PLC 8.0%

Tlou Energy Ltd 7.5%

Rockhopper Exploration PLC 5.4%

Mosman Oil & Gas Ltd 5.1%

Oilex Ltd 4.0%

ADM Energy PLC 3.3%

Union Jack Oil PLC 3.2%

Providence Resources PLC 2.7%

Argos Resources Ltd -16.7%

Scirocco Energy PLC -7.9%

Falcon Oil & Gas Ltd -7.9%

Falcon Oil & Gas Ltd -7.9%

Touchstone Exploration Inc -5.6%

AFC Energy PLC -5.4%

BowLeven PLC -5.1%

President Energy PLC -4.8%

United Oil & Gas PLC -4.7%

TomCo Energy PLC -4.0%

 

Company News

President Energy (AIM:PPC): Positive results at the EVN-x1 exploration well, Argentina

Share Price: 1.47p, Market Cap: £30m

President has confirmed that the EVN-x1 exploration well, near the Estancia Vieja field, Rio Negro Province, Argentina, has been drilled to a target depth of 2,000m on time and budget.

A full suite of electric logs and well pressure testing was performed, supplementary to mug logs obtained.  

Electric logs confirmed a net pay of 10m clear live hydrocarbon pay in two clean sand intervals.

Both exhibited good pressure, permeability and porosity whilst 7m is considered oil and the balance gas, and therefore support pre-drill P50 projections.

Further testing will be required to verify pre-drill production estimates of 60,000 m3/d (353boepd).

Testing will be conducted at each individual interval, which will not be co-mingled.

The drilling rig is being returned to base and a workover rig will complete and test the well which is expected to be undertaken before year end.

Our take: Another positive update from President following a string of encouraging news flow. Whilst not a ground-breaking net pay, the Company has encountered clear evidence of moveable live gas and oil in an exploration well being drilled in a new structure. Given the lack of an analogue structure in close proximity, testing of this well will be key ion opening up a new play for President in our view. The Company will now look to materially increase its gas production in the near term bringing on line two/three new contributors, also putting back online certain oil wells in Rio Negro which have been out of commission for several months requiring repair

 

Global Petroleum (AIM:GBP): FY20 results, farm-out remains key

Share Price: 0.815p, Market Cap: £3m

For the year end June 2020, Global recorded a loss after tax of US$1.5m down from US$1.7m in 2019.

Cash balances of US$932k fell significantly relative to the US$2.7m reported in 2019 however the Company remains debt free excluding that of supplier which is settled on normal commercial terms.

Work commitments in offshore Namibia on PEL 0029 and PEL 0094 remain fully funded following the September placing of £1.4m.  

Exploration and evaluation assets increased slightly to US$2.67m up from US$2.34m in 2019.

During the year the Company reached an agreement with NAMCOR to license pre-existing 3D seismic data for PEL 0094. As consideration for the right to license, NAMCOR transferred 7% participating interest in PEL 0094 to NAMCOR, taking its total interest to 17%. Global retains a 78% and is the operator.

The acquired data covers the Marula and Welwitschia Deep prospects.

An updated estimate of prospective resources for PEL 0094 amounted to 687MMbbl of unrisked best estimate prospective rescores net to Global.

Global extended the PEL 0094 license for a year out to September 2021.

The Company intends to seek a farm-in partner for exploration drilling on PEL 0094.

Our take: Whilst offshore Namibia has had a somewhat chequered drilling history, recent confirmation of a working petroleum system and the region’s underexplored status, has led to a land grab from many of the world’s leading explorers. The next 18 months will see up to five exploration wells drilled on behalf of Exxon, Total, Maurel and Prom, Shell, and Galp, and we would expect further interest in Global’s enviable portfolio of licences given strong read across potential in a success case.

 

Research – Oil & Gas

Sam Wahab - 0203 470 0473

[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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Recommendations are based on a 12-month time horizon as follows:

 

Buy - Expected return >15%

Hold - Expected return range -15% to +15%

Sell - Expected return < 15%

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